<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[X] Preliminary Information Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
[_] Definitive Information Statement
COAST RESORTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
PRELIMINARY COPY
COAST RESORTS, INC.
4000 WEST FLAMINGO ROAD
LAS VEGAS, NEVADA 89103
_______________, 1996
Dear Stockholder:
I am writing to inform you of (i) a proposed amendment to the Articles of
Incorporation of Coast Resorts, Inc. (the "Company") to increase the authorized
number of shares of common stock from 2,000,000 to 75,000,000 and the authorized
number of shares of preferred stock from 500,000 to 10,000,000, and (ii) the
proposed adoption of the 1996 Stock Incentive Plan by the Company. Holders of
more than a majority of the issued and outstanding shares of common stock of the
Company intend to approve the amendment to the Articles of Incorporation and the
adoption of the Stock Incentive Plan. Therefore, this Information Statement is
being furnished to stockholders of the Company for informational purposes only.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
AMENDMENT TO THE ARTICLES OF INCORPORATION AND THE ADOPTION OF THE STOCK
INCENTIVE PLAN.
The accompanying Information Statement describes in more detail the
amendment to the Articles of Incorporation and Stock Incentive Plan. I urge you
to read the accompanying materials carefully.
Sincerely,
Michael J. Gaughan,
Chairman of the Board
and Chief Executive Officer
<PAGE>
PRELIMINARY COPY
COAST RESORTS, INC.
4000 WEST FLAMINGO ROAD
LAS VEGAS, NEVADA 89103
INFORMATION STATEMENT
_______________, 1996
This Information Statement is being furnished to the stockholders of the
Company in connection with (i) a proposed amendment (the "Amendment") to the
Company's Articles of Incorporation to increase the authorized number of shares
of (A) common stock from 2,000,000 to 75,000,000 and (B) preferred stock from
500,000 to 10,000,000, and (ii) the approval of the Company's 1996 Stock
Incentive Plan (the "Plan").
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
AMENDMENT AND THE ADOPTION OF THE PLAN.
As of November 30, 1996, there were 1,494,352.94 shares of Common Stock
issued and outstanding. The approval of the Amendment and the Plan requires the
approval of holders of a majority of the issued and outstanding stock with each
share being entitled to one vote on each matter. Holders of more than a
majority of the issued and outstanding shares of Common Stock of the Company
have informed the Company's Board of Directors that they intend to approve the
Amendment and the adoption of the Plan; no other stockholder approval is
required. This Information Statement is being furnished to you for
informational purposes only.
This Information Statement is first being mailed on or about
_______________, 1996 to the stockholders of Coast Resorts, Inc., a Nevada
corporation (the "Company"), of record as of the close of business on
_______________, 1996.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
I.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF COMMON AND PREFERRED STOCK
Subject to stockholder approval, the Board of Directors approved on July 8,
1996, and has recommended that the stockholders approve, an amendment (the
"Amendment") to Article III of the Company's Articles of Incorporation to
increase the authorized number of shares of (i) common stock from 2,000,000
shares to 75,000,000 shares and (ii) preferred stock from 500,000 shares to
10,000,000 shares. Article III of the Articles of Incorporation as proposed to
be amended is attached as Annex I to this Information Statement.
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to increase the number of authorized shares of
capital stock. The proposed
<PAGE>
Amendment of Article III would provide the Company with greater flexibility in
the future by ensuring that the Company would have an adequate number of
authorized and unissued shares available for corporate purposes and would permit
the Company to respond to opportunities as they arise. Such corporate purposes
and opportunities may include, without limitation, possible financings,
acquisitions, employee benefit plans and stock dividends or splits. The Company
may consider in the future declaring a common stock dividend in order to create
a capital structure for the Company that is more appropriate for future
flexibility, including possible financings and acquisitions.
Neither the shares of common or preferred stock currently authorized nor
the additional shares of common or preferred stock proposed to be authorized
will carry preemptive rights when issued. The additional shares of common stock
would be a part of the existing class of common stock and, if and when issued,
would have the same rights and privileges as the shares presently outstanding.
The issuance of additional authorized shares of common stock may have a dilutive
effect on the equity or voting rights of existing stockholders. The additional
shares of preferred stock may be issued from time to time in one or more series,
with such rights, preferences and privileges as may be approved by the Board of
Directors of the Company.
Although the Company currently has no such intentions, the additional
authorized but unissued shares of common or preferred stock could be used to
make a change in control of the Company more difficult. Under certain
circumstances, additional shares of common or preferred stock could be used to
create voting impediments or to discourage third parties from seeking to effect
a takeover or otherwise gain control of the Company. The sale or distribution
of a substantial number of additional authorized shares of common or preferred
stock or rights to purchase shares of common or preferred stock may have the
effect of discouraging unsolicited attempts to take over or otherwise gain
control of the Company. The Board of Directors of the Company is not aware of
any specific effort to accumulate the Company's securities or to obtain control
of the Company by means of a merger, tender offer, solicitation in opposition to
management or otherwise.
Approval of the Amendment requires the affirmative vote of the holders of
at least a majority of the issued and outstanding shares of common stock of the
Company. Holders of more than a majority of the issued and outstanding shares
of common stock have indicated to the Company's Board of Directors that they
intend to approve the Amendment; no other stockholder approval is required.
II.
APPROVAL OF 1996 STOCK INCENTIVE PLAN
Subject to stockholder approval, the Board of Directors of the Company
adopted on _______________________, 1996, and has recommended that the
stockholders approve, the 1996 Stock Incentive Plan (the "Plan"), pursuant to
which officers, directors, employees and consultants of the Company would be
eligible to receive options to purchase common stock and other awards as
described below. The following is a description of the material features of the
Plan, a complete copy of which is attached hereto as Annex II. The description
which follows is qualified in its entirety by reference to the exact language of
Plan.
2
<PAGE>
GENERAL
The purpose of the Plan is to enable the Company and its subsidiaries to
attract, retain and motivate its directors, employees and consultants by
providing for or increasing the proprietary interests of such persons in the
Company. Every director, employee and consultant of the Company and its
subsidiaries is eligible to be considered for the grant of awards under the
Plan; therefore, the current directors and officers of the Company will be
eligible for awards under the Plan, although no grants have been made as of the
date of this Information Statement.
The Plan will be administered by the Board of Directors of the Company
and/or one or more committees of the Board appointed for such purpose (a
"Committee"). The Compensation Committee of the Board, each member of which
must be an "outside director" as defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), will administer the Plan with
respect to any awards intended to qualify as "performance based compensation"
under Section 162(m) of the Code. The Board of Directors or the Committee has
full and final authority to select the individuals to receive awards and to
grant such awards and has a wide degree of flexibility in determining the terms
and conditions of awards. Subject to limitations imposed by law, the Board of
Directors may amend or terminate the Plan at any time and in any manner.
However, no such amendment or termination may deprive the recipient of an award
previously granted under the Plan of any rights thereunder without his or her
consent.
Awards under the Plan are not restricted to any specified form or structure
and may include, without limitation, sales or bonuses of stock, restricted
stock, stock options, reload stock options, stock purchase warrants, other
rights to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, phantom stock, dividend equivalents, performance
units or performance shares. An award to a recipient may consist of one such
security or benefit or two or more of them in tandem or in the alternative. The
Plan does not specify a minimum exercise price or other consideration that a
recipient of an award must pay to obtain the benefit of an award, and therefore
the maximum compensation payable to employees pursuant to the Plan, during the
term of the Plan and awards granted thereunder, is equal to the number of shares
of common stock with respect to which awards may be issued thereunder,
multiplied by the value of such shares on the date such compensation is
measured. An award granted under the Plan to an employee may include a
provision conditioning or accelerating the receipt of benefits upon the
occurrence of specified events, such as a change of control of the Company or a
dissolution, liquidation, sale of substantially all of the property and assets
of the Company or other significant corporate transaction.
The maximum number of shares of Common Stock that may be issued pursuant to
awards granted under the Plan is 220,000. The Plan generally provides that no
single employee may be granted options or other awards with respect to more than
40,000 shares of common stock in any one calendar year. The Plan also contains
customary anti-dilution provisions; provided, however, that no adjustment will
be made pursuant to such provisions to the extent such adjustment would cause
incentive stock options (as discussed below under "Certain Federal Income Tax
Consequences") issued or issuable under the Plan to be treated other than as
incentive stock options, or to the extent that the Board of Directors or the
Compensation Committee determines that such adjustment would result in the
disallowance of a federal income tax deduction for
3
<PAGE>
compensation attributable to such awards by causing such compensation to be
treated as other than "performance-based compensation" within the meaning of the
Plan.
Awards may not be granted under the Plan on or after the tenth anniversary
of the adoption of the Plan. Although any award that was duly granted prior to
such date may thereafter be exercised or settled in accordance with its terms,
no shares of common stock may be issued pursuant to any award on or after the
twentieth anniversary of the adoption of the Plan.
SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), directors, executive officers and 10% stockholders
of the Company are generally liable to the Company for repayment of any profits
realized from any non-exempt purchase and sale of common stock occurring within
a six-month period. Rule 16b-3 promulgated under the Exchange Act provides an
exemption from Section 16(b) liability for certain transactions by an officer or
director provided certain criteria are met. The Plan is designed to comply with
Rule 16b-3.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax treatment
that will generally apply to awards made under the Plan, based on federal income
tax laws in effect on the date hereof. The exact federal income tax treatment
of awards will depend on the specific nature of any such award.
Pursuant to the Plan, participants who are employees may be granted options
that are intended to qualify as incentive stock options ("ISOs") under Section
422 of the Code. Generally, the optionee is not taxed, and the Company is not
entitled to a deduction, on the grant or exercise of an ISO. However, if the
optionee sells the shares acquired upon the exercise of an ISO ("ISO Shares") at
any time within (i) one year after the transfer of ISO Shares to the optionee
pursuant to the exercise of the ISO or (ii) two years from the date of grant of
the ISO, then the optionee will recognize ordinary income in an amount equal to
the excess, if any, of the lesser of the sale price or the fair market value of
the ISO Shares on the date of exercise, over the exercise price of the ISO. The
Company will generally be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee. If the optionee sells the ISO
Shares at any time after the optionee has held the ISO Shares for at least (A)
one year after the date of transfer of the ISO Shares to the optionee pursuant
to the exercise of the ISO and (B) two years from the date of grant of the ISO,
then the optionee will recognize capital gain or loss equal to the difference
between the sales price and the exercise price of such ISO, and the Company will
not be entitled to any deduction.
The amount by which the fair market value of the ISO Shares received upon
exercise of an ISO exceeds the exercise price will be included as a positive
adjustment in the calculation of an optionee's "alternative minimum taxable
income" ("AMTI") in the year of exercise. The "alternative minimum tax"
imposed on individual taxpayers is generally equal to the amount by
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<PAGE>
which 28% (26% of AMTI below certain amounts) of the individual's AMTI (reduced
by certain exemption amounts) exceeds his or her regular income tax liability
for the year.
The grant of an option or other similar right to acquire stock that does
not qualify for treatment as an ISO (a "non-qualified stock option") is
generally not a taxable event for the optionee. Upon exercise of the option,
the optionee will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the stock acquired upon exercise (determined
as of the date of exercise) over the exercise price of such option, and the
Company will be entitled to a deduction equal to such amount. Nonemployees may
only be awarded non-qualified stock options.
If an optionee is a director, officer or stockholder subject to Section 16
of the Exchange Act (an "Insider") and exercises an option within six months
of the date of grant, the timing of the recognition of any ordinary income
should be deferred until (and the amount of ordinary income should be determined
based on the fair market value (or sales price in the case of a disposition) of
the shares of common stock upon) the earlier of the following two dates (the
"16(b) Date"): (i) six months after the date of grant or (ii) a disposition
of the shares of common stock, unless the Insider makes an election under
Section 83(b) of the Code (an "83(b) Election") within 30 days after exercise
to recognize ordinary income based on the value of the common stock on the date
of exercise. In addition, special rules apply to an Insider who exercises an
option having an exercise price greater than the fair market value of the
underlying shares on the date of exercise.
Awards under the Plan may also include stock bonuses or grants of stock
that include provisions for the delayed vesting of the recipient's rights to the
stock. Unless the recipient makes an 83(b) Election as discussed above within
30 days after the receipt of the restricted shares, the recipient generally will
not be taxed on the receipt of restricted shares until the restrictions on such
shares expire or are removed. When the restrictions expire or are removed, the
recipient will recognize ordinary income (and the Company will be entitled to a
deduction) in an amount equal to the excess of the fair market value of the
shares at that time over the purchase price. However, if the recipient makes an
83(b) Election within 30 days of the receipt of restricted shares, he or she
will recognize ordinary income (and the Company will be entitled to a deduction)
equal to the excess of the fair market value of the shares on the date of
receipt (determined without regard to vesting restrictions) over the purchase
price. In the case of an Insider, the timing of income recognition (including
the date used to compute the fair market value of shares) with respect to
restricted shares may be deferred until the 16(b) Date, unless the Insider makes
a valid 83(b) Election.
Awards may be granted under the Plan which do not fall clearly into the
categories described above. The federal income tax treatment of these awards
will depend upon the specific terms of such awards. Generally, the Company will
be required to make arrangements for withholding applicable taxes with respect
to any ordinary income recognized by a recipient in connection with awards made
under the Plan.
Special rules will apply in cases where a recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations under the Plan by delivering previously owned shares of common stock
or by reducing the amount of shares otherwise issuable
5
<PAGE>
pursuant to the award. The surrender or withholding of such shares will in
certain circumstances result in the recognition of income with respect to such
shares or a carryover basis in the shares acquired.
The terms of the agreements pursuant to which specific awards are made
under the Plan may provide for accelerated vesting or payment of an award in
connection with a change in ownership or control of the Company. In that event
and depending upon the individual circumstances of the recipient, certain
amounts with respect to such an award may constitute "excess parachute
payments" under the "golden parachute" provisions of the Code. Pursuant to
these provisions, a recipient will be subject to a 20% excise tax on any
"excess parachute payments" and the Company will be denied any deduction with
respect to such payment.
In certain circumstances, the Company may be denied a deduction for
compensation (including compensation attributable to the ordinary income
recognized with respect to awards made under the Plan) to certain officers of
the Company to the extent that the compensation exceeds $1,000,000 (per person)
annually.
CONCLUSION
The Board of Directors has directed that the Plan be submitted for
stockholder approval. The affirmative vote of the holders of a majority of the
issued and outstanding shares of Common Stock is required for approval. Holders
of more than a majority of the issued and outstanding shares of Common Stock
have indicated to the Company's Board of Directors that they intend to approve
the adoption of the Plan; no other stockholder action is required.
6
<PAGE>
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information regarding the beneficial
ownership of the common stock of the Company as of September 30, 1996 by (i)
each person who, to the Company's knowledge, owns more than 5% of the
outstanding common stock, (ii) each director of the Company, (iii) each other
person named in the Summary Compensation Table below and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME (1) NUMBER OF SHARES PERCENTAGE
- -------- ---------------- ----------
<S> <C> <C>
Michael J. Gaughan.............................. 440,961.03 29.51%
Jerry Herbst.................................... 249,128.08 16.67%
Jimma Lee Beam.................................. 104,529.41 6.99%
J. Tito Tiberti................................. 99,776.47 6.68%
Franklin Toti................................... 99,776.47 6.68%
Harlan D. Braaten............................... - -
Gage Parrish.................................... - -
F. Michael Corrigan............................. - -
Charles Silverman............................... - -
All directors and executive officers as a group
(7 persons)..................................... 789,865.58 52.86%
</TABLE>
_____________________
(1) The address of Messrs. Gaughan and Herbst is 4000 West Flamingo Road, Las
Vegas, Nevada 89103. The address of Mr. Toti is 3595 Las Vegas Boulevard
South, Las Vegas, Nevada 89109. The address of Mr. Tiberti is 1806 South
Industrial Road, Las Vegas, Nevada 89102. The address of Ms. Beam is 2409
Windjammer Way, Las Vegas, Nevada 89107.
There is no public market for the Company's common stock.
7
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following tables set forth the names and ages of the directors and executive
officers of the Company, their respective positions and the expiration dates of
their respective terms.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Term as a
Director
Name Age Position(s) Held Expires
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael J. Gaughan 53 Director, Chairman of the Board and Chief Executive Officer 1997
Harlan D. Braaten 46 Director, President and Chief Operating Officer 1997
Jerry Herbst 58 Director, Vice President, Treasurer and Assistant Secretary 1999
J. Tito Tiberti 51 Director, Vice President and Secretary 1999
Gage Parrish 43 Director, Vice President, Chief Financial Officer 1997
and Assistant Secretary
F. Michael Corrigan 60 Director 1998
Charles Silverman 64 Director 1998
</TABLE>
MICHAEL J. GAUGHAN. Mr. Gaughan has been a director of the Company since
its formation in September 1995 and is the Chairman of the Board and Chief
Executive Officer of the Company. He is also a director and Chairman of the
Board and Chief Executive Officer of Coast Hotels and Casinos, Inc. ("Coast
Hotels") and a director and President of Coast West, Inc. ("Coast West"), both
subsidiaries of the Company. Mr. Gaughan was a general partner of the Barbary
Coast Hotel and Casino, a Nevada partnership (the "Barbary Coast Partnership"),
from its inception in 1979 until January 1, 1996, the effective date of the
reorganization (the "Reorganization") in which the Barbary Coast Partnership and
the Gold Coast Hotel and Casino, a Nevada limited partnership (the "Gold Coast
Partnership" and, together with the Barbary Coast Partnership, the "Predecessor
Partnerships"), were consolidated and reorganized pursuant to an Agreement and
Plan of Reorganization, as supplemented and amended, entered into among each of
the Predecessor Partnerships, Gaughan-Herbst, Inc., the sole general partner of
the Gold Coast Partnership, and the Company. Mr. Gaughan served as the managing
general partner of the Gold Coast Partnership from its inception in December
1986 until the effective date of the Reorganization. Mr. Gaughan and Mr. Herbst
were the sole shareholders of Gaughan-Herbst, Inc., which was the sole corporate
general partner of the Gold Coast Partnership prior to the Reorganization. Mr.
Gaughan has been involved in the gaming industry since 1960 and has been
licensed as a casino operator since 1967.
HARLAN D. BRAATEN. Mr. Braaten joined the Company as the President, Chief
Financial Officer and a director in October 1995, and was appointed Chief
Operating Officer in February 1996. Mr. Braaten is also the President and Chief
Operating Officer of Coast Hotels. Prior to
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<PAGE>
joining the Company, Mr. Braaten was employed in various capacities, including
the general manager and, most recently, senior vice president, treasurer and
chief financial officer of Rio Hotel & Casino, Inc. in Las Vegas. From March
1989 to February 1991, Mr. Braaten was vice president, finance of MGM/Marina
Hotel and Casino in Las Vegas, Nevada. Prior thereto, from November 1983 to
March 1989, Mr. Braaten was property controller for Harrah's in Reno, Nevada.
Mr. Braaten has over 18 years of experience in the Nevada gaming market.
JERRY HERBST. Mr. Herbst has been a director, Vice President, Treasurer and
Assistant Secretary of the Company since its formation in September 1995. He is
also a director and Vice President, Treasurer and Assistant Secretary of Coast
Hotels and of Coast West. Mr. Herbst has been the president of Terrible Herbst
Oil Company, an owner and operator of gas stations and car washes, since 1959.
Mr. Herbst and Mr. Gaughan were the sole shareholders of Gaughan-Herbst, Inc.,
which was the sole corporate general partner of the Gold Coast Partnership prior
to the effective date of the Reorganization. Mr. Herbst has served as a member
of the board of directors of Bank of America Nevada since 1977.
J. TITO TIBERTI. Mr. Tiberti has been a director, Vice President and
Secretary of the Company since its formation in September 1995. He is also a
director and Vice President and Secretary of Coast Hotels and of Coast West. Mr.
Tiberti is the president, a director and a shareholder of, and together with his
immediate family controls, J. A. Tiberti Construction Company, Inc. ("Tiberti
Construction"), a construction company which is serving as the general
contractor for the construction of The Orleans Hotel and Casino. He has also
served as managing partner of The Tiberti Company, a real estate rental and
development company, since 1971. The Orleans, and The Tiberti Company is the
lessor of the real property site for The Orleans. Mr. Tiberti has been involved
in the gaming industry for 18 years and was a general partner of the Barbary
Coast Partnership prior to the effective date of the Reorganization.
GAGE PARRISH. Mr. Parrish was named Vice President, Finance, Assistant
Secretary and a director of the Company and Coast Hotels in October 1995 and was
promoted to Chief Financial Officer in February 1996. Since 1986, he had been
the Controller and Chief Financial Officer of the Gold Coast Partnership prior
to the effective date of the Reorganization. From 1981 to 1986, Mr. Parrish
served as Assistant Controller of the Barbary Coast Partnership. Mr. Parrish is
a certified public accountant. Mr. Parrish has approximately 17 years
experience in the gaming industry.
F. MICHAEL CORRIGAN. Mr. Corrigan was elected as a director of the Company
and Coast Hotels effective as of March 1, 1996. Since July 1989, Mr. Corrigan
has served as the chief executive officer of Corrigan Investments, Inc., which
owns and manages real estate in Nevada and Arizona. In addition, Mr. Corrigan is
the chief executive officer of Corstan, Inc., a mortgage servicing company, and
was previously the owner, president and chief operating officer of Stanwell
Mortgage, a Las Vegas mortgage company.
CHARLES SILVERMAN. Mr. Silverman was elected as a director of the Company
and Coast Hotels effective as of March 1, 1996. Mr. Silverman is the president
and sole stockholder of Yates-Silverman, Inc., which specializes in developing
theme-oriented interiors and exteriors and is a leading designer of hotels and
casinos. Completed projects of Yates-Silverman, Inc. include
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<PAGE>
Excalibur, Circus Circus, Luxor, the Trump Taj Mahal, Trump Castle, and Atlantic
City Showboat. Yates-Silverman, Inc. is currently working on The Orleans. Mr.
Silverman has served as the president of Yates-Silverman, Inc. since its
inception in 1971.
Directors of the Company who are also employees of the Company receive no
compensation for service on the Company's Board of Directors or its committees.
All other directors receive an annual director's fee of $6,000, payable
quarterly in arrears, and $500 for each Board meeting attended. Directors may
be reimbursed for out-of-pocket expenses incurred in connection with attending
Board of Director or committee meetings.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors established an Audit Committee in March
1996 and a Compensation Committee in July 1996, and appointed Messrs. Corrigan
and Silverman as the members of both committees. It is anticipated that the
duties of the Audit Committee will include making recommendations to the Board
of Directors concerning the selection of the Company's independent auditors and
reviewing with the independent auditors the scope and results of the annual
audit. It is anticipated that the duties of the Compensation Committee will
include making recommendations to the Board of Directors concerning compensation
plans and arrangements with respect to the Company's executive officers and key
personnel. The Board of Directors does not currently have any other standing
committees.
10
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Predecessor
Partnerships during 1995 to each executive officer (the "Named Executive
Officers") whose compensation exceeded $100,000 (or would have exceeded
$100,000 had such person been employed for the full year), in all capacities in
which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
---------
NAME AND PRINCIPAL POSITION ANNUAL COMPENSATION COMPENSATION(1)
--------------------------- ------------------- ---------------
SALARY BONUS
------ -----
<S> <C> <C> <C>
Michael J. Gaughan -- -- $628,000(1)
Partner, Gold Coast Partnership and Barbary
Coast Partnership
Harlan D. Braaten $ 34,406(2) -- --
President and Chief Operating Officer, the
Company(2)
Gage Parrish $128,741 $ 25,000 $ 3,840(4)
Chief Financial Officer, Gold Coast
Partnership and the Company(3)
</TABLE>
- ----------------------------
(1) Amounts shown include guaranteed payments paid to Michael J. Gaughan under
the partnership agreements of the Barbary Coast Partnership and the Gold
Coast Partnership. Mr. Gaughan received no compensation from the
Predecessor Partnerships except as set forth above, although Mr. Gaughan
participated pro rata with the other partners in the distributions made by
the Predecessor Partnerships.
(2) Mr. Braaten joined the Company in October 1995 as President and Chief
Financial Officer of the Company and Coast Hotels. Mr. Braaten was
appointed as Chief Operating Officer of the Company and Coast Hotels in
February 1996.
(3) Mr. Parrish served as Vice President, Finance and Controller of the
Company and Coast Hotels from September 1995 to February 1996. In February
1996, Mr. Parrish was named Chief Financial Officer of the Company and
Coast Hotels.
(4) The amount reflects matching contributions paid by the Gold Coast
Partnership to the Company's 401(k) Profit Sharing Plan and Trust.
11
<PAGE>
Commencing January 1, 1996, the effective date of the Reorganization, the
following annual compensation is being paid to the Named Executive Officers,
subject to adjustment at the discretion of the Board of Directors:
<TABLE>
<CAPTION>
ANNUAL
------
NAME AND PRINCIPAL POSITION(S) COMPENSATION
------------------------------ ------------
<S> <C>
Michael J. Gaughan $300,000
Chairman of the Board and Chief Executive Officer
Harlan D. Braaten 250,000(1)
Director, President and Chief Operating Officer
Gage Parrish 150,000
Director, Chief Financial Officer and Assistant Secretary
</TABLE>
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(1) Represents annual salary paid to Mr. Braaten. In addition, in the event of
a termination of Mr. Braaten's employment other than for cause, Mr. Braaten
will be entitled to receive a severance payment in an amount equal to one
year's base salary. In connection with the commencement of his employment,
the Company agreed that, in the event the Company makes an initial public
offering of the common stock of the Company, Mr. Braaten will receive an
option to acquire a number of shares of such common stock of the Company
equal to two percent of the Company common stock issued and outstanding
(giving effect to the initial public offering) at the initial public
offering price. The option, if granted, will be vested as of the initial
public offering date with respect to one-third of the shares covered
thereby, and will vest with respect to one-third of the shares covered
thereby on each of the first and second anniversaries of the initial public
offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until June 1996, the Company did not have a compensation committee or other
committee of the Board of Directors performing equivalent functions. During the
fiscal year ended December 31, 1995, the compensation paid to Michael J. Gaughan
was determined pursuant to the terms of the partnership agreements of the
Predecessor Partnerships. The compensation being paid to Messrs. Braaten and
Parrish in fiscal year 1995 and to Messrs. Gaughan, Braaten and Parrish
following the consummation of the Reorganization was determined by the Board of
Directors of the Company. All future compensation determinations with respect
to the Named Executive Officers will be made by the Compensation Committee.
BONUS PLAN
In fiscal 1996, the Company established a bonus plan designed to reward
executive officers and other key employees for their contributions to the
Company's business objectives and operating results. Bonuses may be awarded in
the discretion of the Board of Directors based upon achievement of financial
targets established by the Board of Directors on an annual basis, and generally
will be equal to a percentage of the recipient's base salary, depending on the
target achieved.
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RETIREMENT PLAN
The Company maintains separate defined contribution (401(k)) plans for the
Gold Coast and the Barbary Coast. All employees of the Gold Coast and all
employees of the Barbary Coast not covered by the collective bargaining
agreements are eligible to participate. The employees may elect to defer up to
15% of their annual compensation, subject to statutory limits. The Company
contributes 1% of the employees' eligible compensation and also makes matching
contributions of 50% of the first 4% of the employees' contribution. The
Company's contribution expense for the two plans was $217,000, $1,207,000 and
$1,250,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
The Company contributed $0, $0 and $3,840 on behalf of Messrs. Gaughan, Braaten
and Parrish, respectively and $3,840 on behalf of all executive officers as a
group in fiscal year 1995. In addition to the Company's 401(k) contributions,
the Company contributes to multi-employer plans under the collective bargaining
agreements at the Barbary Coast.
OTHER MATTERS
The Company is presenting no other matters to the stockholders.
By Order of the Board of Directors.
J. Tito Tiberti
Secretary
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ANNEX I
ARTICLE III OF THE ARTICLES OF INCORPORATION,
AS PROPOSED TO BE AMENDED
(AMENDMENTS INDICATED BY BOLD-FACED TYPE)
The corporation is authorized to issue two classes of stock consisting of
SEVENTY-FIVE MILLION (75,000,000) shares of common stock, each share having a
par value of ONE CENT ($.01), and TEN MILLION (10,000,000) shares of Preferred
Stock, each share having a par value of ONE CENT ($.01). The Preferred Stock
may be issued from time to time in one or more series, and the board of
directors of the corporation shall have authority, by resolution, to prescribe
the series and the number of each series of Preferred Stock, together with the
voting powers, designations, preferences, limitations, restrictions and relative
rights of each series of Preferred Stock. Such resolution of the board of
directors shall prescribe and describe a distinguishing designation for each
series of Preferred Stock, together with the voting powers, designations,
preferences, limitations, restrictions and relative rights of each such series
of Preferred Stock before the issuance of shares of that class.
<PAGE>
ANNEX II
COAST RESORTS, INC.
1996 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of this 1996 Stock Incentive Plan (the "Plan") of Coast
Resorts, Inc., a Nevada corporation (the "Company"), is to enable the Company to
attract, retain and motivate its employees, directors and consultants as by
providing for or increasing the proprietary interests of such employees,
directors and consultants in the Company.
SECTION 2. PERSONS ELIGIBLE UNDER PLAN
Any person who is an employee, director or consultant of the Company
or any of its subsidiaries or affiliates (an "Eligible Person") shall be
eligible to be considered for the grant of Awards (as hereinafter defined)
hereunder.
SECTION 3. AWARDS
(a) The Committee (as hereinafter defined), on behalf of the Company,
is authorized under this Plan to enter into any type of arrangement with an
Eligible Person that is not inconsistent with the provisions of this Plan and
that, by its terms, involves or might involve the issuance of (i) shares of
Common Stock, one cent ($0.01) par value, of the Company or of any other class
of security of the Company which is convertible into shares of the Company's
Common Stock ("Shares") or (ii) a right or interest with an exercise or
conversion privilege at a price related to the Shares or with a value derived
from the value of the Shares, which right or interest may, but need not,
constitute a "Derivative Security," as such term is defined in Rule 16a-1
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as such Rule may be amended from time to time. The entering into of any
such arrangement is referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure and may
include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights
to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, limited stock appreciation rights, phantom
stock, dividend equivalents, performance units or performance shares, and
an Award may consist of one such security or benefit, or two or more of
them in tandem or in the alternative. The terms upon which an Award is
granted shall be evidenced by a written agreement executed by the Company
and the Eligible Person to whom such Award is granted.
(c) Subject to paragraph (d)(ii) below, Awards may be granted, and Shares may
be issued pursuant to an Award, for any lawful consideration as determined
by the Committee, including, without limitation, services rendered by the
Eligible Person.
(d) Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of
each Award granted under this Plan, which terms and conditions may (but
need not) include, among other things:
(i) provisions permitting the Committee to allow or require the
recipient of such Award, including any Eligible Person who is a director or
officer of the Company, or permitting any such recipient the right, to pay the
purchase price of the Shares or other property issuable pursuant to such Award,
and/or such recipient's tax
<PAGE>
withholding obligation with respect to such issuance, in whole or in part, by
any one or more of the following means:
(A) the delivery of cash;
(B) the delivery of other property, tangible or intangible,
deemed acceptable by the Committee;
(C) the delivery of previously owned shares of capital stock of
the Company (including "pyramiding") or other property;
(D) a reduction in the amount of Shares or other property
otherwise issuable pursuant to such Award; or
(E) the delivery of a promissory note of the Eligible Person or
of a third party, the terms and conditions of which shall be determined by
the Committee;
(ii) provisions specifying the exercise or settlement price for any
option, stock appreciation right or similar Award, or specifying the method by
which such price is determined, provided that the exercise or settlement price
of any option, stock appreciation right or similar Award that is intended to
qualify as "performance based compensation" for purposes of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), shall be not less
than the fair market value of a Share on the date such Award is granted;
(iii) provisions relating to the exercisability and/or vesting of
Awards, lapse and non-lapse restrictions upon the Shares obtained or obtainable
under Awards or under the Plan and the termination, expiration and/or forfeiture
of Awards;
(iv) provisions conditioning or accelerating the grant of an Award or
the receipt of benefits pursuant to such Award, either automatically or in the
discretion of the Committee, upon the occurrence of specified events, including,
without limitation, the achievement of performance goals, the exercise or
settlement of a previous Award, the satisfaction of an event or condition within
the control of the recipient of the Award or within the control of others, a
change of control of the Company, an acquisition of a specified percentage of
the voting power of the Company, the dissolution or liquidation of the Company,
a sale of substantially all of the property and assets of the Company or an
event of the type described in Section 7 hereof;
(v) provisions required in order for such Award to qualify (A) as an
incentive stock option under Section 422 of the Code (an "Incentive Stock
Option"), (B) as "performance based compensation" under Section 162(m) of the
Code, and/or (C) for an exemption from Section 16 of the Exchange Act; and/or
(vi) provisions restricting the transferability of Awards or Shares
issued under Awards.
(e) Unless otherwise provided by the Committee in the written agreement
evidencing an Award, the terms of any stock option granted under the Plan shall
provide:
(i) that the exercise price thereof shall not be less than 100% of the
market value of a share of Common Stock on the date the option is granted;
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(ii) that the term of such option shall be ten years from the date of
grant;
(iii) that if the Eligible Person to whom such option was granted (the
"Participant") ceases to be an Eligible Person for any reason other than death
or disability, the option shall not thereafter become exercisable to an extent
greater than it could have been exercised on the date the Participant's status
as an Eligible Person ceased, and that on the death or disability of a
Participant the option shall become fully exercisable;
(iv) that the option shall expire thirty (30) days after the
Participant ceases to be an Eligible Person for any reason other than death or
disability and shall expire three (3) months after the Participant's death or
disability; and
(v) that the option shall not be assignable or otherwise transferable
except by will or by the laws of descent and distribution or pursuant to a
domestic relations order, and during the lifetime of the Participant, the option
shall be exercisable only by the Participant or the transferee under a domestic
relations order.
(f) The Committee may establish the performance criteria and level of
achievement versus these criteria which shall determine the target and maximum
amount payable under an Award, which criteria may be based on financial
performance and/or personal performance evaluations. Notwithstanding anything to
the contrary herein, the performance criteria for any Award that is intended by
the Committee to satisfy the requirements for "performance-based compensation"
under Code Section 162(m) shall be a measure based on one or more Qualifying
Performance Criteria (as defined below) selected by the Committee and specified
at the time the Award is granted. The Committee shall certify the extent to
which any Qualifying Performance Criteria has been satisfied prior to payment or
settlement of any Award that is intended by the Committee to satisfy the
requirements for "performance-based compensation" under Code Section 162(m). For
purposes of this Plan, the term "Qualifying Performance Criteria" shall mean any
one or more of the following performance criteria, either individually,
alternatively or in any combination, applied to either the Company as a whole or
to a business unit or subsidiary, either individually, alternatively or in any
combination, and measured either on an absolute basis or relative to a pre-
established target, to previous years' results or to a designated comparison
group, in each case as specified by the Committee in the Award: (i) cash flow,
(ii) earnings per share (including earnings before interest, taxes and
amortization), (iii) return on equity, (iv) total stockholder return, (v) return
on capital, (vi) return on assets or net assets, (vii) revenue, (viii) income or
net income, (ix) operating income or net operating income, (x) operating profit
or net operating profit, (xi) operating margin, (xii) return on operating
revenue, and (xiii) market share.
SECTION 4. STOCK SUBJECT TO PLAN
(a) Subject to adjustment as provided in Section 7 hereof, at any
time, the aggregate number of Shares issued and issuable pursuant to all Awards
(including all Incentive Stock Options) granted under this Plan shall not exceed
220,000. Such maximum number does not include the number of Shares subject to
the unexercised portion of any Incentive Stock Option granted under this Plan
that expires or is terminated.
(b) Subject to adjustment as provided in Section 7 hereof, the
aggregate number of Shares subject to Awards granted during any calendar year to
any one Eligible Person (including the number of shares involved in Awards
having a value derived from the value of Shares) shall not exceed 40,000.
(c) The aggregate number of Shares issued under this Plan at any time
shall equal only the number of shares actually issued upon exercise or
settlement of an Award and not settled in cash or
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<PAGE>
returned to the Company upon forfeiture of an Award or in payment or
satisfaction of the purchase price, exercise price or tax withholding obligation
of an Award.
SECTION 5. NATURE AND DURATION OF PLAN
(a) This Plan is intended to constitute an unfunded arrangement for a
select group of management, other key employees, directors and consultants.
(b) No Awards shall be made under this Plan after the tenth
anniversary of the Effective Date of the Plan (as provided in Section 9).
Although Shares may be issued after the tenth anniversary of the Effective Date
pursuant to Awards made prior to such date, no Shares shall be issued under this
Plan after the twentieth anniversary of the Effective Date.
SECTION 6. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by one or more committees of the
Board (any such committee, the "Committee") designated from time to time. If no
persons are designated by the Board to serve on the Committee for such purpose,
the Plan shall be administered by the Board of Directors of the Company (the
"Board") and all references herein to the Committee shall refer to the Board.
The Board shall have the discretion to appoint, add, remove or replace members
of the Committee, and shall have the sole authority to fill vacancies on the
Committee. Unless otherwise provided by the Board: (i) with respect to any
Award for which such is necessary and desired for such Award to be exempted by
Rule 16b-3 of the Exchange Act, the Committee shall consist of the Board of
directors or of two or more directors each of whom is a "non-employee director"
(as such term is defined in Rule 16b-3 promulgated under the Exchange Act, as
such Rule may be amended from time to time), (ii) with respect to any Award that
is intended to qualify as "performance based compensation" under Section 162(m)
of the Code, the Committee shall consist of two or more directors, each of whom
is an "outside director" (as such term is defined under Section 162(m) of the
Code), and (iii) with respect to any other Award, the Committee shall consist of
one or more directors (any of whom also may be an employee who has been granted
or is eligible to be granted Awards under the Plan).
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan with respect to the Awards over which such
Committee has authority, including, without limitation, the following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
(ii) determine which persons are Eligible Persons and to which of
such Eligible Persons, if any, and when Awards shall be granted hereunder;
(iii) grant Awards to Eligible Persons and determine the terms and
conditions thereof, including the number of Shares subject thereto and the
circumstances under which Awards become exercisable or vested or are forfeited
or expire, which terms may but need not be conditioned upon the passage of time,
continued employment, the satisfaction of performance criteria, the occurrence
of certain events (including events which the Board or the Committee determine
constitute a change of control), or other factors;
(iv) at any time cancel an Award, with or without the consent of the
holder thereof, and grant a new Award to such holder in lieu thereof, which new
Award may be the same or a different type of Award, may be for a greater or
lesser number of Shares, may have a higher or lower exercise or settlement price
and otherwise may have similar or dissimilar terms to the cancelled Award;
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<PAGE>
(v) determine whether and the extent to which adjustments are
required pursuant to Section 7 hereof; and
(vi) interpret and construe any terms and conditions of, and define
any terms used in, this Plan, any rules and regulations under the Plan and/or
any Award granted under this Plan.
All decisions, determinations, and interpretations of the Committee shall be
final and conclusive upon any Eligible Person to whom an Award has been granted
and to any other person holding an Award.
(c) The Committee may, in the terms of an Award or otherwise,
temporarily suspend the exercisability of an Award and/or the issuance of Shares
under an Award if the Committee determines that securities law or other
considerations so warrant.
SECTION 7. ADJUSTMENTS
If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (i) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards theretofore granted under
this Plan other than Incentive Stock Options and the exercise or settlement
price of such Awards, and (ii) the maximum number and type of shares or other
securities that may be issued pursuant to such Awards thereafter granted under
this Plan; provided, however, that notwithstanding the foregoing, (A) such
aggregate number of Shares shall be subject to adjustment under this Section 7
only to the extent that such will not affect the status of any Award intended to
qualify as "performance based compensation" under Section 162(m) of the Code;
and (B) the maximum number and type of shares or other securities that may be
acquired pursuant to Incentive Stock Options theretofore granted under this Plan
and that may be subject to Incentive Stock Options thereafter granted under this
Plan (which need not correspond to the maximum number and type of shares or
other securities that may be issued pursuant to such Awards thereafter granted
under this Plan) shall be determined under this Section 7 in a manner consistent
with the requirements for Incentive Stock Options.
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<PAGE>
SECTION 8. AMENDMENT AND TERMINATION OF PLAN
The Board may amend, alter or discontinue the Plan or any agreement
evidencing an Award made under the Plan, but no amendment or alteration shall be
made which would impair the rights of any Award holder, without such holder's
consent, under any Award theretofore granted, provided that no such consent
shall be required if the Committee determines in its sole discretion and prior
to the date of any change of control (as defined, if applicable, in the
agreement evidencing such Award) that such amendment or alteration is not
reasonably likely to significantly diminish the benefits provided under such
Award, or that any such diminishment has been adequately compensated. The
Committee may determine whether or not any amendment to a previously granted
Award is, for purposes of the Plan, deemed to be a cancellation and new grant of
the Award. Notwithstanding the foregoing, if an amendment to the Plan would
affect the ability of Awards granted under the Plan to comply with any law, rule
or regulation (including any rule of a self-regulatory organization), and if the
Committee determines that it is necessary or desirable for any Awards
theretofore or thereafter granted that are intended to comply with any such
provision to so comply, the amendment shall be approved by the Company's
stockholders to the extent required for such Awards to continue to comply with
such law, rule or regulation.
SECTION 9. EFFECTIVE DATE OF PLAN
The Effective Date of this Plan shall be the date upon which it was
approved by the Board, subject however to approval of the Plan by the
affirmative votes of the holders of a majority of the securities of the Company
(i) present, or represented, and entitled to vote with respect thereto at a
meeting of the Company's stockholders, or (ii) by written consent.
SECTION 10. COMPLIANCE WITH OTHER LAWS AND REGULATIONS
The Plan, the grant and exercise of Awards thereunder, and the
obligation of the Company to sell and deliver shares under such Awards, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any governmental or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for shares of
Common Stock prior to the completion of any registration or qualification of
such shares under any federal or state law or issuance of any ruling or
regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
SECTION 11. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to
this Plan shall confer on any individual any right to continue in the employ of
the Company or interfere in any way with the right of the Company to terminate
an individual's employment at any time. The agreement evidencing an Award may
contain such provisions as the Committee may approve with respect to the effect
of approved leaves of absence.
SECTION 12. LIABILITY OF COMPANY
The Company and any affiliate which is in existence or hereafter comes
into existence shall not be liable to an Eligible Person or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sale of Shares as
--------------------------
to which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares hereunder; and
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(b) Tax Consequences. Any tax consequence expected, but not realized,
----------------
by any Eligible Person or other person due to the issuance, exercise,
settlement, cancellation or other transaction involving any Award granted
hereunder.
SECTION 134. GOVERNING LAW
This Plan and any Awards and agreements hereunder shall be interpreted
and construed in accordance with the laws of the State of Nevada and applicable
federal law.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing by directors of the Company, Coast Resorts, Inc. has caused this Plan
to be duly executed in its name and behalf by its proper officers thereunto duly
authorized as of this ______ day of __________, 1996.
Coast Resorts, Inc.
By:___________________________________
Michael J. Gaughan, Chairman of the
Board and Chief Executive Officer
ATTEST:
____________________________
J. Tito Tiberti, Secretary
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