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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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 #0-26922
COAST RESORTS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0345704
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4500 WEST TROPICANA ROAD, LAS VEGAS, NEVADA 89103
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (702) 365-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The number of shares of the Registrant's Common Stock outstanding as of
March 1, 1998 was 1,494,352.94. The aggregate market value of the Common Stock
held by non-affiliates of the Registrant, was $59,864,765 as of March 27, 1998.
___________
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference: In Part III, portions of
the Registrant's definitive Proxy Statement for the Registrant's 1998 Annual
Meeting of Stockholders, to be filed with the Securities and Exchange Commission
within 120 days of the end of the Registrant's fiscal year.
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COAST RESORTS, INC.
Table of Contents
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1997
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PART I
Item 1. Business................................................................................... 3
Item 2. Properties................................................................................. 9
Item 3. Legal Proceedings.......................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders........................................ 10
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.................. 11
Item 6. Selected Financial Data.................................................................... 12
Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations...... 14
Item 8. Financial Statements and Supplementary Data................................................ 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 19
PART III
Item 10. Directors and Executive Officers of the Registrant......................................... 20
Item 11. Executive Compensation..................................................................... 20
Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 20
Item 13. Certain Relationships and Related Transactions............................................. 20
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.......................... 21
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PART I
ITEM 1. BUSINESS
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THE COMPANY
Coast Resorts, Inc., a Nevada corporation (the "Company"), through its
wholly-owned subsidiary Coast Hotels and Casinos, Inc ("Coast Hotels"), owns and
operates three Las Vegas hotel-casinos, the Gold Coast Hotel and Casino (the
"Gold Coast"), the Barbary Coast Hotel and Casino (the "Barbary Coast") and The
Orleans Hotel and Casino ("The Orleans"), which opened on December 18, 1996.
Another wholly-owned subsidiary, Coast West, Inc. ("Coast West") leases certain
real property held for potential development of another gaming property in the
future, although no assurance can be given that any additional properties will
be developed. See "Item 2 -- Properties."
The Company was formed in 1995 as a holding company to consolidate and
reorganize two affiliated partnerships, the Gold Coast Hotel and Casino, a
Nevada limited partnership (the "Gold Coast Partnership"), and the Barbary Coast
Hotel and Casino, a Nevada general partnership (the "Barbary Coast Partnership"
and, together with the Gold Coast Partnership, the "Predecessor Partnerships").
The Gold Coast Partnership, formed in 1986, and the Barbary Coast Partnership,
formed in 1978, previously owned and operated the Gold Coast and the Barbary
Coast, respectively, and the Gold Coast Partnership commenced the development of
The Orleans.
Unless the context otherwise requires, the term "Company" collectively
refers to the Company and its subsidiaries.
The principal executive office of the Company is located at 4500 West
Tropicana Road, Las Vegas, Nevada 89103. The telephone number is (702) 365-
7000.
THE REORGANIZATION
Effective January 1, 1996, the Predecessor Partnerships were consolidated
and reorganized (the "Reorganization") 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. As a result of the Reorganization, the
Company, through Coast Hotels, owns and operates the Gold Coast, the Barbary
Coast and The Orleans, and Coast West has become the lessee under the Coast West
Lease (as defined below). In the Reorganization, (a) the partners of the
Predecessor Partnerships each transferred to the Company, by assignment or
through the merger of Gaughan-Herbst, Inc., their respective partnership
interests in the Predecessor Partnerships in exchange for an aggregate of
1,000,000 shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") and (b) the Company assumed, jointly and severally with Coast
Hotels, all of the liabilities of the Predecessor Partnerships other than (i)
the obligations under approximately $52.5 million principal amount of notes
payable to the shareholders of the Company that were exchanged for an aggregate
of 494,353 shares of Common Stock on January 16, 1996, and (ii) those
liabilities incident to the Coast West Lease, and (c) the Company assumed,
jointly and severally with Coast West, all of the liabilities of the Predecessor
Partnerships incident to the Coast West Lease.
THE GOLD COAST
The Gold Coast, which opened in 1986, is located on West Flamingo Road
approximately one mile west of the Las Vegas Strip (the "Strip") in close
proximity to a major exit from Interstate 15, the major highway linking Las
Vegas and Southern California. The Gold Coast features an approximately 70,000
square foot casino, including approximately 2,050 slot machines, 48 table games,
a keno lounge, a 700-seat bingo parlor and a 160-seat race and sports book. The
Gold Coast also features an 11-story tower with 712 hotel rooms and a swimming
pool with a covered bar.
The Gold Coast features three full-service restaurants, including the
Mediterranean Room, the Cortez Room and the Monterey Room, a 380-seat buffet, a
fast-food restaurant, a snack bar and ice cream parlor. The Gold Coast's
entertainment amenities include a 72-lane bowling center, two movie theaters,
approximately 10,000 square feet of banquet and meeting facilities, four bars,
two entertainment lounges and a showroom/dance hall featuring live
entertainment. Other amenities include a gift shop, a liquor store, a travel
agency, an American Express office, a Western Union office, a beauty salon, a
barber shop, a child care facility and over 3,000 parking spaces.
The Gold Coast has developed a number of innovative marketing programs
designed to complement the non-gaming amenities at the Gold Coast and increase
the level of gaming activity. The Gold Coast's slot club (the "Club") has over
100,000 active members. The Club was established in 1987 to encourage repeat
business from its slot machine players. Each time members win at a Gold Coast
slot machine, points are awarded to their accounts. Upon accumulating
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sufficient points, members can redeem the points for awards, including
appliances, vacations and other items. Other Gold Coast marketing programs have
included the original "Pick the Pros" football contest, a $250,000 paycheck
cashing contest and live entertainment in the showroom/dance hall. In addition,
the Gold Coast is a sponsor of the annual National Finals Rodeo, which attracts
thousands of visitors to Las Vegas each December. The awards ceremonies for the
Rodeo are held nightly at the Gold Coast during the 10-day event.
THE BARBARY COAST
The Barbary Coast, which opened in 1979, is located at the intersection of
Flamingo Road and the Strip (the "Flamingo Four Corners"), adjacent to the
Flamingo Hilton Hotel and Casino. It is situated directly across from Caesars
Palace and Bally's Grand and is diagonally across from the site where Mirage
Resorts, Inc. is developing a new mega-resort, Bellagio, expected to open in the
latter part of 1998. Historically, the Barbary Coast has relied on foot traffic
on the busy Las Vegas Strip for a significant amount of its revenues.
The Barbary Coast features an approximately 30,000 square foot casino,
including approximately 524 slot machines, 41 table games, race and sports books
and other amenities. The Barbary Coast also features an 8-story tower with 197
hotel rooms. The Barbary Coast is furnished and decorated in an elegant turn-of-
the-century Victorian theme and includes three bars and three restaurants,
including Michael's gourmet restaurant, Drai's on the Strip (leased to a third
party) and the Victorian Room.
THE ORLEANS
The Company opened its newest property, The Orleans, on December 18, 1996.
The Orleans was developed to expand the Company's presence in the growing Las
Vegas market and to capitalize on management's belief in the demand for an
upscale, off-Strip hotel-casino alternative for both visitors to Las Vegas and
local residents. The Orleans site is located on Tropicana Avenue, approximately
one and one-half miles west of the Strip.
The Orleans is designed with a distinctive theme reflecting the
architectural heritage of the New Orleans French Quarter. The Orleans features
an approximately 92,000 square foot casino, a 22-story tower with 840 hotel
rooms, a 70-lane bowling center, approximately 40,000 square feet of banquet and
meeting facilities, including an approximately 17,000 square foot grand
ballroom, a wedding chapel, five restaurants, specialty themed bars, a barber
shop, a beauty salon and approximately 3,000 parking spaces. The casino includes
approximately 2,200 slot machines, 52 table games, a keno lounge, a poker parlor
and race and sports books. The Orleans also includes an 827-seat theater that
features live entertainment and other special events. In December 1997, the
Company completed and opened the second phase of The Orleans, including twelve
"stadium seating" movie theaters, a child care facility and video arcade.
BUSINESS AND MARKETING STRATEGY
The Company's business strategy is to attract gaming customers to its
various gaming facilities by offering a combination of quality gaming,
entertainment, dining and recreational activities. In addition, each of the
Company's hotel casinos seeks to encourage repeat business by providing friendly
service and complimentary or reduced-rate accommodations, meals and automotive
and aircraft transportation. However, each of the Company's properties targets
different market segments and employs customer-driven market strategies designed
to expand its growing customer base.
The Gold Coast primarily targets middle-market gaming customers, catering
to local residents as well as repeat visitors to Las Vegas who desire an
alternative to the hotel-casino properties located on the Strip. Management's
operating strategy is to maximize customer visitation and thereby increase
casino revenues at the Gold Coast by offering value-conscious customers a
combination of friendly service, generous portions of quality food at
competitive prices and clean, comfortable and inexpensive hotel rooms.
Management believes this value-oriented approach has generated a high level of
customer satisfaction, fostering customer loyalty and repeat business. In
addition, the Gold Coast is conveniently located on West Flamingo Road, in close
proximity to a major exit from Interstate 15, offering easy automotive access
from all four directions in the Las Vegas valley. The Gold Coast has developed
a number of innovative campaigns designed to promote its business and attract
local residents. See -- "The Gold Coast."
The Barbary Coast's customer base is primarily visitors to the Las Vegas
area. In addition to its favorable location on the Strip, which has historically
enabled it to attract a large volume of walk-in traffic, the Barbary Coast has
also benefited from its more intimate gaming atmosphere, allowing it to develop
a loyal base of table games customers.
The Orleans is designed to differentiate itself in the Las Vegas market by
combining an upscale, off-Strip experience in an exciting New Orleans French
Quarter-themed environment with a wide variety of non-gaming amenities. The
Orleans primarily targets middle to upper-middle income gaming customers, both
visitors to Las Vegas and local residents. Management believes that The
Orleans is an attractive alternative for Las Vegas visitors and local
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residents, offering a full-service hotel-casino and entertainment experience
complemented with a value-oriented pricing strategy. The Orleans employs
marketing programs similar to those which make the Gold Coast a success,
including a slot club and football contests, and tailors its marketing programs
to promote The Orleans as a multi-faceted entertainment complex.
GAMING SECURITY
Each of the Company's existing casinos employs extensive supervision and
accounting procedures to control the handling of cash in their gaming
operations. These measures include security personnel; closed-circuit
television observation of critical areas of the casino; locked cash boxes;
independent auditors and observers; strict sign-in and sign-out procedures which
ensure, to the extent practicable, that gaming chips issued by, and returned to,
the casino cashier's cages are accurately accounted for; and procedures for the
regular observation of gaming employees. The accounting departments of each of
the Company's casinos, which employ persons who have no involvement in the
gaming operations, review on a daily basis records compiled by gaming employees
pertaining to cash flow and credit extension. Moreover, regular periodic
analysis of the results of the Company's gaming operations, including analyses
of the Company's compliance with the internal control standards established by
the Nevada Board (as defined herein), are performed by the Company and its
independent auditors to detect significant deviations from industry standards.
Based on the results of these analyses, management believes that its procedures
are in compliance in all material respects with the requirements established by
the Nevada Gaming Authorities (as defined below).
FUTURE PLANS
The Company is contemplating the development of a new gaming property in
the western area of the Las Vegas valley on real property which is leased by
Coast West. Additionally, the Company owns an approximately 29-acre parcel of
undeveloped land located at the corner of Rancho Drive and Carey Avenue in North
Las Vegas, in close proximity to the Fiesta Hotel and Casino and the Texas
Station Hotel and Casino. The site is zoned for gaming.
The Company has no agreements, arrangements or understandings with respect
to financing the development of either of the foregoing sites. Any future
development would be subject to, among other things, the Company's ability to
obtain necessary financing. No assurance can be given that the Company will
develop successfully any additional properties or, if completed, such properties
will be successful.
COMPETITION
Both the gaming and hotel industries are highly fragmented and
characterized by a high degree of competition among a large number of
participants. Many of the Company's competitors are much larger than the Company
and have substantially greater resources.
The Company's three hotel-casinos face competition from all other casinos
and hotels in the Las Vegas area. Such competition includes several hotel-
casinos that, like the Gold Coast and The Orleans, target, to a high degree,
local residents. The Company also competes with non-hotel gaming facilities that
target local residents. The Company believes that its hotel-casinos' convenient
locations together with innovative marketing strategies and value-oriented
quality rooms and food enable it to compete effectively for the local resident
customers and repeat visitors to Las Vegas.
In recent years, many new Las Vegas area hotel-casinos have opened and many
existing ones have been expanded. Currently, there are over 100,000 hotel rooms
in the Las Vegas area and more are planned to open in 1998 and 1999 with the
anticipated openings of properties such as Bellagio, Paris and the Venetian.
Management believes that the additional capacity has, to date, not materially
impacted the Company's occupancy levels and overall revenues, but additional new
properties and the expansion of existing hotel-casinos could have a material
adverse effect on the Company's business and results of operations.
The Company also competes for gaming customers to a lesser extent with
casinos located in the Laughlin and Reno-Lake Tahoe areas of Nevada, in Atlantic
City, New Jersey, and in other parts of the world, including gaming on cruise
ships and international gaming operations, as well as with state-sponsored
lotteries, on- and off-track wagering, card parlors, riverboat and Native
American gaming ventures and other forms of legalized gaming in the United
States. In addition, several states have recently legalized, and several other
states are currently considering legalizing, casino gaming in specific
geographical areas within those states. The Company believes that the
development of casino properties similar to those in Las Vegas in areas close to
Nevada, particularly California and Arizona, could have a material adverse
effect on its business and its results of operations. The Company believes that
the recent widespread legalization of gaming is being
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fueled by a combination of increasing popularity and acceptability of gaming
activities and the desire and need for states and local communities to generate
revenues without increasing general taxation. The Company believes that the
legalization of unlimited land-based casino gaming in or near any major
metropolitan area, such as Chicago or Los Angeles, could have a material adverse
effect on its business and results of operations. In addition, the development
or expansion of casinos, lotteries and other forms of gaming in other states,
particularly in areas close to Nevada such as California, could have a material
adverse effect on the Company's business and its results of operations.
The Gold Coast primarily targets local residents as well as repeat visitors
to Las Vegas. While The Orleans targets a higher income segment of gaming
customers, it also focuses its marketing efforts in part on the same customer
base as the Gold Coast. The Orleans is located approximately one mile south of
the Gold Coast. The operation of the two hotel-casinos in close proximity and
their overlapping target markets may impact their respective results of
operations. Additionally, the Company may be subject to greater risks,
including risks related to local competitive and economic conditions, than if
these two gaming properties were more geographically distant or had more diverse
targeted markets.
ENVIRONMENTAL MATTERS
The Company is subject to a wide variety of federal, state and local laws
and regulations relating to the use, storage, discharge, emission and disposal
of hazardous materials. While management believes that the Company is presently
in material compliance with all environmental laws, failure to comply with such
laws could result in the imposition of severe penalties or restrictions on
operations by government agencies or courts that could adversely affect
operations. In 1995, the Company completed Phase I environmental assessments at
the properties owned or leased by it. The reports did not identify any
environmental conditions or non-compliance, the remediation or correction of
which are reasonably expected to have a material adverse impact on the business
or financial condition of the Company.
EMPLOYEES
At March 1, 1998, the Company had approximately 4,900 employees.
NEVADA REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in Nevada are
subject to (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act"), and (ii) various local regulations.
The Company's gaming operations are subject to the licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada
State Gaming Control Board (the "Nevada Board") and the Clark County Liquor and
Gaming Licensing Board (the "Clark County Board"). The Nevada Commission, the
Nevada Board and the Clark County Board are collectively referred to as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which seek to, among
other things, (i) prevent unsavory or unsuitable persons from having any direct
or indirect involvement with gaming at any time or in any capacity, (ii)
establish and maintain responsible accounting practices and procedures, (iii)
maintain effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and the safeguarding
of assets and revenues, providing reliable record keeping and requiring the
filing of periodic reports with the Nevada Gaming Authorities, (iv) prevent
cheating and fraudulent practices and (v) provide a source of state and local
revenues through taxation and licensing fees. Changes in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.
Coast Hotels, which operates Gold Coast, the Barbary Coast and The Orleans,
is licensed by the Nevada Gaming Authorities and is a corporate licensee (a
"Corporate Licensee") under the terms of the Nevada Act. The gaming licenses
require the periodic payment of fees and taxes and are not transferable. The
Company is registered with the Nevada Commission as a publicly traded
corporation (a "Registered Corporation") and has been found suitable to own the
stock of Coast Hotels. As a Registered Corporation, the Company is required
periodically to submit detailed financial and operating reports to the Nevada
Commission and furnish any other information that the Nevada Commission may
request. No person may become a shareholder of, or receive any percentage of
the profits from, Coast Hotels without first obtaining licenses and approvals
from the Nevada
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Gaming Authorities. The Company and Coast Hotels have obtained from the Nevada
Gaming Authorities the various registrations, approvals, permits and licenses
required in order to engage in gaming activities at its hotel-casinos.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or Coast
Hotels in order to determine whether such individual is suitable or should be
licensed as a business associate of a Corporate Licensee or a Registered
Corporation. Officers, directors and certain key employees of the Company 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 the Company who are actively and directly
involved in gaming activities of Coast Hotels may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities
may deny an application for licensing for any cause which they deem reasonable.
A finding of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must pay
all the costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and, in addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee of the Company or Coast Hotels unsuitable for licensing or unsuitable
to continue having a relationship with the Company or Coast Hotels, the Company
and Coast Hotels would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Company and Coast Hotels 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.
The Company and Coast Hotels 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 Coast Hotels
must be reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by Coast Hotels, the
gaming licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Company, Coast Hotels 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 the Company's gaming properties and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the Company's gaming properties)
could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of a Registered Corporation'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
a Registered Corporation's voting securities determined if the Nevada Commission
has reason to believe that such ownership would otherwise be inconsistent with
the declared policies 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 30 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 will 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 a Registered Corporation, any change in a Registered Corporation's corporate
charter, bylaws, management, policies or operations, or any of its gaming
affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding the Registered Corporation's voting securities for
investment purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only include: (i) voting
on all matters voted on by shareholders; (ii) 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 (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial
holder of voting securities who
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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 owner, after request, fails to identify the
beneficial owner. Any shareholder found unsuitable and who holds, directly or
indirectly, any beneficial ownership of the voting securities of a Registered
Corporation beyond such period of time as may be prescribed by the Nevada
Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a shareholder or to have any other relationship with the Company or Coast
Hotels, the Company (i) pays that person any dividend or interest upon voting
securities of the Company, (ii) allows that person to exercise, directly or
indirectly, any voting right conferred through securities held by that person,
(iii) pays remuneration in any form to that person for services rendered or
otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable
person to relinquish his voting securities, including, if necessary, the
immediate purchase of such voting securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Corporate Licensee or a Registered Corporation to file
applications, be investigated and be found suitable to own the debt security.
If the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Corporate Licensee or the
Registered Corporation can be sanctioned, including the loss of its licenses, if
without the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest or any distribution whatsoever; (ii)
recognizes any voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any form; or (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation or similar transaction.
The Company 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. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act.
Neither the Company nor Coast Hotels may make a public offering of its
securities without the prior approval of the Nevada Commission if the securities
or proceeds therefrom are intended to be used to construct, acquire or finance
gaming facilities in Nevada, or to require or extend obligations incurred for
such purposes. Such approval, if given, does 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. Any representation to the contrary is unlawful.
Changes in control of a Registered Corporation 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 with respect to a variety of stringent standards prior to
assuming control of such Registered Corporation. The Nevada Commission may also
require controlling shareholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as a 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 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: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before a 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 a Registered
Corporation's Board of Directors in response to a tender offer made directly to
the Registered Corporation's shareholders 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 either monthly, quarterly or
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annually and are based upon either: (i) a percentage of the gross revenues
received; (ii) the number of gaming devices operated; or (iii) the number of
table games operated. A casino entertainment tax is also paid by casino
operations where entertainment is furnished in connection with the selling of
food or refreshments. Nevada licensees that hold a license as an operator of a
slot route, or a manufacturer's or distributor's license, also pay certain fees
and taxes to the State of Nevada.
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 that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
CERTAIN FORWARD-LOOKING STATEMENTS
Certain information included in this Form 10-K and other materials filed or
to be filed by the Company with the Securities and Exchange Commission (as well
as information included in oral statements or other written statements made or
to be made by the Company) contains forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements include
information relating to plans for future expansion and other business
development activities as well as other capital spending, financing sources and
the effects of regulation ( including gaming and tax regulation) and
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any forward-
looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to development and
construction activities, dependence on existing management, leverage and debt
service (including sensitivity to fluctuations in interest rates), competition,
domestic or global economic conditions, pending litigation, changes in federal
or state tax laws or the administration of such laws and changes in gaming laws
or regulations (including the legalization of gaming in certain jurisdictions).
ITEM 2. PROPERTIES
----------
The Company owns the approximately 26.0 acres that the Gold Coast occupies
on West Flamingo Road. The Company also owns an 8.33-acre site across the street
from the Gold Coast that contains an approximately 100,000 square foot
warehouse. The warehouse is used by the Gold Coast, Barbary Coast, and The
Orleans as a shared distribution and storage facility.
The Barbary Coast occupies approximately 1.8 acres at the intersection of
Flamingo Road and the Strip. The hotel-casino occupies real property that is
currently leased by the Company pursuant to a lease that expires on May 1, 2003.
The lease provides for rental payments of $175,000 per annum. The lease contains
two options, exercisable by the Company, to extend the term of the lease for 30
years each (with the rent to be readjusted as provided in the lease during those
renewal periods). The Company has an option to purchase the leased property at
any time during the six month period prior to the expiration of the lease,
provided that certain conditions are met, at a purchase price equal to the
greater of $3.5 million or the then appraised value of the real property. The
Company also has a right of first refusal in the event the landlord desires to
sell the real property during the initial term of the lease. The Company also
leases approximately 2.5 additional acres of real property located adjacent to
the Barbary Coast. The lease expires on December 31, 2003. The lease provides
for rental payments of $125,000 per annum. The real property is used by the
Company as a parking lot for its employees and for valet parking. The landlord
has the right to terminate the lease upon six months prior notice to the Company
if it requires the use of the property for its own business purposes (which
excludes leaving the property vacant or leasing it to third parties prior to
January 1, 2003).
The Orleans is located on a portion of an 80.0-acre site located on West
Tropicana Avenue, approximately one mile south of the Gold Coast. The real
property is leased pursuant to a ground lease entered into by the Company and
The
9
<PAGE>
Tiberti Company, a Nevada general partnership of which J. Tito Tiberti, a
director of the Company, is managing partner (see Note 12 of "Notes to
Consolidated Financial Statements"). The lease has an effective commencement
date as of October 1, 1995, an initial term of 50 years, and includes an option,
exercisable by the Company, to extend the initial term for an additional 25
years. The lease provides for monthly rental payments commencing in January 1996
of $251,726 per month through December 1996, $175,000 per month during the 26-
month period thereafter, $200,000 per month during the 36-month period
thereafter, $225,000 per month during the 48-month period thereafter and
$250,000 per month during the 60-month period thereafter. In March 2011, annual
rental payments will increase on a compounding basis at a rate of 3.0% per
annum. In addition, the Company has been granted an option to purchase the real
property during the two-year period commencing in February 2016. The lease
provides that the purchase price will be the fair market value of the real
property at the time the Company exercises the option, provided that the
purchase price will not be less than 10 times the annual rent and not more than
12 times such annual rent at such time.
Coast West, as the successor to the Gold Coast Partnership, leases an
approximately 50.0-acre site located at the corner of Rampart Boulevard and Alta
Drive in northwest Las Vegas pursuant to a Ground Lease Agreement dated as of
October 28, 1994 (the "Coast West Lease"). The initial term of the Coast West
Lease commenced on September 1, 1995, and expires on December 31, 2055. The
lease contains three options, exercisable by Coast West, to extend the term of
the lease for 10 years each. The lease provided for monthly rental payments of
$166,667 for the year ended December 31, 1995. Thereafter, the monthly rent
increases by the amount of $5,000 in January of each year. The landlord has the
option to require Coast West to purchase the property at the end of 2014, 2015,
2016, 2017 and 2018, at the fair market value of the real property at the time
the landlord exercises the option, provided that the purchase price shall not be
less than 10 times nor more than 15 times the annual rent at such time. Based on
the terms of the lease, the potential purchase price commitment ranges from
approximately $31.0 million to approximately $51.0 million in the years 2014
through 2018. Coast West has a right of first refusal in the event the landlord
desires to sell the property at any time during the lease term.
In March 1995, the Gold Coast Partnership purchased approximately 29.0
acres of undeveloped land located at the corner of Rancho Drive and Carey Avenue
in North Las Vegas in close proximity to the Fiesta Hotel and Casino and the
Texas Station Hotel and Casino. The site is zoned for gaming.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company and its subsidiaries are parties to various legal proceedings
arising in the ordinary course of business. In the opinion of management, the
outcome of all pending claims in such matters will not have a material adverse
effect on the Company's financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to the shareholders of the Company during the
quarter ended December 31, 1997.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS
-------
No equity securities of the Company are being, or have been, publicly
offered by the Company and there is no public trading market for the Company's
common stock. As of March 1, 1998 the Company had 71 shareholders.
The Company was formed in September 1995 and has not declared or paid any
dividends. The Company intends to retain future earnings for use in the
development of its business and does not anticipate paying any cash dividends in
the foreseeable future. The payment of all dividends will be at the discretion
of the Company's Board of Directors and will depend upon, among other things,
future earnings, operations, capital requirements, the general financial
condition of the Company and general business conditions. As a holding company,
the Company is reliant upon the operations of its subsidiaries for cash flow.
The indentures under which the 13% First Mortgage Notes and the 10 7/8% First
Mortgage Notes were issued (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" in Item 7) restrict the ability of Coast Hotels to pay dividends or
make other distributions to the Company. (See note 6 of "Notes to Consolidated
Financial Statements.")
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following Selected Financial Data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this Form 10-K. The balance sheets and statements of income data as of and for
each of the five years in the period ended December 31, 1997 are derived from
the financial statements of the Company which have been audited by Coopers &
Lybrand L.L.P. The financial statements of the Company as of December 31, 1996
and 1997 and for each of the three years in the period ended December 31, 1997
are included in this report on Form 10-K.
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
------------------------------------
1993 1994 1995 1996(1) 1997
----------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statements of Income Data:
Net revenues............................................ $ 169,573 $ 172,573 $ 174,756 $ 195,987 $ 293,883
Departmental operating expenses (2)..................... 108,662 115,028 114,253 118,563 191,849
General and administrative expenses..................... 32,402 32,940 34,186 39,085 57,877
Guaranteed payments to former
partners (3)....................................... 2,485 2,672 858 -- --
Cash land rent payments................................. -- -- 515 2,060 4,220
Deferred rent........................................... -- -- 431 1,760 4,078
Pre-opening............................................. -- -- -- 7,125 --
Depreciation and amortization........................... 7,822 6,766 7,280 7,883 18,278
---------- ---------- ---------- ---------- ----------
Operating income........................................ 18,202 15,167 17,233 19,511 17,581
Interest expense, net................................... (837) (227) (3,545) (9,981) (25,225)
Other income............................................ 3 23 92 58 919
---------- ---------- ---------- ---------- ----------
Net income (loss) before income taxes................... 17,368 14,963 13,780 9,588 (6,725)
Provision (benefit) for income tax...................... -- -- -- 5,952 (2,115)
---------- ---------- ---------- ---------- ----------
Net income (loss)....................................... $ 17,368 $ 14,963 $ 13,780 $ 3,636 $ (4,610)
========== ========== ========== ========== ==========
Net income per share of common stock.................... $ -- $ -- $ -- $ 2.47 $ (3.08)
========== ========== ========== ========== ==========
Weighted average common shares outstanding -- -- -- 1,472,742 1,494,353
========== ========== ========== ========== ==========
Pro Forma Information to Reflect
CHANGE IN TAX STATUS (4):
Provision (benefit) for income taxes.................... 6,117 5,251 4,823 3,452 (2,115)
---------- ---------- ---------- ---------- ----------
Net income (loss)....................................... $ 11,251 $ 9,712 $ 8,957 $ 6,136 $ (4,610)
========== ========== ========== ========== ==========
Net income (loss) per share of common stock............. $ 11.25 $ 9.71 $ 8.96 $ 4.17 $ (3.08)
========== ========== ========== ========== ==========
Weighted average common shares outstanding 1,000,000 1,000,000 1,000,000 1,472,742 1,494,353
========== ========== ========== ========== ==========
Other Data:
EBITDA (5).............................................. $ 26,024 $ 21,933 $ 24,944 $ 36,279 $ 39,937
Capital expenditures.................................... $ 2,736 $ 5,514 $ 32,331 $ 126,133 $ 58,912
Distributions to partners (6)........................... $ 11,500 $ 25,823 $ 58,660 $ -- $ --
</TABLE>
_____________________________
SEE FOOTNOTES TO SELECTED FINANCIAL DATA
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------
1993 1994 1995 1996(1) 1997
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (dollars in thousands):
Cash and cash equivalents (7)........................... $ 14,788 $ 16,967 $ 14,543 $ 61,567 $ 29,430
Total assets............................................ 123,570 134,295 152,363 374,022 366,619
Total long-term debt (8)................................ 1,464 11,776 83,357 195,764 207,173
Stockholders' equity.................................... 98,628 87,781 42,888 99,049 94,439
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
FOOTNOTES TO SELECTED FINANCIAL DATA
(1) On December 18, 1996, The Orleans commenced operations in Las Vegas,
Nevada.
(2) Includes casino, food and beverage, hotel and other expenses.
(3) Prior to the Reorganization (as defined herein), the Predecessor
Partnerships (as defined herein) made guaranteed payments to partners
pursuant to the terms of their respective partnership agreements. In
connection with the Reorganization, such guaranteed payments were
eliminated and replaced with annual compensation (reflected in general and
administrative expenses) to Michael J. Gaughan and certain other former
partners of the Predecessor Partnerships who are executive officers of the
Company. See "The Reorganization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(4) The Gold Coast Partnership and the Barbary Coast Partnership operated as
partnerships and were not subject to federal income taxes. As a result of
the Reorganization, the operations of the Gold Coast and the Barbary Coast
are being conducted by the Company, which has been formed as a "C
Corporation" and, therefore, is subject to federal income taxes. A pro
forma provision for federal income taxes has been made, and pro forma net
income has been calculated, for the historical financial statements for all
periods presented as if the Gold Coast Partnership and the Barbary Coast
Partnership had been treated as a C corporation during those periods.
(5) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, deferred (non-cash) rent expense and pre-opening expenses.
EBITDA should not be construed as an alternative to operating income or net
income (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 generated by operating, investing and
financing activities (as determined in accordance with generally accepted
accounting principles) as an indicator of cash flows or a measure of
liquidity. EBITDA is presented solely as supplemental disclosure because
management believes that it is a widely used measure of operating
performance in the gaming industry.
(6) Because the Gold Coast Partnership and the Barbary Coast Partnership were
partnerships during these periods, a substantial portion of their net
income was distributed to the partners. In 1994, the Barbary Coast
Partnership distributed $11.0 million of partners' capital in the form of
notes payable and, in 1995, the Gold Coast Partnership distributed $50.0
million of partners' capital in the form of notes payable. Such
distributions represented previously taxed but undistributed earnings of
the Predecessor Partnerships. See Notes to Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(7) Cash and cash equivalents at December 31, 1996 includes approximately $8.2
million in cash restricted to pay for construction of The Orleans.
(8) Excludes current maturities.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Prior to the Reorganization on January 1, 1996, the Gold Coast and the
Barbary Coast were operated separately by the Predecessor Partnerships. See
"The Reorganization."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial information regarding the historical results of the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
--------------- --------------- -------------
<S> <C> <C> <C>
Gold Coast
Net operating revenues.......................... $130,695 $140,548 $126,490
Operating income................................ 17,933 28,975 22,603
EBITDA (1)...................................... 23,390 33,609 27,403
BARBARY COAST
Net operating revenues.......................... $ 44,061 $ 49,419 $ 44,610
Operating income................................ 246 4,155 1,034
EBITDA (1)...................................... 2,069 5,800 2,627
THE ORLEANS
Net operating revenues.......................... -- $ 6,020 $122,783
Operating income................................ -- 1,266 3,098
EBITDA (1)...................................... -- 1,669 15,946
EBITDAR (2)..................................... -- 1,669 18,046
TOTAL (INCLUDING CORPORATE)
Net operating revenues.......................... $174,756 $195,987 $293,883
Operating income................................ 17,233 19,511 17,581
EBITDA (1)...................................... 24,944 36,279 39,937
EBITDAR (2)..................................... 25,459 38,339 44,157
</TABLE>
(1) "EBITDA" is defined as earnings before interest, taxes, depreciation,
amortization, deferred rent and pre-opening costs.
(2) "EBITDAR" is defined as earnings before interest, taxes, depreciation,
amortization, pre-opening costs and rent expense (both cash rent and
deferred rent). EBITDA and EBITDAR should not be construed as alternatives
to operating income as an indicator of the company's operating performance,
or as alternatives to cash provided by operating activities as an indicator
of cash flows or a measure of liquidity. EBITDA and EBITDAR are presented
solely as supplemental disclosure because management believes that they are
widely used measures of financial performance in the gaming industry.
FISCAL 1997 COMPARED TO 1996
Net revenues were $293.9 million for the year ended December 31, 1997, an
increase of 50.0% over 1996 net revenues of $196.0 million. The increase was due
primarily to the opening of The Orleans on December 18, 1996. Operating income
declined $1.9 million (9.7%) to $17.6 million in 1997 compared to $19.5 million
in 1996. The decline was primarily due to lower-than-expected revenues at the
Company's newest property, The Orleans, as well as decreased revenues at the
Company's other two hotel-casinos, the Gold Coast and the Barbary Coast
(discussed below). The lower operating income as well as increased interest
expense contributed to a net loss of $4.6 million in 1997 compared to net income
of $3.6 million in 1996.
14
<PAGE>
Gold Coast. Net revenues for the year ended December 31, 1997 decreased 10%
to $126.5 million compared to $140.5 million in 1996. Management attributes the
decrease primarily to increased competition from the opening of The Orleans
approximately one mile from the Gold Coast. Casino revenues declined 10.6% to
$93.1 million in 1997 compared to $104.2 million in 1996, due to lower customer
wagering volume. Food and beverage business decreased as a result of the reduced
customer traffic, causing revenues to decline 12.1% to $25.1 million in 1997
compared to $28.6 million in 1996. In 1997, an increased number of rooms in the
Las Vegas market led to a total room occupancy rate at the Gold Coast of 81.7%
compared to 92.3% in 1996, contributing to a $239,000 (2.3%) decline in hotel
revenues. Gold Coast operating expenses were $103.9 million in 1997, down $7.7
million (6.9%) from $111.6 million in 1996 primarily due to a $9.8 million
(16.5%) reduction in salaries and related costs as management reacted to the
reduced customer volume. Food and beverage expenses declined $3.2 million
(13.3%) and general and administrative expenses declined $3.0 million (11.6%).
Despite lower operating expenses, the reduced revenues contributed to a 22.0%
decrease in operating income to $22.6 million in 1997 compared to $29.0 million
in 1996.
Barbary Coast. Net revenues for the year ended December 31, 1997 decreased
9.7% to $44.6 million compared to $49.4 million in 1996. Casino revenues
declined 13.1% to $34.6 million in 1997 compared to $39.8 million in 1996,
primarily as a result of decreased customer wagering volume on table games and
in the race book. Management attributes the decline to a reduction in foot
traffic since the January 1997 opening of New York, New York Hotel and Casino
one mile south of the Barbary Coast on the Las Vegas Strip as well as to
increased competition from other recently opened or expanded hotel-casinos
(including The Orleans). Food and beverage revenues increased $837,000 (8.6%) in
1997 primarily as a result of higher drink prices in the bars. The increase in
food and beverage revenues was partially offset by an increase in food and
beverage expenses of $664,000 (11.3%). Hotel room revenues declined $367,000
(9.1%) due primarily to lower average room rates as management reacted to
increasing competition. Operating income at the Barbary Coast declined 75.1% to
$1.0 million in 1997 compared to $4.2 million in 1996, primarily as a result of
the decreased revenues discussed above.
The Orleans. The year ended December 31, 1997 was the first full year of
operations for The Orleans, which opened on December 18, 1996. Net revenues for
the fourteen days in 1996 were $6.0 million. Operating income before pre-
opening expenses of $7.1 million was $1.3 million in 1996.
For 1997, net revenues for The Orleans were $122.8 million. Net revenues
were $27.4 million for the quarter ended March 31, 1997, the first full quarter
of operations. Net revenues were $30.7 million in the second quarter, $29.6
million in the third quarter and $35.1 million in the quarter ended December 31,
1997. Operating income for 1997 was $3.1 million, including a first-quarter
operating loss of $2.5 million, operating income of $1.3 million in the second
quarter, operating income of $245,000 in the third quarter and operating income
of $4.1 million in the fourth quarter ended December 31, 1997. The increase in
revenues and operating income since the first quarter is due primarily to
increased casino activity, which management attributes to successful promotions
and an increasing target market familiarity with the property. Table games
customer wagering volume was 9.2% higher in the fourth quarter than in the first
quarter and slot machine customer wagering volume was 31.0% higher in the fourth
quarter than in the first.
As is more fully described in the Liquidity and Capital Resources section,
in the first quarter of 1997, Coast Hotels began construction on a series of
improvements at The Orleans which included twelve movie theaters, a child care
facility, arcade and additional slot machines. The related construction traffic
reduced access to the property, adversely affecting operating results at The
Orleans. Management believes that, upon completion in December 1997, the
improvements and lack of disruption from construction positively affected
operating results in the fourth quarter.
15
<PAGE>
Other Factors Affecting Earnings
Depreciation and amortization expense increased by 132.0% in 1997 compared
to 1996, principally due to the opening of The Orleans in December 1996. Net
interest expense increased 152.8% in 1997 primarily due to decreases in
capitalized interest and interest income. Capitalized interest was $7.5 million
in 1996 during the construction of The Orleans, but was only $1.0 million in
1997 during the construction of phase two of The Orleans. Additionally, the
proceeds from the sale of $175 million in 13% First Mortgage Notes earned
interest income of $4.8 million in 1996, but were substantially utilized by the
end of 1996.
Gain on disposal of equipment was approximately $919,000 in 1997 compared
to $58,000 in 1996, primarily due to a crash of the Company's Beechcraft Super
King Air aircraft which, after receipt of insurance proceeds, resulted in a gain
of $785,000.
FISCAL 1996 COMPARED TO 1995
Consolidated net revenues were $196.0 million for the year ended December
31, 1996, an increase of 12.1% over 1995 net revenues of $174.8 million. The
increase was due, in part, to the opening of The Orleans on December 18, 1996,
contributing $6.0 million in net revenues. Gold Coast net revenues increased
7.5% over 1995, primarily due to an increase in casino revenues. Barbary Coast
net revenues increased 12.2%, primarily due to an increase in race and sports
book revenues.
Consolidated operating income rose 13.2% in 1996 to $19.5 million from
$17.2 million in 1995. The increases in revenues described above were partially
offset by pre-opening costs of $7.1 million in the fourth quarter related to the
opening of The Orleans. Additionally corporate expenses increased to $7.8
million in 1996 compared to $946,000 in 1995. Rent expense on land held for
future development was $3.8 million in 1996, representing a full year's rent
compared to $946,000 in 1995 when rent was paid for one quarter. Corporate
general and administrative expenses were $2.2 million in 1996, the corporation's
first full year of operation. Amortization of bond costs related to the issuance
of the 13% First Mortgage Notes was $1.0 million in 1996. Net income declined
73.6% in 1996, primarily due to increased interest expense as a result of the
issuance of $175.0 million principal amount of 13% First Mortgage Notes. The
Company incurred $22.2 million in interest expense which was partially offset by
$7.5 million in interest capitalized during the construction of The Orleans and
by $4.8 million in interest income earned on the proceeds from the sale of the
Notes. Additionally, the Company had income tax expense of $6.0 million in 1996,
including $2.5 million relating to the recognition of deferred taxes in
connection with the change in tax status from partnerships to a "C" corporation,
but had no income tax in 1995 since, prior to the Reorganization, the Company's
entities reported income as partnerships.
Gold Coast. Net revenues for the year ended December 31, 1996 increased
7.5% compared to the same period in 1995. Casino revenues increased 10.4% in
1996, primarily due to a 13.0% increase in slot machine revenues which
management attributes to an upgrade of slot equipment completed in December
1995. Additionally, race and sports book revenues increased 25% in 1996 due to
higher wagering volume. Table games revenues remained relatively flat compared
to 1995, with a 4.3 % increase in gross wagering (drop) offset by a slightly
lower win percentage. Food and beverage revenues decreased 0.8% in 1996 due to
lower customer volume partially offset by higher prices than in 1995. Hotel
revenues increased 6.3% primarily due to increased room rates.
Gold Coast operating income in 1996 increased 61.6% compared to 1995,
primarily due to the increased revenues discussed above. As casino revenues
increased, casino expenses increased 3.3%, primarily as a result of a 2.3%
increase in wages expense and a 9.5% increase in gaming taxes related to the
higher casino revenues. Food and beverage expenses decreased 7.0%, primarily due
to a 9.9% decrease in cost of sales attributable to lower customer volume which
management believes is a result of higher prices and increased competition.
Additionally, depreciation and amortization expense decreased 15.1% due to
certain items becoming fully depreciated.
Barbary Coast. Net revenues for the year ended December 31, 1996 increased
12.2% compared to the same period in 1995. Casino revenues increased 12.6%,
primarily due to an increase in race and sports book revenues attributable to
higher wagering volume. Additionally, slot revenues increased 9.7%, due to
higher wagering volume which management believes is due primarily to an upgrade
of slot machine equipment and increased promotional activity. Hotel revenues
increased 14.8% primarily due to higher room rates.
16
<PAGE>
Barbary Coast operating income increased to $4.2 million in the year ended
December 31, 1996, compared to $246,000 in the same period in 1995, primarily
due to the increased revenues discussed above. Casino expenses increased
7.8%, related to the increase in casino revenues. Depreciation and amortization
decreased 9.7% due to certain items becoming fully depreciated.
The Orleans. The Orleans was opened on December 18, 1996. Net revenues
for the fourteen days were $6.0 million. Operating income before pre-opening
expenses of $7.1 million was $1.3 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity have consisted of cash
provided by operating activities, bank financing and debt financing. Despite a
$10.1 million decrease in net income in 1996 compared to 1995, net cash provided
by operating activities increased $2.4 million (10.6%) primarily due to
increases in accounts payable and accrued liabilities relating to the opening of
the Company's newest hotel-casino, The Orleans, in 1996. In 1997, cash provided
by operating activities decreased $10.8 million (43.5%) from 1996 primarily due
to the decreased profitability discussed above as well as an increase in
receivables and a decrease in accounts payable.
On January 30, 1996, Coast Hotels issued $175.0 million principal amount of
13% First Mortgage Notes Due 2002 ("13% First Mortgage Notes"). The net
proceeds from the issuance, after deducting discounts and commissions, were
approximately $164.1 million. Of that amount, approximately $29.2 million was
used by the Company to repay all outstanding indebtedness under Coast Hotels'
then existing revolving credit facility, which was terminated, $19.3 million was
deposited into an escrow account to fund the Company's first two semi-annual
interest payments on the 13% First Mortgage Notes, and approximately $114.8
million was applied to the cost of developing The Orleans. The balance of
approximately $800,000 was used to pay, in part, the offering expenses of
approximately $2.4 million. Additionally, approximately $30 million of
equipment for The Orleans was financed through a note payable. In August 1997,
Coast Hotels incurred an additional $3.2 million in equipment financing. At
December 31, 1997, outstanding equipment financing totaled approximately $25.5
million.
Coast Hotels is permitted by the indenture pursuant to which the 13% First
Mortgage Notes were issued (the "Indenture"), to borrow up to an additional $20
million for working capital purposes. In November 1997 Coast Hotels issued $16.8
million principal amount of 10 7/8% First Mortgage Notes Due November 1, 2001
("10 7/8% First Mortgage Notes"), the proceeds of which were used for working
capital purposes. The 10 7/8% First Mortgage Notes are collateralized on a pari
passu basis with the 13% First Mortgage Notes.
As a holding company, the Company is reliant on the operations of its
subsidiaries for cash flow. The indentures under which the 13% First Mortgage
Notes and the 10 7/8% First Mortgage Notes were issued restrict the ability of
Coast Hotels to pay dividends or make other distributions to the Company. The
Company's other subsidiary, Coast West, is a development stage company that has
no operations.
Additionally, the indentures under which the 13% First Mortgage Notes and
the 10 7/8% First Mortgage Notes were issued contain covenants that, among other
things, limit the ability of Coast Hotels to repay existing indebtedness, incur
additional indebtedness, or sell material assets as defined in the indentures.
Additionally, pursuant to the indentures, if on July 20, 1998, the Fixed Charge
Coverage Ratio (as defined in the indentures) of Coast Hotels for the most
recently ended four full fiscal quarters is less than 1.5 to 1, Coast Hotels
would be required to consummate an asset sale of the Barbary Coast within one
year. The proceeds from such asset sale would be required to be used by Coast
Hotels to repurchase 13% First Mortgage Notes at a price equal to 101% of the
principal amount of such Notes. As of December 31, 1997, the Fixed Charge
Coverage Ratio was 1.53 to 1. Based upon recent operating results, management
believes that, for the applicable period, the Fixed Charge Coverage Ratio will
equal or exceed 1.5 to 1, although no assurance can be given that such Fixed
Charge Coverage Ratio will be achieved.
In the first quarter of 1997, the Company began construction of Phase Two
of The Orleans. The first part of the project was completed and opened in
December 1997 at a cost of approximately $27 million and includes twelve movie
theaters, a child care facility, an arcade and additional slot machines. The
project is designed to include additional restaurant, entertainment and gaming
facilities, the construction of which is expected to begin in the near future
with financing out of cash flow from operations. In October 1997 the Company
completed and opened a new restaurant at the Barbary Coast which has a total
cost of approximately $1.9 million. Both The Orleans and Barbary Coast projects
were financed with existing cash reserves and cash from operations.
The Company's consolidated cash requirements, in addition to debt service
on the 10 7/8% First Mortgage Notes, the 13% First Mortgage Notes and equipment
notes payable which is anticipated to be approximately $28.0 million in 1998,
include land lease payments for its properties, ongoing maintenance capital
expenditures at its existing facilities and
17
<PAGE>
periodic enhancements to those facilities. The Company's capital expenditures
(exclusive of those associated with the development and construction of The
Orleans and Barbary Coast projects) for 1997 were approximately $9.2 million,
most of which related to normal maintenance capital expenditures. Management
expects that maintenance capital expenditures for 1998 will be approximately
$7.7 million. Additional expenditures for capital projects, including additional
restaurant, entertainment and gaming facilities at The Orleans, are expected to
cost between $3 million and $5 million in 1998, although no final plans have
been developed concerning the scope or timing of those projects.
Coast Hotels has agreed to provide advances to Coast West sufficient to
make payments on the Coast West Lease and other obligations, including project
development and site improvement. Pursuant to the indenture under which the 13%
First Mortgage Notes were issued, the advances to Coast West cannot exceed $8.0
million in aggregate principal amount at any time outstanding. As of December
31, 1997, Coast Hotels had advanced Coast West $6.4 million related to the Coast
West Lease and development activities. Based on the cash requirements of Coast
West for lease payments and anticipated development costs, it is likely that
during 1998 Coast West will require cash from Coast Hotels (or other sources)
that, when added to the outstanding advances from Coast Hotels, would exceed $8
million. Should Coast West not obtain financing from another source for its
cash needs in excess of the aggregate $8 million permitted to be advanced to it
by Coast Hotels, Coast Hotels would be permitted to continue to make advances to
Coast West in excess of $8 million if Coast West becomes a wholly-owned
subsidiary of Coast Hotels and remains a guarantor of the 13% First Mortgage
Notes. Coast West has no arrangements for financing any such costs in excess of
$8 million from other sources.
Management believes that existing cash balances and operating cash flow
will provide the Company with sufficient resources to meet its existing debt
obligations and foreseeable capital expenditure requirements at the Company's
existing properties.
The Company has no agreements, arrangements or understandings with respect
to financing the development of future properties (see Item 1 - Business -
Future Plans). Any future development would be subject to, among other things,
the Company's ability to obtain necessary financing.
IMPACT OF INFLATION
Absent changes in competitive and economic conditions or in specific prices
affecting the industry, the Company does not expect that inflation will have a
significant impact on the Company's operations. Change in specific prices, such
as fuel and transportation prices, relative to the general rate of inflation may
have a material adverse effect on the hotel and casino industry.
REGULATION AND TAXES
The Company is subject to extensive regulation by the Nevada gaming
authorities. Changes in applicable laws or regulations could have a significant
impact on the Company's operations. In 1996, legislation was enacted which
established a federal commission to study the gaming industry.
The gaming industry represents a significant source of tax revenues,
particularly to the State of Nevada and its counties and municipalities. From
time to time, various state and federal legislators and officials have proposed
changes in tax law, or in the administration of such law, affecting the gaming
industry. Proposals in recent years that have not been enacted included a
federal gaming tax and increases in state or local taxes.
Management believes that the Company's recorded tax balances are adequate.
However, it is not possible to determine with certainty the likelihood of
possible changes in tax law or in the administration of such law. Such changes,
if adopted, could have a material adverse effect on the Company's operating
results.
During 1997, the Company recorded a tax benefit of $2.1 million in relation
to its loss before income taxes of $6.7 million. This benefit represents the
amount to be carried-back to prior taxable income.
IMPACT OF THE YEAR 2000 ISSUE
The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four to define the applicable year. If a company's
date-sensitive computer programs should recognize a date "00" as the year 1900
rather than the year 2000, miscalculations or a system failure could occur,
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
The Company is currently reviewing all of its computer systems with regard
to the Year 2000 Issue and has determined that much of its software is already
compliant. For those systems not already compliant, the Company will utilize
both internal and external resources to reprogram, replace and test the software
for the Year 2000 modifications so that its computer systems will properly
recognize and utilize the dates beyond December 31, 1999. Management believes
that expenditures for these modifications will not be material. However, the
Company may be adversely affected to the extent that vendors and other entities
with which it does business are unable to achieve Year 2000 compliance by
December 31, 1999.
18
<PAGE>
CERTAIN ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components. SFAS 130 requires a separate statement to report
components of comprehensive income for each period presented. The provisions of
SFAS 130 are effective for fiscal years beginning after December 15, 1997.
Management believes that the Company currently does not have items that would
require presentation in a separate statement of comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which supersedes FASB
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise."
SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS 131 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented. SFAS 131 will not have a material
effect on the Company's financial statements as the required information is
either currently being presented by the Company or it is not applicable to the
Company.
In April 1997, the American Institute of Certified Public Accountants
issued an exposure draft of a proposed Statement of Position (SOP), Reporting on
the Costs of Start-up Activities. If issued in its current form, the proposed
SOP would require that the Company expense its pre-opening and related
promotional expense as incurred rather than capitalize it and amortize it over
the estimated period of economic benefit of such costs as is the Company's
current policy.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
The report of independent accountants, consolidated financial statements
and financial statement schedules listed in the accompanying index at Item 14
are filed as part of this report. See "Index to Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
-----------------------------------
None.
19
<PAGE>
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT.
--------------------------------------------------
The information required by Item 10 will be set forth in the Proxy
Statement under the caption "Directors and Executive Officers" and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The information required by Item 11 will be set forth in the Proxy
Statement under the caption "Executive Compensation" and is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
The information required by Item 12 will be set forth in the Proxy
Statement under the caption "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
The information required by Item 13 will be set forth in the Proxy
Statement under the caption "Certain Relationships and Related Transactions" and
is incorporated herein by reference.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------------------------------------
(a) Financial Statements, Financial Statement Schedules and Exhibits
<TABLE>
<CAPTION>
1. Financial Statements Index
<S> <C>
Page
----
Report of Independent Accountants 27
Audited Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and 1997 28
Consolidated Statements of Income (Loss) for the years ended December
31, 1995, 1996 and 1997 29
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1996 and 1997 30
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997 31
Notes to Consolidated Financial Statements 32
2. Financial Statement Schedules Index
Schedule I - Condensed Financial Information of the Company 49
Schedule II - Valuation and Qualifying Accounts 53
3. Exhibits Index
</TABLE>
21
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- -----------------------------------------------------------------------------------
<C> <S>
*2.1 Agreement and Plan of Reorganization dated as of September 29, 1995, among Coast
Resorts, Inc., the Gold Coast Hotel and Casino, a Nevada limited partnership, the
Barbary Coast Hotel and Casino, a Nevada general partnership, and Gaughan-Herbst,
Inc., a Nevada corporation
**2.2 Supplement to Agreement and Plan of Reorganization dated as of December 22, 1995,
among Coast Resorts, Inc., the Gold Coast Hotel and Casino, a Nevada limited
partnership, the Barbary Coast Hotel and Casino, a Nevada general partnership, and
Gaughan-Herbst, Inc., a Nevada corporation
*3.1 Articles of Incorporation of Coast Resorts, Inc.
*3.2 Bylaws of Coast Resorts, Inc.
***10.1 Indenture dated as of January 30, 1996, among Coast Hotels and Casinos, Inc., the
Guarantors, and American Bank National Association, as Trustee.
***10.2 Registration Rights Agreement dated as of January 30, 1996 among Coast Hotels and
Casinos, Inc., the Guarantors, and Bear, Stearns & Co. Inc. and BA Securities, Inc.
***10.3 Form of Note (included in Exhibit 4.1)
***10.4 Note Guarantee of Coast Resorts, Inc.
***10.5 Note Guarantee of Coast West, Inc.
***10.6 Leasehold Deed of Trust, Assignment of Rents, Leases and Security Agreement dated
January 30, 1996 of Coast Hotels and Casinos, Inc.
***10.7 Leasehold Deed of Trust, Assignment of Rents, Leases and Security Agreement dated
January 30, 1996 of Coast West, Inc.
***10.8 Security Agreement dated January 30, 1996 (Coast Hotels and Casinos, Inc.)
***10.9 Security Agreement dated January 30, 1996 (Coast West, Inc.)
***10.10 Stock Pledge and Security Agreement dated January 30, 1996 (Coast Resorts, Inc.)
***10.11 Disbursement and Escrow Agreement dated January 30, 1996
***10.12 Pledge and Escrow Agreement dated January 30, 1996
***10.13 Collateral Assignment of Contracts dated January 30, 1996
***10.14 Escrow Agreement dated January 30, 1996
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- -----------------------------------------------------------------------------------
<C> <S>
***10.15 Unsecured Environmental Indemnification Agreement (Coast Hotels and Casinos, Inc.)
***10.16 Unsecured Environmental Indemnification Agreement (Coast West, Inc.)
***10.17 Tax Sharing Agreement dated as of January 30, 1996
***10.18 Agreement Between Owner and Contractor dated as of January 24, 1996, between J.A.
Tiberti Construction Co., Inc. and Coast Hotels and Casinos, Inc.
*10.19 Ground Lease dated as of October 1, 1995, between The Tiberti Company, a Nevada
general partnership, and Coast Hotels and Casinos, Inc. (as successor of Gold
Coast Hotel and Casino, a Nevada limited partnership)
*10.20 Lease Agreement dated May 1, 1992, by and between Empey Enterprises, a Nevada
general partnership, as lessor, and the Barbary Coast Hotel & Casino, a Nevada
general partnership, as lessee
*10.21 Ground Lease Agreement dated October 28, 1994 by and among 21 Stars, Ltd., a
Nevada limited liability company, as landlord, Barbary Coast Hotel & Casino, a
Nevada general partnership, as tenant, Wanda Peccole, as successor trustee of the
Peccole 1982 Trust dated February 15, 1982 ("Trust), and The William Peter and
Wanda Ruth Peccole Family Limited Partnership, a Nevada limited partnership
("Partnership"), and, together with Trust, as owner, as amended
***10.22 Form of Subordination Agreement with former Gold Coast partners that hold
Subordinated Notes
*10.23 Lease dated as of November 1, 1982, by and between Nevada Power Company, a Nevada
Corporation as landlord, and Barbary Coast Hotel and Casino, a Nevada general
partnership
*10.24 Leasehold Deed of Trust, Assignment of Rents and Security Agreement dated February
13, 1991, by and between the Barbary Coast Hotel and Casino, a Nevada general
partnership, First American Title Company of Nevada, and Exber, Inc., a Nevada
corporation
10.25 10 7/8% First Mortgage Note due 2001, dated November 21, 1997
10.26 Indenture dated as of November 21, 1997 among Coast Hotels and Casinos, Inc., the
Guarantors, and Firstar Bank of Minnesota, N.A., as Trustee
10.27 Note Guarantee of Coast Resorts, Inc.
10.28 Purchase Agreement dated November 21, 1997
10.29 Security Agreement dated November 21, 1997 (Coast Hotels and Casinos, Inc.)
10.30 Deed of Trust, Assignment of Rents, Leases and Security Agreement dated November
21, 1997
10.31 Stock Pledge and Security Agreement dated November 21, 1997 (Coast Resorts, Inc.)
10.32 Pari Passu Intercreditor Agreement dated November 21, 1997
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- -----------------------------------------------------------------------------------
<C> <S>
*16 Letter re Change in Certifying Accountant
*21 List of Subsidiaries of Coast Resorts, Inc.
27 Financial Data Schedule
</TABLE>
- -------------------------------------
* Previously filed as an exhibit to the Registrant's Form 10 General Form For
Registration of Securities, as amended, originally filed on October 3, 1995 (the
"Registration Statement")
** Previously filed as an exhibit to Amendment No. 2 to the Registration
Statement, filed on January 12, 1996
*** Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.
(b) REPORTS ON FORM 8-K
The Company filed no Reports on Form 8-K during the last quarter of the
1996 fiscal year.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Las Vegas, State of Nevada, on March 31, 1998.
COAST RESORTS, INC.
By: /s/ MICHAEL J. GAUGHAN
--------------------------
Michael J. Gaughan
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE Title Date
- ------------------------------------------ ------------------------------------------------ ----------------------
<S> <C> <C>
/s/ MICHAEL J. GAUGHAN Chairman of the Board of Directors and Chief March 31, 1998
- ------------------------------------------ Executive Officer (Principal Executive Officer)
Michael J. Gaughan
/s/ GAGE PARRISH Director and Chief Financial Officer March 31, 1998
- ------------------------------------------ (Principal Financial and Accounting Officer)
Gage Parrish
/s/ HARLAN D. BRAATEN Director March 31, 1998
- ------------------------------------------
Harlan D. Braaten
/s/ JERRY HERBST Director March 31, 1998
- ------------------------------------------
Jerry Herbst
/s/ J. TITO TIBERTI Director March 31, 1998
- ------------------------------------------
J. Tito Tiberti
/s/ CHARLES SILVERMAN Director March 31, 1998
- ------------------------------------------
Charles Silverman
/s/ MICHAEL CORRIGAN Director March 31, 1998
- ------------------------------------------
Michael Corrigan
/s/ JOSEPH A. BLASCO Director March 31, 1998
- ------------------------------------------
Joseph A. Blasco
</TABLE>
25
<PAGE>
INDEX TO FINANCIAL STATEMENTS
COAST RESORTS, INC.
<TABLE>
<S> <C>
Report of Independent Accountants........................................................................ 27
Consolidated Balance Sheets of Coast Resorts, Inc. as of December 31, 1996 and 1997...................... 28
Consolidated Statements of Income (Loss) of Coast Resorts, Inc. for the years ended December 31, 1995,
1996 and 1997........................................................................................... 29
Consolidated Statements of Stockholders' Equity of Coast Resorts, Inc. for the years ended December 31,
1995, 1996 and 1997................................................................................... 30
Consolidated Statements of Cash Flows of Coast Resorts, Inc. for the years ended December 31, 1995,
1996 and 1997......................................................................................... 31
Notes to Consolidated Financial Statements............................................................... 32
</TABLE>
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of
Coast Resorts, Inc. and Subsidiaries
We have audited the consolidated financial statements and financial statement
schedules of Coast Resorts, Inc. and subsidiaries as listed in item 14 of this
Form 10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Coast Resorts,
Inc. as of December 31, 1996 and 1997 and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Las Vegas, Nevada
March 13, 1998
27
<PAGE>
COAST RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1997
(Dollars in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
ASSETS: 1996 1997
------------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of $8,186 in 1996 $ 61,567 $ 29,430
Accounts receivable, less allowance for doubtful accounts
of $379 (1996) and $194 (1997)..................................... 3,659 5,617
Inventories........................................................... 6,364 5,085
Refundable income taxes............................................... 1,384 1,772
Prepaid expenses and other............................................ 7,688 11,118
------------------- -----------------
TOTAL CURRENT ASSETS................................................ 80,662 53,022
PROPERTY AND EQUIPMENT, net........................................... 286,580 307,151
OTHER ASSETS.......................................................... 6,780 6,446
------------------- -----------------
$374,022 $366,619
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................................... $ 11,834 $ 9,107
Accrued liabilities................................................... 25,509 27,681
Construction accounts payable......................................... 23,517 2,491
Current portion of long-term debt..................................... 6,781 8,076
------------------- -----------------
TOTAL CURRENT LIABILITIES........................................... 67,641 47,355
LONG-TERM DEBT, less current portion.................................... 195,764 207,173
DEFERRED INCOME TAXES................................................... 6,639 8,645
DEFERRED RENT........................................................... 4,929 9,007
------------------- -----------------
TOTAL LIABILITIES....................................................... 274,973 272,180
------------------- -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 500,000 shares authorized,
no shares issued and outstanding.................................... -- --
Common stock, $.01 par value, 2,000,000 shares authorized,
1,494,353 issued and outstanding.................................... 15 15
Additional paid-in capital............................................ 95,398 95,398
Retained earnings (deficit)........................................... 3,636 (974)
------------------- -----------------
TOTAL STOCKHOLDERS' EQUITY.......................................... 99,049 94,439
------------------- -----------------
$374,022 $366,619
=================== =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE>
COAST RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the Years Ended December 31, 1995, 1996 and 1997
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
OPERATING REVENUES:
<S> <C> <C> <C>
Casino............................................... $ 129,675 $ 148,509 $ 211,026
Food and beverage.................................... 38,468 39,517 61,724
Hotel................................................ 13,233 14,700 28,095
Other................................................ 9,968 10,635 19,994
--------------------- --------------------- ---------------------
GROSS OPERATING REVENUES........................... 191,344 213,361 320,839
Less: promotional allowances........................ (16,588) (17,374) (26,956)
--------------------- --------------------- ---------------------
NET OPERATING REVENUES............................. 174,756 195,987 293,883
--------------------- --------------------- ---------------------
OPERATING EXPENSES:
Casino............................................... 67,782 72,849 113,391
Food and beverage.................................... 31,242 30,768 48,968
Hotel................................................ 6,692 6,921 12,034
Other................................................ 8,537 8,025 17,456
General and administrative........................... 34,186 39,085 57,877
Pre-opening expenses................................. -- 7,125 --
Land leases.......................................... 515 2,060 4,220
Deferred (non-cash) rent............................. 431 1,760 4,078
Guaranteed payments to former partners............... 858 -- --
Depreciation and amortization........................ 7,280 7,883 18,278
--------------------- --------------------- ---------------------
TOTAL OPERATING EXPENSES........................... 157,523 176,476 276,302
--------------------- --------------------- ---------------------
OPERATING INCOME................................... 17,233 19,511 17,581
--------------------- --------------------- ---------------------
OTHER INCOME (EXPENSES):
Interest expense:
Related parties................................... (3,126) (160) (148)
Other............................................. (760) (22,076) (26,191)
Interest income...................................... 106 4,791 98
Interest capitalized................................. 235 7,464 1,016
Gain on disposal of equipment........................ 92 58 919
--------------------- --------------------- ---------------------
TOTAL OTHER INCOME (EXPENSES).................... (3,453) (9,923) (24,306)
--------------------- --------------------- ---------------------
NET INCOME (LOSS) BEFORE INCOME TAXES................... 13,780 9,588 (6,725)
PROVISION (BENEFIT) FOR INCOME TAXES.................... -- 5,952 (2,115)
--------------------- --------------------- ---------------------
NET INCOME (LOSS)....................................... $ 13,780 $ 3,636 $ (4,610)
===================== ===================== =====================
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE OF COMMON
STOCK.................................................. $ -- $2.47 $(3.08)
===================== ===================== =====================
WEIGHTED AVERAGE SHARES OUTSTANDING..................... -- 1,472,742 1,494,353
===================== ===================== =====================
UNAUDITED PRO FORMA DATA (Reflecting reorganization and
change in tax status)
Provision (benefit) for income taxes................. 4,823 3,452 (2,115)
--------------------- --------------------- ---------------------
Net Income (loss).................................... $ 8,957 $ 6,136 $ (4,610)
===================== ===================== =====================
Basic and diluted net income (loss) per share of common
stock.................................................. $ 8.96 $ 4.17 $(3.08)
===================== ===================== =====================
Weighted average shares outstanding..................... 1,000,000 1,472,742 1,494,353
===================== ===================== =====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
COAST RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1996 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------ Paid-In Unrealized Earnings
Shares Amount Capital Gains(Losses) (Deficit) Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995............. 1,000,000 $10 $19,340 $ 13 $ 68,418 $ 87,781
Net income............................ 13,780 13,780
Change in unrealized gains (losses)
on marketable securities............. (13) (13)
Distributions to former partners...... (58,660) (58,660)
-----------------------------------------------------------------------------
Balances at December 31, 1995........... 1,000,000 10 19,340 -- 23,538 42,888
Exchange of notes payable of
subsidiary for common stock........ 494,353 5 52,520 52,525
Reclassification of undistributed
earnings to additional paid-in
capital upon termination of
partnership status................. 23,538 (23,538)
Net income............................ 3,636 3,636
-----------------------------------------------------------------------------
Balances at December 31, 1996........... 1,494,353 15 95,398 -- 3,636 99,049
Net income (loss)..................... (4,610) (4,610)
-----------------------------------------------------------------------------
Balances at December 31, 1997........... 1,494,353 $15 $95,398 $ -- $ (974) $ 94,439
=============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
COAST RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1996 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1996 1997
---------------- ----------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................. $ 13,780 $ 3,636 $ (4,610)
---------------- ----------------- ----------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization.............................. 7,280 7,883 18,278
Provision for bad debts.................................... 411 94 (185)
Gain on disposal of equipment and securities............... (92) (58) (919)
Deferred income taxes...................................... -- 4,234 (402)
Deferred rent expense...................................... 446 1,760 4,078
Amortization of original issue discount.................... -- 497 616
Other non-cash expenses.................................... 147 -- --
(Increase) decrease in operating assets:
Accounts receivable.................................... (267) (1,608) (1,773)
Income taxes receivable................................ -- (1,384) (388)
Inventories............................................ 854 (2,286) 1,279
Prepaid expenses and other............................. 85 (1,395) (1,370)
Increase (decrease) in operating liabilities:
Accounts payable........................................ (1,057) 4,307 (2,727)
Accrued liabilities..................................... 902 9,204 2,172
---------------- ----------------- ----------------
TOTAL ADJUSTMENTS...................................... 8,709 21,248 18,659
---------------- ----------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 22,489 24,884 14,049
================ ================= ================
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net of amounts in accounts payable.......... (32,331) (126,133) (58,912)
Proceeds from sale of equipment and securities.................... 219 20 1,070
---------------- ----------------- ----------------
NET CASH USED BY INVESTING ACTIVITIES.................. (32,112) (126,113) (57,842)
---------------- ----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of
discounts and commissions..................................... 4,500 179,570 19,569
Proceeds from borrowings under bank lines of credit............... 26,941 1,045 --
Principal payments on bank lines of credit........................ (4,000) (29,200) --
Principal payments on long-term debt.............................. (10,413) (1,826) (7,913)
Payments for debt issue costs..................................... (1,169) (1,336) --
Distributions to former partners.................................. (8,660) -- --
---------------- ----------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 7,199 148,253 11,656
---------------- ----------------- ----------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS................... (2,424) 47,024 (32,137)
CASH AND CASH EQUIVALENTS, at beginning of year...................... 16,967 14,543 61,567
---------------- ----------------- ----------------
CASH AND CASH EQUIVALENTS, at end of year............................ $ 14,543 $ 61,567 $ 29,430
================ ================= ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION
Background Information
Coast Resorts, Inc. ("Coast Resorts" or the "Company") is a Nevada
corporation and serves as a holding company for Coast Hotels and Casinos, Inc.
("Coast Hotels") and Coast West, Inc. ("Coast West"), also Nevada corporations.
Through Coast Hotels, the Company owns and operates the following hotel-casinos
in Las Vegas, Nevada:
-- Gold Coast Hotel and Casino, on Flamingo Road located approximately one
mile west of the Las Vegas Strip.
-- Barbary Coast Hotel and Casino, which is located on the Las Vegas
Strip.
-- The Orleans Hotel and Casino, which is located approximately one mile
west of the Las Vegas Strip on Tropicana Avenue, opened for business on
December 18, 1996.
Prior to the Reorganization described below, the Gold Coast Hotel and Casino
and the Barbary Coast Hotel and Casino had previously been operated
independently by Gold Coast Hotel and Casino, a Nevada limited partnership
organized in 1986 ("Gold Coast") and Barbary Coast Hotel and Casino, a Nevada
partnership organized in 1979 ("Barbary Coast").
On January 1, 1996, the partners of Gold Coast and Barbary Coast (the
"Predecessor Partnerships") completed a reorganization (the
"Reorganization") with Coast Resorts. Coast Resorts was formed in September
1995 for the purpose of effecting such Reorganization of the Predecessor
Partnerships. Coast Resorts, Gold Coast and Barbary Coast were all related
through common ownership and management control.
In the Reorganization, the partners of the Predecessor Partnerships each
transferred to Coast Resorts, by assignment or through the merger of Gaughan-
Herbst, Inc., a Nevada corporation, the sole general partner of the Gold Coast,
their respective partnership interests in the Predecessor Partnerships in
exchange for an aggregate of 1,000,000 shares of common stock, par value $.01
per share, of Coast Resorts. The partners of the Gold Coast (or their
principals) received in the aggregate 65% of such shares of common stock of
Coast Resorts, and the partners of the Barbary Coast received in the aggregate
35% of such shares. The shares of common stock were issued to the respective
partners (or their principals) of each such Predecessor Partnership based upon
such partners' pro rata interests in such Predecessor Partnership.
Concurrently with the exchange of the partners' interests in the Predecessor
Partnerships and the merger of Gaughan-Herbst, Inc. into Coast Resorts, Coast
Resorts became the sole partner of each of the Predecessor Partnerships, and
each Predecessor Partnership dissolved and terminated. Immediately upon such
dissolution and termination, all of the assets and liabilities of the
Predecessor Partnerships became the assets and liabilities of Coast Resorts.
Coast Resorts immediately contributed to Coast Hotels all of the assets of the
Predecessor Partnerships other than those relating to a certain ground lease
(the "Coast West Lease"), which Coast Resorts contributed to Coast West. In
addition, Coast Hotels assumed, jointly and severally with Coast Resorts, all of
the liabilities of the Predecessor Partnerships other than (i) obligations under
a portion of the subordinated notes payable to former partners and $1,500,000
principal amount of demand notes payable to a related party which were retained
by Coast Resorts and were exchanged for shares of Coast Resorts Common Stock (as
defined below), and (ii) those liabilities incident to the Coast West Lease, and
Coast West assumed, jointly and severally with Coast Resorts, all of the
liabilities of the Predecessor Partnerships incident to the Coast West Lease.
32
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION--(CONTINUED)
Coast Resorts retained the liability for an aggregate principal amount of
$51,025,000 in notes payable to former partners and retained the liability for
$1,500,000 relating to demand notes due to a related party (the "Exchange
Liabilities"). On January 16, 1996, the Exchange Liabilities were exchanged for
494,353 shares of common stock, par value $.01 per share, of Coast Resorts (the
"Coast Resorts Common Stock"), based upon management's estimate of the fair
market value of such common stock.
As a result of the Reorganization, the former partners of the Predecessor
Partnerships (or their principals) own all of the issued and outstanding shares
of capital stock of Coast Resorts, Coast Resorts owns all of the issued and
outstanding capital stock of Coast Hotels and Coast West, and Coast Hotels and
Coast West own and have assumed in the aggregate all of the assets and
liabilities of the Predecessor Partnerships (other than the Exchange Liabilities
that were exchanged for Coast Resorts Common Stock).
Coast West holds the Coast West Lease for future development. Coast West
has had no source of income since its inception in September 1995. Coast Hotels
has agreed to provide Coast West with advances sufficient to make payments on
the Coast West Lease and to fund development costs, up to a maximum of $8.0
million.
Basis of Presentation
Gold Coast and Barbary Coast historically operated under a high degree of
common control. The former Managing General Partner of Gold Coast was also a
general partner, and the principal manager, of Barbary Coast. Due to the common
control of Gold Coast and Barbary Coast and the continuation of ownership by the
former partners, the Reorganization was accounted for as a reorganization of
entities under common control. Accordingly, the financial statements of the
Company for all periods are presented as if the Reorganization occurred at the
beginning of the earliest period presented and include the accounts of all
entities involved on a historical cost basis, in a manner similar to a pooling
of interests. The Consolidated Financial Statements include the accounts of the
Company and all subsidiaries. All intercompany balances and transactions have
been eliminated.
The accompanying financial statements reflect the Exchange Liabilities as
obligations of the Company at December 31, 1995, as the exchange for Coast
Resorts Common Stock had not yet occurred. The exchange was accounted for
subsequent to the completion of the Reorganization, through the issuance of
Coast Resorts common stock in 1996 in the amount of $52,525,000, reflecting the
historical cost basis of the Exchange Liabilities.
33
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories, which consist primarily of food and beverage, liquor store, and
gift shop merchandise, are valued at the lower of cost or market value (which is
determined using the first-in, first-out and the average cost methods) except
for the base stocks of bar glassware and restaurant china which are stated at
original cost with subsequent replacements charged to expense.
Original Issue Discount and Debt Issue Costs
Original issue discount is amortized over the life of the related indebtedness
using the effective interest method. Costs associated with the issuance of debt
are deferred and amortized over the life of the related indebtedness also using
the effective interest method.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Expenditures for additions,
renewals and betterments are capitalized; expenditures for maintenance and
repairs are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation are eliminated from the accounts
and the resulting gain or loss is included in income. Depreciation is computed
by the straight-line method over the estimated useful lives of property and
equipment, which range from 5 to 15 years for equipment and up to 40 years for
buildings and improvements.
Pre-opening and Related Promotional Expense
Costs associated with the opening of new hotel-casinos, including personnel,
training, certain marketing and other costs, are capitalized and charged to
expense over management's estimate of the period of economic benefit associated
with such costs. Management believes that such period, with respect to major
hotel-casinos, is within one fiscal quarter of the date of opening.
In April 1997, the American Institute of Certified Public Accountants issued
an exposure draft of a proposed Statement of Position (SOP), Reporting on the
Costs of Start-Up Activities. If issued in its current form, the proposed SOP
would require that the Company expense its pre-opening and related promotional
expense as incurred rather than capitalize it and amortize it over the estimated
period of economic benefit of such costs as is the Company's current policy.
Advertising Costs
Costs for advertising are expensed as incurred, except costs for direct-
response advertising, which are capitalized and amortized over the period of the
related program. Capitalized advertising costs were immaterial at December 31,
1996 and 1997. Advertising expense was $4.3 million, $3.8 million and $7.5
million for the years ended December 31, 1995, 1996 and 1997, respectively.
Casino Revenue
In accordance with common industry practice, the Company recognizes as casino
revenue the net win from gaming activities which is the difference between
amounts wagered and amounts paid to winning patrons.
Deferred Revenue
Wagers received on all sporting events are recorded as a liability until the
final outcome of the event when the payoffs, if any, can be determined.
Progressive Jackpot Payouts
The Company has a number of progressive slot machines, progressive poker games
and a progressive keno game. As coins are played on the progressive slot
machines, the amount available to win increases, to be paid out when the
appropriate jackpot is hit. The keno game and poker game payout also increases
with the amount of play, to be paid out when hit. In accordance with common
industry practice, the Company has recorded the progressive jackpot as a
liability with a corresponding charge against casino revenue.
34
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
Promotional Allowances
The retail value of hotel accommodations and food and beverage items provided
to customers without charge is included in gross revenues and then deducted as
promotional allowances, to arrive at net revenues.
The estimated cost of providing these complimentary services is as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
(in thousands)
Hotel........................................ $ 1,426 $ 1,804 $ 2,023
Food and beverage............................ 14,704 14,725 23,187
------- ------- -------
Total cost of promotional allowances......... $16,130 $16,529 $25,210
======= ======= =======
</TABLE>
The cost of promotional allowances has been allocated to expense as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1996 1997
---------- --------- ---------
<S> <C> <C> <C>
(in thousands)
Casino.......................................... $15,232 $15,361 $22,280
Other........................................... 898 1,168 2,930
------- ------- -------
$16,130 $16,529 $25,210
======= ======= =======
</TABLE>
35
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Slot Club Promotion
The Company has established promotional slot clubs to encourage repeat
business from frequent and active slot customers. Members in the clubs earn
points based on slot activity accumulated in the members' account. Points can be
redeemed for certain consumer products (typically household appliances), travel,
food and beverage and cash. The Company accrues for slot club points expected to
be redeemed in the future based on the average cost of items expected to be
redeemed.
Income Taxes
Prior to the Reorganization, the Company operated as individual partnerships
which did not pay federal income taxes. The partners of Gold Coast and Barbary
Coast were taxed on their proportionate share of each of their respective
partnership's taxable income or loss. Therefore, these statements do not include
any provision or liability for corporate income taxes prior to January 1, 1996.
In connection with the Reorganization, effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS 109"). Under SFAS 109 deferred tax assets and liabilities
are recognized for the expected 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. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. The adoption of SFAS 109 on January 1, 1996
resulted in the recognition in the 1996 financial statements of net deferred tax
liabilities and a corresponding charge to earnings through the income tax
provision of approximately $2,500,000. In addition, upon termination of the
partnership tax status on January 1, 1996, all undistributed earnings of the
predecessor partnerships were reclassified to additional paid-in capital.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a remaining maturity
at acquisition of three months or less to be cash equivalents. Cash in excess of
daily requirements is typically invested in U.S. Government-backed repurchase
agreements with maturities of 30 days or less. Such investments are generally
made with major financial institutions having a high credit rating. At times,
the Company's cash deposited in financial institutions may be in excess of
federally insured limits.
Net Income (Loss) Per Common Share
Net income per common share for the years ended December 31, 1996 and December
31, 1997 is computed by dividing net income by the weighted average number of
shares of common stock outstanding, which weighted average totaled 1,472,742
shares and 1,494,353 shares, respectively. Net income per common share for the
year ended December 31, 1995 has not been presented as the Company operated as
individual partnerships prior to the Reorganization and no common stock was
outstanding. Unaudited pro-forma net income per common share has been presented
for the year ended December 31, 1995 assuming that the Reorganization occurred
on January 1, 1994.
In February 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 is effective for periods ending after December 15, 1997 and replaces
previously reported earnings per share with "basic", or undiluted, earnings per
share and "diluted" earnings per share. Basic earnings per share is computed
based on weighted average shares outstanding while diluted earnings per share
reflects the additional dilution for all potential dilutive securities, such as
stock options and warrants.
The Company has adopted the provisions of SFAS 128 in its fiscal 1997
financial statements. The retroactive adoption had no impact on the Company's
operating results for the year ended December 31, 1996.
36
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Concentration of Credit Risk
The Company extends credit to casino patrons after background checks and
investigations of creditworthiness and does not require collateral. The Company
records provisions for potential credit losses and such losses have been within
management's expectations. Management believes that as of December 31, 1997, no
significant concentration of credit risk exists for which an allowance has not
already been determined and recorded.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components. SFAS 130 requires a separate statement to report
components of comprehensive income for each period presented. The provisions of
SFAS 130 are effective for fiscal years beginning after December 15, 1997.
Management believes that the Company currently does not have items that would
require presentation in a separate statement of comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which supersedes FASB
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise."
SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS 131 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented. SFAS 131 will not have a material
effect on the Company's financial statements as the required information is
either currently being presented by the Company or it is not applicable to the
Company.
Reclassifications
Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform with the 1997 presentation.
37
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3--PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1996 1997
-------------------- --------------------
(IN THOUSANDS)
<S> <C> <C>
Building.......................................... $204,582 $232,661
Furniture and fixtures............................ 133,694 139,022
-------------------- --------------------
338,276 371,683
Less accumulated depreciation..................... (68,058) (81,733)
-------------------- --------------------
270,218 289,950
Land.............................................. 15,232 15,232
Construction in progress.......................... 1,130 1,969
-------------------- --------------------
Net property and equipment........................ $286,580 $307,151
==================== ====================
</TABLE>
38
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4--LEASES
The Barbary Coast building is located on land which is leased. The lease term
runs through May 2003 with a purchase option and two 30 year renewal options. In
addition, the parking lot adjacent to the building is being leased under a 10
year lease which runs through December 2003. Annual rental payments under these
leases total $300,000.
During December 1995, the Company entered into a ground lease for the land
underlying the Orleans. The land is owned by The Tiberti Company, a Nevada
general partnership, of which a stockholder of Coast Resorts is the managing
partner. The stockholder is also the president and a director and stockholder of
the general contractor for the construction of the Orleans, as more fully
described in Note 12. The lease provides for an initial term of fifty years with
a twenty-five year renewal option and includes a purchase option, exercisable by
the Company, at fair market value during the twentieth and twenty-first years of
the lease. Lease payments range from $175,000 to $250,000 per month during the
first sixteen years of the lease increasing by 3% per annum thereafter. The
total amount of the base rent payments on the Orleans lease is being charged to
expense on the straight-line method over the term of the lease. The Company has
recorded deferred rent to reflect the excess of rent expense over cash payments
since inception of the lease.
In September 1995, the Company entered into the Coast West Lease for a parcel
of land located in the western area of Las Vegas to be used for future
development opportunities. The Coast West Lease term runs through December 31,
2055, with three 10-year renewal options. Monthly payments started at $166,667
for the year ended December 31, 1995. Thereafter, the monthly rent increases by
the amount of $5,000 in January of each year. The lease includes a put option
exercisable by the landlord requiring the purchase of the land at fair market
value at the end of the 20th through 24th years of the lease, provided that the
purchase price shall not be less than ten times, nor more than fifteen times,
the annual rent at such time. Based on the terms of the lease, the potential
purchase price commitment ranges from approximately $31,000,000 to approximately
$51,000,000 in the years 2014 through 2018. The total amount of the base rent
payments on the Coast West Lease are being charged to expense on the straight-
line method over the term of the lease. The Company has recorded deferred rent
to reflect the excess of rent expense over cash payments since the inception of
the lease.
Future Minimum Lease Payments
The following is an annual schedule of future minimum lease payments required
under operating leases that have initial or remaining noncancelable terms in
excess of one year as of December 31, 1997:
OPERATING LEASES
(in thousands)
<TABLE>
<S> <C>
1998......................... $ 4,580
1999......................... 4,890
2000......................... 5,000
2001......................... 5,060
2002......................... 5,120
Later years.................. 426,387
--------
Total minimum lease payments.... $451,037
========
</TABLE>
39
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 -- LEASES -(Continued)
Rental Expense
Rent expense for the years ended December 31, 1995, 1996 and 1997 is as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1995 1996 1997
----------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Occupancy rental.................................... $1,559 $8,597 $8,597
Other equipment..................................... 262 414 900
----------------------------------------
$1,821 $9,011 $9,497
========================================
</TABLE>
NOTE 5 -- ACCRUED LIABILITIES
Major classes of accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1997
---------- ----------
(in thousands)
<S> <C> <C>
Slot club liability............................................... $ 5,010 $6,475
Compensation and benefits......................................... 7,535 8,207
Progressive jackpot payouts....................................... 4,124 4,101
Customer deposits and unpaid winners.............................. 2,726 5,069
Deferred sports book revenue...................................... 675 871
Taxes............................................................. 975 1,046
Accrued interest expense.......................................... 1,116 1,354
Other............................................................. 3,348 558
------- -------
$25,509 $27,681
======= =======
</TABLE>
40
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1997
----------------------------------------
(in thousands)
<S> <C> <C>
Related parties:
- ----------------
7.5% notes, payable in monthly installments of interest only, with all
principal and any unpaid interest due December 31, 2001. The notes
are uncollateralized and are payable to the former partners of Barbary
Coast and Gold Coast. Approximately $51,025,000 of the notes were
exchanged for Coast Resorts Common Stock on January 16, 1996 as more
fully described in Note 1.............................................. $ 1,975 $ 1,975
Non-related parties:
- --------------------
13% First Mortgage Notes due December 15, 2002, with interest payable
semiannually on June 15 and December 15, net of original issue
discount of $5,293,000 in 1996 and $4,677,000 in 1997................... 169,707 170,323
10 7/8% First Mortgage Notes due November 1, 2001, with interest
payable quarterly on March 15, June 15, September 15 and December 15. - 16,800
9.19% note payable, payable in 60 monthly installments of approximately
$750,000, including principal and interest, collateralized by certain
gaming and other equipment.............................................. 29,974 22,481
8.6% note due August 11, 2007, payable in monthly installments of
$26,667 principal plus interest on remaining principal balance,
collateralized by 1980 Hawker aircraft.................................. - 3,067
Other notes payable..................................................... 889 603
-------------------------------------
202,545 215,249
Less: current portion.................................................. 6,781 8,076
--------------------------------------
$195,764 $207,173
======================================
</TABLE>
On January 30, 1996, Coast Hotels completed a private placement of $175
million principal amount of 13% First Mortgage Notes Due December 15, 2002 (the
"13% First Mortgage Notes"). Interest on the 13% First Mortgage Notes is
payable semi-annually commencing June 15, 1996. The 13% First Mortgage Notes are
unconditionally guaranteed by the Company, Coast West and certain future
Subsidiaries of the Company. Net proceeds from the offering (after deducting
original issue discount and commissions) were approximately $164.1 million. Of
that amount, (i) approximately $114.8 million was deposited in a construction
disbursement account restricted for use by the Company to finance in part the
cost of developing, constructing, equipping and opening The Orleans, (ii)
approximately $19.3 million was used by the Company to purchase U.S. Government
Obligations which were deposited into an interest escrow account restricted to
fund the interest payable on the 13% First Mortgage Notes through December 15,
1996 and (iii) approximately $29.2 million was used by the Company to repay all
outstanding indebtedness under the Company's New Revolving Facility, which
facility was terminated. The balance of approximately $800,000 was used to pay,
in part, the estimated offering expenses of $2.4 million.
41
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 -- LONG-TERM DEBT (CONTINUED)
The 13% First Mortgage Notes are redeemable at the option of the Company at
106.50% and 103.25% of the principal amount thereof during the twelve month
periods beginning December 15, 2000 and 2001, respectively. In addition, on or
before December 15, 1998, the Company may redeem up to $57.25 million aggregate
principal amount of 13% First Mortgage Notes at 110% of the principal amount
thereof with the net proceeds of a public offering of Coast Resorts Common Stock
subject to certain limitations as outlined in the indenture.
The indenture governing the 13% First Mortgage Notes (the "Indenture")
contains covenants that, among other things, limit the ability of Coast Hotels
to pay dividends or make advances to the Company, repay existing indebtedness,
incur additional indebtedness, or sell material assets as defined in the
Indenture. Additionally, pursuant to the Indenture, if on July 20, 1998 (the
twentieth day of the month following the first month in which The Orleans has
been operating for 18 months), the Fixed Charge Coverage Ratio (as defined in
the Indenture) of Coast Hotels for the most recently ended four full fiscal
quarters is less than 1.5 to 1, the Company would be required to consummate an
asset sale of the Barbary Coast within one year. The proceeds from such asset
sale would be required to be used by the Company to repurchase Notes at a price
equal to 101% of the principal amount of such Notes. As of December 31, 1997,
the Fixed Charge Coverage Ratio was 1.53 to 1. Based upon recent operating
results, management believes that, for the applicable period, the Fixed Charge
Coverage Ratio will equal or exceed 1.5 to 1, although no assurance can be given
that such Fixed Charge Coverage Ratio will be achieved.
Coast Hotels has agreed to provide advances to Coast West sufficient to make
payments on the Coast West Lease and other obligations, including project
development and site improvement. The advances to Coast West are non-interest
bearing and, pursuant to the Indenture, cannot exceed $8.0 million in aggregate
principal amount at any time outstanding. As of December 31, 1996 and 1997,
Coast Hotels had advanced Coast West an aggregate total of $3.2 million and $6.4
million, respectively.
Based on the cash requirements of Coast West for lease payments and anticipated
development costs, it is likely that during 1998 Coast West will require cash
from advances from Coast Hotels (or from other sources) that, when added to the
outstanding advances from Coast Hotels, would exceed the maximum $8.0 million of
advances from Coast Hotels permitted under the terms of the Indenture. Should
Coast West not obtain financing from another source for its cash needs in excess
of the $8.0 million, Coast Hotels would be permitted to continue to make
advances to Coast West in excess of $8.0 million, provided that Coast West
becomes wholly-owned subsidiary of Coast Hotels and remains a guarantor of the
13% First Mortgage Notes.
Coast Hotels is permitted by the Indenture governing the 13% First Mortgage
Notes to borrow up to an additional $20 million for working capital purposes.
In November 1997, Coast Hotels issued $16.8 million principal amount of 10 7/8%
first mortgage notes due November 1, 2001 ("10 7/8% First Mortgage Notes"). The
10 7/8% First Mortgage Notes are collateralized on a pari passu basis with the
13% First Mortgage Notes. Interest on the 10 7/8% First Mortgage Notes is
payable quarterly on March 15, June 15, September 15 and December 15. The 10
7/8% First Mortgage Notes are unconditionally guaranteed by the Company and
certain future subsidiaries. Net proceeds from the offering (after deducting
commissions) were approximately $16.5 million and were used for working capital
purposes.
The 10 7/8% First Mortgage Notes are redeemable at any time prior to November
1, 2001 at a redemption price equal to the principal amount thereof, plus any
accrued and unpaid interest plus an "Applicable Premium" as defined in the
indenture governing the 10 7/8% First Mortgage Notes. That indenture contains
covenants that, among other things, limit the ability of Coast Hotels to pay
dividends to the Company, repay existing indebtedness, incur additional
indebtedness or sell material assets.
Maturities on long-term debt are as follows:
<TABLE>
<CAPTION>
Year ending December 31, Maturities
- ----------------------- ----------------
(in thousands)
<S> <C>
1998............................ $ 8,076
1999............................ 7,905
2000............................ 7,918
2001............................ 19,196
2002............................ 175,323
Thereafter...................... 1,508
-------------------
$219,926
===================
</TABLE>
42
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- INCOME TAXES
As discussed in Note 1, prior to the Reorganization, the Company operated
as individual partnerships which did not pay federal income taxes. Therefore,
these statements do not include any provision or liability for corporate income
taxes prior to January 1, 1996. Effective January 1, 1996, the Company adopted
SFAS 109 on January 1, 1996. The adoption of SFAS 109 resulted in the
recognition in the 1996 financial statements of net deferred tax liabilities and
a corresponding charge to earnings through the income tax provision of
approximately $2,500,000.
The components of the income tax provision (benefit) for the years ended
December 31, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
---------- ---------
Federal: (IN THOUSANDS)
<S> <C> <C>
Current............................................................. $1,716 $(1,713)
Deferred............................................................ 4,236 (402)
---------- ---------
$5,952 $(2,115)
========== =========
</TABLE>
The income tax provision (benefit) for the years ended December 31, 1996
and 1997 differs from that computed at the federal statutory corporate tax rate
as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Federal statutory rate................................................... 34.0% (34.0%)
Establishment of deferred taxes.......................................... 26.1% --
Other.................................................................... 2.0% 2.5%
---------- ----------
Effective tax rate.................................................. 62.1% (31.5%)
========== ==========
</TABLE>
43
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- INCOME TAXES (Continued)
The tax effects of significant temporary differences representing net deferred
tax assets and liabilities at December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1996 1997
--------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Current:
Accrued vacation.......................................... $ 226 $ 565
Allowance for doubtful accounts........................... 133 138
Accrued slot club points.................................. 717 902
Progressive liabilities................................... 1,059 1,025
Accrued medical and other benefits........................ 188 131
Tax credit................................................ -- 398
NOL carryforward.......................................... -- 1,617
Other..................................................... 80 35
--------------- ---------------
Total Current........................................ 2,403 4,811
--------------- ---------------
Non-current:
Deferred rent............................................. 1,726 3,152
--------------- ---------------
Total non-current.................................... 1,726 3,152
--------------- ---------------
Total deferred tax assets....................................... 4,129 7,963
--------------- ---------------
Deferred tax liabilities:
Non-current:
Property, plant and equipment............................. (8,365) (11,797)
--------------- ---------------
Total deferred tax liabilities............................ (8,365) (11,797)
--------------- ---------------
Net deferred tax liability...................................... $ (4,236) $ (3,834)
=============== ===============
</TABLE>
As of December 31, 1997, the Company had a net operating loss carryforward of
$4,620,000 which expires in 2012 and a tax credit of $398,000 which the Company
can carryforward indefinitely.
44
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of the Company's financial instruments
have been determined by the Company using available market information and
appropriate valuation methodologies. The carrying amounts of cash and cash
equivalents, accounts receivable, and accounts payable approximate fair values
due to the short-term maturities of these instruments. The carrying amounts and
estimated fair values of the Company's other financial instruments at December
31, 1997 are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
----------------------
(in thousands)
<S> <C> <C>
Liabilities:
Current portion of long-term debt $ 8,076 $ 8,076
First Mortgage Notes $170,323 $198,625
Other long-term debt $ 36,850 $ 36,400
</TABLE>
The methods and assumptions are summarized as follows:
For current portion of long-term debt, the carrying amount approximates fair
value due to the short-term nature of such debt. The fair value of the 13%
First Mortgage Notes was determined based upon market quotes. For all other
long-term debt, the fair value is estimated using a discounted cash flow
analysis, based on the incremental borrowing rates currently available to the
Company for debt with similar terms and maturity.
NOTE 9 -- CONTINGENCIES AND COMMITMENTS
The Company is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the financial position,
results of operations or cash flows of the Company.
45
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 -- RELATED PARTY TRANSACTIONS
The Company's advertising services are provided by LGT Advertising, a Company
owned by several stockholders of Coast Resorts. Advertising expense amounted to
approximately $2.8 million, $3.8 million and $7.5 million for the years ended
December 31, 1995, 1996 and 1997, respectively.
The Company received laundry services from Exber, Inc. (dba El Cortez Hotel &
Casino). A major stockholder-officer of Exber, Inc. is the father of a major
stockholder of Coast Resorts. Laundry expense payable to Exber, Inc. was
approximately $1.1 million and $864,000 for the years ended December 31, 1995
and 1996, respectively. The Company discontinued its laundry service from
Exber, Inc. in October 1996.
The Company purchases certain of its equipment and inventory for its
operations from RJS, a company owned by the father of a major stockholder and
director of Coast Resorts and by the Company's restaurant manager. RJS invoices
the Company based on actual costs incurred. For the fiscal years ended December
31, 1995, 1996 and 1997, the Company incurred expense payable to RJS of
approximately $388,000, $4.1 million and $1.4 million, respectively.
The Company purchases wallboards and parlay cards for its race and sports
books from Nevada Wallboards, Inc. A major stockholder and director of Coast
Resorts is the majority stockholder of Nevada Wallboards, Inc. For the fiscal
years ended December 31, 1995, 1996 and 1997, the Company incurred expenses
payable to Nevada Wallboards of approximately $123,000, $145,000 and $198,000,
respectively.
A director of the Company is the President and sole stockholder of Yates-
Silverman, Inc. which was retained by the Company as the designer of The Orleans
and the Coast West project. For the fiscal years ended December 31, 1995, 1996
and 1997, the Company incurred expense payable to Yates-Silverman of
approximately $409,000, $508,000 and $177,000, respectively.
The Company maintains numerous racetrack dissemination contracts with Las
Vegas Dissemination, Inc. ("LVD"). The son of a major stockholder and director
of Coast Resorts is the president and sole shareholder of LVD. LVD has been
granted a license by the Nevada gaming authorities to disseminate live racing
for those events and tracks for which it contracts and has been granted the
exclusive right to disseminate all pari-mutuel services and race wire services
in the State of Nevada. Under these dissemination contracts, the Company pays
to LVD an amount based on the wagers accepted for races held at the racetracks
covered by the respective contracts. The Company also pays to LVD a monthly fee
for race wire services. For the fiscal years ended December 31, 1995, 1996 and
1997, the Company incurred expenses payable to LVD of approximately $149,000,
$889,000 and $1.1 million, respectively.
J.A. Tiberti Construction Company ("Tiberti Construction") has served as the
general contractor for the original construction of the Gold Coast and for
certain expansions thereof, for the original construction of the Barbary Coast
and all expansions thereof and for the original construction and Phase II
expansion of The Orleans. The President of Tiberti Construction is a stockholder
and director of Coast Resorts and Coast Hotels. For the years ended December 31,
1995, 1996 and 1997, the Company paid approximately $10.9 million, $80.3 million
and $26.2 million, respectively, to Tiberti Construction in connection with such
construction services.
As more fully described in Note 5, in December 1995, the Company entered into
a ground lease with The Tiberti Company with respect to the land underlying The
Orleans. The President of The Tiberti Company is a director and shareholder of
Coast Resorts. Amounts paid to the Tiberti Company with respect to the lease
were $3.0 million and $2.1 million for the years ended December 31, 1996 and
1997, respectively.
46
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 -- BENEFIT PLANS
401(k) Plans
In November 1993, the Company adopted separate defined contribution 401(k)
plans for eligible employees of the Gold Coast and the Barbary Coast. During
1996, the separate plans were consolidated into one plan. All employees of the
Gold Coast and The Orleans are eligible to participate, All employees of the
Barbary Coast not covered by a collective bargaining agreement are eligible to
participate. The employees may elect to defer up to 15% of their yearly
compensation, subject to statutory limits. The Company makes matching
contributions of 50% of the first 6% of the employees' contribution.
Contribution expense was $1,224,000, $1,176,000 and $842,000 for the years ended
December 31, 1995, 1996, and 1997, respectively.
Defined Benefit Plan
Beginning in 1993, certain employees at the Barbary Coast became covered by a
union-sponsored, collectively bargained, multi-employer, defined benefit pension
plan. The Barbary Coast contributed $312,000, $274,000 and $313,000 during the
years ended December 31, 1995, 1996, and 1997, respectively, for the plan. These
contributions are determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours worked.
Stock Compensation Plan
In December 1996, the Board of Directors adopted the 1996 Stock Incentive Plan
(the "Plan") which authorizes the issuance of (i) shares of Coast Resorts Common
Stock or any other class of security of the Company which is convertible into
shares of Coast Resorts Common Stock or (ii) a right or interest with an
exercise or conversion privilege at a price related to Coast Resorts Common
Stock or with a value derived from the value of such common stock. 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,
limited stock appreciation rights, phantom stock, dividend equivalents,
performance units or performance shares. Officers, key employees, directors
(whether employee directors or non-employee directors) and consultants of the
Company and its subsidiaries are eligible to participate in the Plan.
Under the terms of the Plan, the aggregate number of shares issued and
issuable pursuant to all awards (including all incentive stock options) granted
under the Plan shall not exceed 220,000 at any time. In addition, 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.
No awards shall be made under the Plan after the tenth anniversary of the
adoption of the Plan. Although shares may be issued after the tenth anniversary
of the adoption of the Plan pursuant to awards made prior to such date, no
shares shall be issued under the Plan after the twentieth anniversary of
adoption of the Plan. As of December 31, 1997, no awards have been made under
the Plan.
The Financial Accounting Standards Board has issued Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). This Statement
defines a fair value based method of accounting for an employee stock option in
which companies account for stock options by recognizing, as compensation
expense in the statement of operations, the fair value of stock options granted
over the vesting period of the option. The statement also permits companies to
continue accounting for stock options under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). Upon the
issuance of stock options, the Company has elected to account for stock options
under APB No. 25 and will disclose the pro forma impact on net income and
earning per share as if the Company had used the fair value method recommended
by SFAS No. 123.
47
<PAGE>
COAST RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 -- SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1995 1996 1997
------------ -------------- ----------
<S> <C> <C> <C>
(In Thousands)
Interest paid.............................................................. $ 3,164 $21,607 $25,488
======= ======= =======
Income taxes paid.......................................................... $ -- $ 3,100 $ --
======= ======= =======
Supplemental schedule of non-cash investing and financing activities:
Property and equipment asset acquisitions included in
accounts payable or financed through notes payable............ $ 3,101 $38,918 $ 2,491
======= ======= =======
Distribution to former partners by issuance of notes payable..... $50,000 $ -- $ --
======= ======= =======
Conversion of notes payable to Coast Resorts Common Stock........ $ -- $52,525 $ --
======= ======= =======
</TABLE>
NOTE 13 -- REGULATION OF GAMING OPERATIONS
The gaming operations of the Company are subject to the licensing and
regulatory control of the Nevada Gaming Commission (the Nevada Commission), the
Nevada State Gaming Control Board (the Nevada Control Board) and the Clark
County Liquor and Gaming Board (the Clark County Board) (collectively, the
Nevada Gaming Authorities). These agencies issue gaming licenses based upon,
among other considerations, evidence that the character and reputation of
principal owners, officers, directors, and certain other key employees are
consistent with regulatory goals. The necessary licenses have been secured by
the Company. The licenses are not transferable and must be renewed periodically
upon the payment of appropriate taxes and license fees. The Nevada Gaming
Authorities have broad discretion with regard to the renewal of the licenses
which may at any time revoke, suspend, condition, limit or restrict a license
for any cause deemed reasonable by the issuing agency. Officers, directors and
key employees of the Company must be approved by the Nevada Control Board and
licensed by the Nevada Commission and Clark County Board.
NOTE 14 -- UNAUDITED PRO FORMA DATA
Prior to the Reorganization, the Company operated as individual partnerships
which did not pay federal income taxes. The partners of Gold Coast and Barbary
Coast were taxed on their proportionate share of each of their respective
partnership's taxable income or loss. The pro forma provision for income taxes
and the related pro forma net income and pro forma net income per common share
are unaudited and reflect adjustments to income taxes assuming that the change
in corporate income tax status occurred as of January 1, 1994.
48
<PAGE>
SCHEDULE I
COAST RESORTS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF THE COMPANY
The following condensed financial statements reflect the parent company
(Coast Resorts, Inc.) only, accounting for its wholly owned subsidiaries on the
equity method of accounting. All footnote disclosures have been omitted since
the information has been included in the Company's consolidated financial
statements included elsewhere in this Form 10-K.
COAST RESORTS, INC.
(Parent Company Only)
BALANCE SHEETS
December 31, 1996 and 1997
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1997
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 3 $ 3
------------------ ------------------
TOTAL CURRENT ASSETS...................................................... 3 3
INVESTMENT IN SUBSIDIARIES.................................................. 99,102 94,767
------------------ ------------------
$99,105 $94,770
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to affiliates........................................................... $ 56 $ 301
Accrued liabilities......................................................... -- 30
------------------ ------------------
TOTAL CURRENT LIABILITIES................................................. 56 331
------------------ ------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 500,000 shares authorized, none issued
and outstanding............................................................ -- --
Common stock, $.01 par value, 2,000,000 shares authorized, 1,494,353
shares issued and outstanding.............................................. 15 15
Additional paid-in capital.................................................. 95,398 95,398
Retained earnings (deficit)................................................. 3,636 (974)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY................................................ 99,049 94,439
------------------ ------------------
$99,105 $94,770
================== ==================
</TABLE>
49
<PAGE>
SCHEDULE I
COAST RESORTS, INC.
(Parent Company Only)
STATEMENTS OF INCOME (LOSS)
For the Years Ended December 31, 1995, 1996 and 1997
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
For the year ended December 31,
--------------------------------------------------------
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Equity interest in income (loss) from subsidiaries. $ 13,780 $ 3,689 $ (4,335)
General and administrative expenses................ -- (81) (261)
------------- ------------- -------------
Income (loss) before income taxes.................. 13,780 3,608 (4,596)
Income tax provision (benefit)..................... -- (28) 14
------------- ------------- -------------
NET INCOME (LOSS).................................. $ 13,780 $ 3,636 $ (4,610)
============= ============= =============
Basic and diluted net income (loss) per share of
common stock...................................... $ -- $ 2.47 $ (3.08)
============= ============= =============
Weighted average common shares outstanding......... -- 1,472,742 1,494,353
============= ============= =============
UNAUDITED PRO FORMA DATA (reflecting
reorganization and change in tax status of
subsidiaries):
Income (loss) before income taxes.................. 8,957 6,108 (4,596)
Provision (benefit) for income taxes............... -- (28) 14
------------- ------------- -------------
Net income (loss).................................. $ 8,957 $ 6,136 $ (4,610)
============= ============= =============
Basic and diluted net income (loss) per share of
common stock...................................... $ 8.96 $ 4.17 $ (3.08)
============= ============= =============
Weighted average common shares outstanding......... 1,000,000 1,472,742 1,494,353
============= ============= =============
</TABLE>
50
<PAGE>
SCHEDULE I
COAST RESORTS, INC.
(Parent Company Only)
STATEMENTS OF STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1995, 1996 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------------- Paid-In Unrealized Earnings
Shares Amount Capital Gains(Losses) (deficit) Total
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994........... 1,000,000 $10 $19,340 $ 13 $ 68,418 $ 87,781
Net income............................ 13,780 13,780
Change in unrealized gains (losses)
on marketable securities........... (13) (13)
Distributions to former partners...... (58,660) (58,660)
------------------------------------------------------------------------------------
Balances at December 31, 1995........... 1,000,000 10 19,340 -- 23,538 42,888
Exchange of notes payable of
subsidiary for common stock........ 494,353 5 52,520 52,525
Reclassification of undistributed
earnings to additional paid-in
capital upon termination of
partnership status................. 23,538 (23,538) --
Net income............................ 3,636 3,636
------------------------------------------------------------------------------------
Balances at December 31, 1996........... 1,494,353 15 95,398 -- 3,636 99,049
Net (loss)............................ (4,610) (4,610)
------------------------------------------------------------------------------------
Balances at December 31, 1997........... 1,494,353 $15 $95,398 $ -- $ (974) $ 94,439
====================================================================================
</TABLE>
51
<PAGE>
SCHEDULE I
COAST RESORTS, INC.
(Parent Company Only)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1996 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1995 1996 1997
--------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ 13,780 $ 3,636 $(4,610)
-------------- ------------- ------------
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Equity interest in net (income) loss from
subsidiaries......................................... (13,780) (3,689) 4,335
Due to affiliates..................................... -- 53 245
-------------- ------------- ------------
TOTAL ADJUSTMENTS.................................. (13,780) (3,636) 4,610
-------------- ------------- ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES............................. -- -- --
-------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................... 4 -- --
Cash used to purchase subsidiaries' stock................ (1) -- --
-------------- ------------- ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES....................................... 3 -- --
-------------- ------------- ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS............................................... 3 -- --
CASH AND CASH EQUIVALENTS, at beginning of year............ -- 3 3
-------------- ------------- ------------
CASH AND CASH EQUIVALENTS, at end of year.................. $ 3 $ 3 $ 3
============== ============= ============
</TABLE>
52
<PAGE>
SCHEDULE II
COAST RESORTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1996 and 1997
(in thousands)
<TABLE>
<CAPTION>
Additions Additions
Balance at Charged to Charges to
Beginning Costs and Other Deductions Balance at
DESCRIPTION of Year Expenses Accounts (a) End of Year
- ----------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
(casino receivables)
Year ended December 31, 1995......... $382 $423 $ -- $431 $374
============== ============== ============== ============== ==============
Year ended December 31, 1996......... $374 $ 94 $ -- $ 89 $379
============== ============== ============== ============== ==============
Year ended December 31, 1997......... $379 $448 $ -- $633 $194
============== ============== ============== ============== ==============
</TABLE>
53
<PAGE>
EXHIBIT 10.25
10 7/8% FIRST MORTGAGE NOTE due 2001
No. 1 $16,800,000
CUSIP No. 19035C AD 4
COAST HOTELS AND CASINOS, INC.
promises to pay to CEDE & CO.
or registered assigns,
the principal sum of SIXTEEN MILLION EIGHT HUNDRED THOUSAND ($16,800,000)
Dollars on November 1, 2001.
Interest Payment Dates: March 15, June 15, September 15 and December 15
Record Dates: March 1, June 1, September 1 and December 1
Dated: November 21, 1997
COAST HOTELS AND CASINOS, INC.
By: \s\ Michael J. Gaughan
-------------------------
Michael J. Gaughan
Chairman and Chief Executive Officer
By: \s\ Gage Parrish
-------------------
Gage Parrish
Chief Financial Officer and Assistant
Secretary
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee
By: \s\ Frank Leslie, III
------------------------
Authorized Signatory
<PAGE>
10 7/8% First Mortgage Note due 2001
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depositary Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of [Cede & Co.]
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, [Cede & Co.], has an interest herein.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION FROM THE
REQUIREMENTS OF THE ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a)
INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT OR IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY OR ANY GUARANTOR SO REQUESTS),
(b) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE ACT OR, (c) TO THE COMPANY OR (d)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND, (2) IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
<PAGE>
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER WILL BE
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Coast Hotels and Casinos, Inc., a Nevada corporation (or any
successor thereto as provided in the Indenture, the "Company"), promises to pay
interest on the principal amount of this Note at the rate of 10 7/8% per annum
(the "Interest") from November 21,1997 to the date of payment of such principal
amount of this Note; provided, however, that if the pledge of the common stock
-------- -------
of the Company by Coast Resorts, Inc. ("Coast Resorts") to Firstar Bank of
Minnesota, N.A., as trustee for the Holder, pursuant to that certain Stock
Pledge and Security Agreement, dated as of November 21, 1997, executed by Coast
Resorts, the Company and Coast West, Inc., shall not have become effective
pursuant to the terms thereof on or prior to [May 31, 1998], then the aforesaid
rate of Interest of 10 7/8% per annum shall increase in an amount equal to 1%
per annum so that, commencing on June 1, 1998, Interest on the principal amount
of this Note shall accrue at the rate of 11 7/8% per annum. Installments of
Interest shall become due and payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year, or if any such day is not a Business
Day, on the next succeeding Business Day (each, an "Interest Payment Date").
Additionally, installments of accrued and unpaid Interest shall become due and
payable with respect to any principal amount of this Note that matures (whether
at stated maturity, upon acceleration, upon maturity of repurchase obligation or
otherwise) upon such maturity of such principal amount of this Note. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal at the rate equal to 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 (without regard to any
applicable grace periods) at the same rate to the extent lawful. Interest on
this Note shall be computed on the basis of a 360-day year, consisting of twelve
30-day months. Each installment of Interest shall be calculated to accrue from
and including the most recent date to which Interest has been paid or provided
for (or from and including November 21, 1997 if no installment of Interest has
been paid) to, but not including, the date of payment.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the March 1, June 1, September 1 or December 1 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date (the "Record Date"),
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and interest at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York,
<PAGE>
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest and premium on, all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Firstar Bank of Minnesota,
N.A., the Trustee under the Indenture, shall act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE AND SECURITY DOCUMENTS. The Company issued the Notes under
an Indenture dated as of November 21, 1997 (as it may be amended from time to
time, the "Indenture") among the Company, Coast Resorts, Inc., as Guarantor, and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of such terms. The Notes are secured obligations of the Company
limited to $16,800,000 in aggregate principal amount. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes
or any Note Guarantee. The Notes are secured by certain collateral pursuant to
the Security Documents referred to in the Indenture and that may be released
pursuant to the terms thereof.
5. OPTIONAL REDEMPTION.
(a) At any time on or prior to November 1, 2001, the Company may redeem
the Notes, in whole but not in part, at a redemption price equal to the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, thereon to the redemption date. The Company may not redeem
Notes pursuant to this paragraph if it has made an offer to repurchase the Notes
with respect to a Change of Control pursuant to Section 4.15 of the Indenture.
"Applicable Premium" means, with respect to a Note being redeemed, (a) the
present value on the date of redemption of all remaining required interest and
principal payments due on such Note computed using a discount rate equal to the
Treasury Rate plus 50 basic points minus (b) the then outstanding principal
amount of such Note minus (c) accrued interest paid on the redemption date.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the date fixed
for redemption (or, if such Statistical Release is no longer
<PAGE>
published, any publicly available source of similar market date)) most nearly
equal to the then remaining term to November 1, 2001; provided, however, that if
the then remaining term to November 1, 2001 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the then remaining term to November 1, 2001 is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the
Company shall not be required to make mandatory redemptions or sinking fund
payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at an offer price
in cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within 20 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, when the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall (i)
make an offer to all Holders of Notes to purchase Notes, and (ii) prepay,
purchase or redeem (or make an offer to do so) any other Indebtedness of the
Company ranking on a parity with the Notes and secured on a pari passu basis by
any Pari Passu Collateral from time to time outstanding with provisions
requiring the Company to prepay, purchase or redeem such Indebtedness with the
proceeds from any asset sales (or offer to do so), pro rata in proportion to the
respective principal amounts of the Notes and such other Indebtedness required
to be prepaid, purchased or redeemed or tendered pursuant to such offer (an
"Asset Sale Offer"), in an amount equal to the maximum principal amount of Notes
and such other Indebtedness that may be prepaid, purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof (or such higher price as may be provided with respect to such
other Indebtedness) plus accrued and unpaid interest, if any, thereon to the
date of repurchase, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes and such other
Indebtedness tendered, prepaid, purchased, or redeemed pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use
any remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and such other Indebtedness surrendered by Holders
thereof or required to be prepaid, purchased or redeemed exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased in
compliance with the requirements of the principal national securities exchange,
if
<PAGE>
any, on which the Notes are listed, or, if the Notes are not so listed, on a pro
rata basis (with such adjustments as may be deemed appropriate by the Trustee so
that only Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased). Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. Prior to due presentment for registration of
the transfer of this Note, the Trustee, any Agent, the Company and the Guarantor
may deem and treat the Person in whose name this Note is registered as its
absolute owner for the purpose of receiving payment of principal of and interest
on this Note, and for all other purposes whatsoever, whether or not this Note is
overdue, and neither the Trustee, any Agent, the Company nor the Guarantor shall
be affected by notice to the contrary.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Notes, the Note Guarantees or the Security Documents may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of all of the Notes then outstanding (including any consents
obtained in connection with a tender offer or exchange offer for the Notes),
and, subject to certain exceptions, 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 the Indenture, the Notes, the Note Guarantees or the Security Documents may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes). Without the consent of any Holder
<PAGE>
of a Note, the Company and the Trustee together may amend or supplement the
Indenture, the Notes, the Note Guarantees or the Security Documents to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or the Guarantor's obligations to Holders of the Notes in case of
a merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes (including providing for
additional Note Guarantees pursuant to the Indenture) or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA or to enter into additional or
supplemental Security Documents.
12. DEFAULTS AND REMEDIES. Events of Default include (as more fully
described, and subject to, the terms and conditions of the Indenture as it may
be amended from time to time): (i) default in the payment when due of interest
on the Notes and such default continues for a period of 30 days; (ii) default in
the payment when due of principal or of premium, if any, on the Notes when the
same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise; (iii) failure by the Company
to comply with any of the provisions of Sections 4.7, 4.9, 4.10, 4.12, 4.15,
4.23 or 5.1 of the Indenture; (iv) failure by the Company for 45 days after
notice to the Company by the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes to comply with any of its other agreements
or covenants in, or provisions of, the Indenture or the Notes; (v) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Subsidiaries) whether such Indebtedness or Guarantee
now exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more; (vi) except as permitted in the Indenture, any Note Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Note Guarantee; (vii) certain final judgments for the
payment of money that are not paid, discharged or stayed for a period of 60
days; (viii) breach by the Company or any Guarantor of any material
representation or warranty set forth in the Security Documents, or, subject to
the grace periods set forth in the applicable Security Documents, default by the
Company or any Guarantor in the performance of any covenant set forth in the
Security Documents, except as set forth in the Indenture for 45 days after
notice to the Company by the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes, or repudiation by the Company or any
Guarantor of its obligations under the Security Documents or, except as set
forth in the Indenture, the unenforceability of the Security Documents against
<PAGE>
the Company or any Guarantor for any reason; (ix) certain events of bankruptcy
or insolvency with respect to the Company or any Guarantor that is a Significant
Subsidiary of the Company or any group of Guarantors that together would
constitute a Significant Subsidiary of the Company; or (x) any revocation,
termination, suspension or other cessation of effectiveness of any Gaming
License which results in the cessation or suspension of gaming operations at any
of the Gold Coast, Barbary Coast or Orleans Hotel and Casino for a period of
more than 90 consecutive days. If any Event of Default (other than by reason of
bankruptcy or insolvency) occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
the principal, premium, if any, interest and any other monetary obligations on
all of the Notes to be due and payable immediately. Upon any such declaration,
the principal, premium, if any, interest and any other monetary obligations on
the Notes shall be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries or
any group of Subsidiaries, that, taken as a whole, would constitute a
Significant Subsidiary of the Company, the principal, premium, if any, and
interest and any other monetary obligations on all outstanding Notes shall
become due and payable immediately without further action or notice. Holders of
the Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power, including the exercise of any remedy under the Security
Documents. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. In addition, the Trustee shall have no
obligation to accelerate the Notes if in the best judgment of the Trustee
acceleration is not in the best interest of the Holders of the Notes. The
Holders of not less than a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, premium, if any, or the principal of, the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required, forthwith upon any
Officer becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
13. GUARANTEE. Payment of principal of, premium, if any, and interest
(including interest on overdue principal and overdue interest, if lawful) on the
Notes and all other obligations of the Company under the Notes, the Indenture
and the related Security Documents will be jointly and severally and
unconditionally guaranteed by the Guarantor pursuant to, and subject to the
terms of, Article 11 of the Indenture.
14. TRUSTEE DEALINGS WITH COMPANY. 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 as if it were not the Trustee.
<PAGE>
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or shareholder of the Company, any Subsidiary of the Company or the
Guarantor, as such, shall have any liability for any Obligations of the Company,
any Subsidiary of the Company or the Guarantor under the Notes, any Note
Guarantee, the Indenture, the Security Documents, as applicable, or for any
claim based on, in respect of, or by reason of such Obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for issuance
of the Notes and the Note Guarantees.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual
signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Security Documents.
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. ADDITIONAL INFORMATION. Any Holder of the Notes or prospective
investor may obtain a copy of the Indenture and/or the Security Documents
without charge by writing to the Company at the following address:
Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attention: Corporate Secretary
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to:
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: _________
Your Signature: _________________________________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee:
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10
[ ] Section 4.15
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of this Indenture, state the amount you
elect to have purchased:
$__________
Date: _________
Signature: ___________________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.: _____________________
Signature Guarantee:
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ------------------ ----------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 10.26
================================================================================
COAST HOTELS AND CASINOS, INC.
ISSUER
$16,800,000
10 7/8 % First Mortgage Notes due 2001
COAST RESORTS, INC.
GUARANTOR
_______________________
INDENTURE
Dated as of November 21, 1997
________________________
FIRSTAR BANK OF MINNESOTA, N.A.
TRUSTEE
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I.DEFINITIONS AND INCORPORATION BY REFERENCE...................... 1
Section 1.1 Definitions........................................... 1
Section 1.2 Other Definitions..................................... 20
Section 1.3 Incorporation By Reference of Trust Indenture Act..... 20
Section 1.4 Rules of Construction................................. 21
Section 1.5 Trust Indenture Act................................... 21
ARTICLE II.THE NOTES...................................................... 22
Section 2.1 Form and Dating....................................... 22
Section 2.2 Execution and Authentication.......................... 22
Section 2.3 Registrar and Paying Agent............................ 23
Section 2.4 Paying Agent to Hold Money in Trust................... 23
Section 2.5 Holder Lists.......................................... 24
Section 2.6 Transfer and Exchange................................. 24
Section 2.7 Replacement Notes..................................... 30
Section 2.8 Outstanding Notes..................................... 30
Section 2.9 Treasury Notes........................................ 31
Section 2.10 Temporary Notes....................................... 31
Section 2.11 Cancellation.......................................... 31
Section 2.12 Defaulted Interest.................................... 32
ARTICLE III.OFFERS TO PURCHASE OR REDEMPTION.............................. 32
Section 3.1 Notices to Trustee.................................... 32
Section 3.2 Selection of Notes to Be Redeemed..................... 32
Section 3.3 Notice of Redemption.................................. 33
Section 3.4 Effect of Notice of Redemption........................ 34
Section 3.5 Deposit of Redemption Price........................... 34
Section 3.6 Notes Redeemed in Part................................ 34
Section 3.7 Optional Redemption................................... 35
Section 3.8 Redemption Pursuant to Gaming Law..................... 35
Section 3.9 Mandatory Redemption.................................. 35
Section 3.10 Offer to Purchase By Application of Excess Proceeds... 36
ARTICLE IV. COVENANTS..................................................... 38
Section 4.1 Payment of Notes...................................... 38
Section 4.2 Maintenance of Office or Agency....................... 38
Section 4.3 SEC Reports........................................... 38
Section 4.4 Compliance Certificate................................ 39
Section 4.5 Taxes................................................. 40
Section 4.6 Stay, Extension and Usury Laws........................ 40
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 4.7 Restricted Payments....................................................... 40
Section 4.8 Dividend and Other Payment Restrictions Affecting Subsidiaries............ 42
Section 4.9 Incurrence of Indebtedness and Issuance of Preferred Stock................ 43
Section 4.10 Asset Sales............................................................... 46
Section 4.11 Transactions with Affiliates.............................................. 49
Section 4.12 Liens..................................................................... 49
Section 4.13 Line of Business.......................................................... 50
Section 4.14 Corporate Existence....................................................... 50
Section 4.15 Change of Control......................................................... 50
Section 4.16 Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Subsidiaries....................................................... 52
Section 4.17 Subsidiary Guarantees..................................................... 52
Section 4.18 Maintenance of Insurance.................................................. 53
Section 4.19 Limitation on Status as Investment Company................................ 53
Section 4.20 Further Assurances........................................................ 53
Section 4.21 Limitations on Activities of Coast West................................... 53
Section 4.22 No Amendment to Subordination Provisions.................................. 54
Section 4.23 Limitations on Use of Proceeds............................................ 54
ARTICLE V.SUCCESSORS.......................................................................... 54
Section 5.1 Merger, Consolidation or Sale of Assets................................... 55
Section 5.2 Successor Corporation Substituted......................................... 55
ARTICLE VI.DEFAULTS AND REMEDIES.............................................................. 56
Section 6.1 Event of Default.......................................................... 56
Section 6.2 Acceleration.............................................................. 58
Section 6.3 Other Remedies............................................................ 59
Section 6.4 Waiver of Past Defaults................................................... 59
Section 6.5 Control by Majority....................................................... 59
Section 6.6 Limitation on Suits....................................................... 60
Section 6.7 Rights of Holders of Notes to Receive Payment............................. 60
Section 6.8 Collection Suit by Trustee................................................ 60
Section 6.9 Trustee May File Proofs of Claim.......................................... 61
Section 6.10 Priorities................................................................ 61
Section 6.11 Undertaking For Costs..................................................... 62
Section 6.12 Management of Casinos..................................................... 62
Section 6.13 Intercreditor Agreement................................................... 62
ARTICLE VII.TRUSTEE........................................................................... 62
Section 7.1 Duties of Trustee......................................................... 62
Section 7.2 Rights of Trustee......................................................... 64
Section 7.3 Individual Rights of Trustee.............................................. 64
Section 7.4 Trustee's Disclaimer...................................................... 65
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 7.5 Notice of Defaults...................................................... 65
Section 7.6 Reports by Trustee to Holders of the Notes.............................. 65
Section 7.7 Compensation and Indemnity.............................................. 66
Section 7.8 Replacement of Trustee.................................................. 67
Section 7.9 Successor Trustee by Merger, Etc........................................ 68
Section 7.10 Eligibility; Disqualification........................................... 69
Section 7.11 Preferential Collection of Claims Made Against Company.................. 69
ARTICLE VIII.LEGAL DEFEASANCE AND COVENANT DEFEASANCE....................................... 69
Section 8.1 Legal Defeasance or Covenant Defeasance................................. 69
Section 8.2 Legal Defeasance and Discharge.......................................... 69
Section 8.3 Covenant Defeasance..................................................... 70
Section 8.4 Conditions to Legal or Covenant Defeasance.............................. 70
Section 8.5 Deposited Money and government Securities to be Held in Trust; Other
Miscellaneous Provisions................................................ 72
Section 8.6 Repayment to Company.................................................... 72
Section 8.7 Satisfaction and Discharge of Indenture................................. 73
Section 8.8 Reinstatement........................................................... 74
Section 8.9 Collateral.............................................................. 74
ARTICLE IX.AMENDMENT, SUPPLEMENT AND WAIVER................................................. 75
Section 9.1 Without Consent of Holders of Notes..................................... 75
Section 9.2 With Consent of Holders of Notes........................................ 76
Section 9.3 Compliance with Trust Indenture Act..................................... 77
Section 9.4 Revocation and Effect of Consents....................................... 78
Section 9.5 Notation on or Exchange of Notes........................................ 78
ARTICLE X.COLLATERAL AND SECURITY........................................................... 78
Section 10.1 Security................................................................ 78
Section 10.2 Recording and Opinions.................................................. 80
Section 10.3 Release of Collateral, Etc.............................................. 81
Section 10.4 Protection of the Trust Estate.......................................... 82
Section 10.5 Certificates of the Company............................................. 83
Section 10.6 Certificates of the Trustee............................................. 83
Authorization of Actions to be Taken by the Trustee Under The Security Documents........ 83
Section 10.8 Authorization of Receipt of Funds by The Trustee Under The Security
/Documents.............................................................. 84
Section 10.9 Termination of Security Interest........................................ 84
Section 10.10 Cooperation of Trustee.................................................. 85
Section 10.11 Collateral Agent........................................................ 85
ARTICLE XI.NOTE GUARANTEE................................................................... 85
Section 11.1 Note Guarantees......................................................... 85
Section 11.2 Execution and Delivery of Note Guarantee................................ 87
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 11.3 Limitation of Guarantor's Liability....................................... 88
Section 11.4 Guarantor May Consolidate, Etc., on Certain Terms......................... 88
Section 11.5 Releases of Note Guarantees............................................... 89
Section 11.6 "Trustee" to Include Paying Agent......................................... 89
ARTICLE XII.MISCELLANEOUS..................................................................... 89
Section 12.1 Trust Indenture Act Controls.............................................. 89
Section 12.2 Notice.................................................................... 90
Section 12.3 Communication by Holders of Notes with Other Holders of Notes............. 91
Section 12.4 Certificate and Opinion as to Conditions Precedent........................ 91
Section 12.5 Statements Required in Certificate or Opinion............................. 92
Section 12.6 Rules by Trustee and Agents............................................... 92
Section 12.7 No Personal Liability of Directors, Officers, Employees and Shareholders.. 92
Section 12.8 Governing Law............................................................. 92
Section 12.9 No Adverse Interpretation of Other Agreements............................. 93
Section 12.10 Successors................................................................ 93
Section 12.11 Severability.............................................................. 93
Section 12.12 Counterpart Originals..................................................... 93
Section 12.13 Table of Contents, Headings, Etc.......................................... 93
</TABLE>
-iv-
<PAGE>
EXHIBITS
Exhibit A. Form of Note.
Exhibit B. Form of 1996 Notes Intercreditor Agreement.
Exhibit C. Form of Note Guarantees.
Exhibit D. Form of Certificate of Transfer.
Exhibit E. Form of Coast Hotels Deed of Trust, Assignment
of Rents and Security Agreement.
Exhibit F. Form of Coast Resorts Pledge Agreement.
Exhibit G. Form of Coast Hotels Security Agreement.
Exhibit H. Form of Coast Hotels Unsecured Indemnity
Agreement.
-v-
<PAGE>
SCHEDULES
Schedule A Existing Indebtedness
-vi-
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Sections
<S> <C>
310(a)(1)................................................................. 7.10
(a)(2)................................................................. 7.10
(a)(3)................................................................. N.A.
(a)(4)................................................................. N.A.
(a)(5)................................................................. 7.10
(b).................................................................... 7.10
(c).................................................................... N.A.
311(a).................................................................... 7.11
(b).................................................................... 7.11
(c).................................................................... N.A.
312(a).................................................................... 2.05
(b).................................................................... 12.03
(c).................................................................... 12.03
313(a).................................................................... 7.06
(b)(1)................................................................. 10.03
(b)(2)................................................................. 7.07
(c).............................................................. 7.06; 12.02
(d).................................................................... 7.06
314(a).................................................................... 12.06
(b).................................................................... 10.02
(c)(1)................................................................. 12.04
(c)(2)................................................................. 12.04
(c)(3)................................................................. 12.04
(d)...................................................... 10.2;10.3;10.5;10.6
(e)................................................................ 10.2;12.5
(f).................................................................... N.A.
315(a).................................................................... 7.01
(b)............................................................... 7.05;12.02
(c).................................................................... 7.01
(d).................................................................... 7.01
(e).................................................................... 6.16
316(a)(last sentence)..................................................... 2.09
(a)(1)(A).............................................................. 6.10
(a)(1)(B).............................................................. 6.09
(a)(2)................................................................. N.A.
(b).................................................................... 6.12
(c).................................................................... 2.13
</TABLE>
-vii-
<PAGE>
<TABLE>
<S> <C>
317(a)(1)................................................... 6.13
(a)(2)................................................... 6.14
(b)...................................................... 2.04
318(a)......................................................12.01
(b)...................................................... N.A.
(c)......................................................12.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
-viii-
<PAGE>
INDENTURE dated as of November 21, 1997 among Coast Hotels and Casinos,
Inc., a Nevada corporation (the "Company"), the Guarantor (as defined below),
and Firstar Bank of Minnesota, N.A., as trustee (the "Trustee").
WHEREAS, the Company, the Guarantor and Firstar Bank of Minnesota, N.A., as
trustee (in such capacity, the "1996 Notes Trustee"), have entered into that
certain Indenture dated as of January 30, 1996 (the "1996 Indenture"), Section
4.09 of which Indenture permits the Company to incur and the Guarantor to
guarantee additional debt on a pari passu basis with the 13% First Mortgage
Notes due 2002 (the "1996 Notes") issued by the Company in the aggregate
principal amount of $175,000,000 under such Indenture.
WHEREAS, the Company has agreed to issue and the Guarantor has agreed to
guaranty $16,800,000 in aggregate principal amount of the Company's 10 7/8%
First Mortgage Notes due 2001 (the "Notes") pursuant to this Indenture with the
rights under such Notes to be on a pari passu basis with the 1996 Notes, and,
pursuant to the 1996 Indenture, the Trustee for the holders of the 1996 Notes
has agreed to enter into a Pari Passu Intercreditor Agreement with the Trustee.
NOW THEREFORE, the Company, the Guarantor 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 I.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section I.1 Definitions.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into such specified Person, including, without limitation,
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into such specified Person, and (ii) Indebtedness secured
by a Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
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<PAGE>
"Applicable Premium" means, with respect to a Note being redeemed, (a) the
present value on the date of redemption of all remaining required interest and
principal payments due on such Note, computed using a discount rate equal to the
Treasury Rate plus 50 basis points minus (b) the then outstanding principal
amount of such Note minus (c) accrued interest paid on the redemption date.
"Asset Sale" means (i) the sale, lease, conveyance, transfer or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback) other than sales of inventory or the rental of hotel rooms in the
ordinary course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole shall be governed by Section 4.15 or Article 5
hereof and not by Section 4.10 hereof), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $500,000 or (b) for Net Proceeds in excess of $500,000.
Notwithstanding the foregoing, the following will not be deemed to be Asset
Sales: (i) a transfer of assets by the Company to a Subsidiary that is a
Guarantor or by a Subsidiary to the Company or to another Subsidiary that is a
Guarantor, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary, (iii) a Restricted Payment
that is permitted by the covenant described in Section 4.7 herein and (iv) the
sale of a Restricted Investment.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the
relief of debtors.
"Barbary Coast" means the Barbary Coast Hotel and Casino.
"Barbary Coast Offer" has the meaning set forth in Section 4.10(b) of the
1996 Indenture.
"Barbary Coast Partnership" means Barbary Coast Hotel and Casino, a Nevada
general partnership.
"Barbary Coast Expansion" means any improvement of the Barbary Coast Hotel
and Casino that includes the construction of not less than 150 additional hotel
rooms.
"Board of Directors" means, as to any Person, the board of directors of
such Person, or
any authorized committee thereof or other equivalent governing body of such
Person.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized and reflected as a liability on the
balance sheet in accordance with GAAP.
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<PAGE>
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof with a term not to exceed one year after
the day of acquisition, (iii) time deposits and certificates of deposit and
commercial paper issued by any domestic commercial bank or the parent
corporation of any domestic commercial bank of recognized standing having
capital and surplus in excess of $500.0 million and commercial paper issued by
others rated at least A-2 or the equivalent thereof by Standard & Poor's Ratings
Group or its successors or at least P-2 or the equivalent thereof by Moody's
Investors Service, Inc. or its successors and in each case maturing within one
year after the date of acquisition, (iv) investments in money market funds,
including funds offered by the Trustee or Affiliates of the Trustee,
substantially all of whose assets comprise securities of the types described in
clauses (ii) and (iii) above, and (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
financial qualification specified in clause (iii) above.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
buildings, restaurants, hotels, theaters, parking facilities, retail shops,
land, golf courses and other recreation and entertainment facilities, vessels,
barges, ships and equipment.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of Coast Resorts (except to the Company or a
Wholly-Owned Subsidiary of the Company) or the Company and its Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principals or their Related Parties (as defined
below), (ii) the adoption of a plan relating to the liquidation or dissolution
of Coast Resorts or the Company, (iii) the first day on which a majority of the
members of the Board of Directors of Coast Resorts and the Company are not
Continuing Directors, (iv) prior to the consummation of an IPO, the first day on
which (a) the Principals and their Related Parties in the aggregate become the
beneficial owners, directly or indirectly, of less than (1) 51% of the
outstanding voting stock of Coast Resorts as a result of the sale, transfer or
other disposition of voting stock of Coast Resorts or (2) 30% of the outstanding
voting stock of Coast Resorts if Coast Resorts has issued new shares of voting
stock after the date of this Indenture and the reduction in the percentage of
the outstanding voting stock of Coast Resorts beneficially owned by the
Principals and their Related
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<PAGE>
Parties to less than 30% is solely the result of the issuance of new shares of
voting stock by Coast Resorts or (b) Michael J. Gaughan and his Related Parties
in the aggregate become the beneficial owners, directly or indirectly, of less
than (1) 29% of the outstanding voting stock of Coast Resorts as a result of the
sale, transfer or other disposition of voting stock of Coast Resorts or (2) 15%
of the outstanding voting stock of Coast Resorts if Coast Resorts has issued new
shares of voting stock after the date of this Indenture and the reduction in the
percentage of the outstanding voting stock of Coast Resorts beneficially owned
by Michael J. Gaughan and his Related Parties to less than 15% is solely the
result of the issuance of new shares of voting stock by Coast Resorts, (v)
following the consummation of an IPO, the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that (a) any "person" (as defined above), other than the Principals and their
Related Parties, is or becomes the "beneficial owner" (as such term is defined
in Rule l3d-3 and Rule l3d-5 under the Exchange Act), directly or indirectly, of
more than 40% of the voting stock of Coast Resorts or (b) any "person" (as
defined above) is or becomes the "beneficial owner" (as defined above), directly
or indirectly, of more of the voting stock of Coast Resorts or the Company than
is at the time "beneficially owned" (as defined above) by the Principals and
their Related Parties in the aggregate, but, in the case of both clauses (a) and
(b) immediately above, excluding from the percentage of voting stock held by any
person consisting of a group the voting stock owned by the Principals and their
Related Parties who are deemed to be members of the group, provided that such
Principals and Related Parties beneficially own a majority of the total voting
stock of Coast Resorts held by such group, or (vi) the first day on which Coast
Resorts ceases to own 100% of the outstanding Equity Interests of the Company.
For purposes of this definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring voting stock of the Company will be
deemed to be a transfer of such portion of such voting stock as corresponds to
the portion of the equity of such entity that has been so transferred. For
purposes of this definition, "voting stock" means, with respect to any Person,
any class of Capital Stock of such Person having ordinary voting power (not
depending upon the occurrence of any contingency) in the election of the Board
of Directors (or persons or a governing body performing similar functions) of
such Person.
"Coast Resorts" means Coast Resorts Inc., a Nevada corporation and the sole
shareholder
of the Company.
"Coast Resorts Common Stock" means the Common Stock, par value $.01 per
share, of
Coast Resorts.
"Coast West" means Coast West, Inc., a Nevada corporation, of which Coast
Resorts is the sole shareholder.
"Coast West Lease" means that certain Ground Lease Agreement dated as of
October 28, 1994 originally by and between 21 Stars, Ltd., a Nevada limited-
liability company, Barbary Coast Hotel and Casino, a Nevada general partnership,
Wanda Peccole, as successor Trustee of The Peccole 1982 Trust dated February 15,
1982, and the William Peter and Wanda Ruth
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<PAGE>
Peccole Family Limited Partnership, a Nevada limited partnership, as amended
through the date of this Indenture.
"Coast West Lease Payments" means payments of Basic Monthly Rent (as
defined in the Coast West Lease) and all other rent payable by Coast West
pursuant to the Coast West Lease.
"Collateral" means the Collateral (as defined in the Security Agreement),
all of the collateral granted by the Company to the Trustee pursuant to the
granting provisions A through Q in the Deed of Trust, and the Collateral (as
defined in the Stock Pledge Agreement), provided that Collateral shall not
include the Pledged Securities or any "Excluded Assets" as defined in any of the
foregoing documents.
"Company" means Coast Hotels and Casinos, Inc., a Nevada corporation, of
which Coast Resorts is the sole shareholder.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period),
deferred rent and other non-cash charges (excluding any such non-cash charge
(other than deferred rent) to the extent that it represents an accrual of or
reserve for cash charges in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Subsidiaries for
such period to the extent that such depreciation, amortization and other non-
cash charges were deducted in computing such Consolidated Net Income, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in same proportion) that
the Net Income of such Subsidiary was included in calculating the Consolidated
Net Income of such Person and only if a corresponding amount would be permitted
at the date of determination to be dividended to such Person by such Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its
-5-
<PAGE>
shareholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (which has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its shareholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect of
a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common shareholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
writeups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of this Indenture
in the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each case,
Permitted Investments), and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Deed of Trust" means that certain Deed of Trust, Assignment of Rents and
Security
-6-
<PAGE>
Agreement among the Company, National Title Company, as trustee and the Trustee
substantially in the form attached hereto as Exhibit E.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes attached
hereto as Exhibit A, that do not include the information called for by footnotes
1 and 2 thereof.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.3 hereof as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, 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, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equipment Financing" means Indebtedness (including Capital Lease
Obligations) that is non-recourse to the assets of any Person other than the
Person incurring such Indebtedness, the proceeds of which are used solely to
finance the acquisition, construction or lease by the Company or any of its
Subsidiaries of furniture, fixtures or equipment ("FF&E") used in the ordinary
course of the operation of the business of the Company and its Subsidiaries and
secured by a Lien on such FF&E to secure the purchase price, construction cost
or lease thereof.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Loss" means, with respect to any property or asset (tangible or
intangible, real or personal), any of the following: (i) any loss, destruction
or damage of such property or asset; (ii) any actual condemnation, seizure or
taking by exercise of the power of eminent domain or otherwise of such property
or asset, or confiscation of such property or asset or the requisition of the
use of such property or asset; or (iii) any settlement in lieu of clause (ii)
above, in the case of clause (i), (ii) or (iii), whether in a single event or a
series of related events, which results in Net Proceeds in excess of $500,000.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means certain Indebtedness of the Company
outstanding on the date of this Indenture and described on Schedule A hereto.
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<PAGE>
"Federal Bankruptcy Code" means Title 11 United States Code or any similar
federal law for the relief of debtors.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Company or any of its
Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than
revolving credit borrowings) or issues preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable reference period. For purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the applicable
reference period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the
applicable reference period, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date, and (iv) the
consolidated interest expense attributable to interest on any proposed
Indebtedness bearing a floating interest rate shall be computed on a pro forma
basis as if the rate in effect on the date of computation had been the
applicable rate for the entire period.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding any amortization of debt issuance cost to the extent
included in consolidated interest expense), and (ii) the consolidated interest
expense of such Person and its Subsidiaries that was capitalized during such
period, and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Subsidiaries or secured by a Lien on
assets of such Person or one of its Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) all cash dividend payments (and non-cash
dividend payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, in each case, on a consolidated basis and in
accordance with GAAP.
-8-
<PAGE>
"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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or foreign government, any state, province or any city or other political
subdivision, whether now or hereafter existing, or any officer or official
thereof, including without limitation, the Nevada Gaming Authorities.
"Gaming Laws" means the gaming laws of any jurisdiction or jurisdictions to
which the Company, any of its Subsidiaries or the Guarantor is, or may at any
time after the date of this Indenture be, subject.
"Gaming License" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct gaming activities of the
Company or any of its Subsidiaries, including without limitation, all such
licenses granted under the Nevada Gaming Control Act, and the regulations
promulgated pursuant thereto, and other applicable federal, state, foreign or
local laws.
"Global Notes" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 2 to the form of
the Note attached hereto as Exhibit A.
"Gold Coast" means the Gold Coast Hotel and Casino.
"Gold Coast Partnership" means Gold Coast Hotel and Casino, a Nevada
limited partnership.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each of (i) Coast Resorts and (ii) any other Subsidiary
of the Company that executes a Guarantee in accordance with Section 4.17 hereof,
and their respective successors and assigns.
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<PAGE>
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person.
"Independent Directors" means any members of the Board of Directors of the
Company or Coast Resorts, as the case may be, other than Michael J. Gaughan,
Tito J. Tiberti, Jerry Herbst, Harlan D. Braaten or Gage Parrish or their
Related Parties or any officer or other employee of the Company, Coast Resorts
or any Affiliate of Coast Resorts.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Intercreditor Agreement" means any Intercreditor Agreement, substantially
in the form attached as Exhibit B to the 1996 Indenture, including the 1996
Notes Intercreditor Agreement.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"IPO" means an initial public offering of Coast Resorts Common Stock which
results in net proceeds to Coast Resorts of at least $30.0 million.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in
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the City of New York 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 for the intervening
period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale or Event of Loss
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale or Event of
Loss and insurance proceeds), net of the direct costs relating to such Asset
Sale or Event of Loss (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(to the extent, in the case of revolving credit Indebtedness, such Indebtedness
is permanently reduced) secured by a Lien on the asset or assets that were the
subject of such Asset Sale and any reserve established by the Company or any of
its Subsidiaries in accordance with GAAP against any liabilities associated with
such Asset Sale and retained by the Company or any of its Subsidiaries, as the
case may be, after such Asset Sale.
"Nevada Gaming Authorities" means, without limitation, the Nevada Gaming
Commission, the Nevada State Gaming Control Board, the Clark County Liquor and
Gaming Licensing Board and any other applicable governmental or administrative
state or local agency involved in the regulation of gaming and gaming activities
in the State of Nevada.
"Note Guarantee" means any Guarantee given by any Guarantor pursuant to the
terms of this Indenture.
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<PAGE>
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
or a Guarantor, as the case may be, by two Officers of the Company or a
Guarantor, as the case may be, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company or a Guarantor, as the case may be, that meets
the requirements set forth in Section 12.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.5 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company, any Guarantor or the Trustee.
"Operating" means, with respect to the Orleans Hotel and Casino, the first
time that (i) all Gaming Licenses have been granted and have not been revoked or
suspended, (ii) all Liens (other than the Liens created by the Security
Documents or Permitted Liens) related to the construction of the Orleans Hotel
and Casino have been paid or, if payment is not yet due or if such payment is
contested in good faith by the Company, sufficient funds remain in the Interest
Escrow Account and Construction Disbursement Account to discharge such Liens or
such Liens have been bonded with bonds in form and substance sufficient to
satisfy such Liens, (iii) the project manager and the architect of the Orleans
Hotel and Casino have delivered a certificate to the Trustee certifying that the
Orleans Hotel and Casino is complete in all material respects in accordance with
the Plans and Specifications therefor (taking into account any variations
therefrom contemplated by the definition of "Orleans Hotel and Casino") and all
applicable building laws, ordinances and regulations, (iv) the Orleans Hotel and
Casino is in a condition (including installation of furnishings, fixtures and
equipment) to receive guests in the ordinary course of business, (v) gaming and
other operations in accordance with applicable law are open to the general
public and are being conducted at the Orleans Hotel and Casino, (vi) a permanent
or temporary certificate of occupancy has been issued for the Orleans Hotel and
Casino by Clark County, Nevada and (vii) a notice of completion of the Orleans
Hotel and Casino has been duly recorded.
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<PAGE>
"Orleans Expansion" means any capital addition, improvement, extension or
repair to the Orleans Hotel and Casino.
"Orleans Hotel and Casino" means the Orleans Hotel and Casino located at
4500 West Tropicana Avenue in Las Vegas, Nevada.
"Pari Passu Collateral" means the Collateral, excluding the Rancho Road
Property after the release of such property from the Lien securing the
obligations under this Indenture and the Notes.
"Pari Passu Lien" means a Lien on the Pari Passu Collateral that ranks pari
passu with the Lien of the Trustee for the ratable benefit of the Holders
pursuant to an Intercreditor Agreement.
"Permitted Barbary Coast Expansion Indebtedness" means Indebtedness
incurred by the Company to finance the Project Costs of a Barbary Coast
Expansion the aggregate principal amount of which at any time outstanding,
together with any Permitted Refinancing Indebtedness applied to the refinancing
thereof, does not exceed the lesser of $10.0 million or 70% of the aggregate
Project Costs of such Barbary Coast Expansion.
"Permitted Investments" means (i) any Investments in the Company or in a
Subsidiary of the Company that is a Guarantor; (ii) any Investments in Cash
Equivalents; (iii) Investments by the Company or any Subsidiary of the Company
in a Person that are evidenced by Capital Stock, if as a result of such
Investment (a) such Person becomes a Subsidiary of the Company and a Guarantor
or (b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Subsidiary of the Company that is a Guarantor; (iv) Restricted
Investments made as a result of the receipt of non-cash consideration from an
Asset Sale or other disposition of assets that was made in compliance with
Section 4.10 hereof; (v) Investments in Coast West that are evidenced by Capital
Stock that do not exceed $15.0 million at any time outstanding, provided that
such Investment complies with clause (i) of Section 4.11 hereof; and (vi)
Investments in the form of loans to Coast West solely for the purpose of
conducting the activities permitted by Section 4.21 hereof, which loans (a) are
evidenced by promissory notes that are Collateral for the Notes, (b) are due and
payable no later than one year prior to the final maturity of the 1996 Notes and
(c) do not exceed $8.0 million in aggregate principal amount at any time
outstanding, provided, however, that the aggregate amount of all such loans then
outstanding shall be due and payable prior to, or concurrently with, the release
of Coast West from its Guarantee and the related Security Documents.
"Permitted Liens" means (i) Pari Passu Liens on the Pari Passu Collateral
to secure Indebtedness permitted under clause (i), (iii), (x) or (vi) (to the
extent the Permitted Refinancing Indebtedness secured thereby refinances
Indebtedness permitted by any of the foregoing clauses) of the second paragraph
of Section 4.9 hereof; (ii) Liens in favor of the Company; (iii) Liens on
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<PAGE>
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company, or securing
Indebtedness of any Person existing at the time such Person becomes a Subsidiary
of the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation or such Person becoming a
Subsidiary and do not extend to any assets other than those of the Person merged
into or consolidated with the Company or such Subsidiary, as applicable; (iv)
Liens on property existing at the time of acquisition thereof by the Company or
any Subsidiary of the Company, or securing Indebtedness of any Person existing
at the time such Person becomes a Subsidiary of the Company, provided that such
Liens do not extend to or cover any other property or assets and were in
existence prior to the contemplation of such transaction; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (ii) of the second paragraph of Section 4.9
hereof (and any Permitted Refinancing Indebtedness applied to the refinancing
thereof) covering only the assets acquired, improved or constructed with such
Indebtedness; (vii) Liens securing the 1996 Notes and the 1996 Indenture and
Liens existing on the date of this Indenture; (viii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to obligations that do
not exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company or
such Subsidiary; (x) Liens on Pari Passu Collateral to secure Permitted Orleans
Expansion Indebtedness and Permitted Refinancing Indebtedness that refinances
such Permitted Orleans Expansion Indebtedness; (xi) easements, rights of way,
zoning and similar restrictions and other similar encumbrances or title defects
incurred in the ordinary course of business and consistent with hotel-casino
industry practices that, in the aggregate, are not substantial in amount, and
that do not in any case materially detract from the value of the property
subject thereto (as such property is used by the Company or any of its
Subsidiaries) or interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries; (xii) Liens on the Rancho Road Property to
secure Indebtedness permitted by Section 4.9 hereof (and any Permitted
Refinancing Indebtedness applied to the refinancing thereof); (xiii) Liens
arising by reason of any judgment, decree or order of any court only to the
extent for an amount and for a period not resulting in an Event of Default with
respect thereto and so long as such Lien is being contested in good faith and is
adequately bonded, and any appropriate legal proceedings that may have been duly
initiated for the review of such judgment, decree or order shall not have been
finally and adversely terminated or the period within which such proceedings may
be initiated shall not have expired; (xiv) Liens of carriers, warehouse men,
mechanics, landlords, material men, repairmen or other like Liens arising by
operation of law in the ordinary course of business and consistent with industry
practices and Liens on deposits
-14-
<PAGE>
made to obtain the release of such Liens if (a) the underlying obligations are
not overdue for a period of more than 60 days or (b) such liens are being
contested in good faith and by appropriate proceedings by the Company and
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with GAAP and (c) the Company is in compliance with the
terms of the Security Documents applicable to such Liens and (d) with respect to
such Liens arising in connection with the Orleans Hotel and Casino, the Company
has obtained the title insurance endorsements required under the Disbursement
Agreement, (xv) the Lien of the Trustee under Section 7.7 hereof, and (xvi) to
the extent not permitted by clause (i) through (xv) hereof, "Permitted Liens" as
defined in the 1996 Indenture.
"Permitted Orleans Expansion Indebtedness" means Indebtedness incurred by
the Company to finance the Project Costs of an Orleans Expansion that is (i)
Indebtedness permitted under clause (ii) of the first paragraph of Section 4.9
hereof, and (ii) the aggregate principal amount of which does not exceed the
lesser of $30.0 million or 75% of the aggregate Project Costs of such Orleans
Expansion.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount of such Permitted Refinancing Indebtedness does not exceed the
principal amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith, including any prepayment premium or penalty payable
pursuant to the terms of such Indebtedness); (ii) such Permitted Refinancing
Indebtedness has a final maturity date equal to or later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted Sundance Indebtedness" means Indebtedness incurred by the
Company in an aggregate principal amount not to exceed $70.0 million at any time
outstanding, the proceeds of which are used to pay the Project Costs of the
Sundance, provided that (a) such Indebtedness is pari passu in right of payment
to the Notes, (b) the Weighted Average Life to Maturity of such Indebtedness is
greater than the remaining Weighted Average Life to Maturity of the Notes and
the final maturity of such Indebtedness is not prior to the date on which the
Notes mature, (c) the aggregate principal amount of such Indebtedness at any
time outstanding does not exceed 70% of the aggregate Project Costs of the
Sundance, (d) the Fixed Charge Coverage Ratio of the
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Company for the Company's most recently ended two full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred would have been at least 1.75 to
1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred at the
beginning of such two-quarter period, (e) the Company or any Wholly Owned
Subsidiary of the Company that is a Guarantor owns all of the assets comprising
the Sundance and (f) if the assets comprising the Sundance are owned by a Wholly
Owned Subsidiary of the Company, all proceeds of any such Indebtedness are
transferred to such Wholly Owned Subsidiary in the form of a direct loan
evidenced by a promissory note or notes.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Pledged Securities" means the securities purchased by the Company with a
portion of the proceeds from the sale of the 1996 Notes.
"Principals" means Michael J. Gaughan, Tito J. Tiberti, Jerry Herbst and
Franklin Toti.
"Project Costs" means, with respect to the development, construction and
opening of the Sundance, an Orleans Expansion or a Barbary Coast Expansion, as
the case may be, the aggregate costs required to complete such development,
construction and opening in accordance with the budget and the plans therefor
and applicable legal requirements, as set forth in an Officers' Certificate
submitted to the Trustee, setting forth in reasonable detail all amounts
theretofore expended in connection with such development, construction and
opening, including direct costs related thereto such as construction management,
architectural, engineering and interior design fees, site work, utility
installations and hook-up fees, construction permits, certificates and bonds,
land acquisition costs, costs of furniture, fixtures, furnishings, machinery and
equipment, non-construction supplies and pre-opening payroll, but excluding
principal or interest payments on any Indebtedness (other than interest which is
required to be capitalized in accordance with GAAP, which shall be included in
determining Project Costs).
"Rancho Road Property" means the approximately 29 acres of raw land owned
by the Company on the date of this Indenture located at 4300 West Carey Avenue,
North Las Vegas, Nevada.
"Related Party" with respect to any Principal means (i) any spouse,
sibling, parent or lineal descendant of such Principal or any spouse of any such
sibling or lineal descendant or (ii) any trust, corporation, partnership or
other entity, the beneficiaries, shareholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
such Principal and/or such other Persons referred to in the immediately
preceding clause (i).
"Responsible Officer" means with respect to the Trustee, any officer within
the Corporate
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Trust Administration of the Trustee (or any successor group of the Trustee) or
any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Security Agreement" means that certain Security Agreement executed by the
Company in favor of Trustee in substantially the form attached hereto as Exhibit
G.
"Security Documents" means, subject to Section 10.3 hereof, collectively,
the Deed of Trust, UCC-1s, the Security Agreement, the Stock Pledge Agreement,
the Unsecured Indemnity Agreement, executed by the Company in favor of the
Trustee attached as Exhibit H hereto, or any other agreements, instruments,
financing statements or other documents that evidence, set forth or limit the
Lien of the Trustee in the Collateral and all other documents, filings and
agreements to be executed by the Company on the date of this Indenture in favor
of the Trustee in order to provide the Trustee with a first lien (subject to
Permitted Liens and except to the extent not required pursuant to Section
10.1(c) hereof) on substantially all of the assets of the Company and the
Guarantor as security for the obligations under the Notes.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Related Party" with respect to any shareholder of Coast
Resorts means (i) any spouse, sibling, parent or lineal descendant of such
shareholder or any spouse of any such sibling or lineal descendant or (ii) any
trust, corporation, partnership or other entity, the beneficiaries,
shareholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such shareholder and/or such other
Persons referred to in the immediately preceding clause (i).
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date of this
Indenture.
"Stock Pledge Agreement" means that certain Stock Pledge Agreement executed
by Coast Resorts, Inc. in favor of the Trustee in substantially the form
attached hereto as Exhibit F.
"Subordinated Notes" means those certain promissory notes issued by Gold
Coast Hotel and Casino, a Nevada limited partnership, in an aggregate principal
amount not to exceed $2.0 million, as in effect on the date of this Indenture
which Subordinated Notes became the obligations of the Company pursuant to the
Reorganization as described in the Offering
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Memorandum.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Sundance" means the project to develop, construct and operate the Sundance
Hotel and Casino at the corner of Rampart Boulevard and Alta Drive in northwest
Las Vegas.
"Tax Sharing Agreement" means that certain Tax Sharing Agreement by and
among Coast Resorts, Coast West and the Company dated January 1, 1996 as in
effect on the date of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
"Transfer Restricted Securities" means securities that bear or are required
to bear the first legend set forth in Section 2.6 hereof.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the date fixed
for redemption (or, if such Statistical Release is no longer published, any
publicly available source of similar market date)) most nearly equal to the then
remaining term to November 1, 2001; provided, however, that if the then
remaining term to November 1, 2001 is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the then
remaining term to November 1, 2001 is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"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.
"UCC-1s" means those financing statements and fixture filings filed by the
Company or any Guarantor, in connection with any of the Security Documents.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
Section I.2 Other Definitions.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
<S> <C>
"Affiliate Transaction"................ 4.11
"Asset Sale Offer"..................... 4.10(b)
"Barbary Coast Mandatory Sale Offer"... 4.10(e)
"Benefitted Party"..................... 11.1(b)
"Change of Control Offer".............. 4.15
"Change of Control Payment"............ 4.15
"Change of Control Payment Date"....... 4.15(b)
"Covenant Defeasance".................. 8.3
"Disqualified Holder".................. 3.8
"DTC".................................. 2.3
"Event of Default"..................... 6.1
"Excess Proceeds"...................... 4.10(b)
"incur"................................ 4.9
"Legal Defeasance"..................... 8.2
"Note Guarantee"....................... 11.1
"Notes"................................ Recitals
"Offer Amount"......................... 3.10(b)
"Offer Period"......................... 3.10(b)
"Offer to Purchase".................... 3.10(a)
"Pari Passu Debt"...................... 4.9
"Pari Passu Debtholder"................ 4.9
"Paying Agent"......................... 2.3
"Payment Default"...................... 6.1(v)
"Purchase Date"........................ 3.10(b)
</TABLE>
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<TABLE>
<S> <C>
"Registrar"............................ 2.3
"Restricted Payments".................. 4.7
"SEC Reports".......................... 4.3
"1996 Indenture"....................... Recitals
"1996 Note Intercreditor Agreement".... 6.13
"1996 Notes"........................... Recitals
"1996 Notes Trustee" Recitals
"10 7/8% Barbary Coast Offer".......... 4.10(b)
</TABLE>
Section I.3 Incorporation By Reference of Trust Indenture Act.
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 and the Note Guarantees;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, the Guarantor, if any, and any
successor obligor upon the Notes or any Note Guarantee, as the case may be.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section I.4 Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
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(iv) words in the singular include the plural, and in the plural
include the singular;
(v) provisions apply to successive events and transactions; and
(vi) 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 SEC from time to time.
Section I.5 Trust Indenture Act.
Notwithstanding anything herein to the contrary, the Company and the
Guarantor shall not be required to comply with the TIA, unless and until this
Indenture is otherwise subject thereto pursuant to the terms of the TIA.
ARTICLE II.
THE NOTES
Section II.1 Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Note Guarantees shall be
substantially in the form of Exhibit C hereto. 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 Guarantor
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form of Exhibit A
attached hereto (including the text referred to in footnotes 1 and 2 thereto).
Notes issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without including the text referred to in footnotes 1 and 2
thereto). 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 amount of outstanding Notes from time to time endorsed thereon and
that the aggregate 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 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 2.6 hereof.
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Section II.2 Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
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, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.7 hereof.
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 the Company or an Affiliate of the
Company.
Section II.3 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 Depositary Trust Company ("DTC") to act
as Depositary with respect to any Global Notes.
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 II.4 Paying Agent to Hold Money in Trust.
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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
or premium, if any, or interest on the Notes, and will notify the Trustee of any
default by the Company or any Guarantor 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 or any Guarantor, the Trustee
shall serve as Paying Agent for the Notes.
Section II.5 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, subject to Section 1.5, shall otherwise comply with TIA (S)
312(a). If the Trustee is not the Registrar, the Company or the Guarantor 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, subject to Section 1.5, the Company
and the Guarantor shall otherwise comply with TIA (S) 312(a).
Section II.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount
of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be 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; and
(ii) in the case of a Definitive Note that is a Transfer Restricted
Security, such
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request shall be accompanied by the following additional information and
documents, as applicable:
(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification to that effect from such Holder (in
substantially the form of Exhibit D hereto); or
(B) if such Transfer Restricted Security is being transferred to
a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance with Rule
144 or Rule 904 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form of Exhibit D
hereto); or
(C) if such Transfer Restricted Security is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect from such Holder
(in substantially the form of Exhibit D hereto) and an Opinion of
Counsel from such Holder or the transferee reasonably acceptable to
the Company and to the Registrar to the effect that such transfer is
in compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a Global
Note. A Definitive Note may not be exchanged for a beneficial interest in a
Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive Note is a Transfer Restricted Security, and
(A) if such Definitive Note is being exchanged for a beneficial
interest in the name of such Holder, without transfer, a certification
to that effect from such Holder (in substantially the form of Exhibit
D hereto);
(B) such Definitive Note is being transferred by such Holder to
a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance with Rule
144 or Rule 904 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification from
the Holder thereof (in substantially the form of Exhibit D hereto) to
that effect; or
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(C) such Definitive Security is being transferred in reliance on
another exemption from the registration requirements of the Securities
Act, a certification to that effect from such Holder (in substantially
the form of Exhibit D hereto) and an Opinion of Counsel from such
Holder or the transferee reasonably acceptable to the Company and to
the Registrar to the effect that such transfer is in compliance with
the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing the
Trustee to make, or to direct the Note Custodian to make, an endorsement on
the Global Note to reflect an increase in the aggregate principal amount of
the Notes represented by the Global Note,
in which case the Trustee shall cancel such Definitive Note in accordance with
Section 2.11 hereof and cause, or direct the Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Note Custodian, the aggregate principal amount of Notes
represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.2 hereof, the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note.
(i) Any Person having a beneficial interest in a Global Note may upon
request exchange such beneficial interest for a Definitive Note. Upon
receipt by the Trustee of written instructions or such other form of
instructions as is customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having a beneficial interest in a Global
Note, and, in the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner, a
certification to that effect from such Person (in substantially the
form of Exhibit D hereto); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
or pursuant to an exemption from registration in accordance with Rule
144 or Rule 904 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
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certification to that effect from the transferor (in substantially the
form of Exhibit D hereto); or
(C) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferor (in
substantially the form of Exhibit D hereto) and an Opinion of Counsel
from the transferee or transferor reasonably acceptable to the Company
and to the Registrar to the effect that such transfer is in compliance
with the Securities Act,
in which case the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and procedures
existing between the Depositary and the Note Custodian, cause the aggregate
principal amount of Global Notes to be reduced accordingly and, following such
reduction, the Company shall execute and, the Trustee shall authenticate and
deliver to the transferee a Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial interest in
a Global Note pursuant to this Section 2.6(d) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.6), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(f) Authentication of Definitive Notes in Absence of Depositary. If at
any time:
(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the Global
Notes and a successor Depositary for the Global Notes is not appointed by
the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes under this
Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
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(g) Legends.
(i) Except as permitted by the following paragraph (ii), each Note
certificate evidencing Global Notes and Definitive Notes (and all Notes
issued in exchange therefor or substitution thereof) shall bear legends in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A
THEREUNDER OR ANOTHER EXEMPTION FROM THE REQUIREMENTS OF THE ACT. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY, BY PURCHASING THIS SECURITY, AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) INSIDE THE UNITED STATES TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
OR IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY OR ANY GUARANTOR
SO REQUESTS), (b) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE ACT OR, (c) TO THE COMPANY OR (d)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND, (2) IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
pursuant to Rule 144 under
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the Securities Act or pursuant to an effective registration statement under
the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Note that
does not bear the first legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall not be
required to bear the first legend set forth in (i) above, but shall
continue to be subject to the provisions of Section 2.6(c) hereof;
provided, however, that with respect to any request for an exchange of
a Transfer Restricted Security that is represented by a Global Note
for a Definitive Note that does not bear the first legend set forth in
(i) above, which request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Registrar that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit D hereto).
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Definitive Notes,
redeemed, repurchased or canceled, all Global Notes shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for Definitive Notes, redeemed, repurchased or canceled, the
principal amount 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 the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(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 Definitive Notes and
Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder 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 3.7, 4.10, 4.15 and 9.5 hereof).
(iii) The Registrar shall not be required 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.
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(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Definitive
Notes or Global 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 Notes
during a period beginning at the opening of business 15 days before
the day of any selection of Notes for purchase or redemption under
Section 3.2 hereof and ending at the close of business on the day of
selection; 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; or
(C) to register the transfer of or to exchange a Note between a
record date and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent, the Company and the Guarantor 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 whatsoever, whether or
not this Note is overdue, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and Global
Notes in accordance with the provisions of Section 2.2 hereof.
Section II.7 Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, 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
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled
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to all of the benefits of this Indenture equally and proportionately with all
other Notes duly issued hereunder.
Section II.8 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 this Section as
not outstanding. Except as set forth in Section 2.9 hereof, 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 2.7 hereof, 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 4.1
hereof, 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 II.9 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, any Guarantor or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Guarantor, 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 a Trustee knows are so owned
shall be so disregarded.
Section II.10 Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. 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.
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Section II.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 all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it
has paid or that have been delivered to the Trustee for cancellation.
Section II.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 4.1 hereof. 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.
ARTICLE III.
OFFERS TO PURCHASE OR REDEMPTION
Section III.1 Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions
of Section 3.7 hereof, it shall furnish to the Trustee, at least 35 days but not
more than 60 days before a redemption date, an Officers' Certificate setting
forth (i) the Section of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
Section III.2 Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed 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 by such other method as the Trustee shall deem
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fair and appropriate (and in such manner as complies with applicable legal
requirements).
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 thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section III.3 Notice of Redemption.
(a) Subject to the provisions of Section 3.9 hereof, 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.
(b) The notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
(iii) 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;
(iv) the name and address of the Paying Agent;
(v) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(vi) 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;
(vii) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
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(viii) 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.
(c) At the Company's 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 III.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3 hereof,
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 III.5 Deposit of Redemption Price.
On or prior to 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 and unpaid 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 and unpaid
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. 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 4.1 hereof.
Section III.6 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 III.7 Optional Redemption.
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(a) At any time on or prior to November 1, 2001, the Company may redeem
the Notes, in whole but not in part, at a redemption price equal to the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, thereon to the redemption date. The Company may not redeem
Notes pursuant to this paragraph if it has made an offer to repurchase Notes
with respect to a Change of Control pursuant to Section 4.15.
(b) Any redemption pursuant to this Section 3.7 shall be made pursuant to
the provisions of Sections 3.1 through 3.6 hereof.
Section III.8 Redemption Pursuant to Gaming Law.
(a) Notwithstanding any other provision of this Article 3, if any Gaming
Authority requires that a Holder or beneficial owner of Notes must be licensed,
qualified or found suitable under any applicable Gaming Law and the Holder or
beneficial owner fails to apply for a license, qualification or a finding of
suitability within 30 days after being requested to do so by the Gaming
Authority (or such shorter period required by applicable law), or if such Holder
or such beneficial owner is not so licensed, qualified or found suitable (a
"Disqualified Holder"), the Company shall have the right, at its option, (i) to
require such Disqualified Holder to dispose of such Disqualified Holder's Notes
within 30 days of receipt of such notice of such finding by the applicable
Gaming Authority or such earlier date as may be ordered by such Gaming Authority
or (ii) to call for the redemption of the Notes of such Disqualified Holder at a
price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of redemption or such earlier date as may
be required by such Gaming Authority or applicable Gaming Laws, which may be
less than 30 days following the notice of redemption, if so ordered by such
Gaming Authority or required by applicable Gaming Laws. Immediately upon a
determination of unsuitability, the Disqualified Holder shall have no further
rights whatsoever with respect to the Notes (i) to exercise, directly or
indirectly through any trustee, nominee or any other Person or entity, any right
conferred by the Notes and (ii) to receive any interest or any other
distribution or payment with respect to the Notes or any remuneration in any
form from the Company for services rendered or otherwise, except the redemption
price of the Notes. Under this Indenture and the Security Documents, the
Company is not required to pay or reimburse any Holder or beneficial owner of
Notes who is required to apply for such license, qualification or finding of
suitability for the costs of the licensure or investigation for such
qualification or finding of suitability.
(b) In connection with any redemption pursuant to this Section 3.8, and
except as may be required by a Gaming Authority, the Company shall be required
to comply with Sections 3.1 through 3.6 hereof.
Section III.9 Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall
not be
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required to make mandatory redemptions or sinking fund payments with respect to
the Notes.
Section III.10 Offer to Purchase By Application of Excess Proceeds.
(a) In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Offer to
Purchase"), it shall follow the procedures specified below.
(b) The Offer to Purchase shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Offer
to Purchase. Payment for any Notes so purchased shall be made in the same
manner as interest payments are made.
(c) 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 Offer to Purchase.
(d) Upon the commencement of an Offer to Purchase, the Company shall send,
by first class mail, a notice 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 Offer to
Purchase. The Offer to Purchase shall be made to all Holders. The notice,
which shall govern the terms of the Offer to Purchase, shall state:
(i) that the Offer to Purchase is being made pursuant to this
Section 3.10 and Section 4.10 hereof and the length of time the Offer to
Purchase shall remain open;
(ii) the Offer Amount, the purchase price and the Purchase Date;
(iii) that any Note not properly tendered or accepted for payment
shall remain outstanding and continue to accrue interest;
(iv) that, unless the Company defaults in making such payment, all
Notes accepted for payment pursuant to the Offer to Purchase shall cease to
accrue interest after the Purchase Date;
(v) that Holders electing to have a Note purchased pursuant to an
Offer to Purchase shall 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
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transfer, to the Company, a Depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice prior to the close of
business on the second Business Day preceding the Purchase Date;
(vi) that Holders shall be entitled to withdraw their tendered Notes
and their election to require the Company to purchase the Notes if the
Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes tendered for purchase, and a statement that such
Holder is withdrawing his tendered Notes and his election to have such
Notes purchased;
(vii) that, if the aggregate principal amount of Notes surrendered
(or transferred by book-entry transfer) by Holders exceeds the Offer
Amount, the Trustee shall select the Notes to be purchased 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 (with such adjustments as may be deemed appropriate by the
Trustee so that only Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased); and
(viii) that Holders whose Notes are being purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry transfer).
(e) 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, the
Offer Amount of Notes or portions thereof tendered pursuant to the Offer to
Purchase, or if less than the Offer Amount has been tendered, all Notes
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 3.10. 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 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 Offer to Purchase on the
Purchase Date.
ARTICLE IV.
COVENANTS
Section IV.1 Payment of Notes.
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(a) The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 12:00 noon Eastern time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due.
(b) The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
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 (without regard to any
applicable grace period) at the same rate to the extent lawful.
Section IV.2 Maintenance of Office or Agency.
(a) 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 or the Guarantor 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.
(b) 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.
(c) The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.3.
Section IV.3 SEC Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes and the 1996 Notes are outstanding, Coast Resorts shall
furnish to the Holders of Notes all annual and quarterly reports and the
information, documents, and other reports required to be filed with the SEC
pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC Reports") if Coast
Resorts were required to file SEC Reports and, whether or not required by the
rules and
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regulations of the SEC, Coast Resorts shall file a copy of all such information
and reports with the SEC for public availability (unless the SEC will not accept
such a filing).
(b) For so long as any Notes remain outstanding, the Company and Coast
Resorts shall furnish to the Holders of Notes, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Section IV.4 Compliance Certificate.
(a) The Company 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 of the Company with
a view to determining whether the Company and each obligor on the Notes and this
Indenture is in compliance with this Indenture and each Security Document and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company and each such obligor is in compliance
with each and every covenant contained in this Indenture and each Security
Document and is not in default in the performance or observance of any of the
terms, provisions or conditions of this Indenture or any Security Document (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 what
action the Company or such obligor, as the case may be, 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 or
such obligor, as the case may be, is taking or proposes to take with respect
thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company is in violation
of any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) 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 or any event of default under any document, instrument or
agreement representing Indebtedness of the Company, 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 IV.5 Taxes.
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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 IV.6 Stay, Extension and Usury Laws.
Each of the Company and the Guarantor 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 each of the
Company and the Guarantor (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 IV.7 Restricted Payments.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any distribution
on account of the Company's or any of its Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct holders of the Company's
Equity Interests in any capacity (other than dividends or distributions payable
in Equity Interests (other than Disqualified Stock) of the Company or dividends
or distributions payable to the Company or any Subsidiary of the Company that is
a Guarantor); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company (other than any such Equity Interests owned by
the Company or any Subsidiary of the Company that is a Guarantor); (iii) make
any principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness of the Company that is subordinated to the
Notes; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) the Company shall, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in clause (i) of the first paragraph of Section
4.9 hereof; and
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(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date of
the 1996 Indenture (excluding Restricted Payments permitted by clauses (r), (s),
(t), (v), (w), (y) and (z) of the next succeeding paragraph), is less than the
sum of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first calendar
quarter of 1997 to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from capital contributions from Coast Resorts
or the issue or sale since the date of this Indenture of Equity Interests of the
Company or of debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or convertible debt securities)
sold to any Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus (iii) to the
extent that any Restricted Investment that was made after the date of this
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment, plus (iv) to the extent not included in Consolidated
Net Income of the Company, 100% of the cash distributions or the amount of the
cash principal and interest payments received since the date of this Indenture
by the Company or any Subsidiary from any Person other than any Subsidiary in
respect of any Restricted Investment until the entire amount of such Restricted
Investment has been received and, thereafter, 50% of such cash distributions or
cash principal and interest received by the Company or such Subsidiary from such
Person in respect of such Restricted Investment.
If no Default or Event of Default has occurred and is continuing, or would
occur as a consequence thereof, the foregoing provisions shall not prohibit (q)
the redemption or repurchase (and the payment of dividends by the Company to
Coast Resorts to fund any redemption or repurchase by Coast Resorts) of any debt
or equity securities of the Company or any Guarantor required by, and in
accordance with, any order of any Gaming Authority issued because the holder or
beneficial owner of such security has failed to qualify or to be found suitable
or otherwise eligible under any Gaming Law to remain a holder of such security,
provided that the Company has used its best efforts to effect a disposition of
such securities to a third-party and has been unable to do so; (r) dividends or
other payments (and the payment of dividends by the Company to Coast Resorts to
fund any such payments) to the former partners of the Gold Coast Partnership and
the Barbary Coast Partnership in an aggregate amount not to exceed $1.5 million
to pay income tax liability incurred as such partners and assessed after the
date of the 1996 Indenture; (s) payments to Coast Resorts required to be paid
pursuant to the Tax Sharing Agreement; (t) dividends or other payments to Coast
Resorts in an aggregate amount not to exceed $500,000 per fiscal year to pay
accounting, legal, corporate reporting and other administrative expenses of
Coast Resorts in the ordinary course of business; (u) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (v) the redemption,
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repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the substantially concurrent
sale (other than to a Subsidiary of the Company) of other Equity Interests of
the Company (other than any Disqualified Stock), provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c) (ii) of the
preceding paragraph; (w) the defeasance, redemption, repurchase, acquisition or
retirement of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness or the substantially concurrent
sale (other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock), provided that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c) (ii) of the
preceding paragraph; (x) the payment of Restricted Payments in an aggregate
amount not to exceed $3.0 million; (y) the exchange of Subordinated Notes for
Coast Resorts Common Stock; and (z) Investments in Hedging Obligations with
respect to Indebtedness otherwise permissible under this Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced in the case of a Restricted Payment with a fair market
value in excess of $ 1.0 million by a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate delivered to the Trustee) on
the date of the Restricted Payment of the asset(s) proposed to be transferred by
the Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment.
Section IV.8 Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall 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 Subsidiary to:
(i) (a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries; (ii) make loans or
advances to the Company or any of its Subsidiaries; (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries; (iv) grant Liens
in favor of the Holders of the Notes under the Security Documents; or (v)
guaranty the Notes or any renewals or refinancings thereof, except for such
encumbrances or restrictions existing under or by reason of (A) Existing
Indebtedness as in effect on the date of this Indenture; (B) this Indenture and
the Notes; (C) applicable law; (D) any instrument of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that
the Consolidated Cash Flow of such Person is not taken into account in
determining whether such acquisition was permitted by the terms of this
Indenture; (E) by reason of customary restrictions on subletting or non-
assignment provisions in leases entered into in the ordinary course of business;
(F) Permitted Refinancing Indebtedness,
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provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced; (G) any
restrictions with respect to Capital Stock or assets, as the case may be, of a
Subsidiary of the Company imposed pursuant to an agreement that has been entered
into for the sale or disposition of all of the Capital Stock or all or
substantially all of the assets of such Subsidiary; (H) encumbrances and
restrictions no more restrictive than those contained in this Indenture and the
Collateral Documents arising in connection with Indebtedness permitted under
Section 4.9 hereof that is secured by a Pari Passu Lien; and (I) replacements of
restrictions imposed pursuant to clauses (A) through (H) that are no more
restrictive than those being replaced.
Section IV.9 Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable, contingently or otherwise (collectively,
"incur"), with respect to any Indebtedness (including Acquired Debt), and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that so
long as no Default has occurred and is continuing:
(i) the Company may incur or otherwise become directly or indirectly
liable for Indebtedness (including Acquired Debt) (and a Subsidiary of the
Company that is a Guarantor may guarantee on a subordinated basis such
Indebtedness) and the Company may issue shares of Disqualified Stock if (a)
such Indebtedness is expressly subordinated in right of payment to the
Notes, (b) the Fixed Charge Coverage Ratio of the Company for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock
had been issued, as the case may be, at the beginning of such four quarter
period, (c) the Weighted Average Life to Maturity of such Indebtedness or
Disqualified Stock is greater than the remaining Weighted Average Life to
Maturity of the Notes, and (d) the final maturity of such Indebtedness or
Disqualified Stock is not prior to the date on which the Notes mature; and
(ii) the Company may incur or otherwise become directly or indirectly
liable for Indebtedness (including Acquired Debt) (and a Subsidiary of the
Company that is a Guarantor may guarantee on a pari passu basis such
Indebtedness) if (a) such Indebtedness is unsecured and pari passu in right
of payment to the Notes, (b) the Fixed Charge Coverage Ratio of the Company
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date
on which such additional Indebtedness is incurred would have been at least
2.25
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to 1, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred at the beginning of such four-quarter period, (c) the Weighted
Average Life to Maturity of such Indebtedness is greater than the remaining
Weighted Average Life to Maturity of the Notes, and (d) the final maturity
of such Indebtedness is not prior to the date on which the Notes mature.
So long as no Default has occurred and is continuing, the foregoing
provisions shall not apply to:
(i) working capital Indebtedness and letters of credit of the Company
(and any Guarantee thereof by a Subsidiary of the Company that is a Guarantor)
and Indebtedness represented by standby letters of credit or performance,
surety, appeal or other similar bonds on terms customary in the hotel-casino
industry, in each case to the extent incurred in the ordinary course of
business, in an aggregate principal amount at any time outstanding (with letters
of credit being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Subsidiaries thereunder) not to exceed
(including the amount of any Permitted Refinancing Indebtedness applied to the
refinancing thereof) $20.0 million;
(ii) Indebtedness of the Company represented by Equipment Financing
(or as otherwise described below in this clause (ii)) incurred by the Company;
provided that the aggregate principal amount of Indebtedness outstanding at any
time pursuant to this clause (ii) shall not exceed (including the amount of any
Permitted Refinancing Indebtedness applied to the refinancing thereof) $30.0
million; provided, further, that following the date on which the Orleans is
Operating, up to $10.0 million of such Indebtedness may be used for the purpose
of purchasing or constructing improvements on the following real property used
in the business of the Company: (a) the parcel of real property leased by the
Company from Nevada Power Company on the date of the 1996 Indenture and (b) real
property not included in the Collateral as of the date of this Indenture, so
long as in any such case the Trustee, for the benefit of the Holders, is granted
a lien in such real property and improvements subordinate only to the lien of
such Indebtedness secured by such real property and improvements;
(iii) Permitted Sundance Indebtedness of the Company (and any
Guarantee thereof by a Subsidiary of the Company that is a Guarantor);
(iv) Existing Indebtedness;
(v) Indebtedness of the Company and the Guarantor represented by the
Notes, the 1996 Notes and the respective Guarantees thereof;
(vi) Permitted Refinancing Indebtedness of the Company in exchange
for, or the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund Indebtedness that was permitted to be incurred pursuant to the
first paragraph of this covenant or
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by clauses (i), (ii), (iii), (iv), (v), (x) or this clause (vi) of this
paragraph;
(vii) intercompany Indebtedness between or among the Company and any
of its Wholly Owned Subsidiaries that is a Guarantor; provided, however, that
(i) any subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than a Wholly Owned Subsidiary
that is a Guarantor and (ii) any sale or other transfer of any such Indebtedness
to a Person that is not either the Company or a Wholly Owned Subsidiary that is
a Guarantor shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be;
(viii) Indebtedness of the Company that is owed to any shareholder of
Coast Resorts or any Shareholder Related Party in an aggregate principal amount
at any time outstanding not to exceed $3.0 million; provided, however, that such
Indebtedness is expressly subordinated in right of payment to the Notes, the
Weighted Average Life to Maturity of such Indebtedness is greater than the
remaining Weighted Average Life to Maturity of the Notes and the final maturity
of such Indebtedness is not prior to the date on which the Notes mature;
(ix) Hedging Obligations of the Company with respect to any floating
rate
Indebtedness that is permitted by the terms of this Indenture to be outstanding;
(x) Permitted Barbary Coast Expansion Indebtedness of the Company (and
any Guarantee thereof by a Subsidiary of the Company that is a Guarantor)
incurred after the Orleans Hotel and Casino has become Operating; and
(xi) bond or surety obligations posted by the Company or any
Subsidiary of the Company in order to prevent the loss or material impairment of
or to obtain a Gaming License or as otherwise required by an order of any Gaming
Authority to the extent required by applicable law and consistent in character
and amount with customary industry practice.
If the Company or any Subsidiary of the Company incurs any Indebtedness
that may be secured by a Pari Passu Lien on the Pari Passu Collateral (a "Pari
Passu Debt"), upon the request of the Company, the Trustee is authorized to
enter into an intercreditor agreement with the holder or holders of such pari
passu Indebtedness (the "Pari Passu Debtholder") in substantially the form
thereof attached to the 1996 Indenture.
Section IV.10 Asset Sales.
(a) The Company shall not, and shall not permit any of its Subsidiaries to
consummate an Asset Sale unless (i) no Default or Event of Default exists or is
continuing immediately prior to or after giving effect to such Asset Sale; (ii)
the Company (or the Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the fair market value (evidenced
by a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
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Interests issued or sold or otherwise disposed of and (iii) at least 80% of the
consideration therefor received by the Company or such Subsidiary is in the form
of Cash Equivalents; provided that each of (x) the amount of any liabilities (as
shown on the Company's or such Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Subsidiary (other than liabilities that are
by their terms subordinated to the Notes or any Guarantee thereof) that are
assumed by the transferee of any such assets, (y) the amount of any notes or
other obligations received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash or as to which the Company or such Subsidiary has received at or prior to
the consummation of the Asset Sale a commitment from a nationally recognized
investment, merchant or commercial bank to convert into cash within 90 days of
the consummation of such Asset Sale unless not actually converted into cash
within such 90-day period (to the extent of the cash received or receivable
pursuant to any such commitment) and (z) an amount equal to the fair market
value (evidenced by a resolution of the Board of Directors of the Company set
forth in an Officers' Certificate delivered to the Trustee) of operating assets
to be used or useful in any business in which the Company or any Subsidiary is
permitted to engage pursuant to Section 4.13 hereof with respect to which the
Trustee has received a first priority fully perfected security interest (subject
to Permitted Liens and except to the extent not required pursuant to Section
10.01(c) hereof) will be deemed to be Cash Equivalents for purposes of this
provision. For purposes of the following paragraph and clause (iii) of this
paragraph, an Event of Loss suffered by the Company or any of its Subsidiaries
shall constitute an Asset Sale and the Company will be required to apply the Net
Proceeds from such Event of Loss as set forth below.
(b) Within 270 days after the receipt of any Net Proceeds from an Asset
Sale (including Net Proceeds from an Event of Loss, but excluding any Net
Proceeds from an Asset Sale of the Barbary Coast pursuant to Section 4.10(e)
hereof), the Company or any of its Subsidiaries may (i) apply an amount equal to
such Net Proceeds to the making of a capital expenditure or the acquisition of
other tangible assets, in each case, that is used or useful in any business in
which the Company or the relevant Subsidiary is permitted to be engaged pursuant
to Section 4.13 hereof, upon consummation of which the Trustee shall have
received a first priority fully perfected security interest (subject to
Permitted Liens and except to the extent not required pursuant to Section
10.1(c) hereof) in the property or assets acquired by the Company or its
Subsidiaries in connection therewith, (ii) contractually commit to apply such
Net Proceeds (within 540 days after the receipt thereof) to the payment of the
costs of construction or real property improvements of property used or useful
in any business in which the Company or the relevant Subsidiary is permitted to
be engaged pursuant to Section 4.13 hereof with respect to which the Trustee
shall have received a first priority fully perfected security interest (subject
to Permitted Liens and except to the extent not required pursuant to Section
10.1(c) hereof), or (iii) deem such Net Proceeds to have been applied to the
extent of any capital expenditure or acquisition made within 90 days preceding
the date of the Asset Sale of other tangible assets, in each case, that are used
or useful in any business in which the Company or the relevant Subsidiary is
permitted to be engaged pursuant to Section 4.13 hereof; provided, however, that
(a) any Net Proceeds from an Asset Sale of the Rancho Road Property may be used
by the
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Company for general corporate purposes at any time, and (b) if upon consummation
of an Asset Sale of all or substantially all of the assets used in the business
of the Barbary Coast the Company is required to make a Barbary Coast Offer under
the 1996 Indenture, to the extent that a portion of the 50% of the Net Proceeds
from such Asset Sale required to be used to make the Barbary Coast Offer remain
after making the Barbary Coast Offer pursuant to the 1996 Indenture, such
remaining portion of the Net Proceeds shall be used by the Company to make an
offer to all Holders of Notes to purchase Notes (the "10 7/8% Barbary Coast
Offer") in an amount equal to the maximum principal amount of Notes that may be
purchased with such remaining proceeds, at a price in cash equal to 105% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of repurchase, in accordance with the procedures set forth in Section 3.10
hereof. Any portion of the Net Proceeds from such Asset Sale remaining after the
purchase of Notes pursuant to the 10 7/8% Barbary Coast Offer may be used by the
Company for general corporate purposes. Pending the final application (which,
for purposes of clause (ii) of the first sentence of this Section 4.10(b) shall
be deemed to occur upon payment of such Net Proceeds pursuant to the contractual
commitment referred to therein) of any such Net Proceeds (other than Net
Proceeds to be applied pursuant to the first proviso contained in the first
sentence of this Section 4.10(b)), the Company will invest such Net Proceeds in
Cash Equivalents held in an account in which the Trustee shall have a first
priority security interest (subject to Permitted Liens) for the benefit of the
Holders of Notes and the 1996 Notes and, if the Asset Sale or Event of Loss
relates to Pari Passu Collateral, the holders of any Indebtedness secured by
such Collateral on a pari passu basis with the Notes. Any Net Proceeds from
Asset Sales that are not applied, deemed applied or invested as provided in the
first sentence of this Section 4.10(b) (other than Net Proceeds from an Asset
Sale of the Rancho Road Property or the balance of the Net Proceeds from a sale
of all or substantially all of the assets used in the business of the Barbary
Coast not used to repurchase Notes, as contemplated in this Section 4.10(b))
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company shall (i) make an offer to all
Holders of Notes to purchase Notes, and (ii) prepay, purchase or redeem (or make
an offer to do so) any other Indebtedness of the Company (including the 1996
Notes) ranking on a parity with the Notes and secured on a pari passu basis by
any Pari Passu Collateral from time to time outstanding with provisions
requiring the Company to prepay, purchase or redeem such Indebtedness with the
proceeds from any asset sales (or offer to do so), pro rata in proportion to the
respective principal amounts of the Notes and such other Indebtedness required
to be prepaid, purchased or redeemed or tendered pursuant to such offer (an
"Asset Sale Offer"), in an amount equal to the maximum principal amount of Notes
and such other Indebtedness that may be prepaid, purchased or redeemed out of
the Excess Proceeds, at a price in cash equal to 100% of the principal amount
thereof (or such higher price as may be provided with respect to such other
Indebtedness), plus accrued and unpaid interest, if any, thereon to the date of
repurchase, in accordance with the procedures set forth in Section 3.10 hereof.
To the extent that the aggregate amount of Notes and such other Indebtedness
tendered, prepaid, purchased or redeemed pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes and such
other Indebtedness surrendered by holders thereof or required to be prepaid,
purchased or redeemed
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exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased 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 (with such adjustments as may be deemed
appropriate by the Trustee so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased). Upon completion of such Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
(c) Notwithstanding the foregoing, the Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, make any Asset Sale
of any of the Capital Stock of a Subsidiary except pursuant to an Asset Sale of
all of the Capital Stock of such Subsidiary.
(d) For so long as Coast West is a Subsidiary of Coast Resorts and is a
Guarantor, Coast Resorts shall be prohibited from selling any Capital Stock of
Coast West.
(e) If, on the twentieth day of the month following the first month in
which the Orleans Hotel and Casino has been Operating for 18 months, the Fixed
Charge Coverage Ratio of the Company for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available is
less than 1.5 to 1, the Company shall consummate an Asset Sale of the Barbary
Coast within one year thereafter which Asset Sale shall comply with Section
4.10(a) hereof. Upon consummation of such Asset Sale of the Barbary Coast, the
Company shall make an offer to all holders of 1996 Notes to purchase 1996 Notes
(the "Barbary Coast Mandatory Sale Offer") in an amount equal to the maximum
principal amount of 1996 Notes that may be purchased with the Net Proceeds from
such Asset Sale at a price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any,
thereon to the date of repurchase, in accordance with the procedures set forth
in Section 3.10 of the 1996 Indenture. To the extent that the aggregate amount
of 1996 Notes purchased pursuant to the Barbary Coast Mandatory Sale Offer is
less than the Net Proceeds from such Asset Sale, the Company shall make an offer
to all Holders of Notes to repurchase Notes (the "10 7/8% Barbary Coast
Mandatory Sale Offer") in an amount equal to the maximum principal amount of
Notes that may be purchased with any remaining Net Proceeds from such Asset Sale
remaining after the Barbary Coast Mandatory Sale Offer, at a price in cash equal
to 101% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of repurchase, in accordance with the procedures set forth
in Section 3.10 hereof. To the extent that the aggregate amount of Notes
purchased pursuant to the 10 7/8% Barbary Coast Mandatory Sale Offer is less
than the Net Proceeds from such Asset Sale remaining after the Barbary Coast
Mandatory Sale Offer, the Company may use any such remaining Net Proceeds for
general corporate purposes.
(f) The Company shall comply with the requirements of Rule l4e-1
promulgated 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 the Notes as a result of an Asset Sale.
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Section IV.11 Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Subsidiary with an unrelated
Person or, if such transaction is not one which by its nature could be obtained
from such an unrelated Person, is on fair and reasonable terms and was
negotiated in good faith and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $1.0 million, a resolution of the Board of Directors of the Company set forth
in an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above and that such Affiliate Transaction has been approved by a
majority of (1) the disinterested members of the Board of Directors of the
Company and (2) the Independent Directors and (b) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $7.5 million, an
opinion as to the fairness to the Company or such Subsidiary of such Affiliate
Transaction from a financial point of view issued by an investment banking firm
of national standing; provided that (w) any employment or related agreement or
arrangement entered into by the Company or any of its Subsidiaries in the
ordinary course of business on terms customary in the hotel-casino industry, (x)
transactions between or among the Company and/or its Subsidiaries, (y)
transactions permitted by Section 4.07 hereof, and (z) customary directors' fees
and indemnities, in each case, shall not be deemed Affiliate Transactions.
Section IV.12 Liens.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired, or any income or profits therefrom, or
assign or convey any right to receive income therefrom, except Permitted Liens.
Section IV.13 Line of Business.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than the gaming and hotel businesses and such
business activities as are incidental or related thereto.
Section IV.14 Corporate Existence.
Subject to Article 5, Article 11 and Section 4.10 hereof, as the case may
be, the Company and the Guarantor 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
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each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company, any
such Guarantor or any such Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company, the Guarantor and their
respective Subsidiaries; provided, however, that the Company and the Guarantor
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of their respective
Subsidiaries, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company, the Guarantor and their Subsidiaries, taken as a whole, and that
the loss thereof is not adverse in any material respect to the Holders of the
Notes.
Section IV.15 Change of Control.
Upon the occurrence of a Change of Control, the Company shall make an offer
(the "Change of Control Offer") to each Holder of Notes to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest thereon to the date of purchase (the "Change of
Control Payment").
Within 20 days following any Change of Control, the Company shall mail (or
cause the Trustee to mail) a notice to each Holder stating:
(a) that the Change of Control Offer is being made pursuant to this Section
4.15 and that all Notes tendered shall be accepted for payment;
(b) the purchase price and the purchase date, which shall be no later than
30 Business Days from the date such notice is mailed (the "Change of Control
Payment Date");
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making the Change of Control
Payment, any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(e) that Holders whose Notes are being purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof;
(f) that Holders electing to have a Note purchased pursuant to a Change of
Control Offer shall 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 Company, a Depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice prior to
the close of business on the second Business Day preceding the Change of
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Control Payment Date;
(g) 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 close of business on the Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes the Holder
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Note purchased; and
(h) the circumstances and relevant facts regarding such Change of Control
(including, but not limited to, information with respect to pro forma historical
financial information after giving effect to such Change of Control, information
regarding the Person or Persons acquiring control and such Person's or Persons'
business plans going forward) and any other information that would be material
to a decision as to whether to tender a Note pursuant to the Change of Control
Offer.
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
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Section IV.16 Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly Owned Subsidiary
of the Company to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of the Company to any Person (other
than the Company or a Wholly Owned Subsidiary of the Company), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly Owned Subsidiary and (b) the Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with
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Section 4.10 hereof, and (ii) shall not permit any Wholly Owned Subsidiary of
the Company to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Company or a Wholly Owned Subsidiary of the Company.
Section IV.17 Subsidiary Guarantees.
If (i) the Company or any of its Subsidiaries shall, after the date of this
Indenture, transfer or cause to be transferred, in one or a series of
transactions (whether or not related), any assets, businesses, divisions, real
property or equipment having an aggregate fair market value (as determined in
good faith by the Board of Directors of the Company) in excess of $250,000 to
any Subsidiary that is not a Guarantor, or if the Company or any of its
Subsidiaries shall acquire another Subsidiary having total assets with an
aggregate fair market value (as determined in good faith by the Board of
Directors of the Company) in excess of $250,000, or (ii) the Company elects to
cause any Subsidiary of the Company that is not a Guarantor to become a
Guarantor, then such transferee or Subsidiary shall execute a supplemental
indenture in form and substance substantially satisfactory to Trustee, providing
for the Guarantee of the Obligations under the Notes, this Indenture and the
Security Documents on the terms set forth therein, and deliver to the Trustee an
Opinion of Counsel, in form reasonably satisfactory to the Trustee, that such
supplemental indenture and supplemental Security Documents, if any, have been
duly executed and delivered and are the valid, binding and enforceable
Obligations of such Subsidiary; provided, however, that the aggregate fair
market value (as determined in good faith by the Board of Directors of the
Company) of the assets of Subsidiaries of the Company that is not a Guarantor
shall not at any time exceed $1.0 million.
Section IV.18 Maintenance of Insurance.
On the date of this Indenture, and at all times hereafter, the Company and
each of its Subsidiaries shall have in effect customary comprehensive general
liability, property and casualty and business interruption insurance, in each
case on such terms and in such amounts as are customarily carried by similar
businesses and in any event which are no less favorable to the Company and its
Subsidiaries than those in effect on the date of this Indenture.
Section IV.19 Limitation on Status as Investment Company.
None of the Company or any of its Subsidiaries shall become subject to
registration as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or otherwise become subject to
regulation under the Investment Company Act of 1940.
Section IV.20 Further Assurances.
The Company shall (and shall cause each of its Subsidiaries to) execute,
acknowledge,
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deliver, record, re-record, file, re-file, register and re-register, any and all
such further acts, deeds, conveyances, security agreements, mortgages,
assignments, estoppel certificates, financing statements and continuations
thereof, termination statement, notices of assignment, transfers, certificates,
assurances and other instruments as may be required from time to time in order
(i) to carry out more effectively the purposes of the Security Documents, (ii)
to subject to the Liens created by any of the Security Documents any of the
properties, rights or interests required to be encumbered thereby, (iii) to
perfect and maintain the validity, effectiveness and priority of any of the
Security Documents and the Liens intended to be created thereby, and (iv) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm to
the Trustee any of the rights granted or nor or hereafter intended by the
parties thereto to be granted to the Trustee or under any other instrument
executed in connection therewith or granted to the Company under the Security
Documents or under any other instrument executed in connection therewith.
Section IV.21 Limitations on Activities of Coast West.
Prior to Coast West becoming a Wholly Owned Subsidiary of the Company, the
Guarantor shall cause Coast West to make all Coast West Lease Payments on a
timely basis and shall cause Coast West not to conduct any business or
investment activities whatsoever (including without limitation, issuing any
Equity Interests, making any Investments, incurring any Indebtedness or making
any payments or taking any actions which, if made or taken by the Company, would
constitute Restricted Payments) other than (a) to be the tenant under the Coast
West Lease and to do all things necessary or incident thereto, including without
limitation, making the Coast West Lease Payments and to do or cause to be done
all things necessary to protect the property subject to the Coast West Lease and
to preserve its rights therein, (b) to issue and pay the promissory notes, if
any, described in clause (vi) of the definition of "Permitted Investments," (c)
activities related to the planning and future development of the Sundance,
including without limitation (1) the conduct of feasibility, engineering,
environmental and other studies relating to the Sundance and (2) the negotiation
of licenses, permits, financing commitments, architect's, construction and other
contracts and other documents and matters relating to the development, planning
and construction of the Sundance, (d) to be a Guarantor (as defined in the 1996
Indenture) of the 1996 Notes pursuant to the 1996 Indenture and to do all things
necessary thereto, including without limitation to comply with its obligations
under the Security Documents (as defined in the 1996 Indenture) and (e)
activities incidental or related to any of the foregoing, including without
limitation (1) the payment of taxes, wages, fees and accounts payable, (2) the
receipt of funds from Coast Resorts in the form of capital contributions, (3)
the investment of funds in Cash Equivalents pending application to any of the
foregoing, and (4) the preparation of financial statements and other reports.
Section IV.22 No Amendment to Subordination Provisions.
Without the consent of each Holder of Notes outstanding, the Company shall
not amend, modify or alter the Subordinated Notes in any way that shall (i)
increase the rate of or change the time for payment of interest on any
Subordinated Notes, (ii) increase the principal of, advance
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the final maturity date of or shorten the Weighted Average Life to Maturity of
any Subordinated Notes, (iii) alter the prepayment provisions or add provisions
requiring the Company to redeem or offer to purchase such Subordinated Notes or
(iv) amend the provisions of the third paragraph of the Subordinated Notes
(which relates to subordination) or the provisions of the Subordination
Agreements by and between Gold Coast Partnership and each holder of Subordinated
Notes.
Section IV.23 Limitations on Use of Proceeds.
The Company shall cause the net proceeds from the sale of the Notes to be
used for working capital purposes.
Section IV.24 Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to (i) any holder of any 1996 Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the 1996 Indenture or the 1996 Notes, or (ii) any Holder of any Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes, unless any such consideration paid or
caused to be paid pursuant to clauses (i) or (ii) above is offered to be paid or
agreed to be paid to all Holders of the Notes.
ARTICLE V.
SUCCESSORS
Section V.1 Merger, Consolidation or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes, this Indenture
and the Security Documents pursuant to a supplemental indenture or other
documents or instruments in a form reasonably satisfactory to the Trustee; (iii)
immediately prior to or after such transaction no Default or Event of Default
exists; and (iv) the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) shall have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of
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the Company immediately preceding the transaction and (B) shall, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in clause (i) of the first paragraph
of Section 4.09 hereof.
Section V.2 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.1 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor Person and not to the Company), and may exercise every right and
power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
(i) the Company has delivered to the Trustee an Officers' Certificate and
Opinion of Counsel, subject to customary assumptions and exclusions, stating
that the proposed transaction complies with this Indenture and (ii) such
successor Person shall have been issued, or have a consolidated Subsidiary that
has been issued, Gaming Licenses to operate the acquired casino operations and
entities substantially in the manner and scope operated prior to such
transaction, which Gaming Licenses are in full force and effect; provided
further, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.1 hereof.
ARTICLE VI.
DEFAULTS AND REMEDIES
Section VI.1 Event of Default.
An Event of Default occurs if:
(i) the Company defaults in the payment when due of interest on the
Notes and such default continues for a period of 30 days;
(ii) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to
purchase) or otherwise;
(iii) the Company fails to comply with any of the provisions of
Sections 4.7, 4.9, 4.10, 4.12, 4.15 or 4.23 or 5.1 hereof;
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(iv) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, this Indenture or the Notes for the period
and after the notice specified below;
(v) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is
created after the date of this Indenture, which default (a) is caused by a
failure, to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(vi) except as permitted herein, any Note Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Note Guarantee;
(vii) a final judgment or final judgments for the payment of money
are entered by a court or courts of competent jurisdiction against the
Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary and such
judgment or judgments are not paid, discharged or stayed for a period of 60
days; provided that the aggregate of all such judgments exceeds $5.0
million;
(viii) the Company or any Guarantor breaches any material
representation or warranty set forth in the Security Documents, or, subject
to the grace periods set forth in the applicable Security Documents, the
Company or any Guarantor defaults in the performance of any covenant set
forth in the Security Documents and, if no grace periods are set forth
therein, 45 days (minus one day for every day the Company knowingly fails
to give any notice required pursuant to Section 4.4(c) hereof with respect
to such default) shall have expired from the date that the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes
shall have given notice thereof to the Company or the relevant Guarantor or
the Company or any Guarantor repudiates its obligations under the Security
Documents or the Security Documents become unenforceable against the
Company or any Guarantor for any reason except pursuant to Section 10.3
hereof;
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(ix) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is not paying its debts as they become due; or
(x) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary or for all or substantially
all of the property of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or
(C) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(xi) there is any revocation, termination, suspension or other
cessation of effectiveness of any Gaming License which results in the
cessation or suspension of gaming operations at any of the Gold Coast,
Barbary Coast or Orleans Hotel and Casino (following its commencement of
operations) for a period of more than 90 consecutive days.
A Default under clause (iv) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 25% in principal amount of the
then outstanding Notes
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notify the Company and the Trustee, of the Default and the Company does not cure
the Default within 45 days after receipt of the notice. The notice must specify
the Default, demand that it be remedied and state that the notice is a "Notice
of Default."
Section VI.2 Acceleration.
(a) If any Event of Default (other than an Event of Default specified in
clause (ix) or (x) of Section 6.1 hereof with respect to the Company or any of
its Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary), occurs and is continuing, the
Trustee or the Holders of at least 40% in principal amount of the then
outstanding Notes may declare the principal, premium, if any, interest and any
other monetary obligations on all of the Notes to be due and payable
immediately. Upon any such declaration, the principal, premium, if any,
interest and any other monetary obligations on the Notes shall be due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (ix) or (x) of Section 6.1 hereof occurs with respect to the
Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary of the
Company, the principal, premium, if any, interest any other monetary obligations
on all of the outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
(b) Notwithstanding paragraph (a) of this Section 6.2, the Trustee shall
have no obligation to accelerate the Notes if in the best judgment of the
Trustee acceleration is not in the best interest of the Holders of the Notes.
Section VI.3 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 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 VI.4 Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding
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Notes by notice to the Trustee may on behalf of the Holders of all of the Notes
waive an existing Default or Event of Default and its consequences hereunder,
except a continuing Default or Event of Default in the payment of the principal
of, premium, if any, or interest on, the Notes (including in connection with an
offer to purchase) (provided, however, that the Holders of a majority in
aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). 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; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
Section VI.5 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, including the exercise of any remedy under the Security Documents.
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.
Section VI.6 Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only
(i) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from the
Company;
(ii) 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;
(iii) 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;
(iv) 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
(v) 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; provided, however, that the foregoing
provision does not effect the right of a Holder to sue for enforcement of
any overdue payment thereon.
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.
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Section VI.7 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 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 VI.8 Collection Suit by Trustee.
If an Event of Default specified in clause (i) or (ii) of Section 6.1
hereof 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 or any
Guarantor for the whole amount of principal of, premium 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.
Section VI.9 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 any other obligor upon the Notes, including the Guarantor), 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 7.7 hereof. 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 7.7 hereof 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.
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Section VI.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 7.7 hereof, 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, premium and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal,
premium 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 VI.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 6.11 does not apply to a suit by the Trustee, a suit by a Holder of
a Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
Section VI.12 Management of Casinos.
Notwithstanding any provision of this Article 6 to the contrary, following
an Event of Default that permits the taking of possession of any Casino that
constitutes Collateral by the Trustee or the appointment of a receiver of either
the Collateral or any part thereof pursuant to the Deed of Trust, or after such
taking of possession or such appointment, the Trustee or any such receiver shall
be authorized, in addition to the rights and powers of the Trustee and such
receiver set forth elsewhere in this Indenture and the Security Documents, to
retain one or more experienced operators of Casinos to manage such Casino on
behalf of the Holders of Notes; provided, however, that any such operator shall
have all necessary legal qualifications, including all Gaming Licenses to manage
such Casino.
Section VI.13 Intercreditor Agreement.
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Notwithstanding anything herein to the contrary, all rights and remedies of
the Holders of the Notes under this Article VI (including the application of
proceeds pursuant to Section 6.10) are expressly subject to the terms and
conditions of the Intercreditor Agreement with the trustee for the holders of
the 1996 Notes, which shall be substantially in the form of Exhibit B-1 (the
"1996 Note Intercreditor Agreement"), as well as any other Intercreditor
Agreement that may be entered into after the date hereof.
ARTICLE VII.
TRUSTEE
Section VII.1 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
the Security Documents, and use the same degree of care, and skill in its
exercise, as of a prudent person, 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 Security Documents and the
Trustee need perform only those duties that are specifically set forth in
this Indenture and the Security Documents 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 and the
Security Documents. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the requirements
of this Indenture and the Security Documents.
(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 (c) does not limit the effect of paragraph (b) of
this Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
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(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 6.5 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) and (c) of this Section 7.1.
(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 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 or the Guarantor.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) Except with respect to Section 4.1 hereof, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article Four
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to clause (i) or (ii) of Section 6.1 hereof or (ii) any Default of Event of
Default of which the Trustee shall have received written notification or
obtained actual knowledge.
Section VII.2 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 Counsel. The Trustee may consult with
counsel and the written 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.
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(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor.
(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.
Section VII.3 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 it must eliminate
such conflict within 90 days, apply to the SEC 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 hereof.
Section VII.4 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 VII.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mad to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. 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 Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section VII.6 Reports by Trustee to Holders of the Notes.
(a) Subject to Section 1.5, to the extent required by the TIA, on each May
15 beginning with the May 15 following the date of this Indenture, 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
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reporting date that complies with TIA (S) 313(a) (but if no event described in
TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA (S)
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c).
(b) Subject to Section 1.5, to the extent required by the TIA, 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 SEC and each stock exchange on which the Notes
are listed in accordance with TIA (S) 313(d). The Company shall promptly notify
the Trustee when the Notes are listed on any stock exchange.
(c) At the expense of the Company, the Trustee or, if the Trustee is not
the Registrar, the Registrar, shall report the names of record holders of the
Notes to any Gaming Authority when requested to do so by the Company.
(d) At the express direction of the Company and at the Company's expense,
the Trustee shall provide any Gaming Authority with:
(i) copies of all notices, reports and other written communications
which the Trustee gives to Holders;
(ii) a list of all of the Holders promptly after the original issuance
of the Notes and periodically thereafter if the Company so directs;
(iii) notice of any Default under this Indenture, any acceleration of
the Indebtedness evidenced hereby, the institution of any legal actions or
proceedings before any court or governmental authority in respect of a
Default or Event of Default hereunder;
(iv) notice of the removal or resignation of the Trustee within five
Business Days of the effectiveness thereof;
(v) notice of any transfer or assignment of rights under this
Indenture or the Note Guarantees known to the Trustee within five Business
Days thereof; and
(vi) a copy of any amendment to the Notes or this Indenture within
five Business Days of the effectiveness thereof;
(e) To the extent requested by the Company and at the Company's expense,
the Trustee shall cooperate with any Gaming Authority in order to provide such
Gaming Authority with the information and documentation requested and as
otherwise required by applicable law.
Section VII.7 Compensation and Indemnity.
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(a) The Company shall 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.
(b) The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.7) and defending itself against any claim (whether asserted by
the Company 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
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company 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 need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
(c) The obligations of the Company under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
(d) To secure the Company's payment obligations in this Section 7.7, 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.
(e) When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(ix) or (x) hereof 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.
(f) The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
Section VII.8 Replacement of Trustee.
(a) 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 and taking of office as provided in this Section 7.8.
(b) 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 a majority
in principal amount of
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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:
(i) the Trustee fails to comply with Section 7.10 hereof;
(ii) 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;
(iii) a Custodian or public officer takes charge of the Trustee or
its property; or
(iv) the Trustee becomes incapable of acting.
(c) 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. For up to 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.
(d) If any Gaming Authority requires a Trustee to be approved, licensed or
qualified and the Trustee fails or declines to do so, such approval, license or
qualification shall be obtained upon the request of, and at the expense of, the
Company unless the Trustee declines to do so, or, if the Trustee's relationship
with either the Company or the Guarantor may, in the Company's discretion,
jeopardize any material gaming license or franchise or right or approval granted
thereto, the Trustee shall resign, and, in addition, the Trustee may at its
option resign if the Trustee in its sole discretion determines not to be so
approved, licensed or qualified.
(e) 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 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.
(f) 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 hereof, 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.
(g) 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 7.7 hereof. Notwithstanding
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replacement of the Trustee pursuant to this Section 7.8, the Company's
obligations under Section 7.7 hereof shall continue for the benefit of the
retiring Trustee.
Section VII.9 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;
provided such corporation shall be otherwise eligible and qualified under this
Article.
Section VII.10 Eligibility; Disqualification.
(a) 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 and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
(b) Subject to Section 1.5, (i) this Indenture shall always have a Trustee
who satisfies the requirements of TIA (S) 310(a)(1), (2) and (5), and (ii) the
Trustee is subject to TIA (S) 310(b).
Section VII.11 Preferential Collection of Claims Made Against Company.
Subject to Section 1.5, (i) the Trustee is subject to TIA (S) 311 (a),
excluding any creditor relationship listed in TIA (S) 311 (b), and (ii) a
Trustee who has resigned or been removed shall be subject to TIA (S) 311 (a) to
the extent indicated therein.
ARTICLE VIII.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section VIII.1 Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate delivered to the Trustee, at
any time, elect to have either Section 8.2 or 8.3 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
Section VIII.2 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company and the Guarantor shall, subject to
the satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from their respective obligations with respect to all
outstanding Notes and any Note Guarantees on the date the conditions set forth
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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 8.5
hereof and the other Sections of this Indenture referred to in clauses (i) and
(ii) 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: (i) the rights of Holders of outstanding Notes to receive
solely out of the trust fund described in Section 8.4 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium and
interest on such Notes when such payments are due, (ii) the Company's and any
Guarantor's obligations with respect to the Notes under Article 2 and Section
4.2 hereof, (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder, and the Company's obligations in connection therewith and
(iv) this Article 8. Subject to compliance with this Article 8, the Company may
exercise its option under this Section 8.2 notwithstanding the prior exercise of
its option under Section 8.3 hereof.
Section VIII.3 Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company and the Guarantor shall, subject to
the satisfaction of the conditions set forth in Section 8.4 hereof, be released
from their obligations under the covenants contained in Sections 4.3(a), 4.4,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21,
4.22, 4.23, 4.24, and Article 5 hereof with respect to the outstanding Notes and
Note Guarantees on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders of the Notes (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 and the Guarantor 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 6.1
hereof, but, except as specified above, the remainder of this Indenture and such
Notes and Note Guarantees shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.1 hereof of the option applicable to this
Section 8.3, subject to the satisfaction of the conditions set forth in Section
8.4 hereof, clauses (iii), (iv) (v), (vii), (viii), (xi) and (xii) of Section
6.1 hereof shall not constitute Events of Default.
Section VIII.4 Conditions to Legal or Covenant Defeasance.
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(a) The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, 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 recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest, due on the outstanding Notes on the stated date for
the payment thereof or on the applicable redemption date, as the case may
be, and the Company must specify whether the Notes are being defeased to
maturity or to a particular redemption date.
(ii) in the case of an election under Section 8.2 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the United States
Internal Revenue Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable U.S. federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall confirm, that the Holders of the outstanding Notes will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of
such Legal Defeasance and will be subject to U.S. 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;
(iii) in the case of an election under Section 8.3 hereof, 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 of the outstanding Notes will not recognize income, gain or loss
for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to such 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;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness, all or a portion of
the proceeds of which will be used to defease the Notes pursuant to this
Article 8 concurrently with such incurrence) or insofar as Sections 6.1(ix)
or 6.1(x) hereof is concerned, at any time in the period ending on the 91st
day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
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(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(vii) 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
creditors of the Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States each stating
that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Section VIII.5 Deposited Money and government Securities to be Held in
Trust; Other Miscellaneous Provisions.
(a) Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof 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, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
(b) 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 8.4 hereof 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.
(c) 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 8.4 hereof 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
8.4(a) hereof), 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 VIII.6 Repayment to Company.
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Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
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 an unsecured
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 shall be repaid to the Company.
Section VIII.7 Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 2.2 through 2.7, 4.1, 4.6, 7.7, 7.8, 8.6
and 8.8 hereof, the Guarantor's obligations under Sections 4.6 and 11.1 and the
Trustee's and the Paying Agents obligations under Section 8.8 shall survive
until the Notes are no longer outstanding, after which only such obligations
under Sections 7.7, 8.6 and 8.8 shall survive) and the Trustee, on demand of and
at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(i) all Notes theretofore authenticated and delivered (other than (A)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.6 or 2.7 hereof and (B) Notes for whose
payment money has theretofore been deposited with the Trustee, as provided
in Section 4.1) have been delivered to the Trustee for cancellation; or
(ii) all such Notes not theretofore delivered to the Trustee for
cancellation
(A) have become due and payable, or
(B) will become due and payable at their final maturity within 45
days, or
(C) are to be called for redemption within 45 days under
arrangements satisfactory to the Trustee for the giving of notice or
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of clause (ii)(A), (ii)(B) or (ii)(C) above, has
deposited or caused to
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be deposited with the Trustee in trust for such purpose, together with a
statement by the Company that such deposit is irrevocable, an amount of such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and interest to
the date of such deposit (in the case of Notes that have become due and payable)
or to the final maturity or redemption date, as the case may be;
(b) the Company and the Guarantor has paid or caused to be paid all other
sums payable hereunder by it;
(c) the Company and the Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this Indenture
have been complied with; and
(d) the Company and each Guarantor has complied with Section 314(c) of the
Trust Indenture Act in connection with such satisfaction and discharge.
Section VIII.8 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or noncallable Government Securities in accordance with Section 8.2, 8.3 or 8.7
hereof, 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 and the Guarantor obligations under this
Indenture and the Notes and Note Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to Section 8.2, 8.3 or 8.7 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.2, 8.3 or 8.7 hereof, as the case may be; provided,
however, that, if the Company and the Guarantor make any payment of principal
of, premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company and the Guarantor 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 VIII.9 Collateral.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to either Section 8.2 or 8.3 or the satisfaction and discharge of
this Indenture under Section 8.7 hereof, the Collateral, except the funds in the
trust fund described in Section 8.4 or 8.7, as applicable, hereof, shall be
released pursuant to Section 10.3 hereof.
ARTICLE IX.
AMENDMENT, SUPPLEMENT AND WAIVER
Section IX.1 Without Consent of Holders of Notes.
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(a) Notwithstanding Section 9.2 hereof, without the consent of any Holder
of Notes, the Company and the Trustee together may amend or supplement this
Indenture, the Notes, the Note Guarantees or the Security Documents:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(iii) to provide for the assumption of the Company's or any
Guarantor's obligations to the Holders of the Notes in the case of a merger
or consolidation pursuant to Article 5 or Article 11 hereof, as the case
may be;
(iv) to make any change that would provide any additional rights or
benefits to the Holders of the Notes (including providing for additional
Note Guarantees pursuant to this Indenture) or that does not adversely
affect the legal rights hereunder of any such Holder of Notes;
(v) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(vi) to make any change to any provision of this Indenture, the Notes,
the Note Guarantees or the Security Documents, if and to the extent the
same change is made to the corresponding provision of the 1996 Indenture or
the 1996 Notes, or the Note Guarantees (as defined in the 1996 Indenture)
or Security Documents (as defined in the 1996 Indenture); or
(vii) to enter into additional or supplemental Security Documents.
(b) Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company and the Guarantor authorizing the execution of
any such amended or supplemental Indenture, Notes, Note Guarantees or Security
Documents, and upon receipt by the Trustee of the documents described in Section
7.2 hereof, the Trustee shall join with the Company and the Guarantor in the
execution of any amended or supplemental Indenture, Notes, Note Guarantees or
Security Documents 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, Notes, Note Guarantees or Security Documents that
affects its own rights, duties or immunities under this Indenture or otherwise.
Section IX.2 With Consent of Holders of Notes.
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(a) Except as provided below in this Section 9.2 or elsewhere in this
Indenture, the Company and the Trustee may amend or supplement this Indenture
(including Sections 3.10, 4.10 and 4.15 hereof) the Notes, the Note Guarantees
or the Security Documents with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding (including consents obtained
in connection with a tender offer or exchange offer for Notes) and, subject to
Sections 6.4 and 6.7 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium
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 Notes, the Note Guarantees or the Security Documents may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
(b) Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company and the Guarantor authorizing the execution of
any such amended or supplemental Indenture, Notes, Note Guarantees or Security
Documents, 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 Section 7.2 hereof, the Trustee shall
join with the Company and the Guarantor in the execution of such amended or
supplemental Indenture, Notes, Note Guarantees or Security Documents, unless
such amended or supplemental Indenture, Notes, Note Guarantees or Security
Documents affects the Trustee's own rights, duties or immunities under this
Indenture, the Notes, the Note Guarantees, the Security Documents or otherwise,
in which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture, Notes, Note Guarantees or
Security Documents.
(c) 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.
(d) After an amendment, supplement or waiver under this Section 9.2 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, Notes, Note Guarantees or Security Documents or waiver.
(e) Notwithstanding any other provision of this Section 9.2, without the
consent of each Holder affected, an amendment or waiver may not (with respect to
any Notes held by a nonconsenting Holder of Notes):
(i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
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(ii) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of
the Notes (other than Sections 3.10, 4.10 and 4.15 hereof);
(iii) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(iv) waive a Default or Event of Default in the payment of principal
of, premium or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding and a waiver of the payment default
that resulted from such acceleration);
(v) make any Note payable in money other than that stated in the
Notes;
(vi) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(vii) waive a redemption payment with respect to any Note (other
than payments required by Sections 4.10 and 4.15 hereof);
(viii) release all or substantially all of the Collateral from the
Lien of this Indenture or the Security Documents (except in accordance with
Article 10 hereof or the Security Documents); or
(ix) make any change in Section 6.4 or Section 6.7 hereof or in the
foregoing amendment and waiver provisions.
Section IX.3 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture, the Notes, the Note
Guarantees and the Security Documents shall be set forth in an amended or
supplemental Indenture, Note, Note Guarantee or Security Document that complies
with the TIA as then in effect, if applicable. This Indenture shall be
construed to comply in every respect with the TIA.
Section IX.4 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
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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.
Section IX.5 Notation on or Exchange of Notes.
(a) 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 authenticate new Notes
(accompanied by a notation of the Note Guarantee duly endorsed by the Guarantor)
that reflect the amendment, supplement or waiver.
(b) 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 IX.6 Trustee to Sign Amendments, Etc.
The Trustee shall sign any amended or supplemental Indenture, Note, Note
Guarantee or Security Document, if necessary, 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 or any Guarantor
may not sign an amended or supplemental Indenture, Note, Note Guarantee or
Security Document until its Board of Directors approves it. In executing any
amended or supplemental indenture, Note, Note Guarantee or Collateral Document,
if necessary, the Trustee shall be entitled to receive and (subject to Section
7.1) shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture, Note, Note Guarantee or Security Document is authorized or permitted
by this Indenture and that all conditions precedent have been complied with.
ARTICLE X.
COLLATERAL AND SECURITY
Section X.1 Security.
(a) The due and punctual payment of the principal of, premium and interest
on all of the Notes when and as the same shall be due and payable, whether on an
interest payment date, at maturity, by acceleration, repurchase, redemption or
otherwise, and interest on the overdue principal of, premium and (to the extent
permitted by law) interest on the Notes and performance of all other obligations
of the Company and the Guarantor to the Holders of Notes or the Trustee under
this Indenture and the Notes and the Note Guarantees, according to the terms
hereunder or thereunder, shall be ratably secured by a Lien on the Collateral
owned by the Company and each Note Guarantee similarly shall be secured as
provided in the Security Documents that the Company and the Guarantor have
entered into simultaneously with the execution of this Indenture for the benefit
of the Holders of Notes.
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(b) Each Holder of Notes, by its acceptance thereof, consents and agrees to
the terms of the Security Documents (including, without limitation, the
provisions providing for foreclosure and release of Collateral) and the
Intercreditor Agreement as the same may be in effect or may be amended from time
to time in accordance with its terms and authorizes and directs the Trustee to
enter into the Security Documents and to perform its obligations and exercise
its rights thereunder in accordance therewith. The Company and the Guarantor
shall deliver to the Trustee copies of all documents executed pursuant to this
Indenture and the Security Documents and shall do or cause to be done all such
acts and things as may be necessary or proper, or as may be required by the
provisions of the Security Documents to assure and confirm to the Trustee the
security interest in the Collateral and Guarantee Collateral contemplated
hereby, by the Security Documents or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Notes and the Note Guarantees secured hereby,
according to the intent and purposes herein expressed.
(c) The Company shall take, or shall cause its Subsidiaries to take, upon
request of the Trustee, any and all actions reasonably required to cause the
Security Documents to create and maintain, as security for the Obligations of
the Company or the Guarantor hereunder, valid and enforceable perfected first
priority Liens in and on all the Collateral in favor of the Trustee for the
benefit of the Holders, subject to Permitted Liens. Notwithstanding the
foregoing or anything to the contrary in the Security Documents, nothing in this
Indenture or the Security Documents shall require the Company or Guarantor to do
(or cause to be done) any of the following: (i) create or perfect Liens in any
of the "Excluded Assets," as defined in any of the Security Documents, or any
other assets otherwise excluded from the Collateral pursuant to the terms of the
Security Documents, or (ii) perfect Liens in any of the following: (A) any
personal property a security interest in which must be perfected by the delivery
thereof to the Trustee, if delivery thereof is not required by the Security
Agreement, (B) any automobiles or other assets subject to a certificate of title
or registration, except as required by the Security Documents and (C) any
deposit accounts.
(d) The Net Proceeds of all Asset Sales (including all Events of Loss) of
assets constituting Collateral, as well as Excess Proceeds, shall be promptly
and without any commingling deposited with the 1996 Notes Trustee subject to a
Lien in favor of the Trustee for the benefit of the Holders of the Notes unless
and until applied as permitted under Section 4.10 hereof. The Trustee shall
release its Lien on any Excess Proceeds, that remain after making an offer to
purchase the Notes in compliance with Section 4.10 hereof. Amounts so paid to
the Trustee shall be invested or released in accordance with the provisions of
this Indenture.
(e) The Trustee may appoint one or more collateral agents, who may be
delegated any one or more of the duties or rights of the Trustee under the
Security Documents or that are specified in any of the Security Documents.
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Section X.2 Recording and Opinions.
(a) The Company and the Guarantor shall cause the applicable Security
Documents including the Deed of Trust and any financing statements, all
amendments or supplements to each of the foregoing and any other similar
security documents as necessary, to be registered, recorded and filed and/or re-
recorded, re-filed and renewed in such manner and in such place or places, if
any, as may be required by law or reasonably requested by the Trustee in order
fully to preserve and protect (i) the Liens securing the obligations under the
Notes and the Note Guarantees pursuant to the Security Documents and (ii) the
Lien of the Guarantor securing (for the benefit of the Holders of Notes) the
Notes and the Note Guarantees and to effectuate and preserve the security of the
Holders of Notes and all rights of the Trustee.
(b) To the extent required by the TIA and subject to Section 1.5, the
Company, the Guarantor and any other obligor shall furnish to the Trustee:
(i) promptly after the execution and delivery of this Indenture, and
promptly after the execution and delivery of any other instrument of
further assurance or amendment, an Opinion of Counsel in the United States
either (i) stating that in the opinion of such counsel, this Indenture, the
Deed of Trust and other applicable Security Documents and all other
instruments of further assurance or amendment have been properly recorded,
registered and filed to the extent necessary to make effective the Lien
intended to be created by such Security Documents and reciting the details
of such action or referring to prior Opinions of Counsel in which such
details are given, and stating that, as to such Security Documents and such
other instruments such recording, registering and filing are the only
recordings, registerings and filings necessary to give notice thereof and
further stating that all financing statements and continuation statements
have been executed and filed that are necessary fully to perfect the Liens
intended to be created by the Security Documents, or (ii) stating that, in
the opinion of such counsel, no such action is necessary to make any other
Lien created under any of the Security Documents effective as intended by
such Security Documents; and
(ii) On January 30, in each year beginning with the year 1998, an
Opinion of Counsel, dated as of such date, either (A) stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and re-filing
of this Indenture and all supplemental indentures, financing statements,
continuation statements or other instruments of further assurance as is
necessary to maintain the Lien of this Indenture and the Security Documents
until the next Opinion of Counsel is required to be rendered pursuant to
this paragraph and reciting the details of such action or referring to
prior Opinions of Counsel in which such details are given, and stating that
all financing statements and continuation statements have been executed and
filed that are necessary fully to perfect the Liens intended to be created
by the Security Documents or (B) stating that in the opinion of such
counsel, no such action is necessary to maintain such Lien, until the next
Opinion of Counsel is required to be
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rendered pursuant to this paragraph.
(c) Subject to Section 1.5, the Company shall furnish to the Trustee the
certificates or opinions, as the case may be, required by TIA (S) 314(d). Such
certificates or opinions shall be subject to the terms of TIA (S) 314(e).
Section X.3 Release of Collateral, Etc.
(a) Subject to paragraphs (b), (c) and (d) of this Section 10.3, Collateral
may be released from the Lien and security interest created by this Indenture
and the Security Documents at any time or from time to time upon the request of
the Company pursuant to an Officers' Certificate certifying that all terms for
release and conditions precedent hereunder and under any applicable Security
Document have been met and specifying (i) the identity of the Collateral to be
released and (ii) the provision of this Indenture or the Security Document that
authorizes such release. The Trustee shall release (at the sole cost and
expense of the Company) (i) the Capital Stock of Coast West and the assets of
Coast West (including the Coast West Lease) in the event that Coast Resorts or
Coast West elects to effect such a release and repays to the Company in cash the
aggregate amount of any Indebtedness owed to the Company by Coast West as of the
date of such release, (ii) Equipment included in clause (iv) of the definition
of Excluded Assets set forth in the Security Agreement and the Rancho Road
Property in the event that the Company elects to effect such a release in
connection with the incurrence of additional Indebtedness secured by such assets
in accordance with the provisions of this Indenture; including, without
limitation, the requirement that the net proceeds from such transaction, if any,
are or will be applied in accordance with this Indenture and that no Default or
Event of Default has occurred and is continuing or would occur immediately
following such release; (iii) Collateral that is condemned, seized or taken by
the power of eminent domain or otherwise confiscated pursuant to an Event of
Loss; provided that the Net Proceeds, if any, from such Event of Loss are or
will be applied in accordance with Section 4.10 hereof; (iv) Collateral that may
be released with the consent of Holders pursuant to Article 9 hereof; (v) all
Collateral (except as provided in Article 8 hereof and, in particular, the funds
in the trust fund described in Section 8.4 or 8.7 hereof) upon discharge or
defeasance of this Indenture in accordance with Article 8 hereof; (vi) all
Collateral upon the payment in full of all obligations of the Company with
respect to the Notes; (vii) the assets and Capital Stock and related Collateral
of a Guarantor whose Note Guarantee is released pursuant to Section 11.5 hereof;
(viii) Collateral that is being sold, leased, conveyed or otherwise disposed of,
provided the Net Proceeds, if any, from such disposition are applied in
accordance with Section 4.10, to the extent required thereby; and (ix) in
connection with the transfer of the Capital Stock of Coast West from Coast
Resorts to the Company, the Capital Stock of Coast West and the certificates
representing such Capital Stock registered in the name of Coast Resorts upon
delivery to the Trustee of certificates representing such Capital Stock
registered in the name of the Company. Upon receipt of such Officers'
Certificate the Trustee shall execute, deliver or acknowledge any necessary or
proper instruments of termination, satisfaction or release to evidence the
release of any Collateral permitted to be released pursuant to this Indenture or
the Security Documents.
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(b) No Collateral shall be released from the Lien and security interest
created by the Security Documents pursuant to the provisions of the Security
Documents unless there shall have been delivered to the Trustee the certificate
required by this Section 10.3.
(c) The Trustee may release Collateral from the Lien and security interest
created by this Indenture and the Security Documents upon the sale or
disposition of Collateral pursuant to the Trustee's powers, rights and duties
with respect to remedies provided under any of the Security Documents.
(d) The release of any Collateral from the terms of this Indenture and the
Security Documents shall not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Collateral is released pursuant to the terms hereof. To the extent applicable,
the Company shall cause TIA (S) 313(b), relating to reports, and TIA (S) 314(d),
relating to the release of property or securities from the Lien and security
interest of the Security Documents and relating to the substitution therefor of
any property or securities to be subjected to the Lien and security interest of
the Security Documents to be complied with. Any certificate or opinion required
by TIA (S) 314(d) may be made by an Officer of the Company except in cases where
TIA (S) 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee in the exercise of reasonable
care.
Section X.4 Protection of the Trust Estate.
Upon the prior written notice to the Company and the Guarantor, the Trustee
shall have the power (i) to institute and maintain such suits and proceedings as
it may deem expedient, to prevent any impairment of the Collateral under any of
the Security Documents; and (ii) to enforce the obligations of the Company, the
Guarantor or any Subsidiary under this Indenture or the Security Documents, to
institute and maintain such suits and proceedings as may be expedient to prevent
any impairment of the Collateral under the Security Documents; including the
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or other governmental enactment, rule or
order that may be unconstitutional or otherwise invalid if the enforcement of,
or compliance with, such enactment, rule or order would impair any Collateral or
be prejudicial to the interests of the Holders of Notes or the Trustee, to the
extent permitted thereunder.
Section X.5 Certificates of the Company.
Subject to Section 1.5, the Company shall furnish to the Trustee, prior to
each proposed release of Collateral pursuant to the Security Documents (i) all
documents required by TIA (S) 314(d) and (ii) an Opinion of Counsel in the
United States, to the effect that, such accompanying documents constitute all
documents required by TIA (S) 314(d). The Trustee may, to the extent permitted
by Sections 7.1 and 7.2 hereof, accept as conclusive evidence of compliance with
the
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foregoing provisions the appropriate statements contained in such documents and
such Opinion of Counsel.
Section X.6 Certificates of the Trustee.
Subject to Section 1.5, in the event that the Company wishes to release
Collateral in accordance with the Security Documents and has delivered the
certificates and documents required by the Security Documents and Sections 10.3
and 10.4 hereof, the Trustee shall determine whether it has received all
documentation required by TIA (S) 314(d) in connection with such release and,
based on such determination and the Opinion of Counsel delivered pursuant to
clause (ii) of Section 10.05 hereof, shall deliver a certificate to the Company
setting forth such determination.
Section X.7 Authorization of Actions to be Taken by the Trustee Under The
Security Documents.
Subject to the provisions of Sections 7.1 and 7.2 hereof, the Trustee may,
in its sole discretion and without the consent of the Holders of Notes, direct,
on behalf of the Holders of Notes, the Collateral Agent to, take all actions it
deems necessary or appropriate in order to (i) enforce any of the terms of the
Security Documents and (ii) collect and receive any and all amounts payable in
respect of the Obligations of the Company hereunder. The Trustee shall have
power to institute and maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Collateral by any acts that may be
unlawful or in violation of the Security Documents or this Indenture, and such
suits and proceedings as the Trustee may deem expedient to preserve or protect
its interests and the interests of the Holders of Notes in the Collateral
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the security interest hereunder or be prejudicial to the interests of the
Holders of Notes or of the Trustee).
Section X.8 Authorization of Receipt of Funds by The Trustee Under The
Security / Documents.
(a) Upon an Event of Default and so long as such Event of Default
continues, the Trustee may exercise in respect of the Collateral, in addition to
the other rights and remedies provided for herein, in the Security Documents or
otherwise available to it, all of the rights and remedies of a secured party
under the Uniform Commercial Code or other applicable law, and the Trustee may
also upon obtaining possession of the Collateral as set forth herein, without
notice to the Company, except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Trustee may deem
commercially reasonable. The Company acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to the seller
than if such a
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sale were a public sale. The Company agrees that, to the extent notice of sale
shall be required by law, at least 10 days' notice to the Company of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Trustee shall not be
obligated to make any sale regardless of notice of sale having been given. The
Trustee may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Any cash that is Collateral held by the Trustee and all cash proceeds
received by the Trustee in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied (unless
otherwise provided for in the Security Documents and after payment of any and
all amounts payable to the Trustee pursuant to the Indenture), as the Trustee
shall determine or as the Holders of the Notes shall direct pursuant to Section
6.5 hereof, (i) against the obligations for the ratable benefit of the Holders
of the Notes, (ii) to maintain, repair or otherwise protect the Collateral or
(iii) to take such other action to protect the other rights of the Holders of
the Notes or to take any other appropriate action or remedy for the benefit of
the Holders of the Notes. Any surplus of such cash or cash proceeds held by the
Trustee and remaining after payment in full of all the obligations shall be paid
over to the Company or to whomsoever may be lawfully entitled to receive such
surplus or as a court of competent jurisdiction may direct.
Section X.9 Termination of Security Interest.
Without limiting Section 10.3, upon the payment in full of all Obligations
of the Company under this Indenture and the Notes, or upon Legal Defeasance or
Covenant Defeasance, the Trustee shall, at the request of the Company, deliver a
certificate to the Trustee stating that such Obligations have been paid in full,
and instruct the Trustee to release the Liens pursuant to this Indenture and the
Security Documents.
Section X.10 Cooperation of Trustee.
In the event the Company or the Guarantor pledges or grants a security
interest in additional Collateral, the Trustee shall cooperate with the Company
or such Guarantor in reasonably and promptly agreeing to the form of, and
executing as required, any instruments or documents necessary to make effective
the security interest in the Collateral to be so substituted or pledged. To the
extent practicable, the terms of any security agreement or other instrument or
document necessitated by any such substitution or pledge shall be comparable to
the provisions of the existing Security Documents. Subject to, and in
accordance with the requirements of this Article 10 and the terms of the
Security Documents, in the event that the Company or any Guarantor engages in
any transaction pursuant to Section 10.3 hereof, the Trustee shall cooperate
with the Company or such Guarantor in order to facilitate such transaction in
accordance with any reasonable time schedule proposed by the Company, including
by delivering and releasing the Collateral in a prompt and reasonable manner.
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Section X.11 Collateral Agent.
The Trustee may, from time to time, appoint one or more Collateral Agents
hereunder. Each of such Collateral Agents may be delegated any one or more of
the duties or rights of the Trustee hereunder or under the Security Documents or
that are specified in any Security Documents, including without limitation, the
right to hold any Collateral in the name of, registered to, or in the physical
possession of, such Collateral Agent, for the rateable benefit of the Holders of
the Notes. Each such Collateral Agent shall have such rights and duties as may
be specified in an agreement between the Trustee and such Collateral Agent. The
Trustee and any Collateral Agent shall be authorized hereunder to give any
acknowledgment reasonably requested by any party under the Intercreditor
Agreement to confirm the rights and obligations of the parties under the
Intercreditor Agreement.
ARTICLE XI.
NOTE GUARANTEES
Section XI.1 Note Guarantees.
(a) Each of the Guarantors, jointly and severally, hereby unconditionally
guarantees, on a senior secured basis (such guarantee being a "Note Guarantee"),
to each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity or
enforceability of this Indenture, the Notes or the Obligations of the Company
under this Indenture or the Notes, that: (i) the principal of, premium, if any,
and interest on the Notes shall be paid in full when due, whether at the
maturity or interest payment or mandatory redemption date, by acceleration, call
for redemption or otherwise, and interest on the overdue principal, premium and
(to the extent permitted by law) interest, if any, of the Notes and all other
Obligations of the Company to the Holders or the Trustee under this Indenture or
the Notes shall be promptly paid in full or performed, all in accordance with
the terms of this Indenture and the Notes; and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, they
shall be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration, redemption or
otherwise. Failing payment when due of any amount so guaranteed or failing
performance of any other Obligation of the Company to the Holders, for whatever
reason, Guarantor shall be jointly and severally obligated to pay, or to perform
or to cause the performance of, the same immediately, whether or not such
failure to pay or perform has become an Event of Default that could cause
acceleration pursuant to Section 6.2 hereof. An Event of Default under this
Indenture or the Notes shall constitute an event of default under this Note
Guarantee, and shall entitle the Holders of Notes to accelerate the Obligations
of each Guarantor hereunder in the same manner and to the same extent as the
Obligations of the Company.
(b) Each Guarantor hereby agrees that its obligations with regard to each
Note Guarantee shall be unconditional, irrespective of the validity or
enforceability of the Notes or this
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Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of Notes with respect to any provision hereof or thereof, the
recovery of any judgment against the Company or any other obligor with respect
to this Indenture, the Notes or the Obligations of the Company under this
Indenture or the Notes, any action to enforce the same or any other
circumstances that might otherwise constitute a legal or equitable discharge or
defense of a Guarantor. Each Guarantor, to the extent permitted by law, hereby
waives and relinquishes all claims, rights and remedies accorded by applicable
law to guarantors and agrees not to assert or take advantage of any such claims,
rights or remedies, including but not limited to: (i) any right to require the
Trustee, the Holders or the Company (each, a "Benefitted Party") to proceed
against the Company or any other Person or to proceed against or exhaust any
security held by a Benefitted Party at any time or to pursue any other remedy in
any Benefitted Party's power before proceeding against such Guarantor; (ii) the
defense of the statute of limitations in any action hereunder or in any action
for the collection of any Indebtedness or the performance of any obligation
hereby guaranteed; (iii) any defense that may arise by reason of the incapacity,
lack Of authority, death or disability of any other Person or the failure of a
Benefitted Party to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any other Person; (iv)
diligence, presentment, demand, protest and notice of any kind including but not
limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-action on the part
of such Guarantor, the Company, any Benefitted Party, any creditor of such
Guarantor, the Company or on the part of any other Person whomsoever in
connection with any Indebtedness or Obligations hereby guaranteed; (v) any
defense based upon an election of remedies by a Benefitted Party, including but
not limited to an election to proceed against such Guarantor for reimbursement;
(vi) any defense based upon any statute or rule of law that provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal; (vii) any defense arising because of
a Benefitted Party's election, in any proceeding instituted under the Federal
Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal
Bankruptcy Code; or (viii) any defense based on any borrowing or grant of a
security interest under Section 364 of the Federal Bankruptcy Code. Each
Guarantor hereby covenants that its Note Guarantee will not be discharged except
by complete performance of the obligations contained in the Notes and this
Indenture or as otherwise expressly provided herein.
(c) If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or any Guarantor, or any custodian, trustee, or
similar official acting in relation to either the Company or such Guarantor, any
amount paid by the Company or such Guarantor to the Trustee or such Holder, the
applicable Note Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that it will not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(d) Each Guarantor further agrees that, as between such Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (i) the maturity
of the Obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of this Note
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Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration as to the Company or any other obligor on the Notes of the
obligations guaranteed hereby and (ii) in the event of any declaration of
acceleration of those obligations as provided in Article 6 hereof, those
obligations (whether or not due and payable) shall forthwith become due and
payable by such Guarantor for the purpose of this Note Guarantee.
Section XI.2 Execution and Delivery of Note Guarantee.
To evidence the Note Guarantees set forth in Section 11.1 hereof, each
Guarantor agrees that a notation of the Note Guarantees substantially in the
form included in Exhibit C shall be endorsed on each Note authenticated and
delivered by the Trustee and that this Indenture shall be executed on behalf of
the Guarantor by the Chairman of the Board, any Vice Chairman, the President or
one of the Vice Presidents of the Guarantor, under a facsimile of its seal
reproduced on this Indenture and attested to by an Officer other than the
Officer executing this Indenture.
Each Guarantor agrees that the Note Guarantees set forth in this Article 11
shall remain in full force and effect and apply to all the Notes notwithstanding
any failure to endorse on each Note a notation of the Note Guarantees.
If an Officer whose facsimile signature is on a Note no longer holds that
office at the time the Trustee authenticates the Note on which the Note
Guarantees are endorsed, the Note Guarantees shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Note Guarantees set forth in
this Indenture, on behalf of the Guarantors.
Section XI.3 Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof, each Holder, hereby confirms
that it is its intention that the Note Guarantee by such Guarantor not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar federal or state law to the extent applicable to the Note
Guarantees. To effectuate the foregoing intention, each such Holder hereby
irrevocably agrees that the obligation of such Guarantor under the Note
Guarantees under this Article 11 shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent conveyance. Each
beneficiary under the Note Guarantees, by accepting the benefits hereof,
confirms its intention that, in the event of a bankruptcy, reorganization or
other similar proceeding of the Company or any Guarantor in which concurrent
claims are made
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upon any Guarantor hereunder, to the extent such claims will not be fully
satisfied, each such claimant with a valid claim against the Company shall be
entitled to a ratable share of all payments by such Guarantor in respect of such
concurrent claims.
Section XI.4 Guarantor May Consolidate, Etc., on Certain Terms.
(a) Except as set forth in Article 4 or 5 hereof, no Guarantor shall
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless (i) subject to the provisions of Section 11.5 hereof the Person formed by
or surviving any such consolidation or merger (if other than such Guarantor)
assumes, pursuant to a supplemental indenture and appropriate Security Documents
in form and substance reasonably satisfactory to the Trustee, all the
Obligations of such Guarantor under the Notes, the Indenture and the Security
Documents; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; (iii) such Guarantor, or any Person formed by or
surviving any such consolidation or merger, (A) would have Consolidated Net
Worth (immediately after giving effect to such transaction) equal to or greater
than the Consolidated Net Worth of such Guarantor immediately preceding the
transaction and (B) except with respect to consolidations or mergers between
Guarantors, would have a Fixed Charge Coverage Ratio (immediately after giving
effect to such transaction) no lower than the Fixed Charge Coverage Ratio of
such Guarantor immediately preceding the transaction; and (iv) such transaction
will not result in the loss or suspension or material impairment of any material
Gaming License. Such successor corporation thereupon may cause to be signed the
Note Guarantees to be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee. The Note Guarantees so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of this Indenture as though
the Note Guarantees had been issued at the date of the execution hereof.
(b) The Trustee, subject to the provisions of Section 11.5 hereof, shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale or conveyance, and
any such assumption of Obligations, comply with the provisions of this Section
11.4. Such certificate and opinion shall comply with the provisions of Section
12.5.
Section XI.5 Releases of Note Guarantees.
In the event of a sale or other disposition of any Guarantor, by way of
merger or consolidation, or a sale or other disposition of all of the Capital
Stock of any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
Capital Stock of such Guarantor) shall be released and relieved of any
Obligations under its Note Guarantee; provided that (i) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof and (ii) the Net
Proceeds of such sale or other
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disposition are applied in accordance with the applicable provisions of this
Indenture. Upon delivery by the Company to the Trustee of an Officers'
Certificate and Opinion of Counsel, to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.10 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any such Guarantor from its obligations under its Note Guarantee. Any Guarantor
not released from its obligations under its Note Guarantee shall remain liable
for the full amount of principal of, premium, if any, and interest on the Notes
and for the other Obligations of any Guarantor under this Indenture as provided
in this Article 11. Nothing herein shall relieve the Company from its
obligations to apply the proceeds of an Asset Sale as provided in Section 4.10
hereof.
Section XI.6 "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 11 shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article 11 in place of the Trustee.
ARTICLE XII.
MISCELLANEOUS
Section XII.1 Trust Indenture Act Controls.
Subject to Section 1.5, if any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by TIA (S) 318(c), the imposed
duties shall control.
Section XII.2 Notice.
(a) 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:
If to the Company or the Guarantor:
Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Telecopier No.: (702) 365-7566
Attention: Corporate Secretary
With a copy to:
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Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier No.: (213) 229-7520
Attention: Karen Bertero
and
Leavitt, Sully & Rivers
601 East Bridger Avenue
Las Vegas, NV 89101
Telecopier No.: (702) 382-2892
Attention: Michael Leavitt
If to the Trustee:
Firstar Bank of Minnesota, N.A.
101 East Fifth Street
St. Paul, Minnesota 55101
Telecopier No.: (612) 229-6415
Attention: Corporate Trust Department
(b) The Company, the Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
(c) All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; 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.
(d) 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. Subject to Section 1.5, any notice or communication shall
also be so mailed to any Person described in TIA (S) 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.
(e) 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.
(f) If the Company or a Guarantor mails a notice or communication to
Holders, it
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shall mail a copy to the Trustee and each Agent at the same time.
Section XII.3 Communication by Holders of Notes with Other Holders of
Notes.
Subject to Section 1.5, Holders may communicate pursuant to TIA (S) 312(b)
with other Holders with respect to their rights under this Indenture or the
Notes. Subject to Section 1.5, the Company, the Guarantor, the Trustee, the
Registrar and anyone else shall have the protection of TIA (S) 312(c).
Section XII.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company or such Guarantor,
as the case may be, shall furnish to the Trustee:
(i) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5 hereof) 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
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section XII.5 Statements Required in Certificate or Opinion.
Subject to Section 1.5, 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 (S) 314(a)(4)) shall comply with the
provisions of TIA (S) 314(e) and shall include:
(i) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(ii) 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;
(iii) a statement that, in the opinion of such Person, he or she has
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
(iv) a statement as to whether or not, in the opinion of such Person,
such
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condition or covenant has been satisfied.
Section XII.6 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 XII.7 No Personal Liability of Directors, Officers, Employees and
Shareholders.
No director, officer, employee, incorporator or shareholder of the Company,
any Subsidiary of the Company or any Guarantor, as such, shall have any
liability for any Obligations of the Company, any Subsidiary of the Company or
any Guarantor under the Notes, any Note Guarantee, this Indenture, the Security
Documents, as applicable, or for any claim based on, in respect of, or by reason
of such Obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. Such waiver and release are part of the
consideration for issuance of the Notes and the Note Guarantees.
Section XII.8 Governing Law.
THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
THE CHOICE OF LAW RULES THEREOF.
Section XII.9 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 XII.10 Successors.
All agreements of the Company and the Guarantor in this Indenture, the
Notes and the Note Guarantees, as applicable, shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section XII.11 Severability.
In case any provision in this Indenture, in the Notes or in the Note
Guarantees 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.
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Section XII.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.
Section XII.13 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table 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.
Signature pages follow
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SIGNATURES
Dated as of November 21, 1997 COAST HOTELS AND CASINOS, INC.
By: /s/ Michael J. Gaughan
-------------------------------------
Name: Michael J. Gaughan
Title: Chief Executive Officer
Attest:
/s/ Gage Parrish
----------------------------
Gage Parrish
Vice President - Finance and
Assistant Secretary
Dated as of November 21, 1997
COAST RESORTS, INC.
By: /s/ Michael J. Gaughan
-------------------------------------
Name: Michael J. Gaughan
Title: Chief Executive Officer
Attest:
/s/ Gage Parrish
----------------------------
Gage Parrish
Vice President - Finance and
Assistant Secretary
Dated as of November 21, 1997
FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee
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<PAGE>
By: /s/ Frank Leslie, III
----------------------------------
Name: Frank Leslie, III
Title: Vice President
Attest:
______________________________
Name:
Title:
Dated as of November 21, 1997
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<PAGE>
EXHIBIT 10.27
Execution Copy
--------------
NOTE GUARANTEES
Coast Resorts, Inc., a Nevada corporation (the "Guarantor" which term
includes any successor or additional Guarantor under the Indenture (the
"Indenture") referred to in the Note upon which this notation is endorsed), has
unconditionally guaranteed the Obligations of the Company under the Notes, the
Indenture and the related Security Documents, on a senior secured basis (each
such guarantee being a "Note Guarantee"), to each Holder of a Note authenticated
and delivered by the Trustee and its successors and assigns irrespective of the
validity or enforceability of the Indenture, the Notes or the Obligations of the
Company under this Indenture or the Notes, that: (i) the principal of, premium,
if any, and interest on the Notes issued hereunder shall be paid in full when
due, whether at the maturity or interest payment or mandatory redemption date,
by acceleration, call for redemption or otherwise, and interest on the overdue
principal, premium, if any, and interest, if any, of the Notes and all other
Obligations of the Company to the Holders or the Trustee under this Indenture or
the Notes shall be promptly paid in full or performed, all in accordance with
the terms of this Indenture and the Notes; and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other Obligations, they
shall be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration, redemption or
otherwise. Failing payments when due of any amount so guaranteed or failing
performance of any other Obligation for whatever reason, Guarantor shall be
obligated to pay or to perform or to cause the performance of, the same whether
or not such failure to pay has become an Event of Default that could cause
acceleration pursuant to Section 6.2 of the Indenture. The Guarantor agrees
that this is a guarantee of payment not a guarantee of collection. Capitalized
terms used herein have the meanings assigned to them in the Indenture unless
otherwise indicated, and the Obligations of the Guarantor pursuant to the Note
Guarantees are subject to the terms of the Indenture, to which reference is
hereby made for the precise terms thereof.
Pursuant to Section 11.3 of the Indenture, the Obligation of the Guarantor
under its Note Guarantee is limited to the maximum amount as will, after giving
effect to such maximum amount and all other liabilities of the Guarantor that
are relevant for purposes of fraudulent transfer or conveyance under the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the Obligations of such other
Guarantor under Article 11 of the Indenture, result in the Obligations of such
Guarantor in respect of such maximum amounts not constituting a fraudulent
conveyance, all subject to the terms of the Indenture, to which reference is
hereby made for the precise terms thereof.
<PAGE>
Under certain circumstances as set forth in the Indenture, the Obligation
of the Guarantor under its Note Guarantee may be released under certain
circumstances, including the sale of the Guarantor or of all or substantially
all of the assets of a Guarantor, all subject to the terms of the Indenture, to
which reference is hereby made for the precise terms thereof.
The Note Guarantees shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms of the Indenture.
The Note Guarantees shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note on which the Note Guarantees are
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
By the following, and any other Guarantor as may be added or substituted
from time to time, as Guarantor:
Dated as of November 21, 1997 COAST RESORTS, INC.
By: /s/ Michael J. Gaughan
-----------------------------
Name: Michael J. Gaughan
Title: Chairman and Chief Executive Officer
Attest:
- ----------------------
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<PAGE>
EXHIBIT 10.27
Execution Copy
--------------
NOTE GUARANTEES
Coast Resorts, Inc., a Nevada corporation (the "Guarantor" which term
includes any successor or additional Guarantor under the Indenture (the
"Indenture") referred to in the Note upon which this notation is endorsed), has
unconditionally guaranteed the Obligations of the Company under the Notes, the
Indenture and the related Security Documents, on a senior secured basis (each
such guarantee being a "Note Guarantee"), to each Holder of a Note authenticated
and delivered by the Trustee and its successors and assigns irrespective of the
validity or enforceability of the Indenture, the Notes or the Obligations of the
Company under this Indenture or the Notes, that: (i) the principal of, premium,
if any, and interest on the Notes issued hereunder shall be paid in full when
due, whether at the maturity or interest payment or mandatory redemption date,
by acceleration, call for redemption or otherwise, and interest on the overdue
principal, premium, if any, and interest, if any, of the Notes and all other
Obligations of the Company to the Holders or the Trustee under this Indenture or
the Notes shall be promptly paid in full or performed, all in accordance with
the terms of this Indenture and the Notes; and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other Obligations, they
shall be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration, redemption or
otherwise. Failing payments when due of any amount so guaranteed or failing
performance of any other Obligation for whatever reason, Guarantor shall be
obligated to pay or to perform or to cause the performance of, the same whether
or not such failure to pay has become an Event of Default that could cause
acceleration pursuant to Section 6.2 of the Indenture. The Guarantor agrees
that this is a guarantee of payment not a guarantee of collection. Capitalized
terms used herein have the meanings assigned to them in the Indenture unless
otherwise indicated, and the Obligations of the Guarantor pursuant to the Note
Guarantees are subject to the terms of the Indenture, to which reference is
hereby made for the precise terms thereof.
Pursuant to Section 11.3 of the Indenture, the Obligation of the Guarantor
under its Note Guarantee is limited to the maximum amount as will, after giving
effect to such maximum amount and all other liabilities of the Guarantor that
are relevant for purposes of fraudulent transfer or conveyance under the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the Obligations of such other
Guarantor under Article 11 of the Indenture, result in the Obligations of such
Guarantor in respect of such maximum amounts not constituting a fraudulent
conveyance, all subject to the terms of the Indenture, to which reference is
hereby made for the precise terms thereof.
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<PAGE>
Under certain circumstances as set forth in the Indenture, the Obligation
of the Guarantor under its Note Guarantee may be released under certain
circumstances, including the sale of the Guarantor or of all or substantially
all of the assets of a Guarantor, all subject to the terms of the Indenture, to
which reference is hereby made for the precise terms thereof.
The Note Guarantees shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms of the Indenture.
The Note Guarantees shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note on which the Note Guarantees are
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
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<PAGE>
By the following, and any other Guarantor as may be added or substituted
from time to time, as Guarantor:
Dated as of November 21, 1997 COAST RESORTS, INC.
By: /s/ Michael J. Gaughan
-----------------------------
Name: Michael J. Gaughan
Title: Chairman and Chief Executive Officer
Attest:
- ---------------------
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<PAGE>
EXHIBIT 10.28
Execution Copy
--------------
_________________________________________________________________
PURCHASE AGREEMENT
_________________________________________________________________
$16,800,000
10 7/8% First Mortgage Notes due 2001
of
COAST HOTELS AND CASINOS, INC.
Guaranteed by
COAST RESORTS, INC.
________________________________________________________________
November 21, 1997
________________________________________________________________
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. DEFINITIONS.............................................................. 1
SECTION 2. PURCHASE AND SALE OF SECURITIES.......................................... 6
2.1. Issuance of Securities................................................... 6
2.1.1. Issuance of Notes and Guaranties................................. 6
2.2. Sale and Purchase of the Securities; the Closing......................... 6
2.2.1. Sale and Purchase of Notes....................................... 6
2.2.2. Closing.......................................................... 7
2.3. Purchaser Representations................................................ 7
2.3.1. Authorization and Authority...................................... 8
2.3.2. Investment Intent; Transfer of Securities........................ 8
2.3.3. ERISA............................................................ 9
2.3.4. Qualified Institutional Buyer.................................... 10
2.3.5. Securities Not Registered........................................ 10
2.4. Expenses................................................................. 10
2.5. Indemnification.......................................................... 11
2.5.1. Scope of Indemnification......................................... 11
2.5.2. Indemnification Procedures....................................... 12
2.6. Contribution............................................................. 13
2.6.1. Indemnification Provisions Unenforceable......................... 13
2.6.2. No Pro Rata Allocation........................................... 14
2.6.3. Survival of Obligations.......................................... 14
2.7. Further Actions.......................................................... 14
SECTION 3. CLOSING CONDITIONS....................................................... 14
3.1. Conditions to Your Obligations........................................... 14
3.1.1. Opinions of Counsel.............................................. 15
3.1.2. Officers' and Secretary's Certificates........................... 15
3.1.3. Issue of Securities.............................................. 15
3.1.4. Representations and Warranties True; No Event of Default......... 16
3.1.5. Compliance with Agreements....................................... 16
3.1.6. Your Purchase Permitted by Applicable Laws; Legal Investment..... 16
3.1.7. The Indenture.................................................... 16
3.1.8. Consents and Permits............................................. 17
3.1.9. Proceedings Satisfactory......................................... 17
3.1.10. No Material Adverse Change....................................... 17
3.1.11. No Material Judgment or Order.................................... 17
3.1.12. Execution and Delivery of Documents.............................. 17
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
3.1.13. Security Documents, etc.......................................... 18
3.2. Conditions to the Obligations of the Company and the Guarantor........... 19
3.2.1. Sale of Securities............................................... 19
3.2.2. Purchasers' Representations and Warranties....................... 19
3.2.3. No Material Judgment or Order.................................... 19
3.2.4. The Sale by the Company Permitted by Applicable Laws............. 19
3.2.5. Consents and Permits............................................. 19
SECTION 4. PURCHASERS' RIGHTS....................................................... 20
4.1. Delivery Expenses........................................................ 20
4.2. Issue Taxes.............................................................. 20
4.3. Direct Payment........................................................... 20
4.4. Inspection............................................................... 21
4.5. Financial Statements..................................................... 21
4.5.1. Delivery......................................................... 21
4.5.2. Additional Information........................................... 22
4.6. Usury Laws............................................................... 22
4.7. Gaming Control Board..................................................... 22
SECTION 5. REPRESENTATIONS AND WARRANTIES........................................... 22
5.1. Organization, Standing and Qualification................................. 22
5.1.1. Organization; Standing........................................... 22
5.1.2. Authority........................................................ 23
5.1.3. Subsidiaries..................................................... 23
5.1.4. Stock............................................................ 23
5.2. Capitalization........................................................... 23
5.3. Authorization of Agreement and Other Documents........................... 24
5.4. No Violation............................................................. 24
5.4.1. Existing Violations.............................................. 24
5.4.2. Execution of Agreement........................................... 24
5.5. Use of Proceeds.......................................................... 25
5.6. No Default............................................................... 25
5.7. Financial Statements..................................................... 25
5.7.1. Fair Presentation................................................ 25
5.7.2. Projections...................................................... 26
5.7.3. No Material Adverse Change....................................... 26
5.7.4. Liabilities...................................................... 26
5.8. Accounting Controls, etc................................................. 26
5.9. Full Disclosure.......................................................... 27
5.9.1. No Untrue Statement.............................................. 27
5.9.2. Projections...................................................... 27
5.10. Litigation............................................................... 27
5.10.1. No Material Proceedings......................................... 27
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
5.10.2. No Material Judgments........................................... 28
5.11. Taxes.................................................................... 28
5.12. Labor.................................................................... 28
5.13. ERISA.................................................................... 29
5.14. Compliance with Laws..................................................... 29
5.15. Governmental Consents.................................................... 29
5.16. Permits, etc............................................................. 30
5.17. No Violation of Regulations of Board of Governors of Federal
Reserve System........................................................... 30
5.18. Environmental Matters.................................................... 30
5.19. Private Offering......................................................... 31
5.19.1. Sale Exempt...................................................... 31
5.19.2. No General Solicitation.......................................... 31
5.20. Governmental Regulations................................................. 32
5.21. Patents, Trademarks, etc................................................. 32
5.22. Title to and Condition of Properties..................................... 32
5.23. Real Estate.............................................................. 33
5.24. Survival of Indemnification and Contribution and Representations
and Warranties.......................................................... 33
SECTION 6. MISCELLANEOUS............................................................ 33
6.1. Notices.................................................................. 33
6.2. Successors and Assigns................................................... 34
6.3. Amendment and Waiver..................................................... 34
6.4. Counterparts............................................................. 34
6.5. Headings................................................................. 34
6.6. Governing Law............................................................ 35
6.7. Entire Agreement......................................................... 35
6.8. Severability............................................................. 35
Exhibit A Form of Indenture.......................................................... 38
Exhibit B Form of Opinion of Gibson, Dunn & Crutcher LLP............................. 39
Exhibit C Form of Opinion of Barry Lieberman......................................... 40
Exhibit D Form of Opinion of McDonald Carano WilsonMcCune Bergin Frankovich & Hicks.. 41
</TABLE>
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<PAGE>
Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, NV 89103
Coast Resorts, Inc.
4500 West Tropicana Avenue
Las Vegas, NV 89103
As of November 21, 1997
To Each of the Purchasers
Who Are Signatories Hereto
Ladies and Gentlemen:
Each of Coast Hotels and Casinos, Inc., a Nevada corporation (the
"Company"), and Coast Resorts, Inc., a Nevada corporation (the "Guarantor"),
hereby agrees with each of you as follows:
SECTION 1. DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings:
"accumulated funding deficiency" shall have the meaning specified in
Section 5.13 hereof.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Person authorized to act and who acts on behalf of the
Purchasers
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<PAGE>
with respect to the transactions contemplated by this Agreement and the other
Documents. "Agent" shall also include the Placement Agent and its agents.
"Agreement" means this Purchase Agreement, as the same may be amended,
supplemented or modified from time to time in accordance with the terms hereof.
"Applicable Law" means any Federal, state, local or foreign statute, law,
ordinance, governmental rule or regulation or any judgment, decree, rule or
order of any court or governmental agency or authority applicable to the
Company, the Guarantor or any of their respective Subsidiaries or any of their
respective properties, assets or operations.
"Business Day" means a day that is not a Saturday, a Sunday or a day on
which banking institutions in the State of New York or the State of Nevada are
not required to be open.
"Capital Stock" means any capital stock of any Person and shares,
interests, participations or other ownership interests (however designated), of
any Person and any rights (other than debt securities convertible into capital
stock), warrants or options to purchase any thereof.
"Charter Documents" means the Articles or Certificate of Incorporation and
By-Laws or similar organizational documents, as amended to the Closing Date, of
the applicable Person.
"Closing" shall have the meaning specified in Section 2.2.2 hereof.
"Closing Date" shall have the meaning specified in Section 2.2.2 hereof.
"Coast West" means Coast West, Inc., a Nevada corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning specified in Section 2.1.1 hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" shall mean the Common Stock, $1.00 par value per share, of
the Company.
"Company" shall mean Coast Hotels and Casinos, Inc., a Nevada corporation,
and any successor thereto.
"Default" means any event, act or condition that is, or after notice or
passage of time or both would, constitute an Event of Default.
"disqualified person" shall have the meaning specified in Section 2.3.3
hereof.
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<PAGE>
"Documents" means this Agreement, the Notes, the Guaranties, the Security
Documents and the Indenture, collectively, or each of such documents singularly,
and any documents or instruments contemplated by or executed in connection with
any of them or any of the transactions contemplated hereby or thereby.
"employee benefit plan" shall have the meaning specified in Section 2.3.3
hereof.
"Environmental Laws" shall have the meaning specified in Section 5.18
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean "affiliates" as defined in Section 407(d)(7)
of ERISA.
"Event of Default" shall mean any event defined as an Event of Default in
the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Exchange Act Reports" means, collectively, (i) the Annual Report on Form
10-K of the Company and the Guarantor for the fiscal year ended December 31,
1996 and (ii) the Quarterly Reports on Form 10-Q of the Company and the
Guarantor for each of (a) the fiscal quarter ended June 30, 1997, (b) the fiscal
quarter ended March 31, 1997, and (c) the fiscal quarter ended September 30,
1997.
"Guarantor" shall mean Coast Resorts, Inc., a Nevada corporation and each
of its respective successors and assigns.
"Guaranty" or "Guaranties" shall have the meaning specified in Section
2.1.1 hereof.
"Indemnified Parties" shall have the meaning specified in Section 2.5.1
hereof.
"Indenture" means the Indenture, dated as of the date hereof, by and among
the Company, the Guarantor and the Trustee (initially as substantially in the
form attached hereto as Exhibit A), as the same may be amended from time to
time, in accordance with the terms thereof.
"Intellectual Property" shall have the meaning specified in Section 5.21
hereof.
"Lien" shall have the meaning specified in the Indenture.
"Losses" shall have the meaning specified in Section 2.5.1 hereof.
"Material Adverse Effect" shall mean a material adverse effect on the
properties,
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<PAGE>
business, operations, earnings, assets, liabilities or financial condition of
the Company, the Guarantor and their Subsidiaries taken as a whole, or on the
ability of the Company, the Guarantor and their Subsidiaries taken as a whole to
perform their respective obligations under this Agreement, the Securities or any
of the other Documents.
"Material Permits" shall have the meaning specified in Section 5.16 hereof.
"Notes" shall have the meaning specified in Section 2.1.1 hereof.
"Intercreditor Agreement" means the Pari Passu Intercreditor Agreement,
dated as of the date hereof by and among Firstar Bank of Minnesota, N.A., as
trustee for the benefit of the holders of the 13% First Mortgage Notes due 2002,
issued by the Company in the aggregate principal amount of $175,000, the
Company, the Guarantor and the Trustee.
"Party in interest" shall have the meaning specified in Section 2.3.3
hereof.
"Pension Plan" shall have the meaning specified in Section 5.13 hereof.
"Permit" shall have the meaning specified in Section 5.16 hereof.
"Permitted Liens" shall have the meaning specified in the Indenture.
"Permitted Investments" shall have the meaning specified in the Indenture.
"Person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Placement Agent" shall mean BTM Financial Services, Inc.
"Placement Memorandum" shall mean the Confidential Offering Memorandum
prepared by the Company dated September 1997 relating to the Securities and all
attachments and appendices thereto, and any and all amendments and supplements
thereto.
"Privately Outstanding Securities" shall mean the Notes upon the original
issuance thereof and at all times subsequent thereto until, in the case of any
Note, (i) the sale or other public distribution of such Note shall have been
registered pursuant to the Securities Act and such Note shall have been disposed
of by the Purchaser thereof in accordance with such registration, or (ii) such
Note shall have been resold by the Purchaser thereof pursuant to Rule 144, Rule
144A or other resale exemption from the registration requirements of the
Securities Act.
"Proceeding" shall mean an action, claim, suit or proceeding (including,
without
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<PAGE>
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or to the knowledge of the Company or the Guarantor, as the
case may be, threatened.
"Prohibited transaction" shall have the meaning defined in section 406 of
ERISA or Section 4975 of the Code.
"Projections" shall have the meaning specified in Section 5.7.2 hereof.
"Purchasers" shall mean those Persons who have executed a counterpart of
this Agreement on any one of the signature pages hereto who are to be purchasers
of the Securities.
"qualified trust" shall have the meaning specified in Section 2.3.3 hereof.
"Rule 144" means Rule 144 as promulgated by the Commission pursuant to the
Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission pursuant to
the Securities Act, and any successor rule or regulation thereto.
"Securities" means, collectively, the Notes and the Guaranties.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the Commission pursuant thereto.
"Security Documents" shall have the meaning specified in Section 2.2.1
hereof.
"Security Interests" shall have the meaning specified in Section 2.1.1
hereof.
"Subsidiary" means with respect to any Person, (i) a corporation a majority
of whose capital stock with voting power, under ordinary circumstances, to elect
directors is owned, directly or indirectly, by such Person or by one or more
other Subsidiaries of such Person, or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a corporation) in
which such Person, or one or more other Subsidiaries of such Person or such
Person and one or more other Subsidiaries thereof, directly or indirectly, has
at least a majority equity ownership and power to direct the policies,
management and affairs thereof.
"Trustee" shall have the meaning specified in Section 3.1.7 hereof.
SECTION 2. PURCHASE AND SALE OF SECURITIES
2.1. Issuance of Securities
----------------------
2.1.1. Issuance of Notes and Guaranties
--------------------------------
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<PAGE>
The Company has taken all necessary corporate action to authorize
the issuance and sale of up to $16,800,000 aggregate original
principal amount of its 10 7/8% First Mortgage Notes due 2001 to be
issued pursuant to the Indenture (collectively, the "Notes"). The
Guarantor has taken all necessary action to authorize the
unconditional guaranty of the principal of, premium (if any) and
interest on the Notes when and as due under the Notes and the
Indenture (the "Guaranty" or "Guaranties"). The Notes will be issued
in denominations of $1,000 and any integral multiple of $1,000
thereof, will otherwise be substantially in the form of Note included
as Exhibit A to the Indenture, and will bear the Guaranty endorsed
thereon substantially in the form set out in the Indenture. The
obligations under the Notes and Guaranties will be secured by security
interests in or pledges of (collectively, the "Security Interests")
certain assets (the "Collateral") as set forth in the Security
Documents. Under the terms of the Intercreditor Agreement, the
Purchasers' rights under the Indenture, the Notes and Guaranties and
the Security Documents will rank pari passu with the rights of holders
of the 13% First Mortgage Notes due 2002 in the aggregate original
principal amount of $175,000,000 issued by the Company and guaranteed
by the Guarantor and Coast West under the Indenture dated as of
January 30, 1996 among the Company, the Guarantor and American Bank
National Association, as trustee.
2.2. Sale and Purchase of the Securities; the Closing
------------------------------------------------
2.2.1. Sale and Purchase of Notes
--------------------------
Subject to the terms and conditions set forth herein, the Company
hereby agrees to sell to each Purchaser the aggregate original
principal amount of Notes set forth opposite the name of such
Purchaser on Schedule 2.2.1 hereto (and, in order to induce such
Purchaser to purchase such Notes, the Guarantor agrees to issue the
Guaranties). All of the Notes shall be sold at a price equal to 100%
of the original principal amount thereof.
In reliance upon the representations and warranties of the
Company and the Guarantor contained herein and in the other Documents,
and subject to the terms and conditions set forth herein and therein,
each of the Purchasers hereby agrees, severally and not jointly or
jointly and severally, to purchase the Notes to be purchased by such
Purchaser at the purchase price set forth in this Section. Each
Purchaser shall, severally and not jointly or jointly and severally,
be liable for only the purchase of that portion of such Notes
indicated on the execution page hereof that relates to such Purchaser.
The Notes and the Guaranties will be secured obligations, and
each of the
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<PAGE>
Company and the Guarantor will enter into security agreements, a deed
of trust, a pledge agreement, environmental indemnifications and
certain other collateral agreements each in the form attached as an
exhibit to the Indenture (collectively, the "Security Documents")
dated as of the Closing Date in favor of the Trustee that will provide
for the grant of Security Interests in the collateral to the Trustee
for the benefit of the Purchasers. The Security Interests will secure
the payment and performance when due of all the respective obligations
of the Company and the Guarantor under the Indenture, the Notes, the
Guaranties and the Security Documents.
2.2.2. Closing
-------
The sale and purchase of the Securities shall take place at a
closing (the "Closing") at the offices of Ropes & Gray, special
counsel to the Purchasers, at One International Place, Boston,
Massachusetts 02110-2624, commencing at 9:00 A.M., Boston time, on
November 21, 1997, or such other place, Business Day and time as may
be agreed upon by the Purchasers, the Company and the Guarantor (such
time and date being referred to as the "Closing Date"). At the
Closing, the Company will deliver to the Trustee a Global Note (as
defined in the Indenture) in the original principal amount of
$16,800,000 such Global Note bearing evidence of the Guaranty endorsed
thereon pursuant to the terms of the Indenture, against payment of the
purchase price therefor by Federal funds bank wire transfer to such
bank account as the Company shall designate at least two Business Days
prior to the Closing Date.
2.3. Purchaser Representations
-------------------------
Each of the Purchasers, severally and not jointly or jointly and
severally, makes the following representations and warranties to the
Company and the Guarantor:
2.3.1. Authorization and Authority.
---------------------------
You represent to the Company and the Guarantor that you are
authorized to enter into this Agreement, to perform your obligations
hereunder and to consummate the transactions contemplated hereby. You
further represent that, when executed, this Agreement will be a legal,
valid and binding obligation of you, enforceable against you in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law).
2.3.2. Investment Intent; Transfer of Securities.
-----------------------------------------
-7-
<PAGE>
You further represent to the Company and the Guarantor that you
are purchasing the Securities being purchased by you hereunder for
your own account, and with no intention of distributing or reselling
said Securities or any part thereof in any transaction that would be
in violation of the securities laws of the United States of America or
any state thereof, without prejudice, however, to your right at all
times to sell or otherwise dispose of all or any part of said
Securities pursuant to an effective registration statement under the
Securities Act and in compliance with applicable state securities
laws, or under an exemption from such registration available under the
Securities Act and other applicable state securities laws and subject,
nevertheless, to the disposition of your property being at all times
within your control.
If you desire to offer, sell or otherwise transfer, pledge or
hypothecate all or any part of the Securities (other than pursuant to
an effective registration statement under the Securities Act or
pursuant to Rule 144 or Rule 144A) you shall deliver to the Company
and the Guarantor a written opinion of counsel (who may be in-house or
special counsel), reasonably satisfactory in form and substance to the
Company, that there is available therefor an exemption from the
registration requirements of the Securities Act. Upon original
issuance thereof, and until such time as no longer required by law,
each certificate evidencing the Securities (and all securities issued
in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION
FROM THE REQUIREMENTS OF THE ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY, BY PURCHASING THIS SECURITY, AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED
STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
ACT) IN A
-8-
<PAGE>
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE ACT,
OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY OR ANY GUARANTOR SO REQUESTS), (b) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE ACT, (c) TO THE COMPANY, OR
(d) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND, (2) IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER WILL BE REQUIRED TO, NOTIFY ANY PURCHASER OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.
At such time that any such legend is no longer required by law to
be borne by such certificate, the Company shall, at the request of the
holder thereof, cause such legend to be removed or replace such
certificate with an unlegended security.
2.3.3. ERISA.
-----
You further represent that either (i) no part of the funds to be
used to purchase the Securities to be purchased by you constitutes
assets allocated to any employee benefit plan or any trust, insurance
company general or special account, or other investment vehicle that
contains the assets of any employee benefit plan, in either case with
respect to which the Company or any ERISA Affiliates is a party in
interest or disqualified person or (ii) the use of such assets would
not constitute a non-exempt prohibited transaction. The terms
"employee benefit plan" and "party in interest" shall have the
meanings assigned to such terms in Section 3 of ERISA, the term
"disqualified person" shall have the meaning assigned to such term in
section 4975 of the Code.
-9-
<PAGE>
2.3.4. Qualified Institutional Buyer.
-----------------------------
You further represent that you are a Qualified Institutional
Buyer as that term is defined in Rule 144A.
2.3.5. Securities Not Registered.
-------------------------
You further represent that you understand that (i) the Securities
have not been registered under the Securities Act and are being
offered and sold under an exemption from registration thereunder, (ii)
you must bear the economic risk of your investment in the Securities
for an indefinite period of time because it is not anticipated that
there will be any market for the Securities and because the Securities
cannot be resold unless subsequently registered under the Securities
Act or unless an exemption from such registration is available, and
(iii) no federal or state agency has passed on or made any
recommendations or endorsements of the Securities.
2.4. Expenses
--------
If the Securities are sold, the Company and the Guarantor shall pay
all reasonable expenses relating to this Agreement and the other Documents,
including, but not limited to:
a) the cost of automated production, reproducing and filing
this Agreement, the other Documents and any other documents
contemplated hereby or thereby;
(b) the reasonable out-of-pocket expenses incurred by the
Trustee in connection with the negotiation and execution of the
Documents and the transactions contemplated hereby and thereby;
(c) the reasonable fees and related charges and disbursements
of Ropes & Gray, your special counsel, or such other counsel as you
may employ on your behalf with the consent of the Company;
(d) the cost of delivering to your home office or the office of
your designee the Securities purchased by you at the Closing upon the
issuance thereof;
(e) all reasonable out-of-pocket expenses relating to any
amendment to, or modification of, or any waiver, or consent or
preservation of rights under, this Agreement or any of the Documents;
and
(f) all other reasonable expenses, including without limitation
reasonable
-10-
<PAGE>
attorneys' fees, title search fees, title insurance premiums, UCC
filing fees incurred by the Company and the Guarantor in connection
with the transactions contemplated by this Agreement and the other
Documents.
2.5. Indemnification
---------------
2.5.1. Scope of Indemnification.
------------------------
In addition to all other sums due hereunder or provided for in
this Agreement or any of the other Documents and any and all
obligations of the Company and the Guarantor to indemnify each of you
hereunder or under any of the other Documents, the Company and the
Guarantor, jointly and severally, shall, without limitation as to
time, indemnify and hold harmless you, your Affiliates, and the
employees, officers, directors, and Agents of each of you and your
Affiliates, including attorneys and consultants (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties"), to
the fullest extent lawful, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation,
reasonable costs of preparation and reasonable attorneys' fees) and
expenses, including expenses of investigation (collectively,
"Losses"), incurred by any Indemnified Party, as a consequence of any
claim by or obligation to a third party which arises out of or in
connection with this Agreement or the other Documents or the
transactions contemplated hereby or thereby (or any other document or
instrument executed herewith or pursuant hereto or thereto), whether
or not the transactions contemplated by this Agreement are consummated
and whether or not any Indemnified Party is a formal party to any
Proceeding; provided, however, that the Company and the Guarantor
-------- -------
shall not be liable to any Indemnified Party for any Losses (i)
resulting from a violation by such Indemnified Party of a legal
restriction on its investment powers, (ii) to the extent that it shall
be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or review) that such Losses
arose from the negligence or willful misconduct of such Indemnified
Party and (iii) arising out of or based upon any untrue statement of a
material fact furnished to the Company in writing by any Indemnified
Party, or upon any omission of a material fact in such writing
required to make the statements therein not misleading, and such
writing is stated to be specifically for use in any registration
statement, prospectus or form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus. Subject to the
provisions of the last sentence of Section 2.5.2, the Company and the
Guarantor agree promptly to reimburse any Indemnified Party for all
such Losses as they are incurred and disclosed to the Company in
writing by such Indemnified Party. The obligations of the Company and
the Guarantor to each Indemnified Party hereunder shall be separate
obligations, and the liability of the Company and the Guarantor to any
Indemnified Party hereunder shall not be extinguished solely because
any other Indemnified Party is not entitled to
-11-
<PAGE>
indemnity hereunder.
2.5.2. Indemnification Procedures.
--------------------------
If any proceeding shall be brought or asserted against any
Indemnified Party in respect of which indemnity may be sought from the
Company and the Guarantor hereunder, such Indemnified Party promptly
shall notify the Company in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of
all reasonable fees and expenses incurred in connection with the
defense thereof; provided, that the failure of any Indemnified Party
to give such notice shall not relieve the Company and the Guarantor of
its obligations pursuant to this Agreement, except to the extent that
it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or review) that such
failure shall have materially prejudiced the Company.
Any such Indemnified Party shall have the right to employ
separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Company or the Guarantor have agreed to pay such fees
and expenses; or (2) the Company or the Guarantor shall have failed
promptly to assume the defense of such action, claim or proceeding and
to employ counsel reasonably satisfactory to such Indemnified Party in
any such action, claim or proceeding; or (3) the named parties to any
such action, claim or proceeding (including any impleaded parties)
include both such Indemnified Party and the Company or the Guarantor,
and such Indemnified Party shall have been advised by counsel that an
actual conflict of interest would likely arise or exist and such
conflict would make it impossible for such counsel under professional
rules of conduct applicable to it to continue such dual representation
if such counsel were to represent such Indemnified Party and the
Indemnifying Party (and in the case of any of (1), (2) or (3), if such
Indemnified Party notifies the Company and the Guarantor in writing
that it elects to employ separate counsel at the expense of the
Company, the Company and the Guarantor shall not have the right to
assume the defense thereof and the reasonable fees and expenses of
such counsel shall be at the expense of the Company and the
Guarantor), it being understood, however, that, the Company and the
Guarantor shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties, which firm
shall be designated in writing by such Indemnified Parties. The
Company and the Guarantor shall have the right to employ separate
counsel in, and to participate in the defense of, any action or
-12-
<PAGE>
proceeding with respect to which it has no right to assume the
defense, but the fees and expenses of such counsel shall be at the
expense of the Company and the Guarantor. No Indemnified Party will
be subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld). The
Company and the Guarantor shall not consent to entry of any judgment
or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release, in form and substance satisfactory to
the Indemnified Party, from all liability in respect of such action,
claim or proceeding for which such Indemnified Party would be entitled
to indemnification hereunder (whether or not any Indemnified Party is
a party thereto). All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such action or
proceeding in a manner not inconsistent with this Section 2.5) shall
be paid to the Indemnified Party, as incurred, upon written notice
thereof to the Company; provided, that the Company and the Guarantor
may require such Indemnified Party to undertake to reimburse all such
fees and expenses to the extent it is finally judicially determined by
a court of competent jurisdiction (which determination is not subject
to appeal or review) that such Indemnified Party is not entitled to
indemnification hereunder.
2.6. Contribution
------------
2.6.1. Indemnification Provisions Unenforceable.
----------------------------------------
If a claim by an Indemnified Party for indemnification under
Section 2.5 is found unenforceable in a final judgment by a court of
competent jurisdiction (not subject to further appeal or review) even
though the express provisions hereof provide for indemnification in
such case, then the Company and the Guarantor, in lieu of indemnifying
such Indemnified Party, shall, jointly and severally, contribute to
the amount paid or payable by such Indemnified Party as a result of
such Losses in such proportion as is appropriate to reflect the
relative fault of the Company and the Guarantor, on the one hand, and
such Indemnified Party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
the Company and the Guarantor, on the one hand, and any Indemnified
Party, on the other hand, shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to
information supplied by, the Company, and the Guarantor on the one
hand or such Indemnified Party on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount
paid or payable by a party as a result of any Losses shall be deemed
to include any legal or other fees
-13-
<PAGE>
or expenses incurred by such party in connection with any proceeding.
2.6.2. No Pro Rata Allocation.
----------------------
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 2.6 were determined by pro
---
rata allocation or by any other method of allocation that does not
----
account for the equitable considerations referred to in Section 2.6.1
hereof. Notwithstanding the provisions of this Section 2.6, no
Indemnified Party shall be required to contribute any amount in excess
of the amount by which the price at which the Securities sold by such
Indemnified Party and distributed to the public exceeds the amount of
any damages that such Indemnified Party has otherwise been required to
pay by reason of such statement or omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who is not guilty of such fraudulent misrepresentation.
2.6.3. Survival of Obligations.
-----------------------
The obligations of the Company and the Guarantor under Section
2.5 and this Section 2.6 shall survive the payment or prepayment of
the Securities, at maturity, upon redemption or otherwise, any
transfer of the Securities by you, and any termination of this
Agreement or the other Documents.
2.7. Further Actions
---------------
During the period from the date hereof to the Closing Date, the
Company and each of the Guarantor shall take all commercially reasonable
actions necessary or appropriate to cause their representations and
warranties contained in Section 5 hereof to be true and correct in all
material respects as of the Closing Date, after giving effect to the
transactions contemplated by this Agreement, as if made on and as of such
date.
SECTION 3. CLOSING CONDITIONS
------------------
3.1. Conditions to Your Obligations
------------------------------
Your obligation to purchase and pay for the Securities to be delivered
to you at the Closing shall be subject to the satisfaction of the following
conditions as of the Closing Date.
3.1.1. Opinions of Counsel
-------------------
You shall have received the following opinions:
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<PAGE>
(a) a favorable opinion, dated the Closing Date and
addressed to you, from (i) Gibson, Dunn & Crutcher, special
counsel to the Company and the Guarantor, (ii) Barry Lieberman,
Esq., General Counsel of the Company and the Guarantor, and (iii)
McDonald Carano Wilson McCune Bergin Frankovich & Hicks, special
counsel to the Company and the Guarantor, each in form and
substance reasonably satisfactory to you and in each case,
substantially in the respective forms set forth as Exhibit B,
Exhibit C and Exhibit D hereto.
3.1.2. Officers' and Secretary's Certificates
--------------------------------------
(a) The Purchasers shall have received a certificate, dated the
Closing Date and in form and substance satisfactory to the Purchasers,
signed on behalf of the Company and Coast Resorts by Michael J.
Gaughan, Chairman and Chief Executive Officer, and Harlan D. Braaten,
President and Chief Operating Officer, (i) confirming as of the
Closing Date the satisfaction of the conditions set forth in Sections
3.1.4, 3.1.5, 3.1.8, 3.1.10, 3.1.11, 3.1.12 hereof.
(b) The Purchasers shall have received (i) certificates of the
Secretaries of the Company and the Guarantor, dated the Closing Date
and in form and substance satisfactory to the Purchasers, certifying
as true, accurate and complete, the by-laws, resolutions with respect
to the transactions contemplated herein and incumbency of certain
officers; and (ii) certified copy of Certificates of Articles of
Incorporation issued as of a recent date by the Secretary of State of
the state of incorporation of the Company and the Guarantor; and (iii)
appropriate certificates of qualification to do business and of good
standing, issued on a recent date by the Secretary of State of each
jurisdiction, if any, in which the failure of the Company or the
Guarantor, as the case may be, to be qualified to do business would
have a Material Adverse Effect.
3.1.3. Issue of Securities
-------------------
Simultaneously with the sale to each of you of the Securities to
be purchased by such one of you at the Closing, the Company shall have
issued and sold to the others of you and received payment for the
Securities.
3.1.4. Representations and Warranties True; No Event of Default
--------------------------------------------------------
The representations and warranties of each of the Company and the
Guarantor contained herein and in each of the other Documents shall be
true and correct at and as of the Closing Date, after giving effect to
the transactions contemplated by this Agreement and the other
Documents, as if made on and as of
-15-
<PAGE>
such date. There shall exist at and as of the Closing Date (after
giving effect to the transactions contemplated by this Agreement and
the other Documents) no Default or Event of Default.
3.1.5. Compliance with Agreements
--------------------------
Each of the Company and the Guarantor shall have performed and
complied with all agreements, covenants and conditions contained
herein that are required to be performed or complied with by the
Company or the Guarantor, as applicable, on or before the Closing
Date.
3.1.6. Your Purchase Permitted by Applicable Laws; Legal Investment
------------------------------------------------------------
Your purchase of and payment for the Securities to be purchased
by you (a) shall not be prohibited by any law or governmental
regulation, release, interpretation or opinion (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), (b) shall not subject you to any penalty or
other materially onerous condition under or pursuant to any applicable
law or governmental regulation, and (c) shall be permitted by the laws
and regulations of the jurisdictions to which you are subject. The
Company or the Guarantor shall have delivered to you factual
certificates or other evidence as you shall reasonably request, in
form and substance reasonably satisfactory to you, to enable you to
establish compliance with this condition. The Placement Agent shall
have delivered to you a copy of a letter or letters, addressed to the
Company and the Guarantor, in form and substance reasonably
satisfactory to you, confirming certain matters set forth in Section
5.19.2.
3.1.7. The Indenture
-------------
The Company, the Guarantor and Firstar Bank of Minnesota, N.A.,
as trustee for the benefit of the holders of the Notes (the
"Trustee"), shall have duly entered into the Indenture, and you shall
have received counterparts, conformed as executed, of the Indenture.
-16-
<PAGE>
3.1.8. Consents and Permits
--------------------
The Company and the Guarantor shall have received all consents,
permits and other authorizations, and made all such filings and
declarations, as may be required by them to consummate the transaction
pursuant to any law, statute, regulation or rule (Federal, state,
local and foreign), contemplated by this Agreement and the other
Documents, including the issuance and sale of the Securities to the
Purchasers, and pursuant to all other material agreements, orders and
decrees to which any of them is a party or to which any of them is
subject, in connection with the transactions to be consummated on or
prior to the Closing Date contemplated by this Agreement and the other
Documents.
3.1.9. Proceedings Satisfactory
------------------------
All corporate proceedings taken in connection with the sale of
the Securities and all documents relating thereto, shall be reasonably
satisfactory in form and substance to you. You and Ropes & Gray shall
have received copies of such documents as you or they may reasonably
request in connection with the Closing, or as a basis for the Closing
opinions, all in form and substance reasonably satisfactory to you and
them. Each Document shall be reasonably satisfactory in form and
substance to you.
3.1.10. No Material Adverse Change
--------------------------
There shall not have occurred any Material Adverse Change in the
operations, business, properties, financial condition or results of
operations of the Company, the Guarantor and their subsidiaries, taken
as a whole, subsequent to the date of the Placement Memorandum.
3.1.11. No Material Judgment or Order
-----------------------------
There shall not be on the Closing Date any judgment or order of a
court of competent jurisdiction or any ruling of any agency of the
Federal, state or local government that, in the reasonable judgment of
you or your special counsel, would prohibit the sale or issuance of
the Securities hereunder or subject the Company or the Guarantor to
any material penalty if the Securities were to be issued and sold
hereunder.
3.1.12. Execution and Delivery of Documents
-----------------------------------
The Documents shall have been executed and delivered by all
parties thereto and be in full force and effect and all conditions
precedent to the consummation of the transactions contemplated by the
Documents shall have
-17-
<PAGE>
been satisfied and each of the Purchasers shall have received a fully-
executed original of each Document, other than the Deed of Trust (as
defined in the Indenture), in which case the Purchasers shall be
supplied a copy of such Deed of Trust.
3.1.13. Security Documents, etc.
------------------------
(a) The Trustee shall have received (i) a certificate of
insurance demonstrating insurance coverage of types, in amounts, with
insurers and with other terms required by the terms of the Documents,
(ii) executed copies of each UCC-1 financing statement signed by the
Company and the Guarantor, naming the Trustee as secured party and
filed in such jurisdictions as the Purchasers may reasonably require,
and (iii) to the extent required by the Documents, the original stock
certificates, promissory notes and other instruments pledged to the
Trustee pursuant to the Documents, together with undated stock powers
or endorsements duly executed in blank connection therewith.
(b) All documents and agreements shall have been filed, and
other actions shall have been taken, as may be required to perfect the
Security Interests of the Trustee in the Collateral of the Company and
the Guarantor, and to accord the Trustee the priorities over other
creditors of either of the Company or the Guarantor as contemplated by
the Placement Memorandum and the Documents.
(c) The Trustee shall have received irrevocable commitments for
title insurance from National Title Company, in a form and substance
reasonably satisfactory to the Initial Purchasers, subject only to
Liens permitted under the Indenture, for the title insurance for each
of the properties listed on Schedule 3.1.13 hereto.
(d) Counsel for the Purchasers shall have been furnished with
such documents as are necessary to confirm that there are no liens
against any of the personal or real property of the Company or the
Guarantor unless such liens are permitted under the Indenture or have
otherwise been approved by the Purchasers.
3.1.14. Counsel Fees
------------
All reasonable fees and related charges and disbursements of
Ropes & Gray, special counsel to the Purchasers, to the extent
reimbursable hereunder and invoiced on or before two business days
prior to the Closing Date, shall have been paid in full by the
Company.
3.2. Conditions to the Obligations of the Company and the Guarantor
--------------------------------------------------------------
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<PAGE>
The obligations of the Company and the Guarantor to sell the
Securities to be delivered to you at the Closing shall be subject to the
satisfaction of the following conditions:
3.2.1. Sale of Securities
------------------
The Purchasers shall have delivered payment to the Company, in
respect of the several purchases of the Securities, in an aggregate
amount of $16,800,000.
3.2.2. Purchasers' Representations and Warranties
------------------------------------------
Each Purchaser's payment of the purchase price for the Securities
purchased by him or it at the Closing shall constitute a certification
by that Purchaser that all of its representations and warranties made
herein and in the other Documents shall be true and correct in all
material respects at and as of the Closing Date, after giving effect
to the transactions contemplated by this Agreement and the other
Documents, as if made at and as of such date.
3.2.3. No Material Judgment or Order
-----------------------------
There shall not be on the Closing Date any judgment or order of a
court of competent jurisdiction or any ruling of any agency of the
Federal, state or local government that, in the reasonable judgment of
the Company and the Guarantor, would prohibit the sale or issuance of
the Securities hereunder or subject the Company or the Guarantor to
any material penalty if the Securities were to be issued and sold
hereunder.
3.2.4. The Sale by the Company Permitted by Applicable Laws
----------------------------------------------------
The sale by the Company and your payment for the Securities to be
purchased by you (a) shall not be prohibited by any applicable law or
governmental regulation, release, interpretation or opinion
(including, without limitation, Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System), (b) shall not subject the
Company or the Guarantor to any penalty under or pursuant to any
applicable law or governmental regulation, and (c) shall be permitted
by the laws and regulations of the jurisdictions to which the Company
or the Guarantor is subject.
-19-
<PAGE>
3.2.5. Consents and Permits
--------------------
Each Purchaser shall have received all consents, permits and
other authorizations, and made all such filings and declarations, as
may be required pursuant to any law, statute, regulation or rule
(Federal, state, local and foreign), contemplated by this Agreement
and the other Documents, including the purchase of the Securities by
such Purchaser, and pursuant to all other agreements, orders and
decrees to which such Purchaser is a party or to which such Purchaser
is subject, in connection with the transactions to be consummated on
or prior to the Closing Date contemplated by this Agreement and the
other Documents.
SECTION 4. PURCHASERS' RIGHTS
------------------
4.1. Delivery Expenses
-----------------
If a holder of a Privately Outstanding Security surrenders such
Security to the Company or the Trustee for substitution, replacement or
exchange, the Company will pay the cost of delivering to and from such
holder's home office (or to and from the office of such holder's
designee(s)) and the office of the Company or the Trustee, as the case may
be, insured to such holder's satisfaction, the surrendered Security and
each Security issued in substitution, replacement or exchange therefor.
4.2. Issue Taxes
-----------
The Company shall pay all stamp, transfer and other similar taxes and
governmental fees in connection with (a) the issuance, sale, delivery or
transfer by the Company to the Purchasers of the Privately Outstanding
Securities, (b) the execution and delivery of the Documents, and (c) any
modification of the Documents. The Company and the Guarantor will hold
each holder of Privately Outstanding Securities harmless, without
limitation as to time, against any and all liabilities with respect to all
such taxes and fees. The obligations of the Company and the Guarantor
under this Section 4.2 shall survive the payment or prepayment of the
Securities, at maturity, upon redemption or otherwise, any transfer of the
Securities by the holder thereof, and the termination of this Agreement.
4.3. Direct Payment
--------------
The Company shall instruct the Trustee to pay or cause to be paid all
interest payments with respect to any Privately Outstanding Security held
by each of the Purchasers (if the registered holder) or the registered
nominee(s) thereof (without any presentment of such Privately Outstanding
Security and without any notation of such payment being made thereon) by
crediting such amount, before 12:00 Noon, New York time, on the date such
amount is payable, by Federal funds bank wire transfer in same day
-20-
<PAGE>
available funds, to the registered holder's account in any bank in the
United States of America as may be designated by such holder or such
nominee(s), as the case may be, not less than two Business Days prior to
such payment. The initial bank account for this purpose of each of the
Purchasers is set forth on the signature page hereof. Each registered
holder of the Securities is solely responsible for advising the Company of
any changes in its designated bank account and the Company shall not have
any responsibility for delays in transfers because of any registered
holder's failure to advise the Company of any such change. Each of the
Purchasers agrees, before any sale, transfer or other disposition of any
Security that is a Privately Outstanding Security, to make a notation
thereon, or submit the same to the Trustee under the Indenture for notation
thereon, of the date to which interest has been paid thereon and the amount
of all redemption payments previously made in respect thereof.
4.4. Inspection
----------
So long as any of the Purchasers shall hold Privately Outstanding
Securities in an aggregate principal amount of at least $5 million, the
Company will permit any person designated by any of the Purchasers in
writing and reasonably acceptable to the Company, at such designating
Purchaser's expense, upon reasonable notice during normal business hours,
to visit and inspect any of the properties, the corporate books or
financial records of the Company, and to discuss their affairs, finances
and accounts with the principal officers of the Company and (with notice to
the Company) their independent public accountants, all at such reasonable
times and as often as such Purchaser may reasonably request. Each such
Purchaser agrees that any information obtained by them as a result of such
visits, inspections and discussions or pursuant to this Agreement shall be
confidential and shall be kept confidential by such Purchaser, unless (i)
disclosure of such information is required by court or administrative
order, provided that prior to disclosing any confidential information
pursuant to this clause, such Purchaser agrees to provide notice to the
Company and to cooperate with the Company if the Company reasonably
determines to contest such disclosure, (ii) disclosure of such information
is required by law, provided that prior to disclosing any confidential
information pursuant to this clause, such Purchaser agrees to provide
notice to the Company and to cooperate with the Company if the Company
reasonably determines to contest such disclosure, (iii) such information
becomes available to the public other than as a result of a disclosure or
failure to safeguard by such Purchaser, or (iv) such information becomes
available to such Purchaser from a source other than the Company, which
source is not, to its knowledge, subject to a confidentiality agreement
with, or duty of confidentiality to, the Company.
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<PAGE>
4.5. Financial Statements
--------------------
4.5.1. Delivery
--------
The Company will deliver or cause the Trustee to deliver to each
holder of record of Privately Outstanding Securities the SEC Reports
(as defined in the Indenture) described by Section 4.3 of the
Indenture in the time periods and manner prescribed therein.
4.5.2. Additional Information
----------------------
The Company shall, from time to time, deliver such additional
information regarding the financial position or business of the
Company as the holders of a majority of the outstanding principal
amount of Notes that are Privately Outstanding Securities may
reasonably request, subject in each case to the confidentiality
provisions set forth in Section 4.4 hereof.
4.6. Usury Laws.
----------
The Company and the Guarantor agrees not to insist upon, plead or in
any manner whatsoever claim or take the benefit or advantage of any usury
law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of the Indenture.
4.7. Gaming Control Board
--------------------
The Company and the Guarantor shall timely file all reports with the
Nevada State Gaming Control Board pursuant to Nevada Gaming Commission
Regulation 8.130 in respect to the sale of the Notes and receipt of the
proceeds therefrom.
SECTION 5. REPRESENTATIONS AND WARRANTIES
------------------------------
The Company and the Guarantor, jointly and severally, represent and warrant
to each of you as follows:
5.1. Organization, Standing and Qualification
----------------------------------------
5.1.1. Organization; Standing
----------------------
Each of the Company and the Guarantor is a corporation duly
incorporated, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation; has all requisite
corporate power and authority to own or lease, and operate its
respective properties and assets, and to carry on its
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respective businesses as now conducted and as proposed to be
conducted; and is duly qualified or licensed to do business and is in
good standing as a foreign corporation in all jurisdictions in which
it owns or leases property or in which the conduct of its respective
businesses requires it so to qualify or be licensed, except where the
failure so to qualify would not, singly or in the aggregate, have a
Material Adverse Effect.
5.1.2. Authority
---------
Each of the Company and the Guarantor has all requisite corporate
power and authority to enter into and perform all of its respective
obligations under this Agreement and the other Documents to which it
is a party, to issue, sell and deliver the Securities to be issued by
it, and to carry out the transactions contemplated by this Agreement
or any other Document.
5.1.3. Subsidiaries
------------
As of the Closing, the Company will have no direct or indirect
subsidiaries. The Company does not own, directly or indirectly, any
Capital Stock of any other Person. Except for the Capital Stock of
the Company and Coast West, Coast Resorts does not own, directly or
indirectly, any of the Capital Stock or other equity interest in any
other Person.
5.1.4. Stock
-----
All of the issued and outstanding shares of Capital Stock of the
Company and the Guarantor have been duly and validly authorized and
issued and are fully paid and non-assessable and were not issued in
violation of any preemptive or similar rights, and all of the shares
of Capital Stock of each of the Company and Coast West are owned
directly by Coast Resorts. All of the shares of Capital Stock of
Coast Resorts are owned directly by the Persons set forth on Schedule
5.1.4 hereto. All shares of Capital Stock of the Company are fully
paid and nonassessable, and are owned free and clear of any Liens
other than Permitted Liens. Except as disclosed in the Exchange Act
Reports, there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or Liens
related to or entitling any person to purchase or otherwise to acquire
any shares of the capital stock of, or other ownership interest in,
the Company or the Guarantor.
5.2. Capitalization
--------------
The total authorized Capital Stock of the Company on the Closing Date
will consist of 25,000 shares of Common Stock, 1,000 shares of which will
be issued and
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<PAGE>
outstanding. The total authorized Capital Stock of Coast West on the
Closing Date will consist of 25,000 shares of common stock, 1,010 of which
will be issued and outstanding. On the Closing Date, each respective share
of the Company's and Coast West's Capital Stock that is issued and
outstanding will have been duly authorized and validly issued, and will be
fully paid and nonassessable. There are no outstanding (i) securities
convertible into or exchangeable for any Capital Stock of the Company or
Coast West, (ii) options, warrants or other rights to purchase or subscribe
to Capital Stock of the Company or Coast West, or securities convertible
into or exchangeable for Capital Stock of the Company or Coast West, (iii)
contracts, commitments, agreements, understandings, arrangements, calls or
claims of any kind relating to the issuance of any Capital Stock of the
Company or the Coast West, any such convertible or exchangeable securities
or any such options, warrants or rights or (iv) any voting trust,
agreement, contract, commitment, understanding or arrangement with respect
to the voting of any Capital Stock of the Company or Coast West.
5.3. Authorization of Agreement and Other Documents
----------------------------------------------
Each of the Company and the Guarantor has taken all corporate actions
necessary to authorize it to enter into and perform its respective
obligations under each of this Agreement and the other Documents to which
it is a party and to consummate the transactions contemplated hereby and
thereby (including, without limitation, the issuance and sale of the
Securities). This Agreement is, and, as of the Closing Date (assuming
payment of the purchase price for the Securities by the Purchasers), each
of the Documents to which the Company or the Guarantor is a party will be,
a legal, valid and binding obligation of the Company or the Guarantor, as
the case may be, enforceable against the Company or the Guarantor, as the
case may be, in accordance with its terms, except as such enforcement may
be subject to (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws now or hereafter affecting
creditors' rights and remedies generally and (ii) general principles of
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law).
5.4. No Violation
------------
5.4.1. Existing Violations
-------------------
Neither the Company nor the Guarantor is (i) in violation of its
respective Charter Documents or (ii) in default in the performance of
any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any
indenture, mortgage, deed of trust or any other agreement or
instrument to which any of them is a party other than such defaults
that could not, singly or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
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<PAGE>
5.4.2. Execution of Agreement
----------------------
Neither the execution or delivery by the Company or the Guarantor
of this Agreement or the other Documents to which any of them is a
party, the issuance, sale or delivery of the Securities, the
performance by the Company or the Guarantor of any of their
obligations pursuant to this Agreement and the other Documents, nor
the consummation of the transactions contemplated hereby or thereby
will conflict with, violate, constitute a breach of or a default (with
the passage of time or otherwise) under, require the consent of any
Person (other than consents already obtained) under, or result in the
imposition of a Lien (other than Liens permitted under the Indenture)
on any properties of the Company or of the Guarantor or an
acceleration of indebtedness or other obligation pursuant to, (i) the
Charter Documents of the Company or the Guarantor, (ii) any bond,
debenture, note or any other evidence of indebtedness or any
indenture, mortgage, deed of trust or any other agreement or
instrument to which the Company or the Guarantor is a party or by
which either of them is bound or to which any of the property or
assets of the Company or the Guarantor is subject, or (iii) any
Applicable Law, except in any case where such violation, default,
breach or conflict, or the absence of such consent or the creation of
such Lien, would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.5. Use of Proceeds
---------------
The net proceeds from the sale of the Securities shall be used by the
Company for working capital purposes.
5.6. No Default
----------
Were the Indenture in effect as of the date hereof, after giving
effect to the transactions contemplated hereby, including application of
proceeds from the sale of the Securities, there would be no Default or
Event of Default thereunder or breach thereof.
5.7. Financial Statements
--------------------
5.7.1. Fair Presentation
-----------------
The historical financial statements of the Company and the
Guarantor, together with the notes thereto, set forth in the Exchange
Act Reports comply as to form with the requirements applicable to
financial statements required to be included in registration
statements on Form S-1 under the Securities Act and present fairly the
financial position, results of operations and cash flows of the
Company and the Guarantor at the respective dates and for the
respective periods
-25-
<PAGE>
indicated. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis throughout the periods presented except as stated therein. The
financial and statistical information and data included in the section
entitled "Selected Financial Data and Discussion" in the Placement
Memorandum are accurately presented and prepared on a basis consistent
with the relevant financial statements and the books and records of
the Company and the Guarantor, as applicable.
5.7.2. Projections
-----------
The projections (the "Projections") contained in the section of
the Placement Memorandum entitled "Projected Financial Information"
and in the Appendix to the Placement Memorandum entitled "Projections"
have been prepared on the basis of assumptions that were and are
reasonably believed by the Company to be reasonable as of the date
such projections were prepared, in light of the historical financial
performance of the Company and of current and reasonably foreseeable
business conditions, it being recognized, however, that estimates,
assumptions, forecasts and projections as to future events may not
prove to be correct, that actual future financial performance will
vary from that projected, and may vary materially, and that nothing
contained in this subparagraph shall be construed as a warranty or
guarantee of future financial performance.
5.7.3. No Material Adverse Change
--------------------------
Since June 30, 1997, there has been no material adverse change in
the properties, business, operations, earnings, assets, liabilities,
or financial condition of the Company or the Guarantor from that set
forth in the Placement Memorandum.
5.7.4. Liabilities
-----------
On a consolidated basis, the Company and the Guarantor have no
material liability or obligation (absolute, accrued, contingent or
otherwise), except (i) liabilities reflected in the Placement
Memorandum or in the Exchange Act Reports, (ii) other liabilities
incurred in the ordinary course of business, consistent with past
practices (and in any case not in excess of $250,000), since the date
of said Placement Memorandum, (iii) as set forth in Schedule 5.7.4
hereto as previously delivered and (iv) liabilities reflected on the
balance sheet attached hereto. On a consolidated basis, the Company
and the Guarantor have no material forward or material, long-term
commitments or material unrealized losses or anticipated losses from
any unfavorable commitments, except as reflected in the Placement
Memorandum, the balance sheet included in the Exchange Act Reports
-26-
<PAGE>
and as set forth in Schedule 5.7.4 hereto as previously delivered.
5.8. Accounting Controls, etc.
-------------------------
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
5.9. Full Disclosure
---------------
5.9.1. No Untrue Statement
-------------------
Except for the 1996 Analysts' Report contained in the Appendix to
the Placement Memorandum, or as reflected in the Placement Memorandum,
none of the Placement Memorandum or any of the other Documents
contained as of its respective date, or would now contain were the
information contained therein made available to you as of the date of
this Agreement (other than with respect to additional or updated
information referred to in this Section 5 and certain changes to the
terms of the Indenture from the terms set forth in the Placement
Memorandum), any untrue statement of a material fact or as of such
date omitted, or now omits, to state a material fact necessary to make
the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
5.9.2. Projections
-----------
The projections contained in the Placement Memorandum have been
prepared by the management of the Company and are based on the good
faith estimates and assumptions of the management of the Company, and
the Company has no reason to believe that such estimates and
assumptions are not reasonable, it being understood that the
projections set forth in the Placement Memorandum are not guarantees
of results and that actual results will vary from the projections and
such variations may be material.
5.10. Litigation
----------
5.10.1. No Material Proceedings
-----------------------
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<PAGE>
Except as disclosed in the Company's Exchange Act Reports or the
Placement Memorandum, there is no Proceeding against or affecting the
Company or the Guarantor or any of their properties or assets except
for such Proceedings that, if finally determined adversely to the
Company or the Guarantor, would not reasonably be expected to have,
singly or in the aggregate, a Material Adverse Effect.
5.10.2. No Material Judgments
---------------------
Neither the Company nor the Guarantor is subject to any judgment,
order, decree, rule or regulation of any court, governmental authority
or arbitration board or tribunal that would, singly or in the
aggregate, have a Material Adverse Effect.
5.11. Taxes
-----
All tax returns required to be filed by the Company or the Guarantor
in any jurisdiction (including foreign jurisdictions) have been timely so
filed, and all material taxes, assessments, fees and other charges
(including, without limitation, withholding taxes, penalties, and interest)
due or claimed to be due from the Company or the Guarantor that are due and
payable have been paid, other than those (i) being contested in good faith
and for which an adequate reserve or accrual has been established or (ii)
those currently payable without penalty or interest and for which an
adequate reserve or accrual has been established or extensions duly filed.
The Company and the Guarantor know of no actual or proposed additional tax
assessments for any fiscal period against the Company or the Guarantor that
would, singly or in the aggregate, have a Material Adverse Effect. Neither
the Company's nor the Guarantor's income or franchise tax returns are under
audit and no waivers of the statute of limitations or extensions of time
with respect to any tax returns have been granted by the Company or the
Guarantor.
5.12. Labor
-----
There is (i) no unfair labor practice complaint pending against the
Company or any Guarantor nor, to the knowledge of each of the Company and
the Guarantor, threatened against any of them, before the National Labor
Relations Board, any state or local labor relations board or any foreign
labor relations board, and no grievance or arbitration proceeding arising
out of or under any collective bargaining agreement is so pending against
the Company or any Guarantor, or, to the knowledge of each of the Company
and the Guarantor, threatened against any of them, (ii) no strike, labor
dispute, slowdown or stoppage pending against the Company or any Guarantor
nor, to the knowledge of each of the Company and the Guarantor, threatened
against the Company or the Guarantor and (iii) no union organizing activity
occurring to the knowledge of each of the Company and the Guarantor, and no
outstanding demand for recognition existing
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<PAGE>
with respect to the employees of the Company or the Guarantor, nor any
petition for an election which has been filed with the National Labor
Relations Board to the knowledge of each of the Company and the Guarantor.
5.13. ERISA
-----
The execution and delivery of this Agreement, the other Documents and
the sale of the Securities to be purchased by you will not, to the
Company's and the Guarantor's knowledge, involve any "prohibited
transaction." To the Company's and the Guarantor's knowledge, none of the
Company, the Guarantor or any of their ERISA Affiliates is a "party in
interest" or a "disqualified person" except as to those employee benefit
plans set forth on Schedule 2.3.3. To the Company's and the Guarantor's
knowledge no condition exists or event or transaction has occurred in
connection with any "employee benefit plan" maintained or contributed to by
the Company or the Guarantor or any ERISA Affiliate of the Company or the
Guarantor (any plan being herein referred to as the "Pension Plan") that
could result in the Company or the Guarantor or any such ERISA Affiliate
incurring any liability, fine or penalty which would, singly or in the
aggregate, have a Material Adverse Effect. The Company and the Guarantor
maintain no pension plans subject to Title IV of ERISA.
5.14. Compliance with Laws
--------------------
Neither the Company nor the Guarantor is in violation of any
Applicable Law, except such violations are not reasonably expected to have,
singly or in the aggregate, a Material Adverse Effect. Neither the Company
nor the Guarantor has failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership or operation
of its respective properties or the conduct of its respective business as
currently conducted, except such failures as would not be reasonably
expected to have, singly or in the aggregate, a Material Adverse Effect.
5.15. Governmental Consents
---------------------
No consent, approval or authorization of, or filing, registration or
qualification with, any governmental or regulatory authority or body is
required in connection with or as a condition to the execution and delivery
of this Agreement or any of the other Documents or the consummation of
transactions contemplated hereby or thereby (including, without limitation,
the offer, issuance, sale or delivery of the Securities at the Closing),
except for (i) approval of the Nevada State Gaming Control Board required
to be obtained under the Stock Pledge and Security Agreement dated as of
the date hereof executed by the Guarantor in favor of the Trustee, (ii)
such consents, approvals, authorizations, filings, registrations or
qualifications as have been made or obtained on or before the Closing Date
(and copies of which will be delivered to you upon your request) or are not
required to be made or obtained prior to the Closing Date, and (iii) except
to
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the extent that the failure to obtain any such consents, approvals,
authorizations or qualifications or to make any such filings or
registrations is not reasonably expected to have singly or in the
aggregate, a Material Adverse Effect.
5.16. Permits, etc.
-------------
Each of the Company and the Guarantor has such permits, licenses,
franchises, certificates, consents, orders and authorizations
(collectively, the "Permits") of and from, and has made all declarations
and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals as are necessary to own, lease and operate its respective
properties and to conduct its business in the manner described in the
Placement Memorandum except where the failure to have such Permits would
not reasonably be expected, singly or in the aggregate, to have a Material
Adverse Effect ("Material Permits"). All Material Permits are in full
force and effect, and each of the Company and the Guarantor has fulfilled
and performed all of its material obligations with respect to Material
Permits. No event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination by the issuer thereof or which
results in any other material impairment of the rights of the holder of any
Material Permits. The Company and the Guarantor have no reason to believe
that any governmental body or agency is considering limiting, suspending or
revoking any such Material Permit.
5.17. No Violation of Regulations of Board of Governors of Federal Reserve
--------------------------------------------------------------------
System
- ------
None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the
Securities) shall violate or result in a violation by the Company or the
Guarantor of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System. No part of the proceeds of the sale of the
Securities will be used directly or indirectly for the purpose of
purchasing or carrying any margin securities within the meaning of
Regulation G.
5.18. Environmental Matters
---------------------
Each of the Company and the Guarantor is aware of the potential effect
of Environmental Laws (as defined below) and the disposal of hazardous or
toxic substances, wastes, pollutants and contaminants on the business,
assets, operations and properties of the Company and the Guarantor and
identified and evaluated associated estimated costs and estimated
liabilities (including, without limitation, all estimated material capital
and operating expenditures required for clean-up, closure of properties and
compliance with Environmental Laws, all permits, licenses and approvals,
all related material constraints on operating activities, and potential
liabilities to third parties.) On the basis of such reviews, each of the
Company and the Guarantor believes that such associated estimated costs and
liabilities are not reasonably expected to have a Material
-30-
<PAGE>
Adverse Effect, either individually or in the aggregate. None of the
Company or the Guarantor (i) has violated any environmental, safety or
similar law or regulation applicable to it or its business or property
relating to the protection of human health and safety, the environmental or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) lacks any permit, license or other approval
required of it under applicable Environmental Laws or (iii) is or will be
violating any term or condition of such permit, license or approval, which
in the case of clauses (i), (ii) or (iii), is reasonably expected to either
individually or in the aggregate, have a Material Adverse Effect.
5.19. Private Offering
----------------
5.19.1. Sale Exempt
-----------
Based in part on representations made by the Purchasers and upon
the letter dated this date by BTM Capital Corporation to the
Purchasers, and assuming the correctness of such representations and
that there has been no general solicitation by the Purchasers, the
sale of the Securities hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act and it is not
necessary in connection with the sale of the Securities to the
Purchasers in accordance herewith to qualify the Indenture under the
Trust Indenture Act of 1939, as amended.
5.19.2. No General Solicitation
-----------------------
In the case of each offer or sale of the Securities, no form of
general solicitation or general advertising was used by the Company,
the Guarantor or any of their respective officers, directors or
employees including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine
or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees had been invited by any general
solicitation or general advertising. No offers were made by the
Company or the Guarantor or any of their respective officers,
directors or employees other than to persons whom the offeror
reasonably believed to be accredited investors or sophisticated
purchasers as those terms have been construed under Section 4(2) of
the Securities Act or to Qualified Institutional Buyers within the
meaning of Rule 144A under the Securities Act. The Purchasers are the
sole purchasers of the Securities. No securities of the same class as
any of the Securities have been issued and sold by the Company within
the six-month period immediately prior to the date hereof. The
Company and the Guarantor agree that none of them nor anyone acting on
any of their behalf, will, with the Company's or the Guarantor's
knowledge, offer any Securities so as to bring the issuance and sale
of any of the Securities within the registration requirements of
Section 5 of the Securities Act
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<PAGE>
nor offer any similar securities for issuance or sale to, or solicit
any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with anyone if the sale of any of the
Securities and any such securities could be integrated as a single
offering for purposes of the Securities Act.
5.20. Governmental Regulations
------------------------
Neither the Company nor the Guarantor is subject to regulation, or
will become subject to regulation upon the consummation of the transactions
contemplated by this Agreement or any of the other Documents, under the
Investment Company Act of 1940, as amended, or any Federal or state statute
or regulation limiting its ability to incur or assume indebtedness for
borrowed money or consummate the transactions contemplated hereby.
5.21. Patents, Trademarks, etc.
-------------------------
Each of the Company and the Guarantor owns, or is licensed under, and
has the right to use, all material patents, trademarks, trade names,
copyrights, technology, know-how and processes (collectively, "Intellectual
Property") necessary for the conduct of its business as set forth in the
Placement Memorandum. The consummation of the transactions contemplated by
this Agreement and the other Documents will not alter or impair any such
rights, except to the extent that any such alterations or impairments would
not, singly or in the aggregate, have a Material Adverse Effect. No claims
have been asserted by any person to the use of any Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement related thereto and to the knowledge of the Company and the
Guarantor the use of such Intellectual Property by the Company and the
Guarantor does not infringe on the rights of any person, except to the
extent that any such claims or infringements would not, singly or in the
aggregate, have a Material Adverse Effect.
5.22. Title to and Condition of Properties
------------------------------------
Each of the Company and the Guarantor has good and marketable title to
all the real or personal properties and other assets (tangible, intangible
or mixed) it purports to own, free and clear of all Liens, except for Liens
permitted under the Indenture. To the Company's knowledge, all leases and
other agreements to which the Company or the Guarantor is a party are valid
and binding and in full force and effect, and each of the Company and the
Guarantor, as the case may be, enjoys peaceful and undisturbed possession
under all leases to which it is a party as lessee. No default has occurred
or is continuing under such leases and other agreements, and no consent
need be obtained (other than consents that will be obtained prior to the
Closing Date), from any Person in respect of any such lease or agreement in
connection with the transactions contemplated by this Agreement and the
other Documents, except to the extent that any such defaults,
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or the failure to obtain any such consents, could not, singly or in the
aggregate, have a Material Adverse Effect. The properties used or useful to
the conduct of the business of the Company and the Guarantor are in good
repair and working order, except to such extent as could not, singly or in
the aggregate, have a Material Adverse Effect. The Company and the
Guarantor maintain with reputable insurers such insurance as may be
required by law and such other insurance, to such extent and against such
hazards and liabilities, as is customarily maintained by companies
similarly situated (which may include self-insurance in the same form as is
customarily maintained by companies similarly situated).
5.23. Real Estate
-----------
As of the date hereof, the Company or the Guarantor hold fee and
leasehold interests, as the case may be, in all the real property set forth
in the Exchange Act Reports. No material real property leasehold interest
held by the Company or the Guarantor on the date hereof is omitted from
such reports and, except as set forth in such reports, no such fee or
leasehold interest is encumbered by a mortgage or deed of trust, except as
permitted by the Indenture.
5.24. Survival of Indemnification and Contribution and Representations and
--------------------------------------------------------------------
Warranties
----------
All of the representations and warranties of the Company and the
Guarantor in this Agreement and the other Documents and in any other
document, financial statement or other instrument or certificate delivered
to you by or on behalf of the Company or the Guarantor in connection with
this Agreement and the Documents and the transactions contemplated hereby
and thereby shall be deemed to constitute representations and warranties
hereunder and shall be true in all material respects at and as of the
Closing Date (unless specifically relating to a different date), after
giving effect to the transactions contemplated hereby.
All of the obligations to indemnify you and contribute to your losses
contained in this Agreement and the other Documents and in any other
document, financial statement or other instrument or certificate delivered
to you by or on behalf of the Company or the Guarantor in connection with
this Agreement and the Documents and the transactions contemplated hereby
and thereby and all of the representations and warranties of the Company
and the Guarantor shall survive the execution and delivery of this
Agreement and the other Documents, any investigation by you and the
issuance of the Securities.
SECTION 6. MISCELLANEOUS
-------------
6.1. Notices
-------
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Prior to the Closing, and thereafter with respect to matters
pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-
delivery, next-day air courier, certified first-class mail, return receipt
requested, telex, or facsimile:
(a) if to you, at your address set forth below your signature on
the signature page hereto with a copy to Ropes & Gray, One
International Place, Boston, Massachusetts 02110, Attention: Robert
L. Nutt, Esq; and
(b) if to the Company or the Guarantor, at its address set forth
on the first page of this Agreement with a copy to Gibson, Dunn &
Crutcher LLP, 333 South Grand Avenue, Los Angeles, California 90071-
3197, Attention: Karen Bertero, Esq. and Joerg Esdorn, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day
after being timely delivered to a next-day air courier; five business days
after being deposited in the mail, postage prepaid, if mailed; and when
answered back if telexed.
From and after the Closing, the foregoing notice provisions shall be
superseded by the notice provisions of the Document under which notice is
given.
6.2. Successors and Assigns
----------------------
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, and to the extent set forth
in Sections 2.5 and 2.6 hereof, the Indemnified Parties and their
respective heirs, personal representatives, successors and assigns and no
other persons shall acquire or have any right under or by virtue of this
Agreement.
6.3. Amendment and Waiver
--------------------
Prior to the Closing Date, this Agreement and the other Documents may
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may be given, provided that the same are in
writing and signed by you, the Company and the Guarantor. Thereafter, this
Agreement may only be amended, and such waivers be given, with the consent
of the holders of a majority of the then outstanding aggregate principal
amount of the outstanding Notes (other than Notes owned or acquired by the
Company or its Affiliates).
6.4. Counterparts
------------
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed
-34-
<PAGE>
to be an original and all of which taken together shall constitute one and
the same agreement.
6.5. Headings
--------
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
6.6. Governing Law
-------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW THAT WOULD REQUIRE THE APPLICATION OF ANY OTHER LAW. THE
COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY PURCHASER TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
6.7. Entire Agreement
----------------
This Agreement, together with the other Documents and the Securities
are intended by the parties as a final expression of their agreement and
intended to, be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter
contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, together with the other Documents and
the Securities, supersedes all prior agreements and understandings between
the parties with respect to such subject matter.
6.8. Severability
------------
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force
-35-
<PAGE>
and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart of this Agreement and
return such counterpart to the Company whereupon this Agreement will become
binding between us in accordance with its terms.
Very truly yours,
COAST HOTELS AND CASINOS, INC.
By: /s/ Harlan D. Braaten
------------------------
Name: Harlan D. Braaten
Title: President & COO
COAST RESORTS, INC.
By: /s/ Harlan D. Braaten
------------------------
Name: Harlan D. Braaten
Title: President & COO
-36-
<PAGE>
PURCHASE AGREEMENT SIGNATURE
Accepted and Agreed as of
the date first above written
Each of
Putnam Income Fund
Putnam High Yield Advantage Fund
Putnam Diversified Income Trust
Putnam High Income Convertible and Bond Fund
By: /s/ Paul M. O'Neal
--------------------------
Title: Vice President
The Putnam Advisory Company Inc. on behalf of:
Putnam CBO I Limited
Putnam CBO II Limited
Strategic Global Fund: High Yield Fixed Income (Putnam) Fund
By: /s/ Paul M. O'Neal
-------------------------
Title: Vice President
-37-
<PAGE>
EXHIBIT A
---------
Form of Indenture
-----------------
-38-
<PAGE>
EXHIBIT B
---------
Form of Opinion of Gibson, Dunn & Crutcher LLP
----------------------------------------------
-39-
<PAGE>
EXHIBIT C
---------
Form of Opinion of Barry Lieberman, Esq.
----------------------------------------
-40-
<PAGE>
EXHIBIT D
---------
Form of Opinion of McDonald Carano Wilson
-----------------------------------------
McCune Bergin Frankovich & Hicks
--------------------------------
Schedule 2.2.1
<TABLE>
<S> <C>
Putnam Income Fund $ 200,000
Putnam High Yield Advantage Fund $4,000,000
Putnam Diversified Income Trust $2,000,000
Putnam High Income Convertible and Bond Fund $ 200,000
Putnam CBO I Limited $4,000,000
Putnam CBO II Limited $6,000,000
Strategic Global Fund: High Yield
</TABLE>
-41-
<PAGE>
EXHIBIT 10.29
J8uRopes & Gray
Draft of 11/20/97
ITEM 3.1.1
- ----------
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered into this 21st day of November,
1997, between COAST HOTELS AND CASINOS, INC., a Nevada corporation (the
"DEBTOR"), and FIRSTAR BANK OF MINNESOTA, N.A., as trustee for the benefit of
the holders of the Notes (as defined below) ("SECURED PARTY").
RECITALS
A. NOTES. Debtor is the issuer of those certain $16,800,000 10 7/8%
-----
First Mortgage Notes due 2001 (the "NOTES") pursuant to that certain Indenture
dated as of November __, 1997 (the "INDENTURE") by and among Debtor, Coast
Resorts, Inc., a Nevada corporation, as guarantor, and Secured Party. Any
capitalized term used in this Security Agreement without definition, but defined
in the Indenture, shall have the same meaning here as in the Indenture.
B. PURPOSE. As a material inducement to Secured Party to enter into the
-------
Indenture, the Debtor has agreed to execute this Security Agreement in favor of
Secured Party and to pledge all its right, title and interest in the collateral
described herein to Secured Party.
AGREEMENT
Now therefore, in consideration of the above recitals and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. CREATION OF SECURITY INTEREST. Debtor hereby assigns, pledges and
-----------------------------
grants to Secured Party a security interest in all of Debtor's right, title and
interest in and to the collateral described in Section 2 hereinbelow (the
"COLLATERAL") in each case whether now owned or hereafter acquired by Debtor in
order to secure the payment and performance of the obligations of Debtor to
Secured Party described in Section 3 hereinbelow.
2. COLLATERAL. The Collateral under this Security Agreement is:
----------
a) all of Debtor's personal property, goods, equipment, supplies,
building and other materials of every nature whatsoever and all other
personal property, including, but not limited to, all gaming and general
equipment and devices which are or are to be installed and used in
connection with the operation of the Orleans Hotel and Casino, the Barbary
Coast Hotel and Casino and the Gold Coast Hotel and Casino (collectively,
the "HOTELS"), all computer equipment, calculators, adding machines, and
gaming tables,
<PAGE>
video game and slot machines and any other electronic equipment of every
nature used or located at the Hotels (all of the foregoing property and
similar or after-acquired property included as Collateral under Section
2(g) below being hereinafter referred to as "EQUIPMENT");
(b) all of Debtor's accounts and accounts receivable, including,
without limitation, all rights to payment for goods sold or leased or for
services rendered which are not evidenced by an instrument or chattel
paper, all other present or future rights for money due or to become due,
all of Debtor's chattel paper, instruments, promissory notes, markers and
general intangibles for money due or to become due of any kind, in each
case whether now existing or hereafter arising and wherever arising and
whether or not earned by performance (collectively, the "RECEIVABLES"),
other general intangibles, documents of title, warehouse receipts, leases,
deposit accounts: including, without limitation, money, tax refund claims,
partnership interests, indemnification and other similar claims and
contract rights, the Contracts and Documents (as such term is defined in
the Collateral Assignment, dated as of January 30, 1996, between the Debtor
and American Bank National Association, as trustee) permits and licenses:
including, without limitation, any licenses held or to be held by Debtor
necessary to operate the Hotels, franchises, certificates, stock, and all
rights in, to and under all security agreements, mortgages, deeds of trust,
guarantees, leases and other agreements or contracts securing or otherwise
relating to any of the foregoing (all of the foregoing property, including,
without limitation, the Receivables, and similar or after-acquired property
included as Collateral under Section 2(g) below being hereinafter referred
to as "INTANGIBLES");
(c) all of the trademarks and service marks now held or hereafter
acquired by Debtor, which are registered in the United States Patent and
Trademark Office or in any similar office or agency of the United States or
any state thereof or any political subdivision thereof and any application
for such trademarks and service marks, as well as any unregistered marks
used by Debtor in the United States and trade dress including logos,
designs, trade names, business names, fictitious business names and other
business identifiers in connection with which any of these registered or
unregistered marks are used in the United States ("MARKS") together with
the registration and right to renewals thereof, and the goodwill of the
business of Debtor symbolized by the Marks and all licenses associated
therewith;
(d) all United States copyrights which Debtor now or hereafter has
registered with the United States Copyright Office, as well as any
application for a United States copyright registration now or hereafter
made with the United States Copyright Office by Debtor ("COPYRIGHTS") or
United States patent to which Debtor now or hereafter has title and any
divisions or continuations thereof, as well as any application for a Untied
States patent now or hereafter made by Debtor, and all reissues, renewals
or extension thereof;
(e) all patents and patent applications, which are registered in the
United States
-2-
<PAGE>
Patent and Trademark Office or any similar office or agency of the United
States or any state thereof or political subdivision thereof ("PATENTS")
together with the registration and right to renewals thereof, and the
goodwill of the business of Debtor symbolized by the Patents;
(f) all computer programs of Debtor and all intellectual property
rights therein and all other proprietary information of Debtor, including,
but not limited to, trade secrets;
(g) the Collateral includes all items described in this Section 2,
whether now owned or hereafter at any time acquired by Debtor and wherever
located, and includes all replacements, additions, parts, appurtenances,
accessions, substitutions, repairs, proceeds, products, offspring, rents
and profits, relating thereto or therefrom, and all documents, records,
ledger sheets and files of Debtor relating thereto. Proceeds hereunder
include (i) whatever is now or hereafter receivable or received by Debtor
upon the sale, exchange, collection or other disposition of any item of
Collateral, whether voluntary or involuntary, whether such proceeds
constitute Equipment, Intangibles, or other assets; (ii) any such items
which are now or hereafter acquired by Debtor with any proceeds of
Collateral hereunder; and (iii) any insurance or payments under any
indemnity, warranty or guaranty now or hereafter payable by reason of loss
or damage or otherwise with respect to any item of Collateral or any
proceeds thereof. Notwithstanding the foregoing, "Collateral",
"Equipment", "Receivables", "Intangibles" shall not include any of the
following assets (the "EXCLUDED ASSETS"): (i) any aircraft owned by the
Company and any equipment subject to Liens in existence as of the date of
the 1996 Indenture (as defined in the Indenture) securing Existing
Indebtedness (as defined in the Indenture); (ii) any agreement with a third
party that, pursuant to its terms, prohibits the grant of a lien on such
agreement; provided that the Company shall use its best efforts to obtain
such third party's consent to assignment of all material agreements; (iii)
Gaming Licenses (as defined in the Indenture) or any other governmental
approval or permit, to the extent that, under the terms and conditions of
such approval or under applicable law, it cannot be subjected to a Lien in
favor of the Secured Party without the approval of the relevant
governmental authority, to the extent that such approval has not been
obtained; and (iv) any Equipment (A) the purchase of which was not financed
with the proceeds of the Notes and (B) that Debtor is permitted to encumber
and has encumbered pursuant to clause (ii) of the second paragraph of
Section 4.9 of the Indenture and (C) in which Secured Party is prohibited
from maintaining a security interest pursuant to the terms of the FF&E
Financing Agreement (as defined below) encumbering such Equipment.
3. SECURED OBLIGATIONS OF DEBTOR. The Collateral secures and shall
-----------------------------
hereafter secure (i) the payment by Debtor to the Holders or Secured Party of
all indebtedness now or hereafter owed to Secured Party by Debtor in connection
with the transactions related to the Notes and the Indenture (the "COAST
FINANCING"), whether at stated maturity, by acceleration or otherwise,
including, without limitation, Debtor's obligations under the Indenture, the
Notes or any related documents securing the obligations thereunder, together
with any interest thereon,
-3-
<PAGE>
payments for early termination, fees, expenses, increased costs, indemnification
or otherwise, in connection therewith and extensions, modifications and renewals
thereof, (ii) the performance by Debtor of all other obligations and the
discharge of all other liabilities of Debtor to Secured Party of every kind and
character arising from the Coast Financing, whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising, joint,
several and joint and several, and whether created under this Security Agreement
or any other agreement to which Debtor and Secured Party are parties, (iii) any
and all sums advanced by Secured Party in order to preserve the Collateral or
preserve Secured Party's security interest in the Collateral (or the priority,
thereof) and (iv) the expenses of retaking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Collateral, of any
proceeding for the collection or enforcement of any indebtedness, obligations or
liabilities of Secured Party referred to above, or of any exercise by Secured
Party of its rights hereunder, together with reasonable attorneys' fees and
disbursements and court costs (collectively, the "SECURED OBLIGATIONS"). All
payments and performance by Debtor with respect to any Secured Obligations shall
be in accordance with the terms under which said indebtedness, obligations and
liabilities were or are hereafter incurred or created.
4. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
---------------------------------------
warrants that:
(a) Debtor is (or, to the extent that the Collateral is acquired
after the date hereof, will be) the sole legal and beneficial owner of the
Collateral and has exclusive possession and control thereof; there are no
security interests in, liens, charges or encumbrances on, or adverse claims
of title to, or any other interest whatsoever in, the Collateral or any
portion thereof except Permitted Liens (as defined in the Indenture,
including without limitation Liens that are created by this Security
Agreement); and no financing statement, notice of lien, mortgage, deed of
trust or instrument similar in effect covering the Collateral or any
portion thereof or any proceeds thereof ("LIEN NOTICE") exists or is on
file in any public office, except as relates to Permitted Liens, including
without limitation liens as may have been filed in favor of Secured Party
relating to this Security Agreement or related agreements, or for which
duly executed termination statements have been delivered to Secured Party
for filing;
(b) Debtor has full right, power and authority to execute, deliver
and perform this Security Agreement. This Security Agreement constitutes a
legally valid and binding obligation of Debtor, enforceable against Debtor
in accordance with its terms. Subject to the completion of the items
identified in Section 4(c) below (and except to the extent that
registration of motor vehicles, possession of checks, instruments not
required to be delivered under Section 5(d) and money are required for
perfection and except with respect to deposit accounts), the provisions of
this Security Agreement are effective to create in favor of Secured Party a
valid and enforceable first, prior and perfected security interest in the
Collateral subject only to Permitted Liens;
(c) except for (i) the filing or recording of the financing
statements and fixture filings done concurrently with the execution and
delivery hereof, (ii) the actual taking of possession of instruments
constituting Collateral by the Trustee hereunder or, if the
-4-
<PAGE>
Collateral is required under the 1996 Indenture to be delivered to the 1996
Notes Trustee or is in the possession of the 1996 Notes Trustee, the
providing of such notice to the Secured Party or the taking of such other
actions as are necessary to perfect the Secured Party's security interest
in such Collateral, (iii) all consents received and actions taken in
connection with the closing of the offering of the Notes, (iv) the actions
contemplated by the parenthetical in the second sentence of Section 4(b),
and (v) any filings necessary to perfect Secured Party's security interest
in any Patent, Trademark or Copyright, no authorization, approval or other
action by, no notice to or registration or filing with, any person or
entity, including without limitation, any stockholder or creditor of Debtor
or any governmental authority or regulatory body is required (x) for the
grant by Debtor of the security interest in the Collateral pursuant to this
Security Agreement or for the execution, delivery or performance of this
Security Agreement by Debtor, (y) for the perfection or maintenance of such
security interest created hereby, including the first priority nature of
such security interest subject to Permitted Liens, or (except for notices
required under the UCC) the exercise by Secured Party of the rights and
remedies provided for in this Security Agreement (other than any required
governmental consent or filing with respect to any Patents, Trademarks,
Copyrights, governmental claims, tax refunds, licenses or permits; the
exercise of remedies requiring prior court approval, notices, consents,
approvals or authorizations in connection with the sale of any securities
under laws affecting the offering and sale of securities generally), or (z)
for the enforceability of such security interest against third parties,
including, without limitation, judgment lien creditors;
(d) Except as indicated on Schedule 1, Debtor does not do business,
and for the previous five years has not done business, under any fictitious
business names or trade names;
(e) the Collateral has not been and will not be used or bought by
Debtor for personal, family or household purposes. In addition, the
Collateral does not include crops, timber, farm products, minerals or the
like or accounts resulting from the sale of such minerals at the wellhead
or minehead;
(f) (i) Debtor's chief executive office is located at 4500 West
Tropicana Avenue, Las Vegas, Nevada 89103, Debtor has no places of business
other than such address and other places of business indicated on Schedule
2 and the Collateral is now and will at all times hereafter be located at
Debtor's places of business or as Debtor may otherwise notify Secured Party
in writing;
(g) Debtor does not maintain any deposit accounts other than those
set forth in Exhibit "A" hereto and Debtor is not now indebted to any
-----------
organization with which Debtor maintains a deposit account;
(h) Except for purchases in the ordinary course of business, Debtor
has not purchased any Collateral, other than for cash, within twenty-one
(21) days prior to the date hereof;
-5-
<PAGE>
(i) all originals of all promissory notes, other instruments or
chattel paper which evidence Receivables (other than checks, which Debtor
promptly shall deposit into one of the deposit accounts encumbered
hereunder, or markers, received by Debtor in the ordinary course of
business) with a face or fair market value not to exceed, in the aggregate
$250,000, have been delivered to Secured Party (with all necessary or
appropriate endorsements) or, if such notes, instruments or chattel paper
are required under the 1996 Indenture to be delivered to the 1996 Notes
Trustee or are in the possession of the 1996 Notes Trustee, such notice has
been provided to the Secured Party or any such other actions have been
taken as are necessary to perfect the Secured Party's security interest in
such notes, instruments or chattel paper;
(j) none of the execution, delivery and performance of this Security
Agreement by Debtor, the consummation of the transactions herein
contemplated, the fulfillment of the terms hereof or the exercise by
Secured Party of any rights or remedies hereunder will constitute or result
in a breach of any of the terms or provisions of, or constitute a default
under, or constitute an event which with notice or lapse of time or both
will result in a breach of or constitute a default under, any material
agreement, indenture, mortgage, deed of trust, equipment lease, instrument
or other document to which Debtor is a party, conflict with or require
approval, authorization, notice or consent under any material law, order,
rule, regulation, license or permit applicable to Debtor of any court or
any federal or state government, regulatory body or administrative agency,
or any other governmental body having jurisdiction over Debtor or its
properties or require notice, consent, approval or authorization by or
registration or filing with any person or entity (including, without
limitation, any stockholder or creditor of Debtor) other than (i) any
notices to Debtor or any Guarantor from Secured Party required hereunder,
(ii) notices and filings in connection with the perfection of Liens
hereunder and (iii) notices, consents, approvals or authorizations in
connection with the sale of any securities under laws affecting the
offering and sale of securities generally. Except for documents entered
into in connection with Permitted Liens or Indebtedness permitted under the
Indenture, none of the Collateral is subject to any material agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which Debtor is a party which may restrict or inhibit Secured
Party's rights or ability to sell or dispose of the Collateral or any part
thereof after the occurrence of an Event of Default (as defined herein);
(k) Debtor represents and warrants that it is the true lawful
exclusive owner or licensee of the Marks listed in Annex 1, except those
-------
listed as being held under a nonexclusive license, and that said listed
Marks include all the United States federal registrations or applications
registered in the United States Patent and Trademark office and that said
Marks are valid, subsisting and have not been canceled. Debtor represents
and warrants that except as indicated on Annex 1, it owns or is licensed to
use or not prohibited from using all Marks that it uses. Debtor further
warrants that except as indicated on Annex 1, it is aware of no third party
claim that any aspect of Debtor's present or contemplated business
operations infringes or will infringe Debtor's
-6-
<PAGE>
Mark; and
(l) Debtor represents and warrants that it is the true and lawful
exclusive owner or licensee of all rights in the Patents listed in Annex 2
-------
hereto and in the Copyrights listed in Annex 3 hereto, that said Patents
-------
include all the United States patents and applications for United States
patents that Debtor owns and that said Copyrights constitute all the United
States copyrights registered in the United States Copyright Office and
applications, for United States copyrights that it now uses or practices
under. Debtor further warrants that, except as indicated on Annex 2 or 3,
it is aware of no third party claim that any aspect of Debtor's present or
contemplated business operations infringes or will infringe any Patent or
any copyright.
5. COVENANTS OF DEBTOR. Debtor covenants and agrees that:
-------------------
(a) Debtor will not move or permit to be moved the Collateral or any
portion thereof to any location other than that set forth in or referred in
Section 4(f) hereof or the respective Hotels or locations established in
compliance with Section 5(b) hereof without the prior written consent of
the Secured Party and the prior filing of a financing statement with the
proper office and in the proper form, to the extent necessary or
appropriate, to perfect or continue the perfection (without loss of
priority) of the security interests created herein, which filing shall be
satisfactory in form, substance and location to Secured Party prior to such
filing; provided, however that (i) Debtor shall be permitted to move assets
pursuant to Section 4.10 of the Indenture and (ii) the foregoing shall not
apply to deposit accounts (so long as Debtor complies with Section 5(c)
below) or any other intangible Collateral or any vehicles included in the
Collateral;
(b) Debtor will not voluntarily or involuntarily change its name,
identity, corporate structure, or location of its chief executive office or
any of its other places of business, unless in any such case (i) Debtor
shall have delivered written notice to Secured Party, (ii) Debtor shall
have executed and caused to be filed financing statements with the proper
offices and in the proper form, to the extent necessary or appropriate, to
perfect or continue the perfection (without loss of priority) of the
security interests created herein, which filing shall be satisfactory in
form, substance and location to Secured Party prior to such filing, and
(iii) Debtor shall have delivered to Secured Party any other documents that
may be required by Secured Party in a form and substance reasonably
satisfactory to Secured Party to perfect or continue the perfection
(without loss of priority) of the security interest created herein subject
to the terms and conditions of the 1996 Indenture and the Intercreditor
Agreement, or Debtor will at all times maintain its status as a citizen of
the United States as provided in Section 4(f) hereof;
(c) Debtor will not establish or create any deposit accounts other
than those set forth in Exhibit "A" without giving Secured Party prior
----------
written notice;
(d) Debtor will promptly, and in no event later than 21 days after a
request by
-7-
<PAGE>
Secured Party, procure or execute and deliver all further instruments and
documents (including, without limitation, notices, legal opinions,
financing statements, mortgagee waivers, landlord disclaimers and
subordination agreements) satisfactory to Secured Party subject to the
terms and conditions of the 1996 Indenture and the Intercreditor Agreement,
and take any other actions which are necessary or, in the judgment of
Secured Party, desirable or appropriate to perfect or to continue the
perfection, priority and enforceability of Secured Party's security
interests in the Collateral, to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral,
to protect the Collateral against the rights, claims or interests of third
persons (other than holders of Permitted Liens), or to effect or to assure
further the purposes and provisions of this Security Agreement, and will
pay all costs incurred in connection therewith. Without limiting the
generality of the foregoing, Debtor will: (i) mark conspicuously each item
of chattel paper included in the Collateral with a legend, in form and
substance satisfactory to Secured Party, indicating that such chattel paper
and other contracts are subject to the security interests granted hereby;
(ii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be
necessary or desirable, which Secured Party may reasonably request in order
to perfect and preserve the perfection and priority of the security
interests granted or purported to be granted hereby; (iii) if any
Receivable shall be evidenced by a promissory note or other instrument or
chattel paper (other than checks, which Debtor promptly shall deposit into
one of the deposit accounts encumbered hereunder or markers, received by
Debtor in the ordinary course of business), deliver and pledge to Secured
Party such note or instrument or chattel paper duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in
form and substance reasonably satisfactory to Secured Party; (iv) if any
Collateral is at any time in the possession or control of any warehouseman,
bailee, consignee or any of Debtor's agents or processors, Debtor shall
notify such warehouseman, bailee, consignee, agent or processor of the
security interests created or purported to be created hereby, shall cause
such warehouseman, bailee, consignee, agent or processor to execute any
financing statements or other documents which Secured Party may request,
and, upon the request of Secured Party after the occurrence and during the
continuation of an Event of Default, shall instruct such person to hold all
such Collateral for Secured Party's account subject to Secured Party's
instructions; (v) deliver and pledge to Secured Party all securities and
instruments (other than checks, which Debtor promptly shall deposit into
one of the deposit accounts encumbered hereunder, or markers received by
Debtor in the ordinary course of business) constituting Collateral duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party; and
(vi) at the request of Secured Party following the occurrence of a default
that, with the passage of time would result in an Event of Default, deliver
to Secured Party any and all certificates of title, applications for title
or similar evidence of ownership of all Equipment and shall cause Secured
Party to be named as lienholder on any such certificate of title or other
evidence of ownership; provided, however, that notwithstanding anything to
the contrary in this Agreement, the actions under clauses (iii) and (v)
shall not be required with respect to promissory notes, other instruments,
-8-
<PAGE>
securities and chattel paper with a face or fair market value not to exceed
in the aggregate $250,000;
(e) without the prior written consent of Secured Party or as
otherwise expressly permitted by the Indenture, Debtor will not in any way
encumber, or hypothecate, or create or permit to exist, any lien, security
interest, charge or encumbrance or adverse claim upon or other interest in
the Collateral, except for Permitted Liens, including without limitation
encumbrances permitted by the Indenture and the liens created by this
Security Agreement, and Debtor will defend the Collateral against all
claims and demands of all persons at any time claiming the same or any
interest therein (other than holders of Permitted Liens), except as
expressly provided herein. Debtor will not permit any Lien Notices to exist
or be on file in any public office with respect to all or any portion of
the Collateral except, in each case, for Lien Notices of holders of
Permitted Liens including without limitation encumbrances permitted by the
Indenture or except as may have been filed by or for the benefit of Secured
Party relating to this Security Agreement or related agreements. Debtor
shall promptly notify Secured Party of any attachment or other legal
process levied against any of the Collateral and any information received
by Debtor relative to the Collateral, which may in any material way affect
the value of the Collateral or the rights and remedies of Secured Party in
respect thereto;
(f) without the prior written consent of Secured Party, Debtor will
not sell, transfer, assign (by operation of law or otherwise), exchange or
otherwise dispose of all or any portion of the Collateral or any interest
therein, except as permitted by the Indenture. If the proceeds of any such
prohibited sale are notes, instruments, documents of title, letters of
credit or chattel paper, such proceeds shall be promptly delivered to
Secured Party to be held as Collateral hereunder (with all necessary or
appropriate endorsements) or, if such proceeds are required to be delivered
under the 1996 Indenture to the 1996 Notes Trustee, Debtor shall promptly
provide appropriate notice to the Secured Party or take any such other
actions as are necessary to perfect the Secured Party's security interest
in such proceeds. If the Collateral, or any part thereof or interest
therein, is sold, transferred, assigned, exchanged, or otherwise disposed
of in violation of these provisions, the security interest of Secured Party
shall continue in such Collateral or part thereof notwithstanding such
sale, transfer, assignment, exchange or other disposition, and Debtor will
hold the proceeds thereof in a separate account for Secured Party's
benefit. Debtor will, at Secured Party's request, transfer such proceeds
to Secured Party in kind;
(g) Secured Party is hereby authorized to file one or more financing
statements or fixture filings, and continuations thereof and amendments
thereto, relative to all or any part of the Collateral, without the
signature of Debtor where permitted by law;
(h) Except as expressly permitted by the Indenture, Debtor will pay
and discharge all taxes, assessments and governmental charges or levies
against the Collateral prior to delinquency thereof and will keep the
Collateral free of all unpaid
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<PAGE>
claims and charges (including claims for labor, materials and supplies)
whatsoever;
(i) Debtor will keep and maintain the Collateral in good condition,
working order and repair, ordinary wear and tear excepted, and from time to
time will make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable toward
such end. Debtor will not misuse or abuse the Collateral, or waste or
allow it to deteriorate except for the ordinary wear and tear of its normal
and expected use in Debtor's business in accordance with Debtor's policies
as then in effect (provided that no changes are made to Debtor's policies
--------
as in effect on the date hereof that would be materially adverse to the
interests of the Secured Party), and will comply with all material laws,
statutes and regulations pertaining to the use or ownership of the
Collateral. Debtor will promptly notify Secured Party regarding any loss
or damage to any material portion of the Collateral or portion thereof;
(j) Upon the occurrence and during the continuation of an Event of
Default or a material default which, with the passage of time is reasonably
likely to cause an Event of Default, (i) Debtor will take all actions
directed by Secured Party in Secured Party's sole and absolute discretion,
to create, preserve and enforce any liens or guaranties available to secure
or guaranty payments due Debtor under any contracts or other agreements
with third parties, will not voluntarily permit any such payments to become
more than thirty (30) days delinquent and will in a timely manner record
and assign to Secured Party, to the extent and at the earliest time
permitted by law, any such liens and rights under such guaranties and (ii)
Debtor will give Secured Party written notice of any payments due Debtor
within five (5) days after any such payments become thirty (30) days
delinquent;
(k) Upon Secured Party's request, Debtor will deliver to Secured
Party records and schedules that show the status, condition and location of
the Collateral, including reports reasonably requested by Secured Party,
all in reasonable detail; will promptly notify Secured Party in writing of
any event, or change of law, regulation, business practice, or business
condition that may materially adversely affect the value of the Collateral.
Secured Party shall have the right to review and verify such records,
schedules, and notices, and Debtor will reimburse Secured Party for all
costs incurred thereby;
(l) Except as otherwise provided in this Section 5(l), Debtor shall
continue to collect, at its own expense, all amounts due or to be become
due Debtor under the Receivables. In connection with such collections,
Debtor may take (and upon the occurrence and during the continuation of an
Event of Default, at Secured Party's direction, shall take) such action as
Debtor (or, upon the occurrence and during the continuation of an Event of
Default, Secured Party) may deem necessary or advisable to enforce
collection of the Receivables; provided, however that Debtor shall not
--------
adjust, settle or compromise the amount or payment of any Receivable, or
release wholly or partly any account debtor or obligor thereof, or allow
any credit or discount thereon,
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<PAGE>
other than adjustments, settlements, or discounts that are in accordance
with Debtor's policies as then in effect. Secured Party shall have the
right at any time after the occurrence and during the continuation of an
Event of Default to notify the account debtors or obligors under any of the
Receivables of the assignment of such Receivables to Secured Party and to
direct such account debtors or obligors to make payment of all amounts due
or to become due to Debtor thereunder directly to Secured Party and, upon
such notification and at the expense of Debtor, to enforce collection of
any such Receivables, and to adjust, settle or compromise the amount or
payment thereof, as Secured Party may deem appropriate in its sole
discretion, subject to the Intercreditor Agreement. After the occurrence
and during the continuation of an Event of Default (i) all amounts and
proceeds (including instruments) received by Debtor in respect of the
Receivables shall be received in trust for the benefit of Secured Party
hereunder and, upon notice from Secured Party, shall be segregated from
other funds of Debtor and shall be forthwith paid over to Secured Party in
the same form as so received (with all necessary or appropriate
endorsements) to be held as cash collateral and applied as provided by the
Indenture, subject to the Intercreditor Agreement, and (ii) Debtor shall
not adjust, settle or compromise the amount or payment of any Receivable,
or release wholly or partly any account debtor or obligor thereof, or allow
any credit or discount thereon;
(m) Secured Party shall have the right during regular business hours
and upon prior notice to Debtor to enter into and upon any premises where
any of the Collateral or records with respect thereto are located for the
purpose of inspecting the same, performing any audit, making copies of
records, observing the use of any part of the Collateral, or otherwise
protecting its security interest in the Collateral. Debtor will hold and
preserve all records concerning the Receivables and all originals of all
chattel paper that evidences any Receivables;
(n) Secured Party shall have the right at any time while an Event of
Default exists, but shall not be obligated, to make any payments and do any
other acts Secured Party may deem necessary or desirable to protect its
security interest in the Collateral, including, without limitation, the
right to pay, purchase, contest or compromise any encumbrance, charge or
lien (excluding any Permitted Liens) applicable or purported to be
applicable to any Collateral hereunder, and appear in and defend any action
or proceeding purporting to affect its security interest in and/or the
value of any Collateral, and in exercising any such powers or authority,
the right to pay all expenses incurred in connection therewith, including
reasonable attorneys' fees. Debtor hereby agrees that it shall be bound by
any such payment made or incurred or act taken by Secured Party hereunder
and shall reimburse Secured Party for all payments made and expenses
incurred under this Security Agreement, which amounts shall be secured
under this Security Agreement. Secured Party shall have no obligation to
make any of the foregoing payments or perform any of the foregoing acts;
(o) if Debtor shall become entitled to receive or shall receive any
certificate, instrument, option or rights (other than checks, which Debtor
promptly shall deposit
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<PAGE>
into one of the deposit accounts encumbered hereunder, or markers, received
by Debtor in the ordinary course of business and instruments not required
to be delivered under Section 5(d)), whether as an addition to, in
substitution of, or in exchange for any or all of the Collateral or any
part thereof, or otherwise, Debtor shall accept any such instruments as
Secured Party's agent, shall hold them in trust for Secured Party, and
shall deliver them forthwith to Secured Party or, if required under the
1996 Indenture, to the 1996 Notes Trustee in the exact form received, with
Debtor's endorsement when necessary or appropriate, or accompanied by duly
executed instruments of transfer or assignment in blank or, if requested by
Secured Party, an additional pledge agreement or security agreement
executed and delivered by Debtor, all in form and substance satisfactory to
Secured Party, to be held by Secured Party, subject to the terms hereof, as
additional Collateral to secure the obligations hereunder;
(p) Secured Party is hereby authorized to pay all reasonable costs
and expenses incurred in the exercise or enforcement of its rights
hereunder, including reasonable attorneys' fees, and, while an Event of
Default exists to apply any Collateral or proceeds thereof against such
amounts, and then to credit or use any further proceeds of the Collateral
in accordance herewith;
(q) Secured Party may take any actions permitted hereunder or in
connection with the Collateral by or through agents or employees and shall
be entitled to retain counsel and to act in reliance upon the advice of
counsel concerning all such matters;
(r) Debtor hereby agrees to take all actions necessary to maintain
Secured Party's first prior security interest (subject to Permitted Liens)
in all Marks, Patents and Copyrights (if any), to preserve the value of all
Marks, Patents and Copyrights (if any), to prosecute and defend such Marks,
Patents and Copyrights against infringement, and to provide Secured Party
with notice of any material pertinent information regarding any such
infringement, any material actions with the United States Patent and
Trademark Office and any other information which could have a material
adverse effect on the Marks, Patents and Copyrights; and
(s) This Security Agreement, as applied to Equipment subject to an
FF&E Financing Agreement (as defined below), shall be subordinated to the
liens of any FF&E Financing Agreements (or if required by an FF&E Financing
Agreement, it shall be released) and any future or further advances made
thereunder and to any modifications, renewals or extensions thereof to
which the lien of this Security Agreement attaches, provided, however, that
-------- -------
any such FF&E Financing Agreement shall encumber only that Equipment
specifically subject to the FF&E Financing Agreement. Debtor covenants and
agrees to comply with all of the terms and conditions set forth in any FF&E
Financing Agreement covering Equipment in which Secured Party has taken a
lien hereunder. If, under any FF&E Financing Agreement covering Equipment
in which Secured Party has taken a lien hereunder, Secured Party shall fail
to make any payment of principal of or interest, except where Debtor is
contesting such payment in good faith, then Secured Party may make such
payment of
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<PAGE>
the principal of or interest on the sums secured by such security interest
or may make any payment in order to perform or observe any other term,
covenant, condition or agreement of any such FF&E Financing Agreement on
Debtor's part to be performed or observed and any and all sums so expended
by Secured Party shall be secured by this Security Agreement and shall be
repaid by Debtor upon demand, together with interest thereon at the
interest rate on the Notes from the date of advance. In furtherance of such
subordination or release, as applicable, Secured Party, upon receipt of an
officer's certificate from Debtor certifying that the requirements of this
Section 5(t)) have been satisfied, shall execute, acknowledge and deliver
to Debtor, at Debtor's expense, any and all such evidence and documents
necessary to evidence the subordination or release of this Security
Agreement in accordance with the foregoing provisions of this Section 5(t).
As used herein, "FF&E Financing Agreement" shall mean (A) any financing (i)
as to which the lender holds a security interest in only the assets
purchased, fabricated or leased by such financing for the payment of
principal, interest and other amounts in connection therewith, (ii) which
is permitted by the Indenture to be incurred and (iii) the proceeds of
which are used to acquire, construct or lease the Equipment subject to such
security interest, and (B) any refinancing or renewal of any financing
under clause (A).
6. DEFAULTS AND REMEDIES
---------------------
(a) The occurrence of any "Event of Default" under the Indenture
(subject to the cure rights set forth therein) shall constitute an Event of
Default under this Security Agreement.
(b) Upon the occurrence and continuation of an Event of Default
hereunder, Debtor expressly covenants and agrees that Secured Party may, at
its option, subject to the terms of the Indenture, in addition to other
rights and remedies provided herein or otherwise available to it, without
notice to or demand upon Debtor (except as otherwise required herein),
exercise any one or more of the rights as set forth as follows:
(i) in accordance with the provisions in the Indenture, declare
all advances made by Secured Party to Debtor hereunder, all other
indebtedness owed by Debtor to Secured Party and all Secured
Obligations to be immediately due and payable, whereupon all unpaid
principal and interest on said advances and other indebtedness and
Secured Obligations shall become and be immediately due and payable;
(ii) immediately take possession of any of the Collateral
wherever it may be found or require Debtor to assemble the Collateral
or any part thereof and make it available at one or more places as
Secured Party may designate, and to deliver possession of the
Collateral or any part thereof to Secured Party, who shall have full
right to enter upon any or all of Debtor's places of business,
premises and property to exercise Secured Party's rights hereunder;
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<PAGE>
(iii) exercise any or all of the rights and remedies provided
for by the Nevada Uniform Commercial Code, specifically including,
without limitation, the right to recover the attorneys' fees and other
expenses incurred by Secured Party in the enforcement of this Security
Agreement or in connection with Debtor's redemption of the Collateral.
Secured Party may exercise its rights under this Security Agreement
independently of any other collateral or guaranty that Debtor may have
granted or provided to Secured Party in order to secure payment and
performance of the Secured Obligations, and Secured Party shall be
under no obligation or duty to foreclose or levy upon any other
collateral given by Debtor to secure any Secured Obligation or to
proceed against any guarantor before enforcing its rights under this
Security Agreement;
(iv) use, manage, operate and control the Collateral and
Debtor's business and property to preserve the Collateral or its
value, or to pay the indebtedness secured hereunder, including,
without limitation, the rights to take possession of all of Debtor's
premises and property, to exclude Debtor and any third parties,
whether or not claiming under Debtor, from such premises and property,
to make repairs, replacements, alterations, additions and improvements
to the Collateral and to dispose of all or any portion of the
Collateral in the ordinary course of Debtor's business;
(v) without notice (except as specified below), sell the
Collateral or any part thereof in one or more parcels at one or more
public or private sales, at any of Secured Party's offices or
elsewhere, at such time or times, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as
shall be commercially reasonable. Debtor acknowledges and agrees
that, to the extent notice of sale shall be required by law, at least
ten (10) days' written notice to Debtor of the time and place of any
public sale or of the date on or after which any private sale is to be
made shall constitute reasonable notification. Any public sale shall
be held at such time or times during ordinary business hours and at
such place or places as Secured Party may fix in the notice of such
sale. Notwithstanding the foregoing, Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. Secured Party may, without notice or publication,
adjourn any public or private sale, or cause the same to be adjourned
from time to time by announcement at the time and place fixed for sale
or, with respect to a private sale, after which such sale may take
place, and any such sale may, without further notice, be made at the
time and place to which it was so adjourned or, with respect to a
private sale, after which such sale may take place. Each purchaser at
any such sale shall hold the property sold free from any claim or
right on the part of Debtor, and Debtor hereby waives, to the full
extent permitted by law, all rights of stay and/or appraisal which
Debtor now has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted. Debtor also hereby
waives any claims against Secured Party arising by reason of the fact
that the price at which any Collateral may
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<PAGE>
have been sold at a private sale was less than the price which might
have been obtained at a public sale, even if Secured Party accepts the
first offer received and does not offer such Collateral to more than
one offeree. The parties hereto agree that the notice provisions,
method, manner and terms of any sale, transfer or disposition of any
Collateral in compliance with the terms set forth herein or any other
provision of this Security Agreement are commercially reasonable;
(vi) proceed by an action or actions at law or in equity to
recover the indebtedness secured hereunder or to foreclose this
Security Agreement and sell the Collateral, or any portion thereof,
pursuant to a judgment or decree of a court or courts of competent
jurisdiction in any manner permitted by law, or provided for herein;
(vii) in the event Secured Party recovers possession of all or
any part of the Collateral pursuant to a writ of possession or other
judicial process, whether prejudgment or otherwise, Secured Party may
retain, sell or otherwise dispose of such Collateral in accordance
with this Security Agreement or the Nevada Uniform Commercial Code,
and following such retention, sale or other disposition, Secured Party
may voluntarily dismiss without prejudice the judicial action in which
such writ of possession or other judicial process was issued. Debtor
hereby consents to the voluntary dismissal without prejudice by
Secured Party of such judicial action, and Debtor further consents to
the exoneration of any bond which Secured Party files in such action;
(viii) with respect to the sale of securities constituting
Collateral, to the extent Secured Party deems it advisable to do so,
in its sole discretion or as may be required by applicable law,
restrict the prospective bidders or purchasers to persons who in
Secured Party's sole judgment are sufficiently sophisticated and who
will represent and agree that they are purchasing the securities
constituting Collateral then being sold for their own account and not
with a view to the distribution or resale thereof, and upon
consummation of any such sale, Secured Party shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof
the securities constituting Collateral so sold;
(ix) Secured Party, in its sole discretion, if permitted by
law, may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for and purchase for its account the
whole or any part of the Collateral at any public sale or sale on any
securities exchange or other recognized market;
(x) to the full extent provided by law, have a court having
jurisdiction appoint a receiver, which receiver shall take charge and
possession of and protect, preserve, replace and repair the Collateral
or any part thereof, and manage and operate the same, and receive and
collect all rents, income, receipts, royalties, revenues, issues and
profits therefrom. Debtor shall
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<PAGE>
irrevocably consent and shall be deemed to have hereby irrevocably
consented to the appointment thereof, and upon such appointment,
Debtor shall immediately deliver possession of such Collateral to the
receiver. Debtor also irrevocably consents to the entry of an order
authorizing such receiver to invest upon interest any funds held or
received by the receiver in connection with such receivership. Secured
Party shall be entitled to such appointment as a matter of right, if
it shall so elect, without the giving of notice to any other party and
without regard to the adequacy of the security of the Collateral;
(xi) enforce one or more remedies hereunder, successively or
concurrently, and such action shall not operate to estop or prevent
Secured Party from pursuing any other or further remedy which it may
have hereunder or by law, and any repossession or retaking or sale of
the Collateral pursuant to the terms hereof shall not operate to
release Debtor until full and final payment of any deficiency has been
made in cash. Debtor shall reimburse Secured Party upon demand for,
or Secured Party may apply any proceeds of Collateral to, the costs
and expenses (including attorneys' fees, transfer taxes and any other
charges) incurred by Secured Party in connection with any sale,
disposition, repair, replacement, alteration, addition, improvement or
retention of any Collateral hereunder;
(xii) upon the occurrence of a default hereunder, any cash held
by Secured Party as Collateral and all cash proceeds received by
Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the
discretion of Secured Party, be held by Secured Party as collateral
for and/or then or at any time thereafter applied (including
application to the payment of any costs, expenses, indemnification and
other amounts payable to Secured Party hereunder, which amounts may be
paid in whole or in part prior to the other obligations secured
hereby) in whole or in part by Secured Party against all or any part
of the obligations secured hereby in such order as Secured Party shall
elect. Any surplus of such cash or cash proceeds held by Secured
Party and remaining after payment in full of all the obligations
secured hereby shall be paid over to Debtor or to whomever may be
lawfully entitled to receive such surplus or as a court of competent
jurisdiction may direct, provided, however, that in the event that all
--------
of the conditions to termination of this Security Agreement under
Section 7(l) shall have not been fulfilled, such balance shall be held
as additional Collateral hereunder and applied from time to time to
Secured Party's costs and expenses and as otherwise provided hereunder
until all such conditions shall have been fulfilled; and
(xiii) effect an absolute assignment of all of Debtor's right,
title and interest in and to each Mark (and the goodwill of the
business of Debtor associated therewith), Patent and Copyright.
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<PAGE>
7. MISCELLANEOUS PROVISIONS
------------------------
(a) Notices. All notices, requests, approvals, consents and other
-------
communications required or permitted to be made hereunder shall,
except as otherwise provided, be in writing and may be delivered
personally or sent by telegram, telecopy, facsimile, telex, first
class mail or overnight courier, postage prepaid, to the parties
addressed as follows:
To Debtor: Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
Ph: (702) 365-7111
FAX: (702) 365-7566
With a Copy to:
Barry Lieberman, Esq.
General Counsel
Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Ph: (702) 365-7111
FAX: (702) 365-7566
To Secured Party: Firstar Bank of Minnesota, N.A.
101 East 5th Street
St. Paul, Minnesota 55101
FAX: (612) 229-6415
Atten: Frank Leslie, III
Such notices, requests and other communications sent as provided
hereinabove shall be effective when received by the addressee thereof,
unless sent by registered or certified mail, postage prepaid in which case
they shall be effective exactly three (3) business days after being
deposited in the United States mail. The parties hereto may change their
addresses by giving notice thereof to the other parties hereto in
conformity with this section.
(b) Headings. The various headings in this Security Agreement are
--------
inserted for convenience only and shall not affect the meaning or
interpretation of this Security Agreement or any provision hereof.
(c) Amendments. This Security Agreement or any provision hereof may
----------
be changed, waived, or terminated only by a statement in writing signed by
the party against which such change, waiver or termination is sought to be
enforced, and then
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<PAGE>
any such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
(d) No Waiver. No failure on the part of Secured Party to exercise,
---------
and no delay in exercising, and no course of dealing with respect to, any
power, privilege or right under this Security Agreement or any related
agreement shall operate as a waiver thereof nor shall any single or partial
exercise by Secured Party of any power, privilege or right under this
Security Agreement or any related agreement preclude any other or further
exercise thereof or the exercise of any other power, privilege or right.
The powers, privileges and rights in this Security Agreement are cumulative
and are not exclusive of any other remedies provided by law. No waiver by
Secured Party of any default hereunder shall be effective unless in
writing, nor shall any waiver operate as a waiver of any other default or
of the same default on a future occasion.
(e) Binding Agreement. All rights of Secured Party hereunder shall
-----------------
inure to the benefit of its successors and assigns. Debtor shall not
assign any of its interest under this Security Agreement without the prior
written consent of Secured Party. Any purported assignment inconsistent
with this provision shall, at the option of Secured Party, be null and
void.
(f) Entire Agreement. This Security Agreement, together with any
----------------
other agreement executed in connection herewith, is intended by the parties
as a final expression of their agreement and is intended as a complete and
exclusive statement of the terms and conditions thereof. Acceptance of or
acquiescence in a course of performance rendered under this Security
Agreement shall not be relevant to determine the meaning of this Security
Agreement even though the accepting or acquiescing party had knowledge of
the nature of the performance and opportunity for objection.
(g) Choice of Law. The existence, validity, construction, operation
-------------
and effect of any and all terms and provisions of this Security Agreement
shall be determined in accordance with and governed by the substantive laws
of the State of Nevada, without giving effect to its conflicts of law
principles.
(h) Severability. If any provision or obligation of this Security
------------
Agreement should be found to be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions and obligations or any other agreement executed in connection
herewith, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby and shall nonetheless
remain in full force and effect to the maximum extent permitted by law.
(i) Survival of Provisions. All representations, warranties and
----------------------
covenants of Debtor contained herein shall survive the execution and
delivery of this Security Agreement, and shall terminate only upon the
termination of this Security Agreement pursuant to Subsection 7(k) hereof.
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<PAGE>
(j) Power of Attorney. Debtor hereby irrevocably appoints Secured
-----------------
Party its attorney-in-fact, which appointment is coupled with an interest,
with full authority in the place and stead of Debtor and in the name of
Debtor, Secured Party or otherwise, from time to time in Secured Party's
discretion (a) to execute and file financing and continuation statements
(and amendments thereto and modifications thereof) on behalf and in the
name of Debtor with respect to the security interests granted or purported
to be granted hereby, (b) to take any action and to execute any instrument
which Secured Party may deem necessary or advisable to exercise its rights
under Section 5(p) hereunder, and (c) upon the occurrence and during the
continuance of an Event of Default, to take any action and to execute any
instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Security Agreement, including, without
limitation:
(i) to obtain and adjust insurance required to be paid to
Secured Party pursuant hereto;
(ii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(iii) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses
(i) and (ii) above;
(iv) to sell, convey or otherwise transfer any item of
Collateral to any purchaser thereof; and
(v) to file any claims or take any action or institute any
proceedings which Secured Party may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of Secured Party with respect to any of the Collateral.
(k) Counterparts. This Security Agreement and any amendments,
------------
waivers, consents or supplements may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed
an original, but all of which shall together constitute one and the same
agreement.
(l) Termination of Agreement. Subject to Section 10.1 of the
------------------------
Indenture, this Security Agreement and the security interest hereunder
shall not terminate until full and final payment and performance of all
indebtedness and obligations secured hereunder. At such time, Secured
Party shall reassign and redeliver to Debtor all of the Collateral
hereunder which has not been sold, disposed of, retained or applied by
Secured Party in accordance with the terms hereof, and execute and deliver
to Debtor such documents as Debtor may reasonably request to evidence such
termination. Such reassignment and redelivery shall be without warranty by
or recourse to Secured Party, and shall be at the expense of Debtor;
provided, however, that this Security Agreement (including all
-------- -------
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<PAGE>
representations, warranties and covenants contained herein) shall continue
to be effective or be reinstated, as the case may be, if at any time any
amount received by Secured Party in respect of the indebtedness and
obligations secured hereunder is rescinded or must otherwise be restored or
returned by Secured Party upon or in connection with the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Debtor or any
other person or upon or in connection with the appointment of any
intervenor or conservator of, or trustee or similar official for, Debtor or
any other person or any substantial part of its assets, or otherwise, all
as though such payments had not been made.
(m) Successors and Assigns. This Security Agreement shall inure to
----------------------
the benefit of Secured Party, its successors and assigns, including the
assignees of any Secured Obligation or of the benefit of any Secured
Obligation and shall bind the heirs, executors, administrators, successors
and assigns of Debtor. This Security Agreement is assignable by Secured
Party with respect to all or any portion of the Secured Obligations, and
when so assigned, Debtor shall be liable to the assignees under this
Security Agreement without in any manner affecting the liability of Debtor
hereunder with respect to any of the Secured Obligations retained by
Secured Party. Each reference herein to powers or rights of Secured Party
shall also be deemed a reference to the same power or right of such
assignees, to the extent of the interest assigned to them.
(n) Interaction with Financing Documents.
------------------------------------
(i) Incorporation by Reference. All terms, covenants,
--------------------------
conditions, provisions and requirements of the Indenture are
incorporated by reference in this Security Agreement.
(ii) Conflicts with Indenture. Notwithstanding any other
------------------------
provision of this Security Agreement, the terms and provisions of this
Security Agreement shall be subject and subordinate to the terms of
the Indenture. To the extent that the Indenture provides Debtor with
a particular cure or notice period, or establishes any limitations or
conditions on Secured Party's actions with regard to a particular set
of facts, Debtor shall be entitled to the same cure periods and notice
periods, and Secured Party shall be subject to the same limitations
and conditions in place of the cure periods, notice periods,
limitations and conditions provided for under the Indenture; provided,
---------
however, that such cure periods, notice periods, limitations and
-------
conditions shall not be cumulative as between the Indenture and this
Security Agreement. In the event of any conflict or inconsistency
between the provisions of this Security Agreement and those of the
Indenture, including, without limitation, any conflicts or
inconsistencies in any definitions herein or therein, the-provisions
or definitions of the Indenture shall govern.
(iii) Conflicts with the Deed of Trust. In the event of any
--------------------------------
conflict or
-20-
<PAGE>
inconsistency between the provisions of this Security Agreement (as
they apply to the Collateral) and those of the Deed of Trust (as they
apply to the Collateral), including, without limitation, any conflicts
or inconsistencies in any definitions herein or therein, the
provisions or definitions of this Security Agreement shall govern.
(o) Intercreditor Agreement. Notwithstanding anything herein to the
-----------------------
contrary, all rights and remedies of the Secured Party under this Agreement
are expressly subject to the terms and conditions of the Intercreditor
Agreement.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered by their respective undersigned duly
authorized officers as of the date first above written.
DEBTOR:
COAST HOTELS AND CASINOS, INC.
a Nevada corporation
By: /s/ Harlan D. Braaten
------------------------
Name: Harlan D. Braaten
Title: President & COO
SECURED PARTY:
FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee
By: /s/ Frank Leslie, III
------------------------
Name: Frank Leslie, III
Title: Vice President
-22-
<PAGE>
Exhibit "A"
-----------
DEPOSIT ACCOUNTS
<PAGE>
ANNEX I
-------
A. SCHEDULE OF U.S. TRADEMARKS REGISTRATIONS
None
B. SCHEDULE OF PENDING APPLICATIONS FOR U.S. TRADEMARK REGISTRATIONS ON THE
BASIS OF USE IN COMMERCE UNDER 17 USC (S) 1051(A)
None
C. SCHEDULE OF PENDING APPLICATION FOR U.S. TRADEMARK REGISTRATIONS ON THE
BASIS OF INTENT TO USE THE MARK IN COMMERCE UNDER 17 USC (S) 1051(B)
None
<PAGE>
ANNEX 2
-------
SCHEDULE OF PATENTS AND APPLICATIONS
------------------------------------
None
<PAGE>
ANNEX 3
-------
SCHEDULE OF COPYRIGHTS AND APPLICATIONS
---------------------------------------
<PAGE>
EXHIBIT 10.30
Recording Requested By and recorded
counterparts should be returned to:
Josephine M. Greaves, Esq.
Ropes & Gray
One International Place
Boston, MA 02110-2624
DEED OF TRUST, ASSIGNMENT OF RENTS, LEASES AND SECURITY
AGREEMENT
MADE BY
COAST HOTELS AND CASINOS, INC.
A NEVADA CORPORATION,
AS TRUSTOR,
TO
NATIONAL TITLE COMPANY
A NEVADA CORPORATION,
AS TRUSTEE,
FOR THE BENEFIT OF
FIRSTAR BANK OF MINNESOTA, N.A.
AS BENEFICIARY
******************************************************************************
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND
IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS OF CLARK COUNTY,
NEVADA UNDER THE NAMES OF COAST HOTELS AND CASINOS, INC. AS DEBTOR AND FIRSTAR
BANK OF MINNESOTA, N.A. AS SECURED PARTY.
THIS INSTRUMENT SECURES FUTURE ADVANCES; BUT THE MAXIMUM AMOUNT OF
PRINCIPAL SECURED, FOR PURPOSES OF SECTION 106.360 OF THE NEVADA REVISED
STATUTES, IS $16,800,000.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I COVENANTS OF TRUSTOR......................................................... 15
1.1. Performance of Loan Documents.......................................... 15
1.2. General Representations, Covenants and Warranties...................... 15
1.3. Compliance with Legal Requirements..................................... 16
1.4. Taxes.................................................................. 16
1.5. Insurance.............................................................. 16
1.6. Condemnation........................................................... 19
1.7. Care of Trust Estate................................................... 19
1.8. Space Leases........................................................... 20
1.9. Further Encumbrance.................................................... 21
1.10. Partial Releases of Trust Estate....................................... 22
1.11. Further Assurances..................................................... 23
1.12. Security Agreement and Financing Statements............................ 24
1.13. Assignment of Rents.................................................... 27
1.14. Expenses............................................................... 27
1.15. Beneficiary's Cure of Trustor's Default................................ 28
1.16. Use of Land............................................................ 28
1.17. Compliance with Permitted Lien Agreements.............................. 28
1.18. Defense of Actions..................................................... 29
1.19. Affiliates............................................................. 29
1.20. Title Insurance........................................................ 29
ARTICLE II THE LEASES................................................................... 29
2.1. Status of Leases....................................................... 30
2.2. Performance of Leases.................................................. 30
2.3. Cure by Beneficiary.................................................... 30
2.4. No Merger of Estates................................................... 31
2.5. No Assignment of Leases................................................ 31
2.6. Maintenance of Leases.................................................. 31
2.7. Treatment of the Leases in Bankruptcy.................................. 31
ARTICLE 3 CORPORATE LOAN PROVISIONS...................................................... 32
3.1. Interaction with Indenture............................................. 32
3.2. Other Collateral....................................................... 33
ARTICLE IV DEFAULTS AND REMEDIES........................................................ 33
4.1. Event of Default....................................................... 33
4.2 Accleration of Maturity................................................ 33
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
4.3. Protective Advances.................................................... 34
4.4. Institution of Equity Proceedings...................................... 34
4.5. Beneficiary's Power of Enforcement..................................... 34
4.6. Beneficiary's Right to Enter and Take Possession, Operate and Apply
Income.............................................................. 36
4.7. Leases................................................................. 37
4.8. Purchase by Beneficiary................................................ 38
4.9. Waiver of Appraisement, Valuation, Stay, Extension and Redemption
Laws................................................................ 38
4.10. Receiver............................................................... 38
4.11. Suits to Protect the Trust Estate...................................... 39
4.12. Proofs of Claim........................................................ 39
4.13. Trustor to Pay the Notes on Any Default in Payment; Application of
Monies by Beneficiary............................................... 40
4.14. Delay or Omission; No Waiver........................................... 40
4.15. No Waiver or One Default to Affect Another............................. 40
4.16. Discontinuance of Proceedings; Position of Parties Restored............ 41
4.17. Remedies Cumulative.................................................... 42
4.18. Interest After Event of Default........................................ 43
4.19. Foreclosure; Expenses of Litigation.................................... 43
4.20. Deficiency Judgments................................................... 44
4.21. Waiver of Jury Trial................................................... 44
4.22. Exculpation of Beneficiary............................................. 44
ARTICLE V RIGHTS AND RESPONSIBILITIES OF TRUSTEE; OTHER PROVISIONS
RELATING TO TRUSTEE.......................................................... 45
5.1. Exercise of Remedies by Trustee........................................ 45
5.2. Rights and Privileges of Trustee....................................... 45
5.3. Resignation or Replacement of Trustee.................................. 45
5.4. Authority of Beneficiary............................................... 46
5.5. Effect of Appointment of Successor Trustee............................. 46
5.6. Confirmation of Transfer and Succession................................ 46
5.7. Ratification........................................................... 47
5.8. Exculpation............................................................ 47
5.9. Endorsement and Execution of Documents................................. 47
5.10. Multiple Trustees..................................................... 47
ARTICLE VI MISCELLANEOUS PROVISIONS...................................................... 48
6.1. Heirs, Successors and Assigns Included in Parties...................... 48
6.2. Addresses for Notices, Etc............................................. 50
6.3. Change of Notice Address............................................... 50
6.4. Headings............................................................... 50
6.5. Invalid Provisions to Affect No Others................................. 50
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
6.6. Changes and Priority Over Intervening Liens............................ 50
6.7. Estoppel Certificates.................................................. 51
6.8. Governing Law.......................................................... 51
6.9. Required Notices....................................................... 51
6.10. Reconveyance........................................................... 52
6.11. Attorneys' Fees........................................................ 52
6.12. Late Charges........................................................... 52
6.13. Cost of Accounting..................................................... 52
6.14. Right of Entry......................................................... 52
6.15. Corrections............................................................ 53
6.16. Statute of Limitations................................................. 53
6.17. Subrogation............................................................ 53
6.18. Joint and Several Liability............................................ 53
6.19. Context................................................................ 53
6.20. Time................................................................... 54
6.21. Interpretation......................................................... 54
6.22. Effect of NRS (S) 107.030.............................................. 54
6.23. Amendments............................................................. 54
6.24. No Conflicts........................................................... 54
ARTICLE VII POWER OF ATTORNEY........................................................... 54
7.1. Grant of Power......................................................... 55
7.2. Possession and Completion.............................................. 55
7.3. Plans and Specifications............................................... 55
7.4. Employment of Others................................................... 55
7.5. Security Guards........................................................ 55
7.6. Compromise Claims...................................................... 55
7.7. Legal Proceedings...................................................... 55
7.8. Other Acts............................................................. 55
</TABLE>
SCHEDULE A LAND DESCRIPTION, INCLUDING LEASE DESCRIPTION
SCHEDULE A-1 GOLD COAST LAND DESCRIPTION
SCHEDULE A-2 RANCHO ROAD LAND DESCRIPTION
SCHEDULE A-3 WAREHOUSE LAND DESCRIPTION
SCHEDULE A-4 BARBARY COAST LAND DESCRIPTION
SCHEDULE A-5 PARKING LOT LAND DESCRIPTION
SCHEDULE A-6 ORLEANS LAND DESCRIPTION
DEED OF TRUST, ASSIGNMENT OF RENTS, LEASES AND SECURITY
AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF RENTS, LEASES AND SECURITY
-iii-
<PAGE>
AGREEMENT (hereinafter called "DEED OF TRUST") is made and effective as of
November 21, 1997, by COAST HOTELS AND CASINOS, INC., a Nevada corporation, as
Trustor, whose address is 4500 West Tropicana Avenue, Las Vegas, Nevada 89103 to
NATIONAL TITLE COMPANY, a Nevada corporation, whose address is 714 E. Sahara
Avenue, Las Vegas, Nevada 89104, as Trustee, for the benefit of FIRSTAR BANK OF
MINNESOTA, N.A., a National Association, as trustee under that certain Indenture
dated as of even date herewith among Firstar Bank of Minnesota, N.A., as
trustee, Trustor as issuer, and Coast Resorts, Inc., a Nevada corporation, as
guarantor, whose address is 101 East Fifth Street, St. Paul, Minnesota 5101-1860
("BENEFICIARY").
WHEREAS, Coast Hotels and Casinos, Inc., as trustor, has entered into that
certain Deed of Trust, Assignment of Rents, Leases and Security Agreement dated
as of January 30, 1996 (the "1996 Deed of Trust") with National Title Company,
as trustee, for the benefit of American Bank National Association (the present
successor in interest of which is Firstar Bank of Minnesota, N.A., as trustee
(the "1996 Trustee")) as trustee under that certain Indenture dated as of
January 30, 1996 among the 1996 Trustee, Coast Hotels and Casinos, Inc., as
issuer, and Coast Resorts, Inc., and Coast West, Inc., as guarantors, which 1996
Deed of Trust is recorded as Document No. 00397, Book No. 960130 of the Official
Records, Clark County, Nevada.
WHEREAS, the 1996 Deed of Trust and this Deed of Trust are subject to the
terms and conditions of the Pari Passu Intercreditor Agreement dated as of
---- -----
November 21, 1997 (the "Intercreditor Agreement") among the 1996 Trustee,
Trustor (as herein defined), the Guarantor (as herein defined), Coast West,
Inc., a Nevada corporation and the Trustee (together, the 1996 Trustee and the
Trustee are, the Pari Passu Parties) which sets forth the agreement of the
---- -----
parties thereto as to the nature of the priority of the liens, mortgages,
pledges and security interests held by the Pari Passu Parties in the Pari Passu
---- ----- ---- -----
Collateral (as defined in the Intercreditor Agreement) which includes, among
other things, the Trust Estate, as defined in this Deed of Trust, all as more
particularly defined in the Intercreditor Agreement and certain other matters
related thereto providing equal priority between the 1996 Deed of Trust and this
Deed of Trust recorded herewith.
DEFINITIONS - As used in this Deed of Trust, the following terms have the
meanings hereinafter set forth:
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section 9-
106 (NRS 104.9106) of the UCC for the term "account."
"APPURTENANT RIGHTS" means all and single tenements, hereditaments,
rights, reversions, remainders, development rights, privileges, benefits,
easements (in gross or appurtenant), rights-of-way, gores or strips of
land, streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and all appurtenances whatsoever and claims or demands
of Trustor at law or in equity in any way belonging, benefitting, relating
or appertaining to the Land, the airspace over the Land, the Improvements
or any
<PAGE>
of the Trust Estate encumbered by this Deed of Trust, or which hereinafter
shall in any way belong, relate or be appurtenant thereto, whether now
owned or hereafter acquired by Trustor.
"BANKRUPTCY" means, with respect to any Person, that such Person is or
becomes bankrupt or Insolvent or: (a) is the subject of any order for
relief under any Bankruptcy Law; (b) commences a voluntary proceeding under
any Bankruptcy Law; (c) consents to the entry of an order for relief in an
involuntary proceeding under any Bankruptcy Law; (d) consents to the
appointment of, or taking possession by any Receiver; (e) makes any
assignment for the benefit of creditors; (f) is unable or fails, or admits
in writing its inability, to pay its debts as such debts become due; (g) is
the subject of any involuntary proceeding under any Bankruptcy Law or
involuntary appointment of a Receiver, and such involuntary proceeding or
appointment is not dismissed and terminated within 60 days; (h) is the
subject of any other proceeding or relief similar to any of the foregoing
under any law; (i) is the subject of a warrant of attachment, execution, or
similar process with respect to such Person or any substantial part of such
Person's property, which warrant or similar process remains in effect for
sixty days without having been bonded or discharged; or (j) otherwise
ceases to do business as a going concern.
"BARBARY COAST HOTEL AND CASINO" means the hotel and casino as
currently constructed and located at the intersection of East Flamingo Road
and the Las Vegas Strip, Las Vegas, Nevada.
"BARBARY COAST LEASE" means that certain Lease Agreement dated as of
May 1, 1992 by and between Empey Enterprises and Trustor, as successor in
interest to Barbary Coast Hotel & Casino, covering the real property
described in Schedule A-4. Attached hereto as Exhibit 1 is a Landlord-
Mortgagee Agreement executed by Empey Enterprises in favor of Beneficiary
consenting to this Deed of Trust and granting Beneficiary certain rights
under the Barbary Coast Lease.
"BENEFICIARY" means Firstar Bank of Minnesota, N.A., a National
Association, as trustee under the Indenture and any substitute trustee
designated from time to time under the Indenture.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or a day
on which banking institutions in the State of Nevada or the City of New
York are not required to be open.
"DEED OF TRUST" means this Deed of Trust as it may be amended,
increased or modified from time to time.
"ENVIRONMENTAL LAWS" means any and all laws and Legal Requirements
relating to environmental matters, pollution, or hazardous substances,
including: the
-2-
<PAGE>
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. (S)(S) 1801 et seq.); the Nevada Hazardous Materials Act
(NRS Chapter 459); and other Laws that may form the basis of any claim,
action, demand, suit, proceeding, hearing, or notice of violation that is
based on or related to the generation, manufacture, processing,
distribution, use, existence, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release, or threatened release into
the environment, of any hazardous substance, or other threat to the
environment.
"EVENT OF DEFAULT" has the meaning set forth in Section 4.1 hereof.
"EXCLUDED ASSETS" means (i) any equipment subject to Liens in
existence as of the date of the 1996 Indenture (as defined in the
Indenture) securing Existing Indebtedness (as defined in the Indenture);
(ii) any agreement with a third party that, pursuant to its terms,
prohibits the grant of a lien on such agreement; provided that the Trustor
shall use its best efforts to obtain such third party's consent to
assignment of all material agreements: (iii) Gaming Licenses (as defined in
the Indenture) or any other governmental approval or permit, to the extent
that, under the terms and conditions of such approval or under applicable
law, cannot be subjected to a Lien in favor of the Beneficiary without the
approval of the relevant governmental authority, to the extent that such
approval has not been obtained: (iv) the Designated Assets (as defined in
the 1996 Indenture) and the Rancho Road Property (as defined in the 1996
Indenture), after the release of any such assets from the Lien securing the
obligations under the Indenture and the Notes; and (v) any FF&E (A) the
purchase of which was not financed with the proceeds of the Notes, (B) that
Trustor is permitted to encumber and has encumbered pursuant to clause (ii)
of the second paragraph of Section 4.9 of the Indenture and (C) in which
Beneficiary is prohibited from maintaining a security interest pursuant to
the terms of the FF&E Financing Agreement (as defined herein) encumbering
such FF&E.
"FEE LAND" means the real property situated in the County of Clark,
State of Nevada, more specifically described in Schedules A-1, A-2 and A-3
attached hereto and incorporated herein by reference, including any after
acquired title thereto.
"FF&E" means all furniture, fixtures, equipment, gaming equipment,
appurtenances and personal property now or in the future contained in, used
in connection with, attached to, or otherwise useful or convenient to the
use, operation, or occupancy of, or placed on, but unattached to, any part
of the Land or Improvements whether or not the same constitutes real
property or fixtures in the State of Nevada, including all removable window
and floor coverings, all furniture and furnishings, heating, lighting,
plumbing, ventilating, air conditioning, refrigerating, incinerating and
elevator and escalator plants, cooking facilities, vacuum cleaning systems,
public address and communications systems, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, motors, machinery,
pipes, appliances, equipment, fittings, fixtures, and building materials,
together with all venetian blinds, shades, draperies,
-3-
<PAGE>
drapery and curtain rods, brackets, bulbs, cleaning apparatus, mirrors,
lamps, ornaments, cooling apparatus and equipment, ranges and ovens,
garbage disposals, dishwashers, mantels, and any and all such property
which is at any time installed in, affixed to or placed upon the Land or
Improvements.
"FF&E FINANCING AGREEMENT" shall have the meaning ascribed to that
term in Section 1.9(d) hereof.
"GOLD COAST HOTEL AND CASINO" means the hotel and casino as currently
constructed and located at 4000 West Flamingo Road, Las Vegas, Nevada.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office, public entity, or instrumentality of any
nature whatsoever of the United States federal or foreign government, any
state, province or any city or other political subdivision or otherwise,
whether now or hereafter in existence, or any officer or official thereof,
including, without limitation, any Gaming Authority.
"GUARANTOR(S)" means each of (i) Coast Resorts, Inc., and (ii) any
other Affiliate of Trustor that now or hereafter is obligated under a Note
Guarantee.
"IMPOSITION" means any taxes, assessments, water rates, sewer rates,
maintenance charges, other governmental impositions and other charges now
or hereafter levied or assessed or imposed against the Trust Estate or any
part thereof.
"IMPROVEMENTS" means (1) all the buildings, structures, facilities and
improvements of every nature whatsoever now or hereafter situated on the
Land or any real property encumbered hereby, and (2) all fixtures,
machinery, appliances, goods, building or other materials, equipment,
including without limitation all gaming equipment and devices, and all
machinery, equipment, engines, appliances and fixtures for generating or
distributing air, water, heat, electricity, light, fuel or refrigeration,
or for ventilating or sanitary purposes, or for the exclusion of vermin or
insects, fuel or refrigeration, or for ventilating or sanitary purposes, or
for the exclusion of vermin or insects, or for the removal of dust, refuse
or garbage; all wall-beds, wall-safes, built-in furniture and
installations, shelving, lockers, partitions, doorstops, vaults, motors,
elevators, dumb-waiters, awnings, window shades, venetian blinds, light
fixtures, fire hoses and brackets and boxes for the same, fire sprinklers,
alarm, surveillance and security systems, computers, drapes, drapery rods
and brackets, mirrors, mantels, screens, linoleum, carpets and carpeting,
plumbing, bathtubs, sinks, basins, pipes, faucets, water closets, laundry
equipment, washers, dryers, ice-boxes and heating units; all kitchen and
restaurant equipment, including but not limited to silverware, dishes,
menus, cooking utensils, stoves, refrigerators, ovens, ranges, dishwashers,
disposals, water heaters, incinerators, furniture, fixtures and
furnishings, communication systems, and equipment; all cocktail lounge
supplies, including but not limited to bars, glassware, bottles and
-4-
<PAGE>
tables used in connection with the Land; all chaise lounges, hot tubs,
swimming pool heaters and equipment and all other recreational equipment
(computerized and otherwise), beauty and barber equipment, and maintenance
supplies used in connection with the Land; all amusement rides and
attractions attached to the Land, all specifically designed installations
and furnishings, and all furniture, furnishings and personal property of
every nature whatsoever now or hereafter owned or leased by Trustor or in
which Trustor has any rights or interest and located in or on, or attached
to, or used or intended to be used or which are now or may hereafter be
appropriated for use on or in connection with the operation of the Land or
any real or personal property encumbered hereby or any other Improvements,
or in connection with any construction being conducted or which may be
conducted thereon, and all extensions, additions, accessions, improvements,
betterments, renewals, substitutions, and replacements to any of the
foregoing, and all of the right, title and interest of Trustor in and to
any such property, which, to the fullest extent permitted by law, shall be
conclusively deemed fixtures and improvements and a part of the real
property hereby encumbered.
"INDENTURE" means that certain Indenture, dated as of November 21,
1997, by and among Beneficiary, as trustee, Trustor, as issuer, and
Guarantor, as such Indenture is amended or supplemented from time to time
in accordance with the terms thereof.
"INSOLVENT" means with respect to any person or entity, that such
person or entity shall be deemed to be insolvent if he or it is unable to
pay his or its debts as they became due and/or if the fair market value of
his or its assets does not exceed his or its aggregate liabilities.
"INTANGIBLE COLLATERAL" means (a) the rights to use all names and all
derivations thereof now or hereafter used by in connection with the Land or
Improvements, including, without limitation, the names "Orleans Hotel,"
"Barbary Coast" and "Gold Coast" in the State of Nevada, including any
variations thereon, together with the goodwill associated therewith, and
all names, logos, and designs used by Trustor, or in connection with the
Land or in which Trustor has rights, with the exclusive right to use such
names, logos and designs wherever they are now or hereafter used in
connection with the Resorts, and any and all other trade names, trademarks
or service marks, whether or not registered, now or hereafter used in the
operation of the Resorts, including, without limitation, any interest as a
lessee, licensee or franchisee, and, in each case, together with the
goodwill associated therewith; (b) subject to the absolute assignment
contained herein, the Rents; (c) all securities of Trustor's subsidiaries,
whether now in existence of hereafter incorporated or formed; (d) any and
all books, records, customer lists, concession agreements, supply or
service contracts, licenses, permits, governmental approvals (to the extent
such licenses, permits and approvals may be pledged under applicable law),
signs, goodwill, casino and hotel credit and charge records, supplier
lists, checking accounts, safe deposit boxes (excluding the contents of
such deposit boxes owned by persons other than Trustor and its
subsidiaries), cash, instruments, chattel
-5-
<PAGE>
papers, including inter-company notes and pledges, documents, unearned
premiums, deposits, refunds, including but not limited to income tax
refunds, prepaid expenses, rebates, tax and insurance escrow and impound
accounts, if any, actions and rights in action, and all other claims,
including without limitation condemnation awards and insurance proceeds,
and all other contract rights and general intangibles resulting from or
used in connection with the operation of the Trust Estate and in which
Trustor now or hereafter has rights; (e) all of Trustor's documents,
instruments, contract rights, and general intangibles including, without
limitation, all permits, licenses, franchises and agreements required for
the use, occupancy or operation of any Improvements (to the extent such
licenses, permits and approvals are not prohibited from being pledged under
applicable law); (f) general intangibles, vacation license resort
agreements or other time share license or right to use agreements,
including without limitation all rents, issues, profits, income and
maintenance fees resulting therefrom, whether any of the foregoing is now
owned or hereafter acquired; and (g) any and all markers.
"LAND" means the Fee Land and the Leased Land.
"LEASED LAND" means the real property situated in the County of Clark,
State of Nevada, more specifically described in Schedules A-4, A-5 and A-6
attached hereto and incorporated herein by reference including any after
acquired title thereto.
"LEASES" means the Orleans Lease, the Barbary Coast Lease and the
Parking Lot Lease and all other lease(s) or sublease(s) with respect to the
Land as such (sub) lease(s) may be amended, restated, renewed, modified,
supplemented, or extended from time to time in the future in compliance
with this Deed of Trust, including any options to purchase, extend or renew
provided for in such (sub) lease(s).
"LEGAL REQUIREMENTS" means all applicable restrictive covenants,
applicable zoning and subdivision ordinances and building codes, all
applicable health and Environmental Laws and regulations, all applicable
gaming laws and regulations, and all other applicable laws, ordinances,
rules, regulations, judicial decisions, administrative orders, and other
requirements of any Governmental Authority having jurisdiction over
Trustor, the Trust Estate and/or any Affiliate of Trustor, in effect either
at the time of execution of this Deed of Trust or at any time during the
term hereof, including, without limitation, all Environmental Laws and
Gaming Control Acts.
"LOAN DOCUMENTS" means the Indenture, the Notes, that certain Purchase
Agreement, dated as of November 21, 1997, among the Company, the Guarantor
and the Purchasers (as defined therein), that certain Security Agreement,
dated as of November 21, 1997, by and between Trustor and Beneficiary, that
certain Stock Pledge Agreement, dated as of November 21, 1997, by and
between Coast Resorts, Inc. and Beneficiary, that certain Unsecured
Indemnity Agreement, dated as of November 21, 1997, by and between Trustor
and Beneficiary and any other documents evidencing, guaranteeing or
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securing the Obligations of Trustor under such documents.
"NOTEHOLDERS" means the holders of the Notes.
"NOTES" means Trustor's $16,800,000 10 7/8% First Mortgage Notes due
2001, issued pursuant to the Indenture.
"NRS" means the Nevada Revised Statutes as in effect from time to
time.
"OBLIGATIONS" means the payment and performance of each covenant and
agreement of Trustor contained in this Deed of Trust and the Loan
Documents.
"ORLEANS HOTEL AND CASINO" means the resort constructed in Las Vegas,
Nevada, but excluding (i) any obsolete personal property or real property
improvements determined by Trustor's Board of Directors to be no longer
useful or necessary to the operations or support of the Orleans Hotel and
Casino and (ii) any equipment leased from a third party in the ordinary
course of business.
"ORLEANS LEASE" means that certain Lease, dated as of October 1, 1995,
by and between The Tiberti Company and Trustor, covering the real property
described in Schedule A-6. Attached hereto as Exhibit 2 is a Landlord-
Mortgagee Agreement executed by The Tiberti Company in favor of Beneficiary
consenting to this Deed of Trust and granting Beneficiary certain rights
under the Orleans Lease.
"PARKING LOT LEASE" means that certain Lease, dated as of November 1,
1995, by and between Nevada Power Company and Trustor, as successor in
interest to Barbary Coast Hotel and Casino, covering the real property
described in Schedule A-5. Attached hereto as Exhibit 3 is a Landlord-
Mortgagee Agreement executed by Nevada Power Company in favor of
Beneficiary consenting to this Deed of Trust and granting Beneficiary
certain rights under the Parking Lot Lease.
"PERMITTED DISPOSITIONS" means the sale, transfer, lease or other
disposition of assets in the Trust Estate, in the ordinary course of
business, of inventory held in the ordinary course of business and other
sales, transfers, lease or other dispositions of assets in the Trust
Estate; provided that all provisions of the Indenture are complied with,
--------
including Section 4.10.
"PERSONAL PROPERTY" has the meaning set forth in Section 1.12.
"PROCEEDS" has the meaning assigned to it under the UCC and, in any
event, shall include but not be limited to (i) any and all proceeds of any
insurance (including without limitation property casualty and title
insurance), indemnity, warranty or guaranty payable from time to time with
respect to any of the Trust Estate; (ii) any and all proceeds in the
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form of accounts, security deposits, tax escrows (if any), down payments
(to the extent the same may be pledged under applicable law), collections,
contract rights, documents, instruments, chattel paper, liens and security
instruments, guarantees or general intangibles relating in whole or in part
to the Resorts and all rights and remedies of whatever kind or nature
Trustor may hold or acquire for the purpose of securing or enforcing any
obligation due Trustor thereunder; (iii) any and all payments in any form
whatsoever made or due and payable from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or
any part of the Trust Estate by any Governmental Authority; (iv) subject to
the absolute assignment contained herein, the Rents or other benefits
arising out of, in connection with or pursuant to any Space Lease of the
Trust Estate; and (v) any and all other amounts from time to time paid or
payable in connection with any of the Trust Estate; provided, however, that
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Trustor is not authorized to dispose of any of the Trust Estate unless such
disposition is a Permitted Disposition.
"RECEIVER" means, with respect to any Person (including Trustor), any
receiver, trustee, custodian, debtor in possession, liquidator,
sequestrator, administrator, conservator, or other successor appointed
(whether by a court or otherwise) pursuant to any creditor's exercise of
remedies against such Person, or pursuant to a Bankruptcy of such Person,
or for purposes of reorganization or liquidation, or otherwise for the
benefit of such Person's creditors, or under any similar circumstances, or
otherwise having similar powers over such Person or its property, whether
such Receiver acts on an interim, temporary, or final basis and whether
such appointment applies to all or any significant portion of such Person's
assets or property, including or not including any of the Trust Estate.
"RESORTS" means the Orleans Hotel and Casino, the Barbary Coast Hotel
and Casino, the Gold Coast Hotel and Casino and any hotel, casino or resort
constructed on the Land in the future.
"RENTS" means all rents, room revenues, income, receipts, issues,
profits, revenues and maintenance fees, room, food and beverage revenues,
license and concession fees, income, proceeds and other benefits to which
Trustor may now or hereafter be entitled from the Land, the Improvements,
the Space Leases or any property encumbered hereby or any business or other
activity conducted by Trustor at the Land or the Improvements.
"SPACE LEASES" means any and all leases, subleases, lettings,
licenses, concessions, operating agreements, management agreements, and all
other agreements affecting the Trust Estate that Trustor has entered into,
taken by assignment, taken subject to, or assumed, or has otherwise become
bound by, now or in the future, that give any person the right to conduct
its business on, or otherwise use, operate or occupy, all or any portion of
the Land or Improvements and any leases, agreements or arrangements
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permitting anyone to enter upon or use any of the Trust Estate to extract
or remove natural resources of any kind, together with all amendments,
extensions, and renewals of the foregoing entered into in compliance with
this Deed of Trust, together with all rental, occupancy, service,
maintenance or any other similar agreements pertaining to use or occupation
of, or the rendering of services at the Land, the Improvements or any part
thereof.
"SPACE LESSEE(S)" means any and all tenants, licensees, or other
grantees of the Space Leases and any and all guarantors, sureties,
endorsers or others having primary or secondary liability with respect to
such Space Lease.
"TANGIBLE COLLATERAL" means all personal property, goods, equipment,
supplies, building and other materials of every nature whatsoever and all
other tangible personal property constituting a part or portion of the
Resorts and/or used in the operation of the hotels, casinos, restaurants,
stores, parking facilities and all other commercial operations on the Land
or Improvements, including but not limited to communication systems, visual
and electronic surveillance systems and transportation systems and not
constituting a part of the real property subject to the real property lien
of this Deed of Trust and including all property and materials stored
therein in which Trustor has an interest and all tools, utensils, food and
beverage, liquor, uniforms, linens, housekeeping and maintenance supplies,
vehicles, fuel, advertising and promotional material, blueprints, surveys,
plans and other documents relating to the Land or Improvements, and all
construction materials and all furnishings, fixtures and equipment,
including, but not limited to, all gaming equipment and devices which are
or are to be installed and used in connection with the operation of the
Resorts, those items of furniture, fixtures and equipment which are to be
purchased or leased by Trustor, machinery and any other item of person
property in which Trustor now or hereafter own or acquire an interest or
right, and which are used or useful in the construction, operation, use and
occupancy of the Resorts; to the extent permitted by the applicable
contract or applicable law, all gaming and financial equipment, computer
equipment, calculators, adding machines, gaming tables, video game and slot
machines, and any other electronic equipment of every nature used or
located on any part of the Land or Improvements, and all present and future
right, title and interest of Trustor in and to any casino operator's
agreement, license agreement or sublease agreement used in connection with
the Land or Improvements; provided, however, that Tangible Collateral does
not include Excluded Assets.
"TITLE INSURER" means Stewart Title Guaranty Company.
"TRUST ESTATE" means all of the property described in Granting Clauses
(A) through (Q) below, inclusive, and each item of property therein
described, provided, however, that such term shall not include the property
described in Granting Clause (R) below.
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<PAGE>
"TRUSTEE" means National Title Company, a Nevada corporation, or any
successor thereto appointed in accordance with this Deed of Trust.
"TRUSTOR" means Coast Hotels and Casinos, Inc., a Nevada corporation,
and includes not only the original Trustor hereunder, but also any
successors or assigns of the Trust Estate, or any part thereof, at any time
and from time to time, as the case requires.
"UCC" means the Uniform Commercial Code in effect in the State of
Nevada from time to time, NRS chapters 104 and 104A.
The following terms shall have the meaning assigned to such terms in the
Indenture:
AFFILIATE
BANKRUPTCY LAW
CASH EQUIVALENTS
EVENT OF LOSS
GAMING AUTHORITY
GAMING LAWS
GAMING LICENSE
HOLDER
INTERCREDITOR AGREEMENT
LIEN
PERMITTED LIENS
PERSON
In addition, any capitalized terms used in this Deed of Trust which are not
otherwise defined herein shall have the meaning ascribed to such terms in the
Indenture.
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<PAGE>
W I T N E S S E T H:
-------------------
IN CONSIDERATION OF TEN DOLLARS AND OTHER GOOD AND VALUABLE CONSIDERATION;
THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, AND FOR THE
PURPOSE OF SECURING in favor of Beneficiary (1) the due and punctual payment of
the indebtedness evidenced by the Notes; (2) the performance of each covenant
and agreement of Trustor contained in the Indenture, herein or in the other Loan
Documents; (3) the payment of all such additional loans or advanced as hereafter
may be made by Beneficiary to Trustor or its successors or assigns when
evidenced by a promissory note or notes reciting that they are secured by this
Deed of Trust; provided, however, that any and all future advances by
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Beneficiary to Trustor made for the improvement, protection or preservation of
the Trust Estate, together with interest at the interest rate on the Notes,
shall be automatically secured hereby unless such a note or instrument
evidencing such advances specifically recites that it is not intended to be
secured hereby and (4) the payment of all sums expended or advanced by
Beneficiary under or pursuant to the terms hereof or to protect the security
hereof, together with interest thereon as herein provided, Trustor, in
consideration of the premises, and for the purposes aforesaid, does hereby
ASSIGN, BARGAIN, CONVEY, PLEDGE, RELEASE, HYPOTHECATE, WARRANT, AND TRANSFER
UNTO TRUSTEE IN TRUST FOR THE BENEFIT OF BENEFICIARY AND THE NOTEHOLDERS each of
the following:
(A) The Fee Land and all that certain leasehold estate and interest
of Trustor in and to the Leased Land, together with any and all other,
further or additional, title, estates, interests or rights which may at any
time be acquired by Trustor in or to the Land demised by the Leases and
Trustor expressly agrees that if Trustor shall, at any time prior to
payment in full of all indebtedness secured hereby, acquire fee title to or
any other greater interest in the Land, the lien of this Deed of Trust
shall attach, extend to, cover and be a lien upon such fee simple title or
other greater estate involving real property;
(B) TOGETHER WITH the Improvements;
(C) TOGETHER WITH all Appurtenant Rights;
(D) TOGETHER WITH the Tangible Collateral;
(E) TOGETHER WITH the Intangible Collateral;
(F) TOGETHER WITH (i) all the estate, right, title and interest of
Trustor of, in and to all judgments and decrees, insurance proceeds, awards
of damages and settlements hereafter made resulting from condemnation
proceedings or the taking of any of the property described in Granting
Clauses (A), (B), (C), (D) and (E) hereof or any part thereof under the
power of eminent domain, or for any damage (whether caused by such taking
or otherwise) to the property described in Granting Clauses (A), (B), (C),
(D) and (E) hereof or any part thereof, or to any Appurtenant Rights
thereto, and Beneficiary is
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<PAGE>
hereby authorized to collect and receive said awards and proceeds and to
give proper receipts and acquittance therefor, and (subject to the terms
hereof) to apply the same toward the payment of the indebtedness and other
sums secured hereby, notwithstanding the fact that the amount owing thereon
may not then be due and payable; (ii) all proceeds of any sales or other
dispositions of the property or rights described in Granting Clauses (A),
(B), (C), (D) and (E) hereof or any part thereof whether voluntary or
involuntary, provided, however, that the foregoing shall not be deemed to
permit such sales, transfers, or other dispositions except as specifically
permitted herein; and (iii) whether arising from any voluntary or
involuntary disposition of the property described in Granting Clauses (A),
(B), (C), (D) and (E), all Proceeds, products, replacements, additions,
substitutions, renewals and accessions, remainders, reversions and after-
acquired interest in, of and to such property;
(G) TOGETHER WITH the absolute assignment of any Space Leases or any
part thereof that Trustor has entered into, taken by assignment, taken
subject to, or assumed, or has otherwise become bound by, now or in the
future, together with all of the following (including all "Cash Collateral"
within the meaning of the Bankruptcy Law) arising from the Space Leases:
(a) Rents (subject, however, to the aforesaid absolute assignment to
Beneficiary and the conditional permission hereinbelow given to Trustor to
collect the Rents), (b) all guarantees, letters of credit, security
deposits, collateral, cash deposits, and other credit enhancement
documents, arrangements and other measures with respect to the Space
Leases, (c) all of Trustor's right, title, and interest under the Space
Leases, including the following: (i) the right to receive and collect the
Rents from the lessee, sublessee or licensee, or their Successor(s), under
any Space Leases(s) and (ii) the right to enforce against any tenants
thereunder and otherwise any and all remedies under the Space Leases,
including Trustor's right to evict from possession any tenant thereunder or
to retain, apply, use, draw upon, pursue, enforce or realize upon any
guaranty of any Space Lease; to personal property subject to the Space
Leases; and to enforce or exercise, weather at law or in equity or by any
other means, all provisions of the Space Leases and all obligations of the
tenants thereunder based upon (A) any breach of such tenant under the
applicable Space Lease (including any claim that Trustor may have by reason
of a termination, rejection, or disaffirmance of such Space Lease pursuant
to any Bankruptcy Law) and (B) the use and occupancy of the premises
demised, whether or not pursuant to the applicable Space Lease (including
any claim for use and occupancy arising under landlord-tenant law of the
State of Nevada or any Bankruptcy Law). Permission is hereby given to
Trustor, so long as no Event of Default has occurred and is continuing
hereunder, to collect and use the Rents, as they become due and payable,
but not in advance thereof. Upon the occurrence of an Event of Default,
the permission hereby given to Trustor to collect the Rents shall
automatically terminate, but such permission shall be reinstated upon a
cure of such Event of Default. Beneficiary shall have the right, at any
time and from time to time, to notify any Space Lessee of the rights of
Beneficiary as provided by this section;
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Notwithstanding anything to the contrary contained herein, the
foregoing provisions of this Paragraph (G) shall not constitute an
assignment for purposes of security but shall constitute an absolute and
present assignment of the Rents to Beneficiary, subject, however, to the
conditional license given to Trustor to collect and use the Rents as
hereinabove provided; and the existence or exercise of such right of
Trustor shall not operate to subordinate this assignment to any subsequent
assignment, in whole or in part, by Trustor;
(H) TOGETHER WITH all of Trustor's right, title and interest in and
to any and all maps, plans, specifications, surveys, studies, tests,
reports, data and drawings relating to the development of the Land or the
Orleans Hotel and Casino and the construction of the Improvements,
including, without limitation, all marketing plans, feasibility studies,
soils tests, design contracts and all contracts and agreements of Trustor
relating thereto including, without limitation, architectural, structural,
mechanical and engineering plans and specifications, studies, data and
drawings prepared for or relating to the development of the Land or the
Orleans Hotel and Casino or the construction, renovation or restoration of
any of the Improvements or the extraction of minerals, sand, gravel or
other valuable substances from the Land and purchase contracts or any
agreement granting Trustor a right to acquire any land situated within the
County of Clark, State of Nevada;
(I) TOGETHER WITH, to the extent permitted by applicable law, all of
Trustor's right, title, and interest in and to any and all licenses,
permits, variances, special permits, franchises, certificates, rulings,
certifications, validations, exemptions, filings, registrations,
authorizations, consents, approvals, waivers, orders, rights and agreements
(including, without limitation, options, option rights and contract rights)
now or hereafter obtained by Trustor from any Governmental Authority having
or claiming jurisdiction over the Land, the FF&E, the Resorts, or any other
element of the Trust Estate or providing access thereto, or the operation
of any business on, at, or from the Land;
(J) TOGETHER WITH all water stock, water permits and other water
rights relating to the Land;
(K) TOGETHER WITH all oil and gas and other mineral rights, if any,
in or pertaining to the Land and all royalty, leasehold and other rights of
Trustor pertaining thereto;
(L) TOGETHER WITH any and all monies and other property, real or
personal, which may from time to time be subjected to the lien hereof by
Trustor or by anyone on its behalf or with its consent, or which may come
into the possession or be subject to the control of Trustee or Beneficiary
pursuant to this Deed of Trust or any Loan Document, including, without
limitation, any protection advances under this Deed of Trust (provided that
the maximum amount of principal secured does not exceed the amount set
forth on
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the first page of this Deed of Trust); and all of Trustor's right, title,
and interest in and to all extensions, improvements, betterments, renewals,
substitutes for and replacements of, and all additions, accessions, and
appurtenances to, any of the foregoing that Trustor may subsequently
acquire or obtain by any means, or construct, assemble, or otherwise place
on any of the Trust Estate, and all conversions of any of the foregoing; it
being the intention of Trustor that all property hereafter acquired by
Trustor and required by any Loan Document or this Deed of Trust to be
subject to the lien of this Deed of Trust or intended so to be shall
forthwith upon the acquisition thereof by Trustor be subject to the lien of
this Deed of Trust as if such property were now owned by Trustor and were
specifically described in this Deed of Trust and granted hereby or pursuant
hereto, and Trustee and Beneficiary are hereby authorized, subject to
Gaming Laws, to receive any and all such property as and for additional
security for the obligations secured or intended to be secured hereby.
Trustor agrees to take any action as may reasonably be necessary to
evidence and perfect such liens or security interests, including, without
limitation, the execution of any documents necessary to evidence and
perfect such liens or security interests;
(M) TOGETHER WITH any and all Accounts Receivable and all royalties,
earnings, income, proceeds, products, rents, revenues, reversions,
remainders, issues, profits, avails, production payments, and other
benefits directly or indirectly derived or otherwise arising from any of
the foregoing, all of which are hereby assigned to Beneficiary, who, except
as otherwise expressly provided in this Deed of Trust, is authorized to
collect and receive the same, to give receipts and acquittances therefor
and to apply the same to the Obligations secured hereunder, whether or not
then due and payable;
(N) TOGETHER WITH Proceeds of the foregoing property described in
Granting Clauses (A) through (M);
(O) TOGETHER WITH (i) Trustor's rights further to assign, sell,
lease, encumber or otherwise transfer or dispose of the property described
in Granting Clauses (A) through (N) inclusive, above, for debt or
otherwise, except to the extent expressly reserved by Trustor pursuant to
Section 4.10 of the Indenture, or to evidence or secure a Permitted Lien or
Permitted Disposition;
(P) TOGETHER WITH all credits, deposits, options, privileges and
rights of Trustor, as lessee under any Leases; and
(Q) EXPRESSLY EXCLUDING, HOWEVER, the Excluded Assets and FF&E (to
the extent that (i) the purchase of such FF&E was not financed with the
proceeds of the Notes and (ii) Trustor is permitted to enter into a FF&E
Financing Agreement for such FF&E under clause (ii) of the second paragraph
of Section 4.9 of the Indenture and (iii) such FF&E Financing Agreement
prohibits Beneficiary from maintaining a security
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interest in the FF&E covered thereby).
Trustor, for itself and its successors and assigns, covenants and
agrees to and with Trustee that, at the time or times of the execution of
and delivery of these presents or any instrument of further assurance with
respect thereto, Trustor has good right, full power and lawful authority to
assign, grant, convey, warrant, transfer, bargain or sell its interests in
the Trust Estate in the manner and form as aforesaid, and that the Trust
Estate is free and clear of all liens and encumbrances whatsoever, except
the Permitted Liens, and Trustor shall warrant and forever defend the Trust
Estate in the quiet and peaceable possession of Trustee and its successors
and assigns against all and every person or persons lawfully or otherwise
claiming or to claim the whole or any part thereof, except for the
Permitted Liens. Trustor agrees that any greater title to the Trust Estate
hereafter acquired by Trustor during the term hereof shall be automatically
subject hereto.
ARTICLE I
COVENANTS OF TRUSTOR
--------------------
The purchasers of the Notes have been induced to purchase the Notes on the
basis of the following material covenants, all agreed to by Trustor:
I.1. PERFORMANCE OF LOAN DOCUMENTS.
-----------------------------
Trustor shall perform, observe and comply with each and every
provision hereof, and with each and every provision contained in the Loan
Documents and shall promptly pay to Beneficiary, when payment shall become
due, the principal with interest thereon and all other sums required to be
paid by Trustor under this Deed of Trust and the Loan Documents.
I.2. GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES.
--------------------------------------------------
Trustor represents, covenants and warrants that: (A) Trustor has good
and marketable title to an indefeasible fee estate in the Fee Land and good
and marketable title to an indefeasible leasehold estate in the Leased
Land, free and clear of all encumbrances except Permitted Liens, and that
it has the right to hold, occupy and enjoy its interest in the Trust
Estate, and has good right, full power and lawful authority to subject the
Trust Estate to the Lien of this Deed of Trust and pledge the same as
provided herein and Beneficiary may at all times peaceably and quietly
enter upon, hold, occupy and enjoy the entire Trust Estate in accordance
with the terms hereof; (b) neither Trustor nor any Affiliate of Trustor is
Insolvent and no bankruptcy or insolvency proceedings are pending or
contemplated by or, to the best of Trustor's knowledge, against Trustor or
any Affiliate of Trustor; (c) all costs arising from construction of any
Improvements, the performance of any labor and the purchase of all Tangible
Collateral and Improvements
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have been or shall be paid when due; (d) the Land has frontage on, and
direct access for ingress and egress to dedicated street(s), either
directly or through an easement; (e) Trustor shall at all times conduct and
operate the Trust Estate in a manner so as not to lose the right to conduct
gaming activities at the Resorts; (f) no material part of the Trust Estate
has been damaged, destroyed, condemned or abandoned, other than those
portions of the Trust Estate that have been the subject of condemnation
proceedings that have resulted in the conveyance of such portion of the
Trust Estate to Trustor; (g) no part of the Trust Estate is the subject of
condemnation proceedings, and Trustor has no knowledge of any contemplated
or pending condemnation proceeding with respect to any portion of the Trust
Estate; (h) the Leases are in full force and effect without any defaults by
any parties thereto and Trustor is the holder of the lessee's or tenant's
interest thereunder; and (i) the Trust Estate and all structures,
equipment, fixtures or activities thereon are in compliance with all
applicable zoning and land use ordinances and regulations, building codes,
and fire codes.
I.3. COMPLIANCE WITH LEGAL REQUIREMENTS.
----------------------------------
Trustor shall promptly, fully, and faithfully comply with all Legal
Requirements and shall cause all portions of the Trust Estate and its use
and occupancy to fully comply with Legal Requirements at all times, whether
or not such compliance requires work or remedial measures that are ordinary
or extraordinary, foreseen or unforeseen, structural or nonstructural, or
that interfere with the use or enjoyment of the Trust Estate.
I.4. TAXES.
-----
Trustor shall pay all Impositions prior to delinquency and shall
deliver to Beneficiary promptly upon Beneficiary's request, evidence
satisfactory to Beneficiary that the Impositions have been paid or are not
delinquent; provided that Trustor may contest, in good faith any Imposition
so long as Trustor posts an adequate bond therefor. Trustor shall not
suffer to exist, permit or initiate the joint assessment of the real and
personal property, or any other procedure whereby the lien of the real
property taxes and the lien of the personal property taxes shall be
assessed, levied or charged to the Land as a single lien, except as may be
required by law. In the event of the passage of any law deducting from the
value of real property for the purposes of taxation any lien thereon, or
changing in any way the taxation of deeds of trust or obligations secured
thereby for state or local purposes, or the manner of collecting such taxes
and imposing a tax, either directly or indirectly, on this Deed of Trust or
the Notes, Trustor shall pay all such taxes so long as such tax is not in
lieu of income tax assessed against the net income of Beneficiary.
I.5. INSURANCE.
---------
(1) HAZARD INSURANCE REQUIREMENTS AND PROCEEDS.
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Subject to the terms and conditions of the Intercreditor Agreement:
(1) Hazard Insurance. Trustor shall at its sole expense obtain
----------------
for, deliver to, assign and maintain for the benefit of Beneficiary,
during the term of this Deed of Trust, insurance policies insuring the
Trust Estate and liability insurance policies, all in accordance with
the requirements of Section 4.18 of the Indenture. Trustor shall pay
promptly when due any premiums on such insurance policies and on any
renewals thereof. Copies of all such policies and renewals thereof
shall be given to Beneficiary and all such policies shall contain a
noncontributory standard mortgagee or beneficiary endorsement (Form
438 BFU or its equivalent) making losses payable to Beneficiary as its
interest may appear and shall name the Beneficiary as an additional
insured. At least ten (10) days prior to the expiration date of all
such policies, evidence of the renewal thereof satisfactory to
Beneficiary shall be delivered to Beneficiary together with receipts
evidencing the payment of all premiums on such insurance policies and
renewals. In the event of loss, Trustor shall give immediate written
notice to Beneficiary and Beneficiary may make proof of loss if not
made promptly by Trustor. In the event of the foreclosure of this
Deed of Trust or any other transfer of title to the Trust Estate in
extinguishment of the indebtedness and other sums secured hereby, all
right, title and interest of Beneficiary in and to all insurance
policies and renewals thereof then in force shall pass to the
purchaser or grantee, upon delivery of written notice to Beneficiary
within thirty (30) days following the occurrence of such loss.
(2) Handling of Proceeds. Pursuant to its rights granted
--------------------
hereunder in all Proceeds from any insurance policies, Beneficiary is
hereby authorized and empowered at its option to adjust or compromise
any loss, under any insurance policies on the Trust Estate and to
collect and receive the proceeds from any such policy or policies;
provided that the provisions of this Section 1.5(a)(2) shall not apply
to any losses less than $25,000 per occurrence and $100,000 in the
aggregate per year. Each insurance company is hereby authorized and
directed to make payment for all such losses directly to Beneficiary
alone and not to Trustor and Beneficiary jointly. After deducting
from such Proceeds any reasonable expenses incurred by Beneficiary in
the collection or handling such funds, including reasonable attorneys'
fees, Beneficiary shall apply such insurance proceeds in accordance
with the terms of the Indenture and the following provisions:
1) Such Proceeds shall be invested in Cash Equivalents and
held in an account in which the Beneficiary or its designee shall
have a first priority security interest (subject to Permitted
Liens) for the benefit of the Holders of Notes as depository for
the disbursement thereof as provided in Section 4.10(b) of the
Indenture. If an Event of Default occurs prior to
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disbursement of the proceeds, Beneficiary at its option shall
have the right to either apply all or any portion of such account
toward restoration of the respective Report or toward any amounts
secured hereby.
(2) Trustor shall (and Beneficiary hereby authorizes
Trustor to) use the Proceeds in accordance with Sections 4.10(b)
of the Indenture.
(3) In the event that Trustor uses the Proceeds to restore
the respective Resort, the restoration work and the performance
thereof shall be subject to and performed in accordance with each
of the following provisions: (1) such work and the performance
thereof shall be conducted in a first-class, workmanlike manner,
shall not permanently weaken nor impair the structural strength
of any existing Improvements, nor change the character thereof or
the purpose for which the same may be used, nor lessen the value
of the Trust Estate; (2) before the commencement of any such
work, the plans and specifications therefor (the "RESTORATION
PLANS") shall be filed with and approved by all Governmental
Authorities having jurisdiction and all necessary licenses,
permits and/or authorizations from all Governmental Authorities
shall have been obtained, and all such work shall be done subject
to and in accordance with all applicable Legal Requirements; and
(3) before commencing any such work, Trustor shall, at Trustor's
expense, have delivered to Beneficiary the Restoration Plans and
a line item budget setting forth with reasonable particularity
the cost of completing such work, together with a written opinion
form a reputable architect certifying (a) that the execution of
the work described in the Restoration Plans will substantially
restore the respective Resort, and (b) that the budget
constitutes a reasonable approximation of the cost of so
restoring the respective Resort in accordance with the
Restoration Plans.
(2) INSURANCE ESCROW. In order to secure the performance and
discharge of the Trustor's obligations under this Section 1.5, but not in
lieu of such obligations, Trustor shall, upon a failure to pay or provide
such insurance, at the times and in the manner required herein, pay over to
Beneficiary an amount equal to one-twelfth (1/12th) of the next maturing
annual insurance premiums for each month that has elapsed since the last
date to which such premiums were paid; and Trustor shall, in addition, pay
over to Beneficiary, on the first day of each month, sufficient funds (as
estimated from time to time) to permit Beneficiary to pay said premiums
when due. Such deposits shall not be, nor be deemed to be, trust funds but
may be commingled with the general funds of Beneficiary, and no interest
shall be payable in respect thereof except as required by law. Upon demand
by Beneficiary, Trustor shall deliver to Beneficiary such additional monies
as are necessary to make up any deficiencies in the amounts necessary to
enable Beneficiary to pay such premiums when due.
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(3) COMPLIANCE WITH INSURANCE POLICIES. Trustor shall not violate
or permit to be violated any of the conditions or provisions of any policy
of insurance required by the Indenture or this Deed of Trust and Trustor
shall so perform and satisfy the requirements of the companies writing such
policies that, at all times, companies of good standing shall be willing to
write and/or continue such insurance. Trustor further covenants to
promptly send to Beneficiary copies of all notices relating to any
violation of such policies or otherwise affecting Trustor's insurance
coverage or ability to obtain and maintain such insurance coverage.
I.6. CONDEMNATION.
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Beneficiary is hereby authorized, at its option, to commence, appear
in and prosecute in its own or Trustor's name any action or proceeding
relating to any condemnation, seizure or taking by the exercise of the
power of eminent domain of any of the Trust Estate and to settle or
compromise any claim in connection therewith, and Trustor hereby appoints
Beneficiary as its attorney-in-fact to take any action in Trustor's name
pursuant to Beneficiary's rights hereunder. Immediately upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Trust Estate or any portion thereof, Trustor shall notify the Trustee and
Beneficiary of the pendency of such proceedings. Trustor from time to time
shall execute and deliver to Beneficiary all instruments requested by it to
permit such participation; provided, however, that such instruments shall
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be deemed as supplemental to the foregoing grant of permission to Trustee
and Beneficiary, and unless otherwise required, the foregoing permission
shall, without more, be deemed sufficient to permit Trustee and/or
Beneficiary to participate in such proceedings on behalf of Trustor. All
such compensation awards, damages, claims, rights of action and Proceeds,
and any other payments or relief, and the right thereto, are included in
the Trust Estate. To the extent such condemnation, seizure or taking
constitutes an Event of Loss, Beneficiary, after deducting therefrom all
its expenses, including reasonable attorneys fees, shall, or shall
authorize Trustor to apply such Proceeds in accordance with the provisions
of Section 4.10(b) of the Indenture.
I.7. CARE OF TRUST ESTATE.
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(1) Trustor shall preserve and maintain the Trust Estate in good
condition and repair, reasonable wear and tear excepted. Trustor shall not
permit, commit or suffer to exist any waste, impairment or deterioration of
the Trust Estate or of any part thereof that in any manner materially
impairs Beneficiary's security hereunder and shall not take any action
which will increase the risk of fire or other hazard to the Trust Estate or
to any part thereof.
(2) Except for Permitted Dispositions, no part of the Improvements
shall be removed, demolished or materially altered without the prior
written consent of Beneficiary, which consent shall not be unreasonably
withheld. Trustor shall have the
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right, without such consent, to remove and dispose of free from the lien of
this Deed of Trust any part of the Improvements as from time to time may
become worn out or obsolete, provided that either (i) such removal or
disposition does not materially affect the value of the Trust Estate or
(ii) prior to or promptly following such removal, any such property shall
be replaced with other property of substantially equal utility and of a
value at least substantially equal to that of the replaced property when
first acquired and free from any security interest of any other person
(subject only to Permitted Liens), and by such removal and replacement
Trustor shall be deemed to have subjected such replacement property to the
lien of this Deed of Trust.
(3) To the fullest extent permitted by law, Trustor hereby waives
the benefits of the provisions of NRS 37.115.
I.8. SPACE LEASES.
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(1) Trustor represents and warrants that
(1) Trustor has delivered to Beneficiary true, correct and
complete copies of all Space Leases, including all amendments and
modifications, written or oral existing as of the date hereof;
(2) Trustor has not executed or entered into any modifications
or amendments of the Space Leases, either orally or in writing, other
than amendments that have been disclosed to Beneficiary in writing;
(3) no material default now exists under any Space Lease;
(4) no event has occurred that, with the giving of notice or
the passage of time or both, would constitute such a material default
or would entitle Trustor or any other party under such Space Lease to
cancel the same or otherwise avoid its obligations;
(5) Trustor has not accepted prepayments of installments of
Rent under any Space Leases more than thirty days in advance of the
due date therefor and except for security deposits not in excess of
one month's Rent;
(6) except for the assignment effected hereby, Trustor has not
executed any assignment or pledge of any of Space Leases, the Rents,
or of Trustor's right, title and interest in the same; and
(7) this Deed of Trust conforms and complies with all Space
Leases, does not constitute a violation or default under any Space
Lease, and is and shall at all times constitute a valid lien on
Trustor's interests in the Space Leases.
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I.9. FURTHER ENCUMBRANCE.
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(1) Trustor covenants that at all times prior to the discharge of
the Indenture, except for Permitted Liens (including the 1996 Deed of
Trust), Permitted Dispositions and dispositions permitted under Section
1.10, Trustor shall neither make nor suffer to exist, nor enter into any
agreement for, any sale, assignment, exchange, mortgage, transfer, Lien,
hypothecation or encumbrance of all or any part of the Trust Estate,
including, without limitation, the Rents. As used herein, "transfer"
includes the actual transfer or other disposition, whether voluntary or
involuntary, by law, or otherwise, except those transfers specifically
permitted herein, provided, however, that "transfer" shall not include the
granting of utility or other beneficial easements with respect to the Trust
Estate which have been granted by Trustor and are reasonably necessary to
the construction, maintenance or operation of the Resorts.
(2) Any Permitted Lien described in the definition of "Permitted
Liens" set forth in Section 1.1 of the Indenture which is junior to the
lien of the Loan Documents (a "SUBORDINATE DEED OF TRUST") shall be
permitted hereunder so long as there shall have been delivered to
Beneficiary, not less than thirty (30) days prior to the date thereof, a
copy thereof which shall contain express covenants in form and substance
satisfactory to Beneficiary to the effect that: (i) the Subordinate Deed
of Trust is in all respects subject and subordinate to this Deed of Trust;
(ii) if any action or proceeding shall be brought to foreclose the
Subordinate Deed of Trust (regardless of whether the same is a judicial
proceeding or pursuant to a power of sale contained therein), no tenant of
any portion of the Trust Estate shall be named as a party defendant nor
shall any action be taken with respect to the Trust Estate which would
terminate any occupancy or tenancy of the Trust Estate, or any portion
thereof, without the consent of Beneficiary; (iii) any Rents, if collected
through a receiver or by the holder of the Subordinate Deed of Trust, shall
be applied first to the obligations secured by this Deed of Trust,
including principal and interest due and owing on or to become due and
owing on the Notes, and then to the payment of maintenance expenses,
operating charges, taxes, assessments, and disbursements incurred in
connection with the ownership, operation, and maintenance of the Trust
Estate; and (iv) if any action or proceeding shall be brought to foreclose
the Subordinate Deed of Trust, prompt notice of the commencement thereof
shall be given to Beneficiary.
(3) Trustor agrees that in the event the ownership of the Trust
Estate or any part thereof becomes vested in a person other than Trustor,
Beneficiary may, without notice to Trustor, deal in any way with such
successor or successors in interest with reference to this Deed of Trust,
the Notes and other Obligations hereby secured without in any way vitiating
or discharging Trustor's or any guarantor's, surety's or endorser's
liability hereunder or upon the obligations hereby secured. No sale of the
Trust Estate and no forbearance to any person with respect to this Deed of
Trust and no extension to any
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person of the time for payment of the Notes, and other sums hereby secured
given by Beneficiary shall operate to release, discharge, modify, change or
affect the original liability of Trustor, or such guarantor, surety or
endorser either in whole or in part.
(4) This Deed of Trust, as applied to property subject to an FF&E
Financing Agreement, shall be subordinated to the liens of any FF&E
Financing Agreements (as hereinafter defined in this Section 1.9(d) (or if
required by an FF&E Financing Agreement, it shall be released) and any
future of further advances made thereunder and to any modifications,
renewals or extensions thereof to which the lien of this Deed of Trust
attaches, provided, however, that any such FF&E Financing Agreement shall
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encumber only that FF&E specifically subject to the FF&E Financing
Agreement. Trustor covenants and agrees to comply with all of the terms
and conditions set forth in any FF&E Financing Agreement with respect to
which Beneficiary has taken a lien hereunder. If Trustor shall fail to
make any payment of principal of or pursuant to any FF&E Financing
Agreement with respect to which Beneficiary has taken a lien hereunder on
its part to be performed or observed, except where Trustor is contesting
such payment in good faith, then Beneficiary may make such payment of the
principal of or interest on the sums secured by such security interest or
may make any payment in order to perform or observe any other term,
covenant, condition or agreement of any FF&E Financing Agreement on
Trustor's part to be performed or observed and any and all sums so expended
by Beneficiary or Trustee shall be secured by this Deed of Trust and shall
be repaid by Trustor upon demand, together with interest thereon at the
interest rate on the Notes from the date of advance. In furtherance of
such subordination or release, as applicable, Beneficiary, upon receipt of
an officer's certificate from Trustor certifying that the requirements of
this Section 1.9(d) have been satisfied, shall execute, acknowledge and
deliver to Trustor, at Trustor's expense, any and all such evidence and
documents necessary to evidence the subordination or release of this Deed
of Trust in accordance with the foregoing provisions of this Section
1.9(d). As used herein, "FF&E Financing Agreement" shall mean (A) any
financing (i) as to which the lender holds a security interest in only the
assets purchased, constructed or leased by such financing for the payment
of principal, interest and other amounts in connection therewith, (ii)
which is permitted by the Indenture to be incurred and (iii) the proceeds
of which are used to acquire, construct or lease the FF&E subject to such
security interest, and (B) any refinancing or renewal of any financing
under clause (A).
I.10. PARTIAL RELEASES OF TRUST ESTATE.
--------------------------------
(1) Trustor may from time to time (i) transfer a portion of the
Trust Estate (including any temporary taking) to any person legally
empowered to exercise the power of eminent domain, (ii) make a Permitted
Disposition, (iii) grant utility easements reasonably necessary for the
construction and operation of the Resorts, which grant or transfer is for
the benefit of the Trust Estate, or (iv) transfer a portion of the Trust
Estate as expressly permitted pursuant to Section 4.10(b) of the Indenture.
In each such case,
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Beneficiary shall execute and deliver any instruments necessary or
appropriate to effectuate or confirm any such transfer or grant, free from
the lien of this Deed of Trust, provided, however, that Beneficiary shall
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execute a lien release or subordination agreement, as appropriate, for
matters described in clauses (i) and (iii) above only if:
(1) Beneficiary and Trustee shall have received an Officer's
Certificate required by Section 10.3(a) of the Indenture;
(2) No default or event of default shall have occurred under
the Indenture, no Event of Default shall have occurred hereunder, and
no event which with notice or lapse of time or both would constitute
such Event of Default, has occurred and is continuing and that the
conditions of this Section 1.10 have been fulfilled, and such
transfer, grant or release is permitted by the Indenture;
(3) Beneficiary and Trustee shall have received a counterpart
of the instrument pursuant to which such transfer, grant or release is
to be made, and each instrument which Beneficiary or Trustee is
requested to execute in order to effectuate or confirm such transfer,
grant or release;
(4) In the case of a transfer to a person legally empowered to
exercise the power of eminent domain, which transfer involves property
whose value is greater than $5,000,000, Beneficiary and Trustee shall
have received an opinion of counsel, who may be counsel to Trustor, to
the effect that the assignee or grantee of the portion of the Trust
Estate being transferred is legally empowered to take such portion
under the power of eminent domain; and
(5) Beneficiary and Trustee shall have received such other
instruments, certificates (including evidence of authority) and
opinions as Beneficiary or Trustee may reasonably request, including,
but not limited to, opinions that the proposed release is permitted by
this Section 1.10.
(2) Any consideration received for a transfer to any person
empowered to exercise the right of eminent domain shall be subject to
Section 1.6 hereof.
I.11. FURTHER ASSURANCES.
------------------
(1) At its sole cost and without expense to Trustee or Beneficiary,
Trustor shall do, execute, acknowledge and deliver any and all such further
reasonable acts, deeds, conveyances, notices, requests for notices,
financing statements, continuation statements, certificates, assignments,
notices of assignments, agreements, instruments and further assurances, and
shall mark any chattel paper, deliver any chattel paper or instruments to
Beneficiary and take any other actions that are reasonably necessary,
prudent, or requested by Beneficiary or Trustee to perfect or continue the
perfection and first priority
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of Beneficiary's security interest in the Trust Estate, (except as
expressly provided in the Security Agreement), to protect the Trust Estate
against the rights, claims, or interests of third persons other than
holders of Permitted Liens or to effect the purposes of this Deed of Trust,
including the security agreement and the absolute assignment of Rents
contained herein, or for the filing, registering or recording thereof.
(2) Trustor shall forthwith upon the execution and delivery of this
Deed of Trust, and thereafter from time to time, cause this Deed of Trust
and each instrument of further assurance to be filed, indexed, registered,
recorded, given or delivered in such manner and in such places as may be
required by any present or future law in order to publish notice of and
fully to protect the lien hereof upon, and the title of Trustee and/or
Beneficiary to, the Trust Estate.
I.12. SECURITY AGREEMENT AND FINANCING STATEMENTS.
-------------------------------------------
Trustor (as debtor) hereby grants to Beneficiary (as creditor and
secured party) a present and future security interest in all Tangible
Collateral, Intangible Collateral, FF&E (to the extent Beneficiary is
permitted, in each applicable FF&E Financing Agreement, to maintain a
security interest therein), Improvements, all other personal property now
or hereafter owned or leased by Trustor or in which Trustor has or will
have any interest, to the extent that such property constitutes a part of
the Trust Estate (whether or not such items are stored on the premises or
elsewhere), Proceeds of the foregoing comprising a portion of the Trust
Estate and all proceeds of insurance policies and consideration awards
arising therefrom and all proceeds, products, substitutions, and accessions
therefor and thereto, subject to Beneficiary's rights to treat such
property as real property as herein provided (collectively, the "PERSONAL
PROPERTY"). Trustor shall execute any and all documents and writings,
including without limitation financing statements pursuant to the UCC, as
may be necessary or prudent to preserve and maintain the priority of the
security agreement or as Beneficiary may reasonably request, (other than as
expressly provided in the Security Agreement), and shall pay to Beneficiary
on demand any reasonable expenses incurred by Beneficiary in connection
with the preparation, execution and filing of any such documents. Trustor
hereby authorizes and empowers Beneficiary to execute and file, on
Trustor's behalf, all financing statements and refiling and continuations
thereof as advisable to create, preserve and protect said security
interest. This Deed of Trust constitutes both a real property deed of
trust and a "security agreement," within the meaning of the UCC, and the
Trust Estate includes both real and personal property and all other rights
and interests, whether tangible or intangible in nature, of Trustor in the
Trust Estate. Trustor by executing and delivering this Deed of Trust has
granted to Beneficiary, as security for the Obligations, a security
interest in the Trust Estate.
(1) FIXTURE FILING. Without in any way limiting the generality
of the immediately preceding paragraph of the definition of the Trust
Estate, this Deed
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of Trust constitutes a fixture filing under Section 9-402 of the UCC
(NRS 105.9502). For such purposes, (i) the "debtor" is Trustor and its
address is the address given for it in the initial paragraph of this
Deed of Trust; (ii) the "secured party" is Beneficiary, and its
address for the purpose of obtaining information is the address given
for it in the initial paragraph of this Deed of Trust; (iii) the real
estate to which the fixtures are or are to become attached is
Trustor's interest in the land; and (iv) the record owner of such real
estate is Trustor.
(2) REMEDIES. This Deed of Trust shall be deemed a security
agreement as defined in the UCC and the remedies for any violation of
the covenants, terms and conditions of the agreements herein contained
shall include any or all of (i) those prescribed herein, and (ii)
those available under applicable law, and (iii) those available under
the UCC, all at Beneficiary's sole election. In addition, a
photographic or other reproduction of this Deed of Trust shall be
sufficient as a financing statement for filing wherever filing may be
necessary to perfect or continue the security interest granted herein.
(3) DEROGATION OF REAL PROPERTY. It is the intention of the
parties that the filing of a financing statement in the records
normally having to do with personal property shall never be construed
as in any way derogating from or impairing the express declaration and
intention of the parties hereto as hereinabove stated that everything
used in connection with the production of income from the Trust Estate
and/or adapted for use therein and/or which is described or reflected
in this Deed of Trust is, and at all times and for all purposes and in
all proceedings both legal or equitable, shall be regarded as part of
the real property encumbered by this Deed of Trust irrespective of
whether (i) any such item is physically attached to the Improvements,
(ii) serial numbers are used for the better identification of certain
equipment items capable of being thus identified in a recital
contained herein or in any list filed with Beneficiary, or (iii) any
such item is referred to or reflected in any such financing statement
so filed at any time. It is the intention of the parties that the
mention in any such financing statement of (1) rights in or to the
proceeds of any fire and/or hazard insurance policy, or (2) any award
in eminent domain proceedings for a taking or for loss of value, or
(3) Trustor's interest as lessors in any present or future Space Lease
or rights to Rents, shall never be construed as in any way altering
any of the rights of Beneficiary as determined by this Deed of Trust
or impugning the priority of Beneficiary's real property lien granted
hereby or by any other recorded document, but such mention in the
financing statement is declared to be for the protection of
Beneficiary in the event any court or judge shall at any time hold
with respect to the matters set forth in the foregoing clauses (1),
(2) and (3) that notice of Beneficiary's priority of interest to be
effective against a particular class of persons, including but not
limited to, the federal government and any subdivisions or entity of
the federal government, must be filed in the UCC
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records.
(4) PRIORITY; PERMITTED FINANCING OF TANGIBLE COLLATERAL.
Except as provided in Section 1.9(d) hereof, all Personal Property of
any nature whatsoever, which is subject to the provisions of this
security agreement, shall be purchased or obtained by Trustor in its
name and free and clear of any lien or encumbrance, except for
Permitted liens and the lien hereof, for use only in connection with
the business and operation of the Resorts, and shall be and at all
times remain free and clear of any lease or similar arrangement,
chattel financing, installment sale agreement, security agreement and
any encumbrance of like kind, so that Beneficiary's security interest
shall attach to and vest in Trustor for the benefit of Beneficiary,
with the priority herein specified, immediately upon the installation
or use of the Personal Property at the Land and Trustor warrants and
represents that Beneficiary's security interest in the Personal
Property is validly attached and binding security interest, properly
pursuant to Permitted Dispositions or to obtain releases of Personal
Property from the Lien of this Deed of Trust pursuant to Section 1.10
hereof.
(5) PRESERVATION OF CONTRACTUAL RIGHTS OF COLLATERAL. Trustor
shall, prior to delinquency, default, or forfeiture, perform all
obligations and satisfy all material conditions required on its part
to be satisfied to preserve its rights and privileges under any
contract, lease, license, permit, or other authorization (i) under
which it holds any Tangible Collateral or (ii) which constitutes part
of the Intangible Collateral except where Trustor is contesting such
obligations in good faith.
(6) REMOVAL OF COLLATERAL. Except as otherwise permitted
herein, none of the Tangible Collateral shall be removed from the
Trust Estate without Beneficiary's prior written consent, and except
damaged or obsolete Tangible Collateral which is either no longer
usable or which is removed temporarily for repair or improvement or
removed for replacement on the Trust Estate with Tangible Collateral
of similar function.
(7) CHANGE OF NAME. Trustor shall not change its corporate or
business name, or do business within the State of Nevada under any
name other than such name, or any trade name(s) other than those as to
which Trustor gives prior written notice to Beneficiary of its intent
to use such trade names, or any other business names (if any)
specified in the financing statements delivered to Beneficiary for
filing in connection with the execution hereof, without providing
Beneficiary with the additional financing statement(s) and any other
similar documents deemed reasonably necessary by Beneficiary to assure
that its security interest remains perfected and of undiminished
priority in all such Personal Property notwithstanding such name
change.
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I.13. ASSIGNMENT OF RENTS.
-------------------
The assignment of Leases and Rents set out above in Granting Clause
(G) shall constitute an absolute and present assignment to Beneficiary,
subject to the license herein given to Trustor to collect the Rents, and
shall be fully operative without any further action on the part of any
party, and specifically Beneficiary shall be entitled upon the occurrence
of an Event of Default hereunder to all Rents, whether or not Beneficiary
takes possession of the Trust Estate, or any portion thereof. The absolute
assignment contained in Granting Clause (G) shall not be deemed to impose
upon Beneficiary any of the obligations or duties of Trustor provided in
any such Space Lease (including, without limitation, any liability under
the covenant of quiet enjoyment contained in any lease in the event that
nay lessee shall have been joined as a party defendant in any action to
foreclose this Deed of Trust and shall have been barred and foreclosed
thereby of all right, title and interest and equity of redemption in the
Trust Estate or any part thereof).
I.14. EXPENSES.
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(1) Trustor shall pay when due and payable all costs, including
without limitation, those reasonable appraisal fees, recording fees, taxes,
brokerage fees and commissions, abstract fees, title policy fees, escrow
fees, attorneys' and paralegal fees, travel expenses, fees for inspecting
architect(s) and engineer(s) and all other costs and expenses of every
character which have been incurred or which may hereafter be incurred by
Beneficiary or any assignee of Beneficiary in connection with the
preparation and execution of loan documents, amendments thereto or
instruments, agreements or documents of further assurance, the funding of
the Notes secured hereby, and the enforcement of any Loan Document; and
(2) Trustor shall, upon demand by Beneficiary, reimburse Beneficiary
or any assignee of Beneficiary for all such reasonable expenses described
in Section 1.14(a) which have been incurred or which shall be incurred by
it; and
(3) Trustor shall indemnify Beneficiary with respect to any
transaction or matter in any way connected with any portion of the Trust
Estate, this Deed of Trust, including any occurrence at, in, on, upon or
about the Trust Estate (including any personal injury, loss of life, or
property damage), or Trustor's use, occupancy, or operation of the Trust
Estate, or the filing or enforcement of any mechanic's lien, or otherwise
caused in whole or in part by any act, omission or negligence occurring on
or at the Trust Estate, including failure to comply with any Legal
Requirement or with any requirement of this Deed of Trust be paid or
performed by Trustor, unless caused by the gross negligence or willful Deed
of Trust be paid or performed by Trustor, unless caused by the gross
negligence or willful misconduct of Beneficiary. If Beneficiary is a party
to any litigation as to which either Trustor is required to indemnify
Beneficiary (or is made a defendant in any action
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of any kind against Trustor or relating directly or indirectly to any
portion of the Trust Estate) then, at Beneficiary's option, Trustor shall
undertake Beneficiary's defense, using counsel satisfactory to Beneficiary
(and any settlement shall be subject to Beneficiary's consent, and in any
case shall indemnify Beneficiary against such litigation. Trustor shall pay
all reasonable costs and expenses, including reasonable legal costs, that
Beneficiary pays or incurs in connection with any such litigation. Any
amount payable under any indemnity in this Deed of Trust shall be a demand
obligation, shall be added to, and become a part of, the secured
obligations under this Deed of Trust, shall be secured by this Deed of
Trust, and shall bear interest at the interest rate on the Notes. Such
indemnity shall survive any release of this Deed of Trust and any
Foreclosure.
I.15. BENEFICIARY'S CURE OF TRUSTOR'S DEFAULT.
---------------------------------------
If Trustor defaults in the payment of any tax, assessment, lien,
encumbrance or other Imposition, in its obligation to furnish insurance
hereunder, or in the performance or observance of any other covenant,
condition or term of this Deed of Trust or any Loan Document unless Trustor
is contesting in good faith such Imposition and posts an adequate bond
therefor, Beneficiary may, but is not obligated to, to preserve its
interest in the Trust Estate, perform or observe the same, and all payments
made (whether such payments are regular or accelerated payments) and
reasonable costs and expenses incurred or paid by Beneficiary in connection
therewith shall become due and payable immediately. The amounts so
incurred or paid by Beneficiary, together with interest thereon at the
interest rate on the Notes from the date incurred until paid by Trustor,
shall be added to the indebtedness and secured by the lien of this Deed of
Trust. Beneficiary is hereby empowered to enter and to authorize others to
enter upon the Land or any part thereof for the purpose of performing or
observing any such defaulted covenant, condition or term, without thereby
becoming liable to Trustor or any person in possession holding under
Trustor. No exercise of any rights under this Section by Beneficiary shall
cure or waive any Event of Default or notice of default hereunder or
invalidate any act done pursuant hereto or to any such notice, but shall be
cumulative of all other rights and remedies.
I.16. USE OF LAND.
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Trustor covenants that the Trust Estate shall be used and operated in
a manner consistent with the operation of casino-hotels located in Las
Vegas, Nevada, open during such days and hours as are customarily observed
by such casino-hotels.
I.17. COMPLIANCE WITH PERMITTED LIEN AGREEMENTS.
-----------------------------------------
Trustor or any Affiliate of Trustor shall comply with each and every
material obligation contained in any agreement pertaining to a material
Permitted Lien.
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I.18. DEFENSE OF ACTIONS.
------------------
Trustor shall appear in an defend any action or proceeding affecting
or purporting to affect the security hereof or the rights or powers of
Beneficiary or Trustee, and shall pay all costs and expenses, including
cost of title search and insurance or other evidence of title, preparation
of survey, and reasonable attorneys' fees in any such action or proceeding
in which Beneficiary or Trustee may appear or may be jointed as a party and
in any suit brought by Beneficiary based upon or in connection with this
Deed of Trust or any Loan Document. Nothing contained in this section
shall, however, limit the right of Beneficiary to appear in such action or
proceeding with counsel of its own choice, either on its own behalf or on
behalf of Trustor.
I.19. AFFILIATES.
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(1) SUBJECT TO TRUST DEED. Trustor shall cause all of its
Affiliates in any way involved with the operation of the Trust Estate or
the Resorts to observe the covenants and conditions of this Deed of Trust
to the extent necessary to give the full intended effect to such covenants
and conditions and to protect and preserve the security of Beneficiary
hereunder. Trustor shall, at Beneficiary's request, cause any such
Affiliate to execute and deliver to Beneficiary or Trustee such further
instruments or documents as Beneficiary may reasonably deem necessary to
effectuate the terms of this Section 1.19.
(2) RESTRICTION ON USE OF SUBSIDIARY OR AFFILIATE. Trustor shall
not use any Affiliate in the operation of the Trust Estate or the Resorts
if such use would in any way impair the security for the Notes and the
Indenture or circumvent any covenant or condition of this Deed of Trust or
of any other Loan Document.
I.20. TITLE INSURANCE.
---------------
Concurrently with the execution and delivery of this Deed of Trust,
Trustor shall cause to be delivered to Trustee at Trustor's expense, one or
more ALTA extended coverage Lender's Policies of Title Insurance (1970)
showing fee and leasehold title to the real property situated in the City
of Las Vegas, County of Clark, State of Nevada, more specifically described
in Schedule A attached hereto, vested in Trustor and the lien of this Deed
of Trust to be a perfected lien, prior to any and all encumbrances other
than Permitted Liens.
ARTICLE II
THE LEASES
----------
II.1. STATUS OF LEASES.
----------------
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Trustor represents and warrants that: (a) Trustor has provided to
Beneficiary true, correct and complete copies of all Leases and Trustor has
not executed or entered into any modifications or amendments of the Leases,
either orally or in writing, other than written amendments that have been
disclosed to Beneficiary in writing; (b) the Leases are in full force and
effect, unmodified by any writing or otherwise, except as previously
disclosed by Trustor to Beneficiary; (c) all rent and other charges
reserved in the Leases have been paid to the extent they are payable to the
date hereof; (d) Trustor enjoys the quiet and peaceful possession of the
property demised by the Leases; (e) Trustor is not in default under any of
the terms thereof; and (f) no event has occurred that, with the giving of
notice or the passage of time or both, would constitute such a default or
would entitle Trustor or any other party under the Leases to cancel the
same or otherwise avoid its obligations.
II.2. PERFORMANCE OF LEASES.
---------------------
Trustor agrees: (a) to promptly and faithfully observe, perform and
comply in all material respects with all the terms, covenants and
provisions of the Leases on its part to be observed, performed and complied
with, at the times set forth therein; (b) to give Beneficiary immediate
notice of any material default by anyone under the Leases; and (c) to
furnish to Beneficiary such additional information and evidence as
Beneficiary may reasonably request in writing concerning the due
observance, performance and compliance with the terms, covenants and
provisions of the Leases. No release or forbearance of any of Trustor's
obligations under the Leases shall release Trustor from any of its
obligations under this Deed of Trust, including its obligations with
respect to the payment of rent and performance of all of the terms and
provisions of the Leases to be performed by Trustor.
II.3. CURE BY BENEFICIARY.
-------------------
In the event of any default by Trustor in the performance of any of
its obligations under the Leases, including, without limitation, any
default in the payment of rent and other charges and impositions payable by
the tenant thereunder that Beneficiary determines could constitute, with
the giving of notice or the passage of time, an Event of Default hereunder,
then, in each and every case, Beneficiary may, subject to the terms and
conditions of the Intercreditor Agreement, at its option and without notice
(but without any obligation to do so), cause the default or defaults to be
remedied and otherwise exercise any and all of the rights of Trustor
thereunder in the name of an on behalf of Trustor. Trustor shall, on
demand, reimburse Beneficiary for all advances made and expenses incurred
by Beneficiary in curing any such default (including, without limitation,
reasonable attorneys' fees), together with interest thereon at the interest
rate payable on the Notes from the date that an advance is made or expense
is incurred, to and including the date the same is paid.
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II.4. NO MERGER OF ESTATES.
--------------------
It is hereby agreed that the fee title and the leasehold estate in the
property demised by each Lease shall not merge but shall always be kept
separate and distinct, notwithstanding the union of such estates in the
landlord thereunder, Trustor or a third party, whether by purchase or
otherwise. If Trustor acquires the fee title or any other estate, title or
interest in the Land, or any part thereof, the lien of this Deed of Trust
shall attach to, cover and be a lien upon such acquired estate, title or
interest and such estate, title or interest shall thereupon be and become a
part of the Trust Estate with the same force and effect as if specifically
encumbered herein. Trustor agrees to execute all instruments and documents
that Beneficiary may reasonably require to ratify, confirm and further
evidence Beneficiary's lien on the acquired estate, title or interest.
Furthermore, Trustor hereby appoints Beneficiary its true and lawful
attorney-in-fact to execute and deliver all such instruments and documents
in the name and on behalf of Trustor. This power, being coupled with an
interest, shall be irrevocable as long as any Obligations remain unpaid.
II.5. NO ASSIGNMENT OF LEASES.
-----------------------
Anything herein to the contrary notwithstanding, this Deed of Trust
shall not constitute an assignment of the Leases within the meaning of any
provisions thereof prohibiting its assignment and Beneficiary shall have no
liability or obligation thereunder by reason of its acceptance of this Deed
of Trust.
II.6. MAINTENANCE OF LEASES.
---------------------
Trustor shall not surrender its leasehold estate under the Leases, nor
terminate or cancel the Leases. Trustor shall not agree to any amendment
of the Leases without the prior written consent of Beneficiary. Trustor
shall renew all Leases in a timely manner when and as permitted in
accordance with the terms except to the extent Beneficiary directs
otherwise in writing.
II.7. TREATMENT OF THE LEASES IN BANKRUPTCY.
-------------------------------------
(1) 365(H) ELECTION. If the lessor under any Lease (the "LESSOR")
rejects or disaffirms, or seeks or purports to reject or disaffirm, such
Lease pursuant to any bankruptcy law, then Trustor shall not, except as
otherwise provided in this paragraph, exercise the 365(h) Election, or any
comparable right provided under any other bankruptcy law. To the extent
permitted by law, Trustor shall not suffer or permit the termination of any
Lease or relinquishment of its possession of its leasehold by exercise of
the 365(h) Election or otherwise without Beneficiary's consent. Trustor
acknowledges that because the Leases are a primary element of Beneficiary's
security for the Obligations secured hereunder, it is not anticipated that
Beneficiary would consent to
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termination of the Leases. If Trustor makes any 365(h) Election in
violation of this Deed of Trust, then such 365(h) Election shall be void
and of no force or effect.
(2) ASSIGNMENT TO BENEFICIARY. Trustor hereby assigns to
Beneficiary the 365(h) Election with respect to the Leases. Trustor
acknowledges and agrees that the foregoing assignment of the 365(h)
Election and related rights is one of the rights that Beneficiary may use
at any time to protect and preserve Beneficiary's other rights and
interests under this Deed of Trust. Trustor further acknowledges that
exercise of the 365(h) Election in favor of terminating any Lease would
constitute waste prohibited by this Deed of Trust. Trustor acknowledges
and agrees that the 365(h) Election is in the nature of a remedy available
to Trustor under the Leases, and is not a property interest that Trustor
can separate from the Leases as to which it arises. Therefore, Trustor
agrees and acknowledges that exercise of the 365(h) Election in favor of
preserving the right to possession under any Leases shall not be deemed to
constitute Beneficiary's taking or sale of the Trust Estate (or any element
thereof) and shall not entitle Trustor to any credit against the
Obligations secured hereunder or otherwise impair Beneficiary's remedies.
(3) SCOPE OF COLLATERAL. Trustor acknowledges that if the 365(h)
Election is exercised in favor of Trustor's remaining in possession under
any Lease, then Trustor's resulting occupancy rights, as adjusted by the
effect of Section 365 of the Bankruptcy Code, shall then be part of the
Property and shall be subject to the lien of this Deed of Trust.
(4) NOTICES. Trustor shall promptly deliver to Beneficiary a copy
-------
of any notice of default or termination that it receives from any Lessor.
Trustor shall promptly notify Beneficiary of any request that either party
to a Lease makes for arbitration pursuant to such Lease.
ARTICLE III
CORPORATE LOAN PROVISIONS
-------------------------
III.1. INTERACTION WITH INDENTURE.
--------------------------
(1) INCORPORATION BY REFERENCE. All terms, covenants, conditions,
provisions and requirements of the Indenture are incorporated by reference
in this Deed of Trust. Any capitalized term used in this Deed of Trust
without definition, but defined in the Indenture, shall have the same
meaning here as in the Indenture.
(2) CONFLICTS. Notwithstanding any other provision of this Deed of
Trust, the terms and provisions of this Deed of Trust shall be subject and
subordinate to the terms of the Indenture. To the extent that the
Indenture provides Trustor with a particular cure or notice period, or
establishes any limitations or conditions on Beneficiary's actions with
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regard to a particular set of facts, Trustor shall be entitled to the same
cure periods and notice periods, and Beneficiary shall be subject to the
same limitations and conditions, under this Deed of Trust, as under the
Indenture, in place of the cure periods, notice periods, limitations and
conditions provided for under this Deed of Trust; provided, however, that
-------- -------
such cure periods, notice periods, limitations and conditions shall not be
cumulative as between the Indenture and this Deed of Trust. In the event
of any conflict or inconsistency between the provisions of this Deed of
Trust and those of the Indenture, including, without limitation, any
conflicts or inconsistencies in any definitions herein or therein, the
provisions or definitions of the Indenture shall govern.
III.2. OTHER COLLATERAL.
----------------
This Deed of Trust is one of a number of security agreements to secure
the debt delivered by or on behalf of Trustor pursuant to the Indenture and
the other Loan Documents and securing the Obligations secured hereunder.
All potential junior Lien claimants are placed on notice that, under any of
the Loan Documents or otherwise (such as by separate future unrecorded
agreement between Trustor and Beneficiary), other collateral for the
Obligations secured hereunder (i.e., collateral other than the Trust
Estate) may, under certain circumstances, be released without a
corresponding reduction in the total principal amount secured by this Deed
of Trust. Such a release would decrease the amount of collateral securing
the same indebtedness, thereby increasing the burden on the remaining Trust
Estate created and continued by this Deed of Trust. No such release shall
impair the priority of the lien of this Deed of Trust. By accepting its
interest in the Trust Estate, each and every junior Lien claimant shall be
deemed to have acknowledged the possibility of, and consented to, any such
release. Nothing in this paragraph shall impose any obligation upon
Beneficiary.
ARTICLE IV
DEFAULTS AND REMEDIES
---------------------
IV.1. EVENT OF DEFAULT.
----------------
The term "Event of Default," wherever used in this Deed of Trust,
shall mean any one or more of the events of default listed in Section 6.1
of the Indenture, subject to such cure rights as may be expressly set forth
in the Indenture (whether any such event shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body).
IV.2. ACCELERATION OF MATURITY.
------------------------
If an Event of Default occurs, Beneficiary may (except that such
acceleration shall
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be automatic if the Event of Default is caused by a Trustor's Bankruptcy),
in accordance with Section 6.01(ii) of the Indenture, declare the Notes and
all indebtedness or sums secured hereby, to be due and payable immediately,
and upon such declaration such principal and interest and other sums shall
immediately become due and payable without demand, presentment, notice or
other requirements of any kind (all of which Trustor waives)
notwithstanding anything in this Deed of Trust or any Loan Document or
applicable law to the contrary.
IV.3. PROTECTIVE ADVANCES.
-------------------
If Trustor fails to make any payment or perform any other obligation
under the Notes or any other Loan Document, then without thereby limiting
Beneficiary's other rights of remedies, waiving or releasing any of
Trustor's obligations, or imposing any obligation on Beneficiary,
Beneficiary may, subject to the terms and conditions of the Intercreditor
Agreement, either advance any amount owing or perform any or all actions
that Beneficiary considers necessary or appropriate to cure such default.
All such advances shall constitute "Protective Advances." No sums advanced
or performance rendered by Beneficiary shall cure, or be deemed a waiver of
any Event of Default.
IV.4. INSTITUTION OF EQUITY PROCEEDINGS.
---------------------------------
If an Event of Default occurs, Beneficiary may institute an action,
suit or proceeding in equity for specific performance of this Deed of
Trust, the Notes or any Loan Document, all of which shall be specifically
enforceable by injunction or other equitable remedy. Trustor waives any
defense based on laches or any applicable statute of limitations.
IV.5. BENEFICIARY'S POWER OF ENFORCEMENT.
----------------------------------
Subject to the terms and conditions of the Intercreditor Agreement:
(1) If an Event of Default occurs, Beneficiary shall be
entitled, at its option and in its sole and absolute discretion, to
prepare and record on its own behalf, or to deliver to Trustee for
recording, if appropriate, written declaration of default and demand
for sale and written Notice of Breach and Election to Sell (or other
statutory notice) to cause the Trust Estate to be sold to satisfy the
obligations hereof, and in the case of delivery to Trustee, Trustee
shall cause said notice to be filed for record.
(2) After the lapse of such time as may then be required by law
following the recordation of said Notice of Breach and Election to
Sell, and notice of sale having been given as then required by law,
including compliance with all applicable Gaming Laws, Trustee without
demand on Trustor, shall sell the Trust
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Estate or any portion thereof at the time and place fixed by it in
said notice, either as a whole or in separate parcels, and in such
order as it may determine, at public auction to the highest bidder, of
cash in lawful money of the United States payable at the time of sale.
Trustee may, for any cause it deems expedient, postpone the sale of
all or any portion of said property until its shall be completed and,
in every case, notice of postponement shall be given by public
announcement thereof at the time and place last appointed for the sale
and from time to time thereafter Trustee may postpone such sale by
public announcement at the time fixed by the preceding postponement.
Trustee shall execute and deliver to the purchaser its Deed, Bill of
Sale, or other instrument conveying said property so sold, but without
any covenant or warranty, express or implied. The recitals in such
instrument of conveyance of any matters or facts shall be conclusive
proof of the truthfulness thereof. Any person, including Beneficiary,
may bid at the sale.
(3) After deducting all costs, fees and expenses of Trustee and
of this Deed of Trust, including, without limitation, costs of
evidence of title and reasonable attorneys' fees of Trustee or
Beneficiary in connection with a sale, Trustee shall apply the
proceeds of such sale to payment of all sums expended under the terms
hereof not then repaid, with accrued interest at the interest rate on
the Notes then to the payment of all other sums then secured hereby
and the remainder, if any, to the person or persons legally entitled
thereto as provided in NRS 40.462.
(4) Subject to compliance with applicable Gaming Laws, if any
Event of Default occurs, Beneficiary may, either with or without entry
or taking possession of the Trust Estate, and without regard to
whether or not the indebtedness and other sums secured hereby shall be
due and without prejudice to the right of Beneficiary thereafter to
bring an action or proceeding to foreclose or any other action for any
default existing at the time such earlier action was commenced,
proceed by any appropriate action or proceeding: (1) to enforce
payment of the Notes, to the extent permitted by law, or the
performance of any term hereof or any other right; (2) to foreclose
this Deed of Trust in any manner provided by law for the foreclosure
of mortgages or deeds of trust on real property and to sell, as an
entirety or in separate lots or parcels, the Trust Estate or any
portion thereof pursuant to the laws of the State of Nevada or under
the judgement or decree of a court or courts of competent
jurisdiction, and Beneficiary shall be entitled to recover in any such
proceeding all costs and expenses incident thereto, including
reasonable attorneys' fees in such amount as shall be awarded by the
court; (3) to exercise any or all of the rights and remedies available
to it under the Indenture; and (4) to pursue any other remedy
available to it. Beneficiary shall take action either by such
proceedings or by the exercise of its powers with respect to entry or
taking possession, or both, as Beneficiary may determine.
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(5) The remedies described in this Section 4.5 may be exercised
with respect to all or any portion of the Personal Property, either
simultaneously with the sale of any real property encumbered hereby or
independent thereof. Beneficiary shall at any time be permitted to
proceed with respect to all or any portion of the Personal Property in
any manner permitted by the UCC and Section 4.178. Trustor agrees
that Beneficiary's inclusion of all or any portion of the Personal
Property in a sale or other remedy exercised with respect to the real
property encumbered hereby, as permitted by the UCC, is a commercially
reasonable disposition of such property.
IV.6. BENEFICIARY'S RIGHT TO ENTER AND TAKE POSSESSION, OPERATE AND APPLY
-------------------------------------------------------------------
INCOME.
------
Subject to the terms and conditions of the Intercreditor Agreement:
(1) Subject to compliance with applicable Gaming Laws, if an
Event of Default occurs, (i) Trustor, upon demand of Beneficiary,
shall forthwith surrender to Beneficiary the actual possession and, if
and to the extent permitted by law, Beneficiary itself, or by such
officers or agents as it may appoint, may enter and take possession of
all the Trust Estate including the Personal Property, without
liability for trespass, damages or otherwise, and may exclude Trustor
and its agents and employees wholly therefrom and may have joint
access with Trustor to the books, papers and accounts of Trustor, and
(ii) Trustor shall pay monthly in advance to Beneficiary on
Beneficiary's entry into possession, or to any receiver appointed to
collect the Rents, all Rents then due and payable.
(2) If Trustor shall for any reason fail to surrender or
deliver the Trust Estate, the Personal Property or any part thereof
after Beneficiary's demand, Beneficiary may obtain a judgment or
decree conferring on Beneficiary or Trustee the right to immediate
possession or requiring Trustor to deliver immediate possession of all
or part of such property to Beneficiary or Trustee and Trustor hereby
specifically consents to the entry of such judgment or decree.
Trustor shall pay to Beneficiary or Trustee, upon demand, all costs
and expenses of obtaining such judgment or decree and reasonable
compensation to Beneficiary or Trustee, their attorneys and agents,
and all such costs, expenses and compensation shall, until paid, be
secured by the lien of this Deed of Trust.
(3) Subject to compliance with applicable Gaming Laws, upon
every such entering upon or taking of possession, Beneficiary or
Trustee may hold, store, use, operate, manage and control the Trust
Estate and conduct the business thereof, and, from time to time in its
sole and absolute discretion and without being under any duty to so
act:
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(1) make all necessary and property maintenance, repairs,
renewals, replacements, additions, betterments and improvements
thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty and other property;
(2) insure or keep the Trust Estate insured;
(3) manage and operate the Trust Estate and exercise all
the rights and powers of Trustor in their name or otherwise with
respect to the same;
(4) enter into agreements with others to exercise the
powers herein granted Beneficiary or Trustee, all as Beneficiary
or Trustee from time to time may determine; and, subject to the
receive all the Rents, including those past due as well as those
accruing thereafter; and shall apply the monies so received by
Beneficiary or Trustee in such priority as Beneficiary may
determine to (1) the payment of interest and principal due and
payable on the Notes, (2) the deposits for taxes and assessments
and insurance premiums due, (3) the cost of insurance, taxes,
assessments and other proper charges upon the Trust Estate or any
part thereof; (4) the compensation, expenses and disbursements of
the agents, attorneys and other representatives of Beneficiary or
Trustee; and (5) any other charges or costs required to be paid
by Trustor under the terms hereof.
(5) rent or sublet the Trust Estate or any portion thereof
for any purpose permitted by this Deed of Trust.
Beneficiary or Trustee shall surrender possession of the Trust
Estate and the Personal Property to Trustor only when all that is due
upon such interest and principal, tax and insurance deposits, and all
amounts under any of the terms of the Indenture or this Deed of Trust,
shall have been paid and all defaults made good. The same right of
taking possession, however, shall exist if any subsequent Event of
Default shall occur and be continuing.
IV.7. LEASES.
------
Beneficiary is authorized to foreclose this Deed of Trust subject to
the rights of any tenants of the Trust Estate, and the failure to make any
such tenants parties defendant to any such foreclosure proceedings and to
foreclose their rights shall not be, nor be asserted by Trustor to be, a
defense to any proceedings instituted by Beneficiary to collect the sums
secured hereby or to collect any deficiency remaining unpaid after the
foreclosure sale of the Trust Estate, or any portion thereof. Unless
otherwise agreed by Beneficiary in writing, all Space Leases executed
subsequent to the date hereof, or any part thereof, shall be subordinate
and inferior to the lien of this Deed of Trust; provided,
--------
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however that (i) Beneficiary may be required to execute a non-disturbance
-------
and attornment agreement in connection with certain lease transactions; and
(ii) from time to time Beneficiary may execute and record among the land
records of the jurisdiction where this Deed of Trust is recorded,
subordination statements with respect to such of said Space Leases as
Beneficiary may designate in its sole discretion, where by the Space Leases
so designated by Beneficiary shall be made superior to the lien of this
Deed of Trust for the term set forth in such subordination statement. From
and after the recordation of such subordination statements, and for the
respective periods as may be set forth therein, the Space Leases therein
referred to shall be superior to the lien of this Deed of Trust and shall
not be affected by any foreclosure hereof. All such Space Leases shall
contain a provision to the effect that the Trustor and Space Lessee
recognize the right of Beneficiary to elect and to effect such
subordination of this Deed of Trust and consents thereto.
IV.8. PURCHASE BY BENEFICIARY.
-----------------------
Upon any foreclosure sale (whether judicial or nonjudicial),
Beneficiary may bid for and purchase the property subject to such sale and,
upon compliance with the terms of sale, may hold, retain and possess and
dispose of such property in its own absolute right without further
accountability.
IV.9. WAIVER OF APPRAISEMENT, VALUATION, STAY, EXTENSION AND REDEMPTION
-----------------------------------------------------------------
LAWS.
----
Trustor agrees to the full extent permitted by law that if an Event of
Default occurs, neither Trustor nor anyone claiming through or under it
shall or will set up, claim or seek to take advantage of any appraisement,
valuation, stay, extension or redemption laws now or hereafter in force, in
order to prevent or hinder the enforcement or foreclosure of this Deed of
Trust or the absolute sale of the Trust Estate or any portion thereof or
the final and absolute putting into possession thereof, immediately after
such sale, of the purchasers thereof, and Trustor for itself and all who
may at any time claim through or under it, hereby waives, to the full
extent that it may lawfully so do, the benefit of all such laws, and any
and all right to have the assets comprising the Trust Estate marshaled upon
any foreclosure of the lien hereof and agrees that Trustee or any court
having jurisdiction to foreclose such lien may sell the Trust Estate in
part or as an entirety.
IV.10. RECEIVER.
--------
If an Event of Default occurs, Beneficiary, to the extent permitted by
law and in accordance with all applicable Gaming Laws, and subject to the
terms and conditions of the Intercreditor Agreement, and without regard to
the value, adequacy or occupancy of the security for the indebtedness and
other sums secured hereby, shall be entitled as a matter of right if it so
elects to the appointment of a receiver to enter upon and take
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possession of the Trust Estate and to collect all Rents and apply the same
as the court may direct, and such receiver may be appointed by any court of
competent jurisdiction upon application by Beneficiary. Beneficiary may
have a receiver appointed and shall promptly notify Trustor of such
appointment of a receiver, and Beneficiary may have a receiver appointed
and shall promptly notify Trustor of such appointment of a receiver, and
Beneficiary may waive any requirement that the receiver post a bond;
provided, however, that failure to notify Trustor or any other third party
shall not affect the enforceability of any actions taken by the receiver.
Beneficiary shall have the power to designate and select the Person who
shall serve as the receiver and to negotiate all terms and conditions under
which such receiver shall serve. Any receiver appointed on Beneficiary's
behalf may be an Affiliate of Beneficiary. The expenses, including
receiver's fees, attorneys' fees, costs and agent's compensation, incurred
pursuant to the powers herein contained shall be secured by this Deed of
Trust. The right to enter and take possession of and to manage and operate
the Trust Estate and to collect all Rents, whether by a receiver or
otherwise, shall be cumulative to any other right or remedy available to
Beneficiary under this Deed of Trust, the Indenture or otherwise available
to Beneficiary and may be exercised concurrently therewith or independently
thereof. Beneficiary shall be liable to account only for such Rents
(including, without limitation, security deposits) actually received by
Beneficiary, whether received pursuant to this section or any other
provision hereof. Notwithstanding the appointment of any receiver or other
custodian, Beneficiary shall be entitled as pledgee to the possession and
control of any cash, deposits, or instruments at the time held by, or
payable or deliverable under the terms of this Deed of Trust to,
Beneficiary.
IV.11. SUITS TO PROTECT THE TRUST ESTATE.
---------------------------------
Subject to the terms and conditions of the Intercreditor Agreement,
Beneficiary shall have the power and authority to institute and maintain
any suits and proceedings as Beneficiary, in its sole and absolute
discretion, may deem advisable (a) to prevent any impairment of the Trust
Estate by any acts which may be unlawful or any violation of this Deed of
Trust, (b) to preserve or protect its interest in the Trust Estate, or (c)
to restrain the enforcement of or compliance with any legislation or other
Legal Requirement that may be unconstitutional or otherwise invalid, if the
enforcement of or compliance with such enactment, rule or order might
impair the security hereunder or be prejudicial to Beneficiary's interest.
IV.12. PROOFS OF CLAIM.
---------------
In the case of any receivership, Insolvency, Bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceedings affecting Trustor, any Affiliate or any guarantor, co-maker or
endorse or any of Trustor's obligations, its creditors or its property,
Beneficiary, to the extent permitted by law, shall be entitled to file such
proofs of claim or other documents as it may deem be necessary or advisable
in
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order to have its claims allowed in such proceedings for the entire amount
due and payable by Trustor under the Notes or any other Loan Document, at
the date of the institution of such proceedings, and for any additional
amounts which may become due and payable by Trustor after such date.
IV.13. TRUSTOR TO PAY THE NOTES ON ANY DEFAULT IN PAYMENT; APPLICATION OF
-------------------------------------------------------------------
MONIES BY BENEFICIARY.
---------------------
(1) In case of a foreclosure sale of all or any part of the Trust
Estate and of the application of the proceeds of sale to the payment of the
sums secured hereby, Beneficiary shall be entitled to enforce payment from
Trustor of any additional amounts then remaining due and unpaid and to
recover judgment against Trustor for any portion thereof remaining unpaid,
with interest at the interest rate on the Notes, in accordance with NRS
40.451 et seq.
(2) Trustor hereby agrees to the extent permitted by law, that no
recovery of any such judgment by Beneficiary or other action by Beneficiary
and no attachment or levy of any execution upon any of the Trust Estate or
any other property shall in any way affect the Lien and security interest
of this Deed of Trust upon the Trust Estate or any part thereof or any
Lien, rights, powers or remedies of Beneficiary hereunder, but such Lien,
rights, powers and remedies shall continue unimpaired as before.
(3) Any monies collected or received by Beneficiary under this
Section 4.13 shall be first applied to the payment of compensation,
expenses and disbursements of the agents, attorneys and other
representatives of Beneficiary, and the balance remaining shall be applied
to the payment of amounts due and unpaid under the Notes.
(4) The provisions of this section shall not be deemed to limit or
otherwise modify the provisions of any guaranty of the indebtedness
evidenced by the Notes.
IV.14. DELAY OR OMISSION; NO WAIVER.
----------------------------
No delay or omission of Beneficiary or Noteholder to exercise any
right, power or remedy upon any Event of Default shall exhaust or impair
any such right, power or remedy or shall be construed to waive any such
Event of Default or to constitute acquiescence therein. Every right, power
and remedy given to Beneficiary whether contained herein or in the
Indenture or otherwise available to Beneficiary may be exercised from time
to time and as often as may be deemed expedient by Beneficiary.
IV.15. NO WAIVER OR ONE DEFAULT TO AFFECT ANOTHER.
------------------------------------------
No waiver of any Event of Default hereunder shall extend to or affect
any subsequent or any other Event of Default then existing, or impair any
rights, powers or
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remedies consequent thereon. If Beneficiary or a majority of Noteholders,
to the extent applicable under the Indenture, (a) grants forbearance or an
extension of time for the payment of any sums secured hereby; (b) takes
other or additional security for the payment thereof; (c) waives or does
not exercise any right granted in the Notes, the Indenture, this Deed of
Trust or any other Loan Document; (d) releases any part of the Trust Estate
from the lien or security interest of this Deed of Trust or any other
instrument securing the Notes; (e) consents to the filing of any map, plat
or replat of the Land; (f) consents to the granting of any easement of the
Land; or (g) makes or consents to any agreement changing the terms of this
Deed of Trust or any Loan Document subordinating the lien or any charge
hereof, no such act or omission shall release, discharge, modify, change or
affect the original liability under the Notes, this Deed of Trust or any
other Loan Document or otherwise of Trustor, or any subsequent purchaser of
the Trust Estate or any part thereof or any maker, co-signer, surety or
guarantor. No such act or omission shall preclude Beneficiary from
exercising any right, power or privilege herein granted or intended to be
granted in case of any Event of Default then existing or of any subsequent
Event of Default, nor, except as otherwise expressly provided in an
instrument or instruments executed by Beneficiary, shall the lien or
security interest of this Deed of Trust be altered thereby, except to the
extent expressly provided in any releases, maps, easements or
subordinations described in clause (d), (e), (f) or (g) above of this
Section 4.15. In the event of the sale or transfer by operation of law or
otherwise of all or any part of the Trust Estate, Beneficiary, without
notice to any person, firm or corporation, is hereby authorized and
empowered to deal with any such vendee or transferee with reference to the
Trust Estate or the indebtedness secured hereby, or with reference to any
of the terms or conditions hereof, as fully and to the same extent as it
might deal with the original parties hereto and without in any way
releasing or discharging any of the liabilities or undertakings hereunder,
or waiving its right to declare such sale or transfer an Event of Default
as provided herein. Notwithstanding anything to the contrary contained in
this Deed of Trust or any Loan Document, (i) in the case of any non-
monetary Event of Default, Beneficiary may continue to accept payments due
hereunder without hereby waiving the existence of such or any other Event
of Default and (ii) in the case of any monetary Event of Default,
Beneficiary may accept partial payments of any sums due hereunder without
thereby waiving the existence of such Event of Default if the partial
payment is not sufficient to completely cure such Event of Default.
IV.16. DISCONTINUANCE OF PROCEEDINGS; POSITION OF PARTIES RESTORED.
-----------------------------------------------------------
If Beneficiary shall have proceeded to enforce any right or remedy
under this Deed of Trust by foreclosure, entry of judgment or otherwise and
such proceedings shall have been discontinued to abandoned for any reason,
or such proceedings shall have resulted in a final determination adverse to
Beneficiary, then and in every such case Trustor and Beneficiary shall be
restored to their former positions and rights hereunder, and all rights,
powers and remedies of Beneficiary shall continue as if no such
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<PAGE>
proceedings had occurred or had been taken.
IV.17. REMEDIES CUMULATIVE.
-------------------
No right, power or remedy, including without limitation remedies with
respect to any security for the Notes, conferred upon or reserved to
Beneficiary by the Note Guarantees, this Deed of Trust or any other Loan
Document is exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and
shall be in addition to any other right, power and remedy given hereunder
or under any Loan Document, now or hereafter existing at law, in equity or
by statute, and Beneficiary shall be entitled to resort to such rights,
powers, remedies or security as Beneficiary shall in its sole and absolute
discretion deem advisable, subject to the terms and conditions of the
Intercreditor Agreement. The rights and remedies of Beneficiary upon the
occurrence of one or more defaults by Trustor may be exercised by
Beneficiary, in the sole discretion of Beneficiary, either alternatively,
concurrently, or consecutively in any order. The exercise by Beneficiary
or Trustee, of any one or more of such rights and remedies shall not be
construed to be an election or remedies nor a waiver of any other rights
and remedies Beneficiary might have unless, and limited to the extent that,
Beneficiary shall so elect or so waive by an instrument in writing
delivered to Trustee. Without limiting the generality of the foregoing, to
the extent that this Deed of Trust covers the real property and personal
property, Beneficiary may, in the sole discretion of Beneficiary, either
alternatively, concurrently, or consecutively in any order;
(1) Proceed as to both the real property, the personal property
and other collateral in accordance with Beneficiary's rights and
remedies in respect to the real property; or
(2) Proceed as to the real property in accordance with
Beneficiary's rights and remedies in respect to the real property and
proceed as to the personal property and other collateral in accordance
with Beneficiary's rights and remedies in respect to the personal
property and other collateral;
Beneficiary may in the sole discretion of Beneficiary, appoint Trustee
as the agent of Beneficiary for the purpose of disposition of the personal
property and other collateral in accordance with the Nevada Uniform
Commercial Code--Secured Transactions.
If Beneficiary should elect to proceed as to both the real property,
the personal property and other collateral in accordance with Beneficiary's
rights and remedies in respect to real property;
(a) All the real property and all the personal property and
other collateral may be sold, in the manner and at the time and place
provided in this Deed of Trust, in one lot, or in separate lots
consisting of any combination or
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combinations of the real property, the personal property, and other
collateral, as the Beneficiary may elect, in the sole discretion of
Beneficiary.
(b) Trustor acknowledges and agrees that a disposition of the
personal property and other collateral in accordance with
Beneficiary's rights and remedies in respect to real property, as
hereinabove provided, is a commercially reasonable disposition of the
collateral.
If the Beneficiary should elect to proceed as to the personal property
and other collateral in accordance with Beneficiary's rights and remedies
in respect to personal property and other collateral, Beneficiary shall
have all the rights and remedies conferred on a secured party by NRS
104.9501 to NRS 104.9507, both inclusive.
IV.18. INTEREST AFTER EVENT OF DEFAULT.
-------------------------------
If an Event of Default shall have occurred and is continuing, all sums
outstanding and unpaid under the Notes and this Deed of Trust shall bear
interest at the interest rate on the Notes until such Event of Default has
been cured. Trustor's obligation to pay such interest shall be secured by
this Deed of Trust.
IV.19. FORECLOSURE; EXPENSES OF LITIGATION.
-----------------------------------
If Trustee forecloses, reasonable attorneys' fees for services in the
supervision of said foreclosure proceeding shall be allowed to the Trustee
and Beneficiary as part of the foreclosure costs. In the event of
foreclosure of the lien hereof, there shall be allowed and included as
additional indebtedness all reasonable expenditures and expenses which may
be paid or incurred by or on behalf of Beneficiary for attorneys fees,
appraiser's fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which may be
estimated as to items to be expended after foreclosure sale or entry of the
decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies and guarantees, and similar data and
assurances with respect to title as Beneficiary may deem reasonably
advisable either to prosecute such suit or to evidence to a bidder at any
sale which may be had pursuant to such decree the true condition of the
title to or the value of the Trust Estate or any portion thereof. All
expenditures and expenses of the nature in this section mentioned, and such
expenses and fees as may be incurred in the protection of the Trust Estate
and the maintenance of the lien and security interest of this Deed of
Trust, including the fees of any attorney employed by Beneficiary in any
litigation or proceeding affecting this Deed of Trust or any Loan Document,
the Trust Estate or any portion thereof, including, without limitation,
civil, probate, appellate and bankruptcy proceedings, or in preparation for
the commencement or defense of any proceeding or threatened suit or
proceeding, shall be immediately due and payable by Trustor, with interest
thereon at the interest rate on the Notes, and shall be secured by this
Deed of Trust. Trustee waives its right to any
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statutory fee in connection with any judicial or nonjudicial foreclosure of
the lien hereof and agrees to accept a reasonable fee for such services.
IV.20. DEFICIENCY JUDGMENTS.
--------------------
If after foreclosure of this Deed of Trust or Trustee's sale
hereunder, there shall remain any deficiency with respect to any amounts
payable under the Notes or hereunder or any amounts secured hereby, and
Beneficiary shall institute any proceedings to recover such deficiency or
deficiencies, all such amounts shall continue to bear interest at the
interest rate on the Notes. Trustor waives any defense to Beneficiary's
recovery against Trustor of any deficiency after any foreclosure sale of
the Trust Estate. Trustor expressly waives any defense or benefits that
may be derived from any statute granting Trustor any defense to any such
recovery by Beneficiary. In addition, Beneficiary and Trustee shall be
entitled to recovery of all of their reasonable costs and expenditures
(including without limitation any court imposed costs) in connection with
such proceedings, including their reasonable attorneys' fees, appraisal
fees and the other costs, fees and expenditures referred to in Section 4.19
above. This provision shall survive any foreclosure or sale of the Trust
Estate, any portion thereof and/or the extinguishment of the lien hereof.
IV.21. WAIVER OF JURY TRIAL.
--------------------
To the fullest extent permitted by law, Beneficiary and Trustor each
waive any right to have a jury participate in resolving any dispute whether
sounding in contract, tort or otherwise arising out of, connected with,
related to or incidental to the relationship established between them in
connection with the Notes, this Deed of Trust or any other Loan Document.
Any such dispute shall be resolved in a bench trial without a jury.
IV.22. EXCULPATION OF BENEFICIARY.
--------------------------
The acceptance by Beneficiary of the assignment contained herein with
all of the rights, powers, privileges and authority created hereby shall
not, prior to entry upon and taking possession of the Trust Estate by
Beneficiary, be deemed or construed to make Beneficiary a "mortgagee in
possession"; nor thereafter or at any time or in any event obligate
Beneficiary to appear in or defend any action or proceeding relating to the
Space Leases, the Rents or the Trust Estate, or to take any action
hereunder or to expend any money or incur any expenses or perform or
discharge any obligation, duty or liability under any Space Lease or to
assume any obligation or responsibility for any security deposits or other
deposits except to the extent such deposits are actually received by
Beneficiary, nor shall Beneficiary, prior to such entry and taking, be
liable in any way for any injury or damage to person or property sustained
by any Person in or about the Trust Estate.
ARTICLE V
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RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE
------------------------------------
Notwithstanding anything to the contrary in this Deed of Trust, Trustor and
Beneficiary agree as follows.
V.1. EXERCISE OF REMEDIES BY TRUSTEE.
-------------------------------
To the extent that this Deed of Trust or applicable law, including all
applicable Gaming Laws, authorizes or empowers Beneficiary to exercise any
remedies set forth in Article Four hereof or otherwise, or perform any acts
in connection therewith, Trustee (but not to the exclusion of Beneficiary
unless so required under the law of the State of Nevada) shall have the
power to exercise any or all such remedies, and to perform any acts
provided for in this Deed of Trust in connection therewith, all for the
benefit of Beneficiary and on Beneficiary's behalf in accordance with
applicable law of the State of Nevada. In connection therewith, Trustee:
(a) shall not exercise, or waive the exercise of, any Beneficiary's
Remedies (other than any rights or Trustee to any indemnity or
reimbursement), except at Beneficiary's request, and (b) shall exercise, or
waive the exercise of, any or all of Beneficiary's remedies at
Beneficiary's request, and in accordance with Beneficiary's directions as
to the manner of such exercise or waiver. Trustee may, however, decline to
follow Beneficiary's request or direction if Trustee shall be advised by
counsel that the action or proceeding, or manner thereof, so directed may
not lawfully be taken or waived.
V.2. RIGHTS AND PRIVILEGES OF TRUSTEE.
--------------------------------
To the extent that this Deed of Trust requires Trustor to indemnify
Beneficiary or reimburse Beneficiary for any expenditures Beneficiary may
incur, Trustee shall be entitled to the same indemnity and the same rights
to reimbursement of expenses as Beneficiary, subject to such limitations
and conditions as would apply in the case of Beneficiary. To the extent
that this Deed of Trust negates or limits Beneficiary's liability as to any
matter, Trustee shall be entitled to the same negation or limitation of
liability. To the extent that Trustor, pursuant to this Deed of Trust,
appoints Beneficiary as Trustor's attorney in fact for any purpose,
Beneficiary or (when so instructed by Beneficiary) Trustee shall be
entitled to act on Trustor's behalf without joinder or confirmation by the
other.
V.3. RESIGNATION OR REPLACEMENT OF TRUSTEE.
-------------------------------------
Trustee may resign by an instrument in writing addressed to
Beneficiary, and Trustee may be removed at any time with or without cause
(i.e., in Beneficiary's sole and absolute discretion) by an instrument in
writing executed by Beneficiary. In case of the
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death, resignation, removal or disqualification of Trustee or if for any
reason Beneficiary shall deem it desirable to appoint a substitute,
successor or replacement Trustee to act instead of Trustee originally named
(or in place of any substitute, successor or replacement Trustee), then
Beneficiary shall have the right and is hereby authorized and empowered to
appoint a successor, substitute or replacement Trustee, without any
formality other than appointment and designation in writing executed by
Beneficiary, which instrument shall be recorded if required by the law of
the State of Nevada. The law of the State of Nevada shall govern the
qualifications of any Trustee. The authority conferred upon Trustee by this
Deed of Trust shall automatically extend to any and all other successor,
substitute and replacement Trustee(s) successively until the Secured
Obligations have been paid in full or the Trust Estate has been sold
hereunder or released in accordance with the provisions of the Loan
Documents. Beneficiary's written appointment and designation of any Trustee
shall be full evidence of Beneficiary's right and authority to make the
same and of all facts therein recited. No confirmation, authorization,
approval or other action by Trustor shall be required in connection with
any resignation or other replacement of Trustee.
V.4. AUTHORITY OF BENEFICIARY.
------------------------
If Beneficiary is a banking corporation, state banking corporation or
a national banking association and the instrument of appointment of any
successor replacement Trustee is executed on Beneficiary's behalf by an
officer of such corporation, state banking corporation or national banking
association, then such appointment shall be conclusively presumed to be
executed with authority and shall be valid and sufficient without proof of
any action by the board of directors or any superior officer of
Beneficiary.
V.5. EFFECT OF APPOINTMENT OF SUCCESSOR TRUSTEE.
------------------------------------------
Upon the appointment and designation of any successors, substitute or
replacement Trustee, Trustee's entire estate and title in the Trust Estate
shall vest in the designated successor, substitute or replacement Trustee.
Such successor, substitute or replacement Trustee shall thereupon succeed
to and shall hold, possess and execute all the rights, powers, privileges,
immunities and duties herein conferred upon Trustee. All references herein
to Trustee shall be deemed to refer to Trustee (including any successor or
substitute appointed and designated as herein provided) from time to time
acting hereunder.
V.6. CONFIRMATION OF TRANSFER AND SUCCESSION.
---------------------------------------
Upon the written request of Beneficiary or of any successor,
substitute or replacement Trustee, any former Trustee ceasing to act shall
execute and deliver an instrument transferring to such successor,
substitute or replacement Trustee all of the
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right, title, estate and interest in the Trust Estate of Trustee so ceasing
to act, together with all the rights, powers, privileges, immunities and
duties herein conferred upon Trustee, and shall duly assign, transfer and
deliver all properties and moneys held by said Trustee hereunder to said
successor, substitute or replacement Trustee.
V.7. RATIFICATION.
------------
Trustor hereby ratifies and confirms any and all acts that any Trustee
may take or perform by virtue of this Deed of Trust.
V.8. EXCULPATION.
-----------
Trustee shall not be liable for any error of judgment or act done by
Trustee in good faith, or otherwise be responsible or accountable under any
circumstances whatsoever, except for Trustee's gross negligence, willful
misconduct or knowing violation of law. Trustee shall have the right to
rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by it hereunder, believed by it in
good faith to be genuine. All moneys received by Trustee shall, until used
or applied as herein provided, by held in trust for the purposes for which
they were received, but need not be segregated in any manner from any other
moneys (except to the extent required by law). Trustee shall be under no
liability for interest on any moneys received by it hereunder.
V.9. ENDORSEMENT AND EXECUTION OF DOCUMENTS.
--------------------------------------
Upon Beneficiary's written request, Trustee shall, without liability
or notice to Trustor, execute, consent to, or join in any instrument or
agreement in connection with or necessary to effectuate the purposes of the
Loan Documents. Trustor hereby irrevocably designates Trustee as its
attorney in fact to execute, acknowledge and deliver, on Trustor's behalf
and in Trustor's name, all instruments or agreements necessary to implement
any provision(s) of this Deed of Trust or to further perfect the lien
created by this Deed of Trust on the Trust Property. This power of
attorney shall be deemed to be coupled with an interest and shall survive
any disability of Trustor.
V.10. MULTIPLE TRUSTEES.
-----------------
If Beneficiary appoints multiple trustees, then any Trustee,
individually may exercise all powers granted to Trustee under this
instrument, without the need for action by any other Trustee(s).
(1) TERMS OF TRUSTEE'S ACCEPTANCE. Trustee accepts the trust
-----------------------------
created by this Deed of Trust upon the following terms and conditions:
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(2) DELEGATION. Trustee may exercise any of its powers through
----------
appointment attorney(s) in fact or agents.
(3) SECURITY. Trustee shall be under no obligation to take any
action upon any Event of Default unless furnished security or
indemnity, in form satisfactory to Trustee, against costs, expenses
and liabilities that the Trustee may incur.
(4) COSTS AND EXPENSES. Trustor shall reimburse Trustee, as
part of the Obligations secured hereunder, for all reasonable
disbursements and expenses (including reasonable legal fees and
expenses) incurred by reason of and as provided for in this Deed of
Trust, including any of the foregoing incurred in Trustee's
administering and executing the trust created by this Deed of Trust
and performing Trustee's duties and exercising Trustee's powers under
this Deed of Trust.
(5) RELEASE. Pursuant to the terms in this Section 5.11(d) and
Section 6.10, upon payment of the Obligations secured hereunder,
Beneficiary shall request Trustee to reconvey this Deed of Trust and
shall surrender all the Obligations secured hereunder to Trustee.
Trustee shall release this Deed of Trust without charge to Trustor.
Trustor shall pay all costs of recordation, if any.
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
VI.1. HEIRS, SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES.
-------------------------------------------------
Whenever one of the parties hereto is named or referred to herein, the
heirs, successors and assigns of such party shall be included, and subject
to the limitations set forth in Section 1.10, all covenants and agreements
contained in this Deed of Trust, by or on behalf of Trustor or Beneficiary
shall bind and inure to the benefit of its heirs, successors and assigns,
whether so expressed or not.
VI.2. ADDRESSES FOR NOTICES, ETC.
--------------------------
Any notice, report, demand or other instrument authorized or required
to be given or furnished under this Deed of Trust to Trustor or Beneficiary
shall be deemed given or furnished (i) when addressed to the party intended
to receive the same, at the address of such party set forth below, and
delivered at such address or (ii) three (3) days after the same is
deposited in the United States mail as first class certified mail, return
receipt requested, postage prepaid, whether or not the same is actually
received by such party:
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<PAGE>
Beneficiary: Firstar Bank of Minnesota, N.A.
101 East Fifth Street
St. Paul, Minnesota 55101-1860
Telecopier No.: (612) 229-6415
Attention: Corporate Trust Department
Trustor: Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
Ph: (702) 365-7111
FAX: (702) 365-7566
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<PAGE>
With a copy to: Leavitt, Sully & Rivers
601 East Bridger Avenue
Las Vegas, Nevada 89101
Ph: (702) 382-5111
FAX: (702) 382-2892
Attn: K. Michael Leavitt
Trustee: National Title Company
714 E. Sahara Avenue
Las Vegas, Nevada 89104
Attention: C.H. Bouchard
Tel: (702) 737-3366
FAX: (702) 737-9255
VI.3. CHANGE OF NOTICE ADDRESS.
------------------------
Any person may change the address to which any such notice, report,
demand or other instrument is to be delivered or mailed to that person, by
furnishing written notice of such change to the other party, but no such
notice of change shall be effective unless and until received by such other
party
VI.4. HEADINGS.
--------
The headings of the articles, sections, paragraphs and subdivisions of
this Deed of Trust are for convenience of reference only, are not to be
considered a part hereof, and shall not limit or expand or otherwise affect
any of the terms hereof.
VI.5. INVALID PROVISIONS TO AFFECT NO OTHERS.
--------------------------------------
In the event that any of the covenants, agreements, terms or
provisions contained herein or in the Notes, the Indenture or any other
Loan Document shall be invalid, illegal or unenforceable in any respect,
the validity of the lien hereof and the remaining covenants, agreements,
terms or provisions contained herein or in the Notes, the Indenture, the
Note Guarantees or any other Loan Document shall be in no way affected,
prejudiced or disturbed thereby. To the extent permitted by law, Trustor
waives any provision of law which renders any provision hereof prohibited
or unenforceable in any respect.
VI.6. CHANGES AND PRIORITY OVER INTERVENING LIENS.
-------------------------------------------
Neither this Deed of Trust nor any term hereof may be changed, waived,
discharged or terminated orally, or by any action or inaction, but only by
an instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or
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termination is sought. Any agreement hereafter made by Trustor and
Beneficiary relating to this Deed of Trust shall be superior to the rights
of the holder of any intervening lien or encumbrance.
VI.7. ESTOPPEL CERTIFICATES.
---------------------
Within ten Business Days after Beneficiary's written request, Trustor
shall from time to time execute a certificate, in recordable form (an
"Estoppel Certificate"), stating, except to the extent it would be
inaccurate to so state: (a) the current amount of the Obligations secured
hereunder and all elements thereof, including principal, interest, and all
other elements; (b) Trustor has no defense, offset, claim, counterclaim,
right of recoupment, deduction, or reduction against any of the Obligations
secured hereunder; (c) non of the Loan Documents have been amended, whether
orally or in writing; (d) Trustor has no claims against Beneficiary of any
kind: (e) any Power of Attorney granted to Beneficiary is in full force and
effect; and (f) such other matters relating to this Deed of Trust, any Loan
Documents and the relationship of Trustor and Beneficiary shall request.
In addition, the Estoppel Certificate shall set forth the reasons why it
would be inaccurate to make any of the foregoing assurances ("a" through
"f").
VI.8. GOVERNING LAW.
-------------
This Deed of Trust shall be construed, interpreted, enforced and
governed by and in accordance with the laws of the State of Nevada, without
regard to its choice of law provisions.
VI.9. REQUIRED NOTICES.
----------------
Trustor shall notify Beneficiary promptly of the occurrence of any of
the following and shall immediately provide Beneficiary a copy of the
notice or documents referred to: (i) receipt of notice from any
Governmental Authority relating to all or any material part of the Trust
Estate if such notice relates to a default, or act, omission or
circumstances which would result in a default after notice or passage of
time or both; (ii) receipt of any notice from any tenant leasing all or any
material portion of the Trust Estate if such notice relates to a default or
act, omission or circumstance which would result in a default after notice
or passage of time or both; (iii) receipt of notice from the holder of any
Permitted Lien relating to a default or act, omission or circumstance which
would result in a default after notice or passage of time or both; (iv) the
commencement of any proceedings or the entry of any judgment, decree or
order materially affecting all or any portion of the Trust Estate or which
involve the potential liability of Trustor or its Affiliates in an amount
in excess of $25,000,000 (other than for personal injury actions and
related property damage suits which have been acknowledged by the insurer
to be covered by such insurance); or (v) commencement of any judicial or
administrative proceedings or the entry of any judgment, decree or order by
or against or otherwise
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affecting Trustor or any Affiliate of Trustor, a material portion of the
Trust Estate, or a material portion of the Personal Property, or any other
action by any creditor or lessor thereof as a result of any default under
the terms of any lease.
VI.10. RECONVEYANCE.
------------
Upon written request of Beneficiary stating that all sums secured
hereby have been paid, and upon surrender of this Deed of Trust to Trustee
for cancellation and retention and upon payment of its fees, Trustee shall
reconvey, without warranty, the property then held hereunder. The recitals
in such reconveyance of any matters or facts shall be conclusive proof of
the truthfulness thereof. The grantee in such reconveyance may be
described as "the person or persons legally entitled thereto."
VI.11. ATTORNEYS' FEES.
---------------
Without limiting any other provision contained herein, Trustor agrees
to pay all costs of Beneficiary or Trustee incurred in connection with the
enforcement of this Deed of Trust or the taking of this Deed of Trust as
security for the repayment of the Notes, including without limitation all
reasonable attorneys' fees whether or not suit is commenced, and including,
without limitation, fees incurred in connection with any probate,
appellate, bankruptcy, deficiency or any other litigation proceedings, all
of which sums shall be secured hereby.
VI.12. LATE CHARGES.
------------
By accepting payment of any sum secured hereby after its due date,
Beneficiary does not waive its right to collect any late charge thereon or
interest thereon at the interest rate on the Notes, if so provided, not
then paid or its right either to require prompt payment when due of all
other sums so secured or to declare default for failure to pay any amounts
not so paid.
VI.13. COST OF ACCOUNTING.
------------------
Trustor shall pay to Beneficiary, for and on account of the
preparation and rendition of any accounting, which Trustor may be entitled
to require under any law or statute now or hereafter providing therefor,
the reasonable costs thereof.
VI.14. RIGHT OF ENTRY.
--------------
Subject to compliance with applicable Gaming Laws, Beneficiary may at
any reasonable time or times make or cause to be made entry upon and
inspections of the Trust Estate or any part thereof in person or by agent;
provided that Beneficiary shall use its best efforts not to interfere with
Trustor's operations on the Property.
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<PAGE>
VI.15. CORRECTIONS.
-----------
Trustor shall, upon request of Trustee, promptly correct any defect,
error or omission which may be discovered in the contents of this Deed of
Trust or in the execution or acknowledgment hereof, and shall execute,
acknowledge and deliver such further instruments and do such further acts
as may be necessary or as may be reasonably requested by Trustee to carry
out more effectively the purposes of this Deed of Trust, to subject to the
lien and security interest hereby created any of Trustor's properties,
rights or interest covered or intended to be covered hereby, and to perfect
and maintain such lien and security interest.
VI.16. STATUTE OF LIMITATIONS.
----------------------
To the fullest extent allowed by the law, the right to plead, use or
assert any statute of limitations as a plea or defense or bar of any kind,
or for any purpose, to any debt, demand or obligation secured or to be
secured hereby, or to any complaint or other pleading or proceeding filed,
instituted or maintained for the purpose of enforcing this Deed of Trust or
any rights hereunder, is hereby waived by Trustor.
VI.17. SUBROGATION.
-----------
Should the proceeds of the loan made by Beneficiary to Trustor,
repayment of which is hereby secured, or any part thereof, or any amount
paid out or advanced by Beneficiary, be used directly or indirectly to pay
off, discharge, or satisfy, in whole or in part, any prior or superior lien
or encumbrance upon the Trust Estate, or any part thereof, then, as
additional security hereunder, Trustee, on behalf of Beneficiary, shall be
subrogated to any and all rights, superior titles, liens, and equities
owned or claimed by any owner or holder of said outstanding liens, charges,
and indebtedness, however remote, regardless of whether said liens,
charges, and indebtedness are acquired by assignment or have been released
of record by the holder thereof upon payment.
VI.18. JOINT AND SEVERAL LIABILITY.
---------------------------
All obligations of Trustor hereunder, if more than one, are joint and
several. Recourse for deficiency after sale hereunder may be had against
the property of Trustor, without, however, creating a present or other lien
or charge thereon.
VI.19. CONTEXT.
-------
In this Deed of Trust, whenever the context so requires, the neuter
includes the masculine and feminine, and the singular including the plural,
and vice versa.
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<PAGE>
VI.20. TIME.
----
Time is of the essence of each and every term, covenant and condition
hereof. Unless otherwise specified herein, any reference to "days" in this
Deed of Trust shall be deemed to mean "calendar days."
VI.21. INTERPRETATION.
--------------
As used in this Deed of Trust unless the context clearly requires
otherwise: The terms "herein" or "hereunder" and similar terms without
reference to a particular section shall refer to the entire Deed of Trust
and not just to the section in which such terms appear; the term "lien"
shall also mean a security interest, and the term "security interest" shall
also mean a lien.
VI.22. EFFECT OF NRS (S) 107.030.
-------------------------
To the extent not inconsistent herewith, the provisions of NRS (S)
107.030 are included herein by reference.
VI.23. AMENDMENTS.
----------
This Deed of Trust cannot be waived, changed, discharged or terminated
orally, but only by an instrument in writing signed by the party against
whom enforcement of any waiver, change, discharge or termination is sought
and only as permitted by the provisions of the Indenture.
VI.24. NO CONFLICTS.
------------
In the event that any of the provisions contained herein conflict with
the Security Agreement, the provisions contained in the Security Agreement
shall prevail.
VI.25. INTERCREDITOR AGREEMENT.
-----------------------
Notwithstanding anything herein to the contrary, all rights and
remedies of Beneficiary under this Deed of Trust are expressly subject to
the terms and conditions of the Intercreditor Agreement.
ARTICLE VII
POWER OF ATTORNEY
-----------------
VII.1. GRANT OF POWER.
--------------
-54-
<PAGE>
Trustor irrevocably appoints Beneficiary and any successor thereto as
its attorney-in-fact, with full power and authority, including the power of
substitution, exercisable only during the continuance of an Event of
Default to act for Trustor in its name, place and stead as hereinafter
provided:
VII.2. POSSESSION AND COMPLETION.
-------------------------
To take possession of the Land and the Resorts, remove all employees,
contractors and agents of Trustor therefrom, complete or attempt to
complete the work of construction of the Orleans Hotel and Casino, and
market, sell or lease the Land and the Resorts.
VII.3. PLANS AND SPECIFICATIONS.
------------------------
To make such additions, changes and corrections in the current Plans
and Specifications as may be necessary or desirable, in Beneficiary's
reasonable discretion, or as it deems proper to complete the restoration of
the Resorts.
VII.4. EMPLOYMENT OF OTHERS.
--------------------
To employ such contractors, subcontractors, suppliers, architects,
inspectors, consultants, property managers and other agents as Beneficiary,
in its discretion, deems proper for the restoration of the Resorts, for the
protection or clearance of title to the Land or Personal Property, or for
the protection of Beneficiary's interests with respect thereto.
VII.5. SECURITY GUARDS.
---------------
To employ watchmen to protect the Land and the Resorts from injury.
VII.6. COMPROMISE CLAIMS.
-----------------
To pay, settle or compromise all bills and claims then existing or
thereafter arising against Trustor, which Beneficiary, in its discretion,
deems proper for the protection or clearance of title to the Land or
Personal Property, or for the protection of Beneficiary's interests with
respect thereto.
VII.7. LEGAL PROCEEDINGS.
-----------------
To prosecute and defend all actions and proceedings in connection with
the Land or the Resorts.
VII.8. OTHER ACTS.
----------
-55-
<PAGE>
To execute, acknowledge and deliver all other instruments and
documents in the name of Trustor that are necessary or desirable, to
exercise Trustor's rights under all contracts concerning the Land or the
Resorts, including, without limitation, under any Space Leases, and to do
all other acts with respect to the Land or the Resorts that Trustor might
do on its own behalf, as Beneficiary, in its reasonable discretion, deems
proper.
-56-
<PAGE>
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust, Assignment of
Rents, Leases and Security Agreement the day and year first above written.
COAST HOTELS AND CASINOS, INC.
a Nevada corporation,
as Trustor
By: /s/ Harlan D. Braaten
------------------------------------
Name: Harlan D. Braaten
Title: President & COO
-57-
<PAGE>
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
On this ____ day of November, 1997, personally appeared before me, a
notary public, _____________________, personally known or proven to me to be the
person whose name is subscribed to the above instrument who acknowledged that he
executed the instrument.
_________________________________
NOTARY PUBLIC
-58-
<PAGE>
SCHEDULE "A-1"
PARCEL I:
The South Half (S1/2) of the Southeast Quarter (SE1/4) of the Southeast Quarter
(SEI/4) of Section 18, Township 21 South, Range 61 East, M.D.B. & M.
EXCEPTING THEREFROM the Easterly 50 feet as conveyed to the County of Clark for
road and public utility purposes as disclosed by Document No. 1060811 in Book
1101, recorded August 14, 1979, Official Records, Clark County, Nevada.
FURTHER EXCEPTING THEREFROM those portions of Flamingo Road and Valley View
Boulevard a conveyed to Clark County by Document No. 1261245 in Book 1302,
recorded October 27, 1980, Official Records, Clark County, Nevada.
PARCEL II:
That portion of the Southeast Quarter (SE1/4) of the Southeast Quarter (SEI/4)
of Section 18, Township 21 South, Range 61 East, M.D.B. & M., more particularly
described as Lot 2, as shown by Parcel Map in File 52, Page 91, recorded May 20,
1987 in Book 870520 as Document No. 00643, of Official Records, Clark County,
Nevada.
<PAGE>
SCHEDULE "A-2"
A portion of the southeast Quarter (SE1/4) of the Southwest Quarter (SW1/4) of
Section 18, Township 20 South, Range 61 East, M.D.B. & M., described as follows:
BEGINNING at the Northeast corner of the Southwest Quarter (SW1/4) of Section
18; thence South 1 degree 57' 55" East, along the East line of said Southeast
Quarter (SE1/4) of the Southwest Quarter (SW1/4) of Section 18, a distance of
996.86 feet; thence South 89 degrees 26' 34" West, 330 feet; thence South 1
degree 57' 55" East, 279.99 feet to a point 50.00 feet Northerly of, and
measured at right angles to the South line of said Section 18; thence South 89
degrees 26' 34" West, parallel with said South line of Section 18 a distance of
50.01 feet; thence South 1 degree 58' 27" East, 20.01 feet to a point 30.00 feet
Northerly of, and measured at right angles to said South line of Section 18;
thence South 89 degrees 26' 34" West, parallel with said South line of Section
18, a distance of 214.93 feet to a point on the Northeasterly right-of-way of
Rancho Drive (U.S. Highway 95), said right-of-way being 62.50 feet Northeasterly
of, and measured at right angles to the "O" line as shown on the right-of-way
drawings for said U.S. Highway 95; thence North 36 degrees 42' 02" West,
parallel with said "O" line, 1600.72 feet to a point on the North line of said
Southeast Quarter (SE1/4) of the Southwest Quarter (SW1/4) of Section 18; thence
North 89 degrees 17' 52" East, 1507.20 feet to the Point of Beginning.
<PAGE>
SCHEDULE "A-3"
PARCEL I:
That portion of the Northwest Quarter (NW1/4) of the Southwest Quarter (SW1/4)
of Section 17, Township 21 South, Range 61 East, M.D.B. & M., described as
follows:
Lot One (1) as shown by map thereof on File 55 of Parcel Maps, Page 40, in the
Office of the County Recorder of Clark County, Nevada recorded January 27, 1988
in Book 880127 as Document No. 530.
PARCEL II:
That portion of the Northwest Quarter (NW1/4) of the Southwest Quarter (SWI/4)
of Section 17, Township 21 South, Range 61 East, M.D.B. & M., described as
follows:
Lot Two (2) as shown by map thereof on File 55 of Parcel Maps, Page 40, in the
Office of the County Recorder of Clark County, Nevada recorded January 27, 1988
in Book 880127 as Document No. 530.
<PAGE>
SCHEDULE "A-4"
That portion of the Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4)
of Section 21, Township 21 South, Range 61 East, M.D.M., described as follows:
COMMENCING at the Northwest (NW) corner of said Section 21, South 88 degrees 05'
38" East along the North line of said Section 21, a distance of 155.55 feet to a
point on the East line of U.S. Highway No. 91, as conveyed by the Southern
Nevada Power Company to the State of Nevada by Deed recorded January 23, 1943 as
Document No. 159436, Clark County, Nevada Records, the true point of beginning;
thence South 00 degrees 02' East along the said East line, a distance of 200.11
feet to a point; thence South 88 degrees 05' 38" East parallel to the said North
line, a distance of 500.00 feet to a point; thence North 00" 02' West parallel
to the said East line, a distance of 200.11 feet to a point on the said North
line; thence North 88 degrees 05' 38" West along the said North line, a distance
of 500.00 feet to. the TRUE POINT OF BEGINNING.
EXCEPTING therefrom the Easterly 30 feet thereof.
Also, a portion of the North 200 feet of the Northwest Quarter (NW1/4) of the
Northwest Quarter (NWI/4) of Section 21, Township 21 South, Range 61 East,
M.D.M., and being a portion of that certain right-of-way (150 feet wide) granted
to the State of Nevada by Southern Nevada Power Co. on January 23, 1943 and
recorded as Document No. 159436 in Book 43 of Deeds, Pages 191 and 192, Clark
County, Nevada Records. The parcel of land to be conveyed is that portion of
the above referred to right-of-way described as follows, to-wit:
Being all of the aforementioned right-of-way lying right or Easterly of a line
located 50.00 feet right or Easterly of and parallel to the "0" line centerline
of U.S. Highway 91 (S.R.6) as staked and constructed in 1951 and lying right or
Easterly of Highway Engineer's Station "0" 934, approximately to Highway
Engineer's Station "0" 936, approximately, and being that parcel remised,
released and quitclaimed unto the Southern Nevada Power Co. by the State of
Nevada, by Quitclaim Deed dated December 20, 1957 and recorded January 10, 1958
as Document No. 122228, Official Records, Book No. 149, Clark County, Nevada.
FURTHER EXCEPTING THEREFROM the interest in and to the South 40 feet of the
hereinabove described parcel of land as conveyed to the County of Clark for road
purposes by Deed recorded September 9, 1953 as Document No. 413334, Official
Records of Clark County, Nevada.
FURTHER EXCEPTING THEREFROM the Northerly Ten (10) feet of the Southerly Fifty
(50) feet, together with that certain radius in the Southwest corner thereof
bounded as follows: On the West side by the East line of U.S. Highway 91, on
the South side by the North line of the South 50.00 feet and on the Northeast
side by the arc of a circle concave to the Northeast having a radius of 25.00
feet that is tangent to the East line of U.S. Highway 91 and tangent to the
North line of said South 50.00 feet as conveyed to the County of Clark by Deed
recorded November 6, 1985 in Book 2213 as Document No. 2172026.
<PAGE>
SCHEDULE "A-5"
A strip of land Two Hundred (200) feet wide along the North line of the
Northwest Quarter (NW1/4) of Section Twenty-one (21), Township Twenty-one (21)
South of Range Sixty-one (61) East of the M.D.B. & M., particularly described as
beginning at the Northwest corner of Section Twenty-one (21); thence East along
the North line of said Section to the Northeast corner of the Northwest Quarter
(NW114) of said Section; thence South at right angles Two Hundred (200) feet;
thence West parallel with the North line of said Section to the West line
thereof; thence North Two Hundred (200) feet to the Place of Beginning.
EXCEPTING THEREFROM that portion of the Northwest Quarter (NW1/4) of the
Northwest Quarter (NW1/4) of Section 21, Township 21 South, Range 61 East,
M.D.M., described as follows:
COMMENCING at the Northwest (NW) corner of said Section 21, South 88 degrees 05'
38" East along the North line of said Section 21, a distance of 155.55 feet to a
point on the East line of U.S. Highway No. 91, as conveyed by the Southern
Nevada Power Company to the State of Nevada by Deed recorded January 23, 1943 as
Document No. 159436, Clark County, Nevada Records, the true point of beginning;
thence South 00 degrees 02' East along the said East line, a distance of 200.11
feet to a point; thence South 88 degrees 05' 38" East parallel to the said North
line, a distance of 500.00 feet to a point; thence North 00 degrees 02' West
parallel to the said East line, a distance of 200.11 feet to a point on the said
North line; thence North 88 degrees 05' 38" West along the said North line, a
distance of 500.00 feet to the TRUE POINT OF BEGINNING.
Also, a portion of the North 200 feet of the Northwest Quarter (NW1/4) of the
Northwest Quarter (NW114) of Section 21, Township 21 South, Range 61 East,
M.D.M., and being a portion of that certain right-of-way (150 feet wide) granted
to the State of Nevada by Southern Nevada Power Co. on January 23, 1943 and
recorded as Document No. 159436 in Book 43 of Deeds, Pages 191 and 192, Clark
County, Nevada Records. The parcel of land to be conveyed is that portion of
the above referred to right-of-way described as follows, to-wit:
Being all of the aforementioned right-of-way lying right or Easterly of a line
located 50.00 feet right or Easterly of and parallel to the "0" line centerline
of U.S. Highway 91 (S.R.6) as staked and constructed in 1951 and lying right or
Easterly of Highway Engineer's Station "0" 934, approximately to Highway
Engineer's Station "0" 936, approximately, and being that parcel remised,
released and quitclaimed unto the Southern Nevada Power Co. by the State of
Nevada, by Quitclaim Deed dated December 20, 1957 and recorded January 10, 1958
as Document No. 122228, official Records, Book No. 149, Clark County, Nevada.
FURTHER EXCEPTING THEREFROM the interest in and to the South 40 feet of the
hereinabove described parcel of land as conveyed to the County of Clark for road
purposes by Deed recorded September 9, 1953 as Document No. 413334, Official
Records of Clark County, Nevada.
<PAGE>
FURTHER EXCEPTING THEREFROM the Northerly Ten (10) feet of the Southerly Fifty
(50) feet, together with that certain radius in the Southwest corner thereof
bounded as follows: On the West side by the East line of U.S. Highway 91, on the
South side by the North line of the South 50.00 feet and on the Northeast side
by the arc of a circle concave to the Northeast having a radius of 25.00 feet
that is tangent to the East line of U.S. Highway 91 and tangent to the North
line of said South 50.00 feet as conveyed to the County of Clark by Deed
recorded November 6, 1985 in Book 2213 as Document No. 2172026.
FURTHER EXCEPTING THEREFROM that portion of land as conveyed to the State of
Nevada by Final Order of Condemnation recorded May 30, 1995 in Book 950530 as
Document No. 00882 of official Records, Clark County, Nevada.
<PAGE>
SCHEDULE "A-6"
The East Half (El/2) of the Southwest Quarter (SW1/4) of Section 19, Township 21
South, Range 61 East, M.D.B. & M.
EXCEPTING THEREFROM the southerly 50 feet as granted to the County of Clark for
road, utilities and other public purposes by Document No; 444500, recorded July
7, 1964.
FURTHER EXCEPTING THEREFROM the West Thirty feet (30.00') of said land, together
with that certain spandrel area in the Southwest corner thereof, also being the
Northeast corner of the intersection of Tropicana Avenue and Cameron Street,
bounded as follows: On the South by the North line of the South Fifty feet
(50.00'); on the West by the East line of the West Thirty feet (30.00'); and on
the Northeast by the arc of a curve concave Northeasterly, having a radius of
Twenty-five feet (25.00') and being tangent to the North line of said South
Fifty feet (50.00') and to the East line of said West Thirty feet (30.00').
FURTHER EXCEPTING THEREFROM the East Forty feet (40.00') of said land, together
with that certain spandrel area in the Southeast corner thereof, also being the
Northwest corner of the intersection of Tropicana Avenue and Arville Street,
bounded as follows: on the East by the West line of the East Forty feet
(40.00'); on the South by the North line of the South Fifty feet (50.00'); and
on the Northwest by the arc of a curve concave Northwesterly, having a radius of
Twenty-five feet (25.00') and being tangent to the West line of said East Forty
feet (40.00'); and to the North line of said South Fifty feet (50.00').
FURTHER EXCEPTING THEREFROM the North Thirty feet (30.00') together with that
spandrel area in the Northwest corner thereof, also being the Southeast corner
of the intersection of Cameron Street and Harmon Avenue, bounded as follows: On
the North by the South line of the North Thirty feet (30.00'); on the West by
the East line of the West Thirty feet (30.00'); and on the Southeast by the arc
of a curve concave to the Southeast having a radius of Twenty feet (20.00') and
being tangent to the South line of said North Thirty feet (30.00') and to the
East line of said West Thirty feet (30.00'); also together with that other
spandrel area in the Northeast corner thereof being the Southwest corner of the
intersection of Harmon Avenue and Arville Street, bounded as follows: On the
North by the South line of the North Thirty feet (30.00'); on the East by the
East line of the Southwest Quarter (SW1/4) of Section 19; and on the Southwest
by the arc of a curve concave to the Southwest having a radius of Twenty-five
feet (25.00') and being tangent to the South line of said North Thirty feet
(30.00') and to the West line of the East Forty feet (40.00'); and on the South
side by the prolongation of a line radial to the curve's point of tangency with
the West line of the East Forty feet (40.00'), as conveyed to Clark County for
roads and other public purposes by Deed recorded October 21, 1976 as Document
No. 630256 and by Deed recorded May 23, 1978 as Document No. 850472 and by Deed
recorded February 27, 1986 in Book 860227 as Document No. 00275 and by Deed
recorded February 25, 1989 in Book 890225 as Document Nos. 00659 and 00660 and
by Deed recorded December 7, 1990 in Book 901207 as Document Nos. 00731 and
00732 of Official Records, Clark County, Nevada.
<PAGE>
FURTHER EXCEPTING THEREFROM that portion conveyed to Clark County by Grant,
Bargain, Sale Deed recorded November 21, 1996 as Document No. 1951 of Official
Records, Clark County, Nevada. More particularly described as follows:
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Cameron
Street, thence North 89 degrees 53' 40" East, 370.62 feet to a point on the
centerline of Tropicana Avenue, thence North 00 degrees 06' 20" West, 50.00 feet
to a point on the existing Northern right-of-way line of Tropicana Avenue, also
being the TRUE POINT OF BEGINNING; thence North 00 degrees 06' 20" West, 14.00
feet to a point; thence North 89 degrees 53' 40" East, 120.76 feet to a point on
a curve, radius point of said curve is located South 00 degrees 06' 20" East,
266.00 feet from the previous point; thence on a curve to the right, subtending
a central angle of 13 degrees 10' 25", and having a radius of 266.00 feet along
said curve an arc length of 61.16 feet to a point of compound curvature of a
curve to the left. Thence along said curve to the left, subtending a central
angle of 13 degrees 10' 25", and having a radius of 266.00 feet an arc length of
61.16 feet to a point of curve located on the existing right-of-way of Tropicana
Avenue, thence south 89 degrees 53' 40" West, 242.00 feet to the TRUE POINT OF
BEGINNING.
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Cameron
Street, thence North 89 degrees 53' 40" East, 572.62 feet to a point on the
centerline of Tropicana Avenue, thence North 00 degrees 06' 20" West, 50.00
feet to a point on the existing Northern right-of-way of Tropicana Avenue, also
being the TRUE POINT OF BEGINNING; thence North 00 degrees 06' 20" West, 12.00
feet, thence North 89 degrees 53' 40" East, 108.50 feet to a point of curve,
radius point of said curve is located South 00 degrees 06' 20" East, 300.00
feet, from the previous point; thence on a curve to the right, subtending a
central angle of 11 degrees 29' 50", and having a radius of 300.00 feet along
said curve an arc length of 60.20 feet to a point of compound curvature of a
curve to the left; subtending a central angle of 12 degrees 28' 13", and having
a radius of 300.00 feet, along said curve an arc length of 65.29 feet to a point
of curve on the existing right-of-way of Tropicana Avenue; thence South 89
degrees 53' 40" West, 233.19 feet to the TRUE POINT OF BEGINNING.
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Cameron
Street, thence North 89 degrees 53' 40" East, 1087.48 feet to a point on the
centerline of Tropicana Avenue, thence North 00 degrees 06' 20" West, 50.00 feet
to the TRUE POINT OF BEGINNING, located on the existing Northern right-of-way
line of Tropicana Avenue, thence North 00 degrees 06' 20" West, 14.00
<PAGE>
feet; thence North 89 degrees 53' 40" East, 6.23 feet to a point of curve;
radius point of said curve is located South 00 degrees 06' 20" East, 266.00 feet
from the previous point; thence along a curve to the right subtending a central
angle of 13 degrees 10' 25", and having a radius of 266.00 feet, an arc length
of 61.16 feet to a point of compound curvature of a curve to the left; thence
along said curve to the left, subtending a central angle of 13 degrees 10' 25",
and having a radius of 266.00 feet, an arc length of 61.16 feet to a point on
the existing Northern right-of-way of Tropicana Avenue; thence South 89 degrees
53' 40" West, 127.47 feet to the TRUE POINT OF BEGINNING.
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Arville
Street; thence North 00 degrees 39' 24" West, 75.63 feet to a point on the
centerline of Arville Street; thence South 89 degrees 20' 36" West, 40.00 feet
to a point of curve; also being the TRUE POINT OF BEGINNING, on the existing
Western right-of-way line of Arville Street, radius point of said curve is
located South 89 degrees 20' 36" West, 25.00 feet; from the previous point,
thence on a curve to the right, subtending a central angle of 90 degrees 33'
04", and having a radius of 25.00 feet, an arc length of 39.51 feet to a point
of curve on the existing Northern right-of-way of Tropicana Avenue; thence South
89 degrees 53' 40" West, 13.00 feet, continuing along the existing Northern
right-of-way line of Tropicana Avenue to a point of curve; radius point of said
curve is located North 00 degrees 06' 20" West, 25.00 feet from the previous
point; thence on a curve to the left subtending a central angle of 90 degrees
33' 04", and having a radius of 25.00 feet, an arc length of 39.51 feet to a
point of curve; thence North 00 degrees 39' 24" West, 407.97 feet to a point of
curve; radius point of said curve is located North 89 degrees 20' 36" East,
205.00 feet from the previous point; thence along a curve to the right
subtending a central angle of 08 degrees 01' 57", and having a radius of 205.00
feet, an arc length of 28.74 feet to a point; thence North 07 degrees 22' 33"
East, 64.95 feet to a point of curve; radius point of said curve is located
North 82 degrees 37' 27" West, 195.00 feet from the previous point; thence along
a curve to the left, subtending a central angle of 08 degrees 01' 57", and
having a radius of 195.00 feet an arc length of 27.34 feet to a point of curve
on the existing Western right-of-way of Arville Street; thence South 00 degrees
39' 24" East, 528.30 feet to the TRUE POINT OF BEGINNING.
<PAGE>
EXHIBIT 1
(Landlord-Mortgagee Agreement Executed by Empey Enterprises
Regarding Barbary Coast Lease)
<PAGE>
CONSENT
-------
and
LANDLORD-MORTGAGEE AGREEMENT
----------------------------
THIS CONSENT AND LANDLORD-MORTGAGEE AGREEMENT ("Agreement") is dated
November 21, 1997 for purposes of reference only and is entered into by and
between FIRSTAR BANK OF MINNESOTA, N.A. (the "Trustee"), EMPEY ENTERPRISES, a
Nevada general partnership ("Landlord") and BARBARY COAST HOTEL AND CASINO, a
Nevada general partnership ("Lessee").
RECITALS
--------
A. Property and Lease. Landlord is the owner of real property in Clark
------------------
County, Nevada, described in Exhibit "A" attached hereto and by this reference
incorporated herein (the "Premises"). Landlord and Lessee are parties to a
Lease Agreement dated May 1, 1992 relating to the Premises (the "Lease").
B. Reorganization. Lessee and Gold Coast Hotel and Casino, a Nevada
--------------
limited partnership, intend to reorganize in a transaction (the
"Reorganization") in which (i) the assets of Lessee will become the assets of
Coast Resorts, Inc., a Nevada corporation ("Resorts") and (ii) Resorts will then
immediately transfer and assign those assets to Coast Hotels and Casinos, Inc.,
a Nevada corporation ("Tenant") in capitalization of Tenant.
C. Notes. It is anticipated that Trustee will be the trustee under an
-----
Indenture (the "Indenture"), by and among Tenant as issuer, Resorts as
guarantor, and Trustee, pursuant to which, Tenant will issue 10 7/8% First
Mortgage Notes due 2001 (the "Notes") in a total principal amount not to exceed
SIXTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS ($16,800,000.00).
D. Obligations. In accordance with the anticipated requirements of the
-----------
Indenture, and as security for the Notes and other obligations of Tenant under
the Indenture (the "Obligations"), Tenant intends to execute as trustor and
deliver to Trustee, a Leasehold Deed of Trust, Security Agreement and Assignment
of Rents and Leases (the "Deed of Trust") encumbering Tenant's leasehold
interest in the Premises and the Lease. As additional security for the
Obligations, Tenant intends to grant to Trustee a security interest in Tenant's
inventory, equipment and other personal property now or hereafter located on the
Premises (the "Personal Property").
E. Reliance. Landlord acknowledges and understands that Lessee, Tenant,
--------
Resorts and Trustee, on behalf of the holders of Notes will rely upon the
provisions set forth in this Agreement.
<PAGE>
CONSENT AND AGREEMENT
---------------------
In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Consent to Assignment and Deed of Trust. Landlord hereby consents to
---------------------------------------
the assignment by Lessee of Lessee's leasehold interest under the Lease to
Resorts and the assignment of that leasehold interest thereafter to Tenant
incident to the Reorganization so long as Tenant agrees in writing, for the
benefit of Landlord, to assume the terms and conditions of the Lease and
Lessee's obligations thereunder. Landlord hereby consents to Tenant's grant to
Trustee of a lien on Tenant's leasehold interest in the Premises pursuant to the
terms of the Deed of Trust. Landlord agrees that the provisions of Paragraphs 3
through 10 below shall take effect upon the recording of the Deed of Trust.
Those provisions shall be solely for the benefit of Trustee, any successor
Trustee and the holders of the Notes and shall not inure to the benefit of any
other lender, person or entity without Landlord's prior written approval. Those
provisions shall expire and become null and void upon (i) full and complete
discharge of the obligations secured by the Deed of Trust, (ii) a full
reconveyance of the Deed of Trust or (iii) a Foreclosure Transfer (as defined in
Paragraph 5).
2. Status of Lease. Landlord certifies that (i) the Lease is in full
---------------
force and effect, (ii) no amendment has been made to the Lease, (iii) no default
exists under the Lease and (iv) rent and other charges have been paid to the
extent payable and have not been prepared more than one year in advance.
3. Personal Property. The Personal Property shall not be deemed to be a
-----------------
fixture or part of the underlying real estate but shall at all times be
considered personal property. Landlord waives and relinquishes any landlord's
lien, all rights of levy or constraint, security interest or other interest that
Landlord may now or hereafter have in any of the Personal Property, whether for
rent or otherwise; provided, however, that nothing in the foregoing shall
constitute a waiver or release by Landlord of any right or interest of Landlord
in the real property being leased by Landlord under the Lease or the building
and site improvements located on that property. Landlord agrees that Trustee,
at its option, may enter the Premises for the purpose of repossessing, removing,
selling or otherwise dealing with the Personal Property, and such license shall
be irrevocable and shall continue without charge for a period of ninety (90)
days after the receipt by Trustee of written notice from Landlord directing
removal of the Personal Property.
4. Notice and Cure Rights. No notice from Landlord shall be effective
----------------------
unless it is also given to Trustee. Any notice of default shall state the
nature of the default and shall specify the amounts of rent or other payments
claimed to be in default. In the event of a default by Tenant, under the Lease,
Landlord shall accept any curative acts undertaken by or at the instigation of
Trustee as if undertaken by Tenant. Trustee shall be given notice of any
arbitration or other proceeding or dispute between Landlord and Tenant and shall
have the right to intervene therein and be made a party thereto. Further,
Trustee shall receive notice, and a copy, of any
<PAGE>
award or decision made in such arbitration or other proceeding. If Landlord
shall elect to terminate the Lease by reason of any default of Tenant, Trustee
shall have the rights set forth in Exhibit "B" attached hereto and by this
reference incorporated herein.
5. Assignment. Tenant's interest in the Lease may be assigned,
----------
transferred or conveyed pursuant to judicial or nonjudicial foreclosure or a
conveyance in lieu of foreclosure (a "Foreclosure Transfer"). If Trustee is the
transferee under a Foreclosure Transfer, Trustee may assign the Lease without
Landlord's prior written consent, but if the Lease is so assigned by Trustee
without Landlord's prior written consent, Trustee shall be and remain jointly
and severally liable with the assignee for any and all liability arising or
accruing under the Lease after the date of such assignment, including the
obligation to pay rent under the Lease. If Trustee is the transferee under a
Foreclosure Transfer and Trustee obtains Landlord's prior written consent to
assignment of the Lease as provided in the Lease, upon such assignment, Trustee
shall thereupon be released from all prospective liability as tenant under the
Lease from and after the date of such assignment so long as (but only so long
as) the assignee executes, acknowledges and delivers to Landlord an instrument
in writing by which assignee expressly assumes all of the obligations, terms and
conditions of the Lease. Notwithstanding anything in the foregoing to the
contrary, a Foreclosure Transfer shall not operate to release Tenant from any
liability of Tenant under the Lease, and a Foreclosure Transfer shall not
operate to release Trustee from any liability as tenant under the Lease for any
period during which Trustee has the right to possession of the Premises.
6. Extension Options. If the Deed of Trust is not reconveyed prior to
-----------------
January 1, 2003, and if Tenant has then failed to exercise its option to extend
the term of the Lease beyond May 1, 2003, then after January 31, 2003, but
before April 30, 2003, Landlord agrees to accept from Trustee, on behalf of
Tenant, the exercise of an option to extend the term of the Lease within the
time period set forth in the Lease for such exercise.
7. Amendment to Lease and Mortgage by Landlord. The cancellation,
-------------------------------------------
surrender or amendment of the Lease by Tenant shall not be effective without the
prior written consent of Trustee.
8. Insurance and Condemnation Proceeds. Notwithstanding any provisions
-----------------------------------
of the Lease to the contrary, any insurance or condemnation proceeds payable to
Tenant or the Trustee as a result of damage, destruction or condemnation of any
portion of the property or improvements thereto shall be paid to the respective
parties in order of priority, for handling in accordance with the terms of the
Deed of Trust, up to the amount of the obligations secured by the Deed of Trust.
Any remaining proceeds shall be distributed as provided in the Lease. Landlord
and Tenant shall not enter into any settlement or adjustment relating to such
proceeds without the prior written consent of the Trustee. Nothing in the
foregoing is intended to diminish or otherwise affect the amount of condemnation
or insurance proceeds payable to Landlord pursuant to the Lease or to diminish
or otherwise affect the amount of condemnation or insurance proceeds that would
be payable to or for the benefit of Tenant under the Lease absent the Deed of
<PAGE>
Trust.
9. No Merger. If Tenant acquires the fee estate in the Premises, the
---------
Deed of Trust shall not merge out of existence but instead shall be, become and
continue as an encumbrance of the entire interests of Tenant in the Premises.
10. Estoppel Certificates. Within fifteen (15) days after written request
---------------------
by Tenant or Trustee, Landlord shall deliver to the requesting party (and any
other party identified by the requesting party) an estoppel certificate signed
by Landlord in form reasonably designated by the requesting party that certifies
as to (i) the rent payable under the Lease, (ii) the term of the Lease and the
rights of Tenant, if any, to extend the term of the Lease, (iii) the nature of
any defaults by Tenant alleged by Landlord and (iv) any other matters reasonably
requested by the requesting party. Within 15 days after written request by
Landlord or Trustee, Tenant shall deliver to the requesting party an estoppel
certificate signed by Tenant in form reasonably designated by Landlord or
Trustee that certifies as to (i) the rent payable under the Lease, (ii) the
nature of any defaults by Landlord alleged by Tenant and (iii) any other matters
reasonably requested by Landlord.
11. Miscellaneous. This Agreement may not be changed or terminated orally
-------------
and is binding upon, and inures to the benefit of, the parties hereto and each
of their respective successors and assigns. This Agreement shall be governed
by and construed in accordance with the laws of the State of Nevada. This
Agreement may be executed in counterparts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Consent and Landlord-Mortgagee Agreement to be effective as of the day and
year first above written.
EMPEY ENTERPRISES, a Nevada FIRSTAR BANK OF MINNESOTA, N.A.
general partnership as Trustee
By /s/ Philip H. Empey, Jr, By /s/ Frank Leslie, III
---------------------------- -------------------------------
Name: Philip H. Empey, Jr. Name: Frank Leslie, III
Title: Managing Partner Title: Vice President
By /s/ Nancy Empey Helm
---------------------------
Name: Nancy Empey Helm
Title:
COAST HOTELS AND CASINOS, INC.,
a Nevada corporation
By /s/ Michael Gaughan
-----------------------------
MICHAEL GAUGHAN, Chairman of
the Board and Chief Executive Officer
<PAGE>
STATE OF ______________)
) ss.:
COUNTY OF _____________)
This instrument was acknowledged before me on _________, 199_ by
____________ _________________ as ________ of EMPEY ENTERPRISES, a Nevada
general partnership.
________________________________
NOTARY PUBLIC
STATE OF ______________)
) ss.:
COUNTY OF _____________)
This instrument was acknowledged before me on __________, 199_ by
__________ ________________ as _________ of EMPEY ENTERPRISES, a Nevada general
partnership.
________________________________
NOTARY PUBLIC
STATE OF ______________)
) ss:
COUNTY OF _____________)
This instrument was acknowledged before me on __________, 199_ by
__________ _________________ as _____________ of FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee.
_______________________________
NOTARY PUBLIC
STATE OF NEVADA )
) ss.:
COUNTY OF CLARK )
This instrument was acknowledged before me on ____________, 199_ by MICHAEL
GAUGHAN as Chairman of the Board and Chief Executive Officer of COAST HOTELS AND
CASINOS, INC., a Nevada corporation.
_______________________________
NOTARY PUBLIC
<PAGE>
EXHIBIT "A"
That portion of the Northwest Quarter (NW1/4) of the Northwest Quarter (NWI/4)
of Section 21, Township 21 South, Range 61 East, M.D.M., described as follows:
COMMENCING at the Northwest (NW) corner of said Section 21, South 88 degrees 05'
38" East along the North line of said Section 21, a distance of 155.55 feet to a
point on the East line of U.S. Highway No. 91, as conveyed by the Southern
Nevada Power Company to the State of Nevada by Deed recorded January 23, 1943 as
Document No. 159436, Clark County, Nevada Records, the true point of beginning;
thence South 00 degrees 02' East along the said East line, a distance of 200.11
feet to a point; thence South 88 degrees 05' 38" East parallel to the said North
line, a distance of 500.00 feet to a point; thence North 00 degrees 02' West
parallel to the said East line, a distance of 200.11 feet to a point on the said
North line; thence North 88 degrees 05' 38" West along the said North line, a
distance of 500.00 feet to the TRUE POINT OF BEGINNING.
EXCEPTING therefrom the Easterly 30 feet thereof.
Also, a portion of the North 200 feet of the Northwest Quarter (NW1/4) of the
Northwest Quarter (NW1/4) of Section 21, Township 21 South, Range 61 East,
M.D.M., and being a portion of that certain right-of-way (150 feet wide) granted
to the State of Nevada by Southern Nevada Power Co. on January 23, 1943 and
recorded as Document No. 159436 in Book 43 of Deeds, Pages 191 and 192, Clark
County, Nevada Records. The parcel of land to be conveyed is that portion of
the above referred to right-of-way described as follows, to-wit:
Being all of the aforementioned right-of-way lying right or Easterly of a line
located 50.00 feet right or Easterly of and parallel to the "0" line centerline
of U.S. Highway 91 (S.R.6) as staked and constructed in 1951 and lying right or
Easterly of Highway Engineer's Station "0" 934, approximately to Highway
Engineer's Station "0" 936, approximately, and being that parcel remised,
released and quitclaimed unto the Southern Nevada Power Co. by the State of
Nevada, by Quitclaim Deed dated December 20, 1957 and recorded January 10, 1958
as Document No. 122228, Official Records, Book No. 149, Clark County, Nevada.
FURTHER EXCEPTING THEREFROM the interest in and to the South 40 feet of the
hereinabove described parcel of land as conveyed to the County of Clark for road
purposes by Deed recorded September 9, 1953 as Document No. 413334, Official
Records of Clark County, Nevada.
FURTHER EXCEPTING THEREFROM the Northerly Ten (10) feet of the Southerly Fifty
(50) feet, together with that certain radius in the Southwest corner thereof
bounded as follows: on the West side by the East line of U.S. Highway 91, on the
South side by the North line of the South 50.00 feet and on the Northeast side
by the arc of a circle concave to the Northeast having a radius of 25.00 feet
that is tangent to the East line of U.S. Highway 91 and tangent to the North
line of said South 50.00 feet as conveyed to the County of Clark by Deed
recorded November 6, 1985 in Book 2213 as Document No. 2172026.
<PAGE>
EXHIBIT "B"
If Landlord shall elect to terminate the Lease by reason of any default of
Tenant, prior to doing so, Landlord agrees to give notice of such election to
Tenant and Trustee, specifying the default or defaults of Tenant resulting in
such termination and further agrees as follows:
(a) Trustee may nullify any notice of termination by curing such
default prior to the effective date of termination.
(b) With respect to a termination resulting only from a default or
defaults which Trustee reasonably can cure, Trustee may nullify any such
notice of termination by doing all of the following:
(i) Curing or causing to be cured, within forty-five (45) days of
such notice, any monetary defaults and any other defaults which are
capable of cure within 45 days; and
(ii) Within 45 days of such notice, commencing to cure or causing
the commencement of cure of any other default and thereafter
diligently pursuing such cure to completion; and
(iii) During any cure period, paying or causing to be paid any
rent and other monetary obligations of Tenant under the Lease of which
Trustee has knowledge, as the same fall due.
(c) With respect to a termination resulting, in whole or in part, from
a default or defaults of Tenant which Trustee cannot reasonably cure,
Trustee may postpone and extend the specified date for such termination as
fixed by Landlord in its notice of termination, for a period of not more
than ninety (90) days; provided that Trustee shall agree with Landlord (by
giving a notice to that effect to Landlord) before the effective date of
termination, to accomplish the following within the times hereinafter
provided and shall, in fact, accomplish the following in a timely manner:
(i) cure or cause to be cured within forty-five (45) days of such
notice any then-existing monetary defaults of which Trustee has
knowledge;
(ii) pay or cause to be paid during such 90-day period (as it may
be extended as provided below) any rent and other monetary obligations
of Tenant under the Lease of which Trustee has knowledge, as the same
fall due;
(iii) promptly cure or cause to be cured any other defaults that
Trustee can cure and of which Trustee has knowledge;
(iv) take steps to acquire or sell Tenant's interest in the Lease
by
<PAGE>
foreclosure of the Deed of Trust or otherwise; provided that the time
period for commencement of such steps shall be extended one day for
each day that Trustee is under any statutory or judicial restraint
precluding the taking of such steps; and
(v) prosecute to completion with reasonable diligence the steps
commenced pursuant to the preceding clause.
If, at the end of such 90-day period (as it may be extended), Trustee shall
be actively engaged in steps to acquire or sell Tenant's interest in the
Lease and is in compliance with the other conditions set forth in clauses
(i) through (v) above, including the payment of all rent and other monetary
obligations of Tenant as they fall due, the time for completion of such
steps shall be further extended upon the same conditions for such period as
shall be reasonably necessary to complete such steps with reasonable
diligence so long as, but only so long as Trustee continues to timely pay
or cause to be paid all rent and other monetary obligations of Tenant as
they fall due. If Tenant's interest is acquired or sold by foreclosure of
the Deed of Trust or otherwise during such 90-day period (as it may be
extended), the intended termination of the Lease by Landlord under the
subject notice will be automatically nullified, and the Lease will continue
as if the notice of termination had never been given so long as Trustee has
complied with the conditions set forth in clauses (i) through (v) above and
has commenced and is diligently pursuing the cure of all defaults which
Trustee can reasonably cure.
(d) If the Lease, without the consent of Trustee, is terminated for
any reason before the end of its stated term, as such stated term may be
extended, then Landlord shall, upon written request from Trustee made
within sixty (60) days after such termination, enter into a new lease of
the Premises with Trustee. The new lease shall be on the same terms and
conditions as the Lease (including without limitation any rights or options
to extend the term of the Lease or acquire the Premises) and shall have the
same priority as the Lease. Landlord's obligation to enter into such a new
lease shall be conditioned upon the following: (i) Trustee shall have
cured all monetary defaults and commenced, and diligently prosecuted, the
cure of all reasonably curable non-monetary defaults and (ii) Trustee shall
reimburse Landlord for all reasonable costs and expenses incurred in
entering into such new lease.
<PAGE>
EXHIBIT 2
(Landlord-Mortgagee Agreement Executed by The Tiberti Company Regarding Orleans
Lease)
<PAGE>
CONSENT
-------
and
LANDLORD-MORTGAGEE AGREEMENT
----------------------------
THIS CONSENT AND LANDLORD-MORTGAGEE AGREEMENT ("Agreement") is dated and
made effective as of November 21, 1997 and is entered into by and between
FIRSTAR BANK OF MINNESOTA, N.A. (the "Trustee"), THE TIBERTI COMPANY, a Nevada
general partnership ("Landlord") and COAST HOTELS AND CASINOS, INC., a Nevada
corporation ("Tenant").
RECITALS
--------
A. Property and Lease. Landlord is the owner of real property in Clark
------------------
County, Nevada, described in Exhibit "A" attached hereto and by this reference
incorporated herein (the "Premises"). Landlord and Gold Coast Hotel and Casino,
a Nevada limited partnership ("Lessee") were parties to a Lease dated October 1,
1995 relating to the Premises (the "Lease").
B. Reorganization. Lessee and Barbary Coast Hotel and Casino, a Nevada
--------------
general partnership, have reorganized in a transaction (the "Reorganization") in
which (i) the assets of Lessee became the assets of Coast Resorts, Inc., a
Nevada corporation ("Resorts") and (ii) Resorts transferred and assigned those
assets to Tenant in capitalization of Tenant.
C. Notes. It is anticipated that Trustee will be the trustee under an
-----
Indenture (the "Indenture"), by and among Tenant as issuer, Resorts as
guarantor, Coast West, Inc., a Nevada corporation, as guarantor, and Trustee,
pursuant to which Tenant will issue 10 7/8% First Mortgage Notes due 2001 (the
"Notes") in a total principal amount of SIXTEEN MILLION EIGHT HUNDRED THOUSAND
DOLLARS ($16,800,000.00).
D. Obligations. In accordance with the anticipated requirements of the
-----------
Indenture, and as security for the Notes and other obligations of Tenant under
the Indenture (the "Obligations"), Tenant intends to execute as trustor and
deliver to Trustee, a Leasehold Deed of Trust, Security Agreement and Assignment
of Rents and Leases (the "Deed of Trust") encumbering Tenant's leasehold
interest in the Premises and the Lease. As additional security for the
obligations, Tenant intends to grant to Trustee a security interest in Tenant's
inventory, equipment and other personal property now or hereafter located on the
Premises (the "Personal Property").
E. Reliance. Landlord acknowledges and understands that Tenant, Resorts
--------
and Trustee, on behalf of the holders of Notes, will rely upon the provisions
set forth in this Agreement.
CONSENT AND AGREEMENT
---------------------
<PAGE>
In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Consent to Deed of Trust. Landlord hereby consents to Tenant's grant
------------------------
to Trustee of a lien on Tenant's leasehold interest in the Premises pursuant to
the terms of the Deed of Trust. Landlord agrees that the provisions of
Paragraphs 3 through 10 below shall take effect upon the recording of the Deed
of Trust. Those provisions shall be for the benefit of Trustee, any successor
Trustee and the holders of the Notes and shall not inure to the benefit of any
other lender, person or entity without Landlord's prior written approval. Those
provisions shall expire and become null and void upon (i) full and complete
discharge of the obligations secured by the Deed of Trust, (ii) a full
reconveyance of the Deed of Trust or (iii) a Foreclosure Transfer (as defined in
Paragraph 5).
2. Status of Lease. Landlord certifies that to the best of Landlord's
---------------
knowledge, (i) the Lease is in full force and effect, (ii) no amendment has been
made to the Lease, (iii) no default exists sunder the Lease and (iv) rent and
other charges have been paid to the extent payable and have not been prepaid
more than one year in advance.
3. Personal Property. The Personal Property shall not be deemed to be a
-----------------
fixture or part of the underlying real estate but shall at all times be
considered personal property. Landlord waives and relinquishes any landlord's
lien, all rights of levy or constraint, security interest or other interest that
Landlord may now or hereafter have in any of the Personal Property, whether for
rent or otherwise; provided, however, that nothing in the foregoing shall
constitute a waiver or release by Landlord of any right or Interest of Landlord
in the real property being leased by Landlord under the Lease or the building
and site improvements located on that property. Landlord agrees that Trustee,
at its option, may enter the Premises for the purpose of repossessing, removing,
selling or otherwise dealing with the Personal Property, and such license shall
be irrevocable and shall continue without charge for a period of ninety (90)
days after the receipt by Trustee of written notice from Landlord directing
removal of the Personal Property.
4. Notice and Cure Rights. No notice from Landlord shall be effective
----------------------
unless it is also given to Trustee. Any notice of default shall state the
nature of the default and shall specify the amounts of rent or other payments
claimed to be in default. In the event of a default by Tenant under the Lease,
Landlord shall accept any curative acts undertaken by or at the instigation of
Trustee as if undertaken by Tenant. Trustee shall be given notice of any
arbitration or other proceeding or dispute between Landlord and Tenant and shall
have the right to intervene therein and be made a party thereto. Further,
Trustee shall receive notice, and a copy, of any award or decision made in such
arbitration or other proceeding. If Landlord shall elect to terminate the Lease
by reason of any default of Tenant, Trustee shall have the rights set forth in
Exhibit "B" attached hereto and by this reference incorporated herein.
5. Assignment. Tenant's interest in the Lease may be assigned,
----------
transferred or conveyed pursuant to judicial or non-judicial foreclosure or a
conveyance in lieu of foreclosure (a "Foreclosure Transfer"). If Trustee is the
transferee under a Foreclosure Transfer, Trustee may
<PAGE>
assign the Lease without Landlord's prior written consent, but if the Lease is
so assigned by Trustee, and Landlord's prior written consent is either not
sought by Trustee or is sought by Trustee but reasonably withheld by Landlord,
Trustee shall be and remain jointly and severally liable with the assignee for
any and all liability arising or accruing under the Lease after the date of such
assignment, including the obligation to pay rent under the Lease. If Trustee is
the transferee under a Foreclosure Transfer and Trustee obtains Landlord's prior
written consent to assignment of the Lease as provided in the Lease, or if
Trustee seeks Landlord's prior written consent and Landlord unreasonably
withholds that consent, then upon such assignment, Trustee shall thereupon be
released from all prospective liability as tenant under the Lease from and after
the date of such assignment so long as (but only so long as) the assignee
executes, acknowledges and delivers to Landlord an instrument in writing by
which assignee expressly assumes all of the obligations, terms and conditions of
the Lease. Notwithstanding anything in the foregoing to the contrary, a
Foreclosure Transfer shall not operate to release Tenant from any liability of
Tenant under the Lease, and a Foreclosure Transfer shall not operate to release
Trustee from any liability as tenant under the Lease for any period during which
Trustee has the right to possession of the Premises.
6. INTENTIONALLY OMITTED
---------------------
7. Amendment to Lease and Mortgage by Landlord. The cancellation,
-------------------------------------------
surrender or amendment of the Lease by Tenant shall not be effective without the
prior written consent of Trustee.
8. Insurance and Condemnation Proceeds. Notwithstanding any provisions of
-----------------------------------
the Lease to the contrary, any insurance or condemnation proceeds payable to
Tenant or the Trustee as a result of damage, destruction or condemnation of any
portion of the property or improvements thereto shall be paid to the respective
parties in order of priority, for handling in accordance with the terms of the
Deed of Trust, up to the amount of the obligations secured by the Deed of Trust.
Any remaining proceeds shall be distributed as provided in the Lease. Landlord
and Tenant shall not enter into any settlement or adjustment relating to such
proceeds without the prior written consent of the Trustee. Nothing in the
foregoing is intended to diminish or otherwise affect the amount of condemnation
or insurance proceeds payable to Landlord pursuant to the Lease or to diminish
or otherwise affect the amount of condemnation or insurance proceeds that would
be payable to or for the benefit of Tenant under the Lease absent the Deed of
Trust.
9. No Merger. If Tenant acquires the fee estate in the Promises, the Deed
---------
of Trust shall not merge out of existence but instead shall be, become and
continue as an encumbrance of the entire interests of Tenant in the Premises.
10. Estoppel Certificates. Within fifteen (15) days after written request
---------------------
by Tenant or Trustee, Landlord shall deliver to the requesting party (and any
other party identified by the requesting party) an estoppel certificate signed
by Landlord in form reasonably designated by the requesting party that certifies
as to (i) the rent payable under the Lease, (ii) the term of the Lease
<PAGE>
and the rights of Tenant, if any, to extend the term of the Lease, (iii) the
nature of any defaults by Tenant alleged by Landlord and (iv) any other matters
reasonably requested by the requesting party. Within 15 days after written
request by Landlord or Trustee, Tenant shall deliver to the requesting party an
estoppel certificate signed by Tenant in form reasonably designated by Landlord
or Trustee that certifies as to (i) the rent payable under the Lease, (ii) the
nature of any defaults by Landlord alleged by Tenant and (iii) any other matters
reasonably requested by Landlord.
11. Miscellaneous. This Agreement may not be changed or terminated orally
-------------
and is binding upon, and inures to the benefit of, the parties hereto and each
of their respective successors and assigns. This Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada. This
Agreement may be executed in counterparts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Consent and Landlord-Mortgagee Agreement to be effective as of the day and
year first above written.
THE TIBERTI COMPANY, a Nevada FIRSTAR BANK OF MINNESOTA, general
partnership N.A., as Trustee
By /s/ J. Tito Tiberti By /s/ Frank Leslie, III
---------------------- --------------------------
Name: J. TITO TIBERTI Name: Frank Leslie, III
Title: Managing Partner Title: Vice President
COAST HOTELS AND CASINOS,
INC., a Nevada corporation
By /s/ Michael Gaughan
------------------------
MICHAEL GAUGHAN, Chairman
of the Board and Chief Executive
Officer
<PAGE>
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
This instrument was acknowledged before me on __________, 199_ by J. TITO
TIBERTI as Managing Partner of THE TIBERTI COMPANY, a Nevada general
partnership.
_______________________________
NOTARY PUBLIC
STATE OF ______________)
) ss:
COUNTY OF _____________)
This instrument was acknowledged before me on __________, 199_ by
__________ _________________ as _____________ of FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee.
_______________________________
NOTARY PUBLIC
STATE OF _________)
) ss.:
COUNTY OF_________)
This instrument was acknowledged before me on ________________, 199_ by
MICHAEL GAUGHAN as Chairman of the Board and Chief Executive Officer of COAST
HOTELS AND CASINOS, INC., a Nevada corporation.
_______________________________
NOTARY PUBLIC
<PAGE>
EXHIBIT "A"
The East Half (El/2) of the Southwest Quarter (SW1/4) of Section 19, Township 21
South, Range 61 East, M.D.B. & M.
EXCEPTING THEREFROM the Southerly 50 feet as granted to the County of Clark for
road, utilities and other public purposes by Document No. 444500, recorded July
7, 1964.
FURTHER EXCEPTING THEREFROM the West Thirty feet (30.00') of said land, together
with that certain spandrel area in the Southwest corner thereof, also being the
Northeast corner of the intersection of Tropicana Avenue and Cameron Street,
bounded as follows: on the South by the North line of the South Fifty feet
(50.00'); on the West by the East line of the West Thirty feet (30.00'); and on
the Northeast by the arc of a curve concave Northeasterly, having a radius of
Twenty-five feet (25.00') and being tangent to the North line of said South
Fifty feet (50.00') and to the East line of said West Thirty feet (30.00').
FURTHER EXCEPTING THEREFROM the East Forty feet (40.00') of said land, together
with that certain spandrel area in the Southeast corner thereof, also being the
Northwest corner of the intersection of Tropicana Avenue and Arville Street,
bounded as follows: On the East. by the West line of the East Forty feet
(40.00'); on the South by the North line of the South Fifty feet (50.00'); and
on the Northwest by the arc of a curve concave Northwesterly, having a radius of
Twenty-five feet (25.00') and being tangent to the West line of said East Forty
feet (40.00'); and to the North line of said South Fifty feet (50.00').
FURTHER EXCEPTING THEREFROM the North Thirty feet (30.00'), together with that
spandrel area in the Northwest corner thereof, also being the Southeast corner
of the intersection of Cameron Street and Harmon Avenue, bounded as follows: On
the North by the South line of the North Thirty feet (30.00'); on the West by
the East line of the West Thirty feet (30.00'); and on the Southeast by the arc
of a curve concave to the Southeast having a radius of Twenty feet (20.00') and
being tangent to the South line of said North Thirty feet (30.00') and to the
East line of said West Thirty feet (30.00'); also together with that other
spandrel area in the Northeast corner thereof being the Southwest corner of the
intersection of Harmon Avenue and Arville Street, bounded as follows: on the
North by the South line of the North Thirty feet (30.00'); on the East by the
East line of the Southwest Quarter (SW1/4) of Section 19; and on the Southwest
by the arc of a curve concave to the Southwest having a radius of Twenty-five
feet (25.001) and being tangent to the South line of said North Thirty feet
(30.00') and to the West line of the East Forty feet (40.00') and on the South
side by the prolongation of a line radial to the curve's point of tangency with
the West line of the East Forty feet (40.00'), as conveyed to Clark County for
roads and other public purposes by Deed recorded October 21, 1976 as Document
No. 630256 and by Deed recorded May 23, 1978 as Document No. 850472 and by Deed
recorded February 27, 1986 in Book 860227 as Document No. 00275 and by Deed
recorded February 25, 1989 in Book 890225 as Document Nos. 00659 and 00660 and
by Deed recorded December 7, 1990 in Book 901207 as Document Nos. 00731 and
00732 of Official Records, Clark County, Nevada.
<PAGE>
FURTHER EXCEPTING THEREFROM that portion conveyed to Clark County by Grant,
Bargain, Sale Deed recorded November 21, 1996 as Document No. 1951 of Official
Records, Clark County, Nevada. More particularly described as follows:
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Cameron
Street, thence North 89 degrees 53' 40" East, 370.62 feet to a point on the
centerline of Tropicana Avenue, thence North 00 degrees 06' 20" West, 50.00 feet
to a point on the existing Northern right-of-way line of Tropicana Avenue, also
being the TRUE POINT OF BEGINNING; thence North 00 degrees 06' 20" West, 14.00
feet to a point; thence North 89 degrees 53' 40" East, 120.76 feet to a point on
a curve, radius point of said curve is located South 00 degrees 06' 20" East,
266.00 feet from the previous point; thence on a curve to the right, subtending
a central angle of 13 degrees 10' 25", and having a radius of 266.00 feet along
said curve an arc length of 61.16 feet to a point of compound curvature of a
curve to the left. Thence along said curve to the left, subtending a central
angle of 13 degrees 10' 25", and having a radius of 266.00 feet an arc length of
61.16 feet to a point of curve located on the existing right-of-way of Tropicana
Avenue, thence south 89 degrees 53' 40" West, 242.00 feet to the TRUE POINT OF
BEGINNING.
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Cameron
Street, thence North 89 degrees 53' 40" East, 572.62 feet to a point on the
centerline of Tropicana Avenue, thence North 00 degrees 06 ' 20" West, 50.00
feet to a point on the existing Northern right-of-way of Tropicana Avenue, also
being the TRUE POINT OF BEGINNING; thence North 00 degrees 06' 20" West, 12.00
feet, thence North 89 degrees 53' 40" East, 108.50 feet to a point of curve,
radius point of said curve is located South 00 degrees 06' 20" East, 300.00
feet, from the previous point; thence on a curve to the right, subtending a
central angle of 11 degrees 29' 50", and having a radius of 300.00 feet along
said curve an arc length of 60.20 feet to a point of compound curvature of a
curve to the left; subtending a central angle of 12 degrees 28' 13", and having
a radius of 300.00 feet, along said curve an arc length of 65.29 feet to a point
of curve on the existing right-of-way of Tropicana Avenue; thence South 89
degrees 53' 40" West, 233.19 feet to the TRUE POINT OF BEGINNING.
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Cameron
Street, thence North 89 degrees 53' 40" East, 1087.48 feet to a point on the
centerline of Tropicana Avenue, thence North 00 degrees 06' 20" West, 50.00 feet
to the TRUE POINT OF BEGINNING, located on the existing Northern right-of-way
line of Tropicana Avenue, thence North 00 degrees 06' 20" West, 14.00 feet;
thence North 89 degrees 53' 40" East, 6.23 feet to a point of curve; radius
point of said curve is located South 00 degrees 06' 20" East, 266.00 feet from
the previous point; thence along a curve to the
<PAGE>
right subtending a central angle of 13 degrees 10' 25", and having a radius of
266.00 feet, an arc length of 61.16 feet to a point of compound curvature of a
curve to the left; thence along said curve to the left, subtending a central
angle of 13 degrees 10' 25", and having a radius of 266.00 feet, an arc length
of 61.16 feet to a point on the existing Northern right-of-way of Tropicana
Avenue; thence South 89 degrees 53' 40" West, 127.47 feet to the TRUE POINT OF
BEGINNING.
The East Half (E 1/2) of the Southwest Quarter (SW 1/4) of Section 19, Township
21 South, Range 61 East, M.D.M., Clark County, Nevada.
COMMENCING at the centerline intersection of Tropicana Avenue and Arville
Street; thence North 00 degrees 39' 24" West, 75.63 feet to a point on the
centerline of Arville Street; thence South 89 degrees 20' 36" West, 40.00 feet
to a point of curve; also being the TRUE POINT OF BEGINNING, on the existing
Western right-of-way line of Arville Street, radius point of said curve is
located South 89 degrees 20' 36" West, 25.00 feet; from the previous point,
thence on a curve to the right, subtending a central angle of 90 degrees 33'
04", and having a radius of 25.00 feet, an arc length of 39.51 feet to a point
of curve on the existing Northern right-of-way of Tropicana Avenue; thence South
89 degrees 53' 40" West, 13.00 feet, continuing along the existing Northern
right-of-way line of Tropicana Avenue to a point of curve; radius point of said
curve is located North 00 degrees 06' 20" West, 25.00 feet from the previous
point; thence on a curve to the left subtending a central angle of 90 degrees
33' 04", and having a radius of 25.00 feet, an arc length of 39.51 feet to a
point of curve; thence North 00 degree 39' 24" West, 407.97 feet to a point of
curve; radius point of said curve is located North 89 degrees 20' 36" East,
205.00 feet from the previous point; thence along a curve to the right
subtending a central angle of 08 degrees 01' 57", and having a radius of 205.00
feet, an arc length of 28.74 feet to a point; thence North 07 degrees 22' 33"
East, 64.95 feet to a point of curve; radius point of said curve is located
North 82 degrees 37' 27" West, 195.00 feet from the previous point; thence along
a curve to the left, subtending a central angle of 08 degrees 01' 57", and
having a radius of 195.00 feet an arc length of 27.34 feet to a point of curve
on the existing Western right-of-way of Arville Street; thence South 00 degrees
39' 24" East, 528.30 feet to the TRUE POINT OF BEGINNING.
<PAGE>
EXHIBIT "B"
-----------
If Landlord shall elect to terminate the Lease by reason of any default of
Tenant, prior to doing so, Landlord agrees to give notice of such election to
Tenant and Trustee, specifying the default or defaults of Tenant resulting in
such termination and further agrees as follows:
(a) Trustee may nullify any notice of termination by curing such default
prior to the effective date of termination.
(b) With respect to a termination resulting only from a default or defaults
which Trustee reasonably can cure, Trustee may nullify any such notice of
termination by doing all of the following:
(i) Curing or causing to be cured, within forty-five (45) days of such
notice, any monetary defaults and any other defaults which are capable of
cure within 45 days; and
(ii) Within 45 days of such notice, commencing to cure or causing the
commencement of cure of any other default and thereafter diligently
pursuing such cure to completion; and
(iii) During any cure period, paying or causing to be paid any rent and
other monetary obligations of Tenant under the Lease of which Trustee has
knowledge, as the same fall due.
(c) With respect to a termination resulting, in whole or in part, from a
default or defaults of Tenant which Trustee cannot reasonably cure, Trustee may
postpone and extend the specified date for such termination as fixed by Landlord
in its notice of termination, for a period of not more than ninety (90) days;
provided that Trustee shall agree with Landlord (by giving a notice to that
effect to Landlord) before the effective date of termination, to accomplish the
following within the times hereinafter provided and shall, in fact, accomplish
the following in a timely manner:
(i) cure or cause to be cured within forty-five (45) days of such
notice any then-existing monetary defaults of which Trustee has knowledge;
(ii) pay or cause to be paid during such 90-day period (as it may be
extended as provided below) any rent and other monetary obligations of
Tenant under the Lease of which Trustee has knowledge, as the same fall
due;
(iii) promptly cure or cause to be cured any other defaults that
Trustee can cure and of which Trustee has knowledge;
<PAGE>
(iv) take steps to acquire or sell Tenant's interest in the Lease by
foreclosure of the Deed of Trust or otherwise; provided that the time
period for commencement of such steps shall be extended one day for each
day that Trustee is under any statutory or judicial restraint precluding
the taking of such steps; and
(v) prosecute to completion with reasonable diligence the steps
commenced pursuant to the preceding clause.
If, at the end of such 90-day period (as it may be extended), Trustee shall be
actively engaged in steps to acquire or sell Tenant's interest in the Lease and
is in compliance with the other conditions met forth in clauses (i) through (v)
above, including the payment of all rent and other monetary obligations of
Tenant as they fall due, the time for completion of such steps shall be further
extended upon the name conditions for such period as shall be reasonably
necessary to complete such steps with reasonable diligence so long as, but only
so long an Trustee continues to timely pay or cause to be paid all rent and
other monetary obligations of Tenant as they fall due. If Tenant's interest is
acquired or sold by foreclosure of the Deed of Trust or otherwise during such
90-day period (as it may be extended), the intended termination of the Lease by
Landlord under the subject notice will be automatically nullified, and the Lease
will continue an if the notice of termination had never been given so long as
Trustee has complied with the conditions met forth In clauses (i) through (v)
above and has commenced and in diligently pursuing the cure of all defaults
which Trustee can reasonably cure.
(d) if the Lease, without the consent of Trustee, is terminated for any
reason before the end of its stated term, as such stated term may be extended,
then Landlord shall, upon written request from Trustee made within sixty (60)
days after such termination, enter into a new lease of the Premises with
Trustee. The new lease shall be on the same terms and conditions as the Lease
(including without limitation any rights or options to extend the term of the
Lease or acquire the Premises) and shall have the same priority as the Lease.
Landlord': obligation to enter into such a new lease shall be conditioned upon
the following: (i) Trustee shall have cured all monetary defaults and commenced,
and diligently prosecuted, the cure of all reasonably curable nonmonetary
defaults and (ii) Trustee shall reimburse Landlord for all reasonable costs and
expenses incurred in entering into such new lease.
<PAGE>
EXHIBIT 3
(Landlord-Mortgagee Agreement Executed by Nevada Power Company
Regarding Parking Lot Lease)
<PAGE>
CONSENT
-------
and
LANDLORD-MORTGAGEE AGREEMENT
----------------------------
THIS CONSENT AND LANDLORD-MORTGAGEE AGREEMENT ("Agreement") is dated and
made effective as of November 21, 1997 and is entered into by and between
FIRSTAR BANK OF MINNESOTA, N.A. (the "Trustee"), NEVADA POWER COMPANY, a Nevada
Corporation ("Landlord") and COAST HOTELS AND CASINOS, INC., a Nevada
corporation ("Tenant").
RECITALS
--------
A. Property and Lease. Landlord is the owner of real property in Clark
------------------
County, Nevada, described in Exhibit "A" attached hereto and by this reference
incorporated herein (the "Premises"). Landlord and Barbary Coast Hotel and
Casino, a Nevada general partnership ("Lessee") were parties to a Lease dated
November 1, 1982 relating to the Premises (the "Lease").
B. Reorganization. Lessee and Gold Coast Hotel and Casino, a Nevada
--------------
limited partnership, have reorganized in a transaction (the Reorganization) in
which (i) the assets of Lessee became the assets of Coast Resorts,.Inc., a
Nevada corporation ("Resorts") and (ii) Resorts transferred and assigned those
assets to Tenant in capitalization of Tenant.
C. Notes. It is anticipated that Trustee will be the trustee under an
-----
Indenture (the "Indenture"), by and among Tenant as issuer, Resorts as
guarantor, Coast West, Inc., a Nevada corporation, as guarantor, and Trustee,
pursuant to which Tenant will issue 10 7/8% First Mortgage Notes due 2001 (the
"Notes") in a total principal amount of SIXTEEN MILLION EIGHT HUNDRED THOUSAND
DOLLARS ($16,800,000.00).
D. Obligations. In accordance with the anticipated requirements of the
-----------
Indenture, and as security for the Notes and other obligations of Tenant under
the Indenture (the "Obligations"), Tenant intends to execute as trustor and
deliver to Trustee, a Leasehold Deed of Trust, Security Agreement and Assignment
of Rents and teases (the "Deed of Trust") encumbering Tenant's leasehold
interest in the Premises and the Lease. As additional security for the
obligations, Tenant intends to grant to Trustee a security interest in Tenant's
inventory, equipment and other personal property now or hereafter located on the
Premises (the "Personal Property").
E. Reliance. Landlord acknowledges and understands that Tenant, Resorts
--------
and Trustee, on behalf of the holders of Notes, will rely upon the provisions
set forth in this Agreement.
<PAGE>
CONSENT AND AGREEMENT
---------------------
In consideration of the foregoing recitals and other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Consent to Deed of Trust. Landlord hereby consents to Tenant's grant
------------------------
to Trustee of a lien on Tenant's leasehold interest in the ,Premises pursuant to
the terms of the Deed of Trust. Landlord agrees that the provisions of
Paragraphs 3 through 10 below shall take effect upon the, recording of the Deed
of Trust. Those provisions shall be for the benefit of. Trustee, any successor
Trustee and the holders of the Notes.
2. Status of Lease. Landlord certifies that to the best of Landlord's
---------------
knowledge, (i) the Lease is in full force and effect, (ii) no amendment has been
made to the Lease, (iii) no default exists sunder the Lease and (iv) rent and
other charges have been paid to the extent payable and have not been prepaid
more than one year in advance.
3. Personal Property. The Personal Property shall not be deemed to be a
-----------------
fixture or part of the underlying real estate but shall at all times be
considered personal property. Landlord waives and relinquishes any landlord's
lien, all rights of levy or constraint, security interest or other interest that
Landlord may now or hereafter have in any of the Personal Property, whether for
rent or otherwise; provided, however, that nothing in the foregoing shall
constitute a waiver or release by Landlord of any right or interest of Landlord
in the real property being leased by Landlord under the Lease or the site
improvements located on that property. Landlord agrees that Trustee, at its
option, may enter the Premises for the purpose of repossessing, removing,
selling or otherwise dealing with the Personal Property, and such license shall
be irrevocable and shall continue without charge for a period of ninety (90)
days after the receipt by Trustee of written notice from Landlord directing
removal of the Personal Property.
4. Notice and Cure Rights. No notice from Landlord shall be effective
----------------------
unless it is also given to Trustee. Any notice of default shall state the
nature of the default and shall specify the amounts of rent or other payments
claimed to be in default. In the event of a default by Tenant under the Lease,
Landlord shall accept any curative acts undertaken by or at the instigation of
Trustee as if undertaken by Tenant. Trustee shall be given notice of any
arbitration or other proceeding or dispute between Landlord and Tenant and shall
have the right to intervene therein and be made a party thereto. Further,
Trustee shall receive notice, and a copy, of any award or decision made in such
arbitration or other proceeding. If Landlord shall elect to terminate the Lease
by reason of any default of Tenant, Trustee shall have the rights set forth in
Exhibit "B" attached hereto and by this reference incorporated herein.
5. Assignment. Tenant's interest in the Lease may be assigned,
----------
transferred or conveyed pursuant to judicial or non-judicial foreclosure or a
conveyance in lieu of foreclosure (a "Foreclosure Transfer"). If Trustee is the
transferee under a Foreclosure Transfer, Trustee may assign the Lease without
Landlord's prior written consent, but if the Lease is so assigned by Trustee,
and Landlord's prior written consent is either not sought by Trustee or is
sought by
<PAGE>
Trustee but reasonably withheld by Landlord, Trustee shall be and remain jointly
and severally liable with the assignee for any and all liability arising or
accruing under the Lease after the date of such assignment, including the
obligation to pay rent under the Lease. If Trustee is the transferee under a
Foreclosure Transfer and Trustee obtains Landlord's prior written consent to
assignment of the Lease as provided in the Lease, or if Trustee seeks Landlord's
prior written consent and Landlord unreasonably withholds that consent, then
upon such assignment, Trustee shall thereupon be released from all prospective
liability as tenant under the Lease from and after the date of such assignment
so long as (but only so long as) the assignee executes, acknowledges and
delivers to Landlord an instrument in writing by which assignee expressly
assumes all of the obligations, terms and conditions of the Lease.
Notwithstanding anything in the foregoing to the contrary, a Foreclosure
Transfer shall not operate to release Tenant from any liability of Tenant under
the Lease, and a Foreclosure Transfer shall not operate to release Trustee from
any liability as tenant under the Lease for any period during which Trustee has
the right to possession of the Premises.
6. INTENTIONALLY OMITTED
---------------------
7. Amendment to Lease and Mortgage by Landlord. The cancellation,
-------------------------------------------
surrender or amendment of the Lease by Tenant shall not be effective without the
prior written consent of Trustee.
8. Insurance and Condemnation Proceeds. Notwithstanding any provisions of
-----------------------------------
the Lease to the contrary, any insurance or condemnation proceeds payable to
Tenant or the Trustee as a result of damage, destruction or condemnation of any
portion of the property or improvements thereto shall be paid to the respective
parties in order of priority, for handling in accordance with the terms of the
Deed of Trust, up to the amounts of the obligations secured by the Deed of
Trust. Any remaining proceeds shall be distributed as provided in the Lease.
Landlord and Tenant shall not enter into any settlement or adjustment relating
to such proceeds without the prior written consent of the Trustee. Nothing in
the foregoing is intended to diminish or otherwise affect the amount of
condemnation or insurance proceeds payable to Landlord pursuant to the Lease or
to diminish or otherwise affect the amount of condemnation or insurance proceeds
that would be payable to or for the benefit of Tenant under the Lease absent the
Deed of Trust.
9. No Merger. If Tenant acquires the fee estate in the Premises, the
---------
Deed of Trust shall not merge out of existence but instead shall be, become and
continue as an encumbrance of the entire interests of Tenant in the Premises.
10. Estoppel Certificates. Within fifteen (15) days after written request
---------------------
by Tenant or Trustee, Landlord shall deliver to the requesting party (and any
other party identified by the requesting party) an estoppel certificate signed
by Landlord in form reasonably designated by the requesting party that certifies
as to (i) the rent payable under the Lease, (ii) the term of the Lease and the
rights of Tenant, if any, to extend the term of the Lease, (iii) the nature of
any defaults by
<PAGE>
Tenant alleged by Landlord and (iv) any other matters reasonably requested by
the requesting party. Within 15 days after written request by Landlord or
Trustee, Tenant shall deliver to the requesting party an estoppel certificate
signed by Tenant in form reasonably designated by Landlord or Trustee that
certifies as to (i) the rent payable under the Lease, (ii) the nature of any
defaults by Landlord alleged by Tenant and (iii) any other matters reasonably
requested by Landlord.
11. Miscellaneous. This Agreement may not be changed or terminated orally
-------------
and is binding upon, and inures to the benefit of, the parties hereto and each
of their respective successors and assigns. This Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada. This
Agreement may be executed in counterparts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Consent and Landlord-Mortgagee Agreement to be effective as of the day and
year first above written.
NEVADA POWER COMPANY, FIRSTAR BANK OF MINNESOTA, NATIONAL
a Nevada corporation N.A.,as Trustee.
By /s/ Richard L. Hinckley By /s/ Frank Leslie, III
--------------------------- ----------------------------
Name: Richard l. Hinckley Name: Frank Leslie, III
Title: Vice President Title: Vice President
COAST HOTELS AND CASINOS,
INC., a Nevada corporation
By /s/ Michael Gaughan
----------------------------
MICHAEL GAUGHAN,
Chairman of the Board and
Chief Executive Officer
<PAGE>
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
This instrument was acknowledged before me on __________, 199_ by
__________ __________________ as __________________ of NEVADA POWER COMPANY, a
corporation.
_______________________________
NOTARY PUBLIC
STATE OF ______________)
) ss:
COUNTY OF ____________)
This instrument was acknowledged before me on __________, 199_ by
__________ _________________ as _____________ of FIRSTAR BANK OF MINNESOTA, N.A.
as Trustee.
_______________________________
NOTARY PUBLIC
STATE OF NEVADA )
) ss.:
COUNTY OF ______)
This instrument was acknowledged before me on ________________, 199_ by
MICHAEL GAUGHAN as Chairman of the Board and Chief Executive Officer of COAST
HOTELS AND CASINOS, INC., a Nevada corporation.
_______________________________
NOTARY PUBLIC
<PAGE>
EXHIBIT "A"
A strip of land Two Hundred (200) feet wide along the North line of the
Northwest Quarter (NW1/4) of Section Twenty-one (21), Township Twenty-one (21)
South of Range Sixty-one (61) East of the M.D.B. & M., particularly described as
beginning at the Northwest corner of Section Twenty-one (21); thence East along
the North line of said Section to the Northeast corner of the Northwest Quarter
(NW114) of said Section; thence South at right angles Two Hundred (200) feet;
thence West parallel with the North line of said Section to the West line
thereof; thence North Two Hundred (200) feet to the Place of Beginning.
EXCEPTING THEREFROM that portion of the Northwest Quarter (NWI/4) of the
Northwest Quarter (NW1/4) of Section 21, Township 21 South, Range 61 East,
M.D.M., described as follows:
COMMENCING at the Northwest (NW) corner of said Section 21, South 88
degrees 05' 38" East along the North line of said Section 21, a distance of
155.55 feet to a point on the East line of U.S. Highway No. 91, as conveyed by
the Southern Nevada Power Company to the State of Nevada by Deed recorded
January 23, 1943 as Document No. 159436, Clark County, Nevada Records, the true
point of beginning; thence South 00" 02' East along the said East line, a
distance of 200.11 feet to a point; thence South 88 degrees 05' 38" East
parallel to the said North line, a distance of 500.00 feet to a point; thence
North 00 degrees 02' West parallel to the said East line, a distance of 200.11
feet to a point on the said North line; thence North 88 degrees 05' 38" West
along the said North line, a distance of 500.00 feet to the TRUE POINT OF
BEGINNING.
Also, a portion of the North 200 feet of the Northwest Quarter (NW1/4) of
the Northwest Quarter (NW1/4) of Section 21, Township 21 South, Range 61 East,
M.D.M., and being a portion of that certain right-of-way (150 feet wide) granted
to the State of Nevada by Southern Nevada Power Co. on January 23, 1943 and
recorded as Document No. 159436 in Book 43 of Deeds, Pages 191 and 192, Clark
County, Nevada Records. The parcel of land to be conveyed is that portion of
the above referred to right-of-way described as follows, to-wit:
Being all of the aforementioned right-of-way lying right or Easterly of a
line located 50.00 feet right or Easterly of and parallel to the "0" line
centerline of U.S. Highway 91 (S.R.6) as staked and constructed in 1951 and
lying right or Easterly of Highway Engineer's Station "0" 934, approximately to
Highway Engineer's Station "0" 936, approximately, and being that parcel
remised, released and quitclaimed unto the Southern Nevada Power Co. by the
State of Nevada, by Quitclaim Deed dated December 20, 1957 and recorded January
10, 1958 as Document No. 122228, official Records, Book No. 149, Clark County,
Nevada.
FURTHER EXCEPTING THEREFROM the interest in and to the South 40 feet of the
hereinabove described parcel of land as conveyed to the County of Clark for road
purposes by Deed recorded September 9, 1953 as Document No. 413334, Official
Records of Clark County, Nevada.
FURTHER EXCEPTING THEREFROM the Northerly Ten (10) feet of the Southerly
Fifty (50) feet, together with that certain radius in the Southwest corner
thereof bounded as follows: on the West side by the East line of U.S. Highway
91, on the South side by the North line of the South 50.00 feet and on the
Northeast side by the arc of a circle concave to the Northeast having a radius
of 25.00 feet that is tangent to the East line of U.S. Highway 91 and tangent to
the North line of said South 50.00 feet as conveyed to the County of Clark by
Deed recorded November 6, 1985 in Book 2213 as Document No. 2172026.
FURTHER EXCEPTING THEREFROM that portion of land as conveyed to the state
of Nevada by Final Order of Condemnation recorded May 30, 1995 in Book 950530 as
Document
<PAGE>
No. 00882 of Official Records, Clark County, Nevada.
<PAGE>
EXHIBIT "B"
-----------
If Landlord shall elect to terminate the Lease by reason of any default of
Tenant, prior to doing so, Landlord agrees to give notice of such election to
Tenant and Trustee, specifying the default or defaults of Tenant resulting in
such termination and further agrees as follows:
(a) Trustee may nullify any notice of termination by curing such
default prior to the effective date of termination.
(b) With respect to a termination resulting only from a default or
defaults which Trustee reasonably can cure, Trustee may nullify any such
notice of termination by doing all of the following:
(i) Curing or causing to be cured, within forty-five (45) days
of such notice, any monetary defaults and any other defaults which are
capable of cure within 45 days; and
(ii) Within 45 days of such notice, commencing to cure or
causing the commencement of cure of any other default and thereafter
diligently pursuing such cure to completion; and
(iii) During any cure period, paying or causing to be paid any
rent and other monetary obligations of Tenant under the Lease of which
Trustee has knowledge, as the same fall due.
(c) With respect to a termination resulting, in whole or in part,
from a default or defaults of Tenant which Trustee cannot reasonably cure,
Trustee may postpone and extend the specified date for such termination as
fixed by Landlord in its notice of termination, for a period of not more
than ninety (90) days; provided that Trustee shall agree with Landlord (by
giving a notice to that effect to Landlord) before the effective date of
termination, to accomplish the following within the times hereinafter
provided and shall, in fact, accomplish the following in a timely manner:
(i) cure or cause to be cured within forty-five (45) days of
such notice any then-existing monetary defaults of which Trustee has
knowledge;
(ii) pay or cause to be paid during such 90-day period (as it
may be extended as provided below) any rent and other monetary
obligations of Tenant under the Lease of which Trustee has knowledge,
as the same fall due;
(iii) promptly cure or cause to be cured any other defaults
that Trustee can cure and of which Trustee has knowledge;
(iv) take steps to acquire or sell Tenant's interest in the
Lease by
<PAGE>
foreclosure of the Deed of Trust or otherwise; provided that the time
period for commencement of such steps shall be extended one day for
each day that Trustee is under any statutory or judicial restraint
precluding the taking of such steps; and
(v) prosecute to completion with reasonable diligence the steps
commenced pursuant to the preceding clause.
If, at the end of such 90-day period (as it may be extended),
Trustee shall be actively engaged in steps to acquire or sell Tenant's
interest in the Lease and is in compliance with the other conditions
set forth in clauses (i) through (v) above, including the payment of
all rent and other monetary obligations of Tenant as they fall due,
the time for completion of such steps shall be further extended upon
the same conditions for such period as shall be reasonably necessary
to complete such steps with reasonable diligence so long as, but only
so long as Trustee continues to timely pay or cause to be paid all
rent and other monetary obligations of Tenant as they fall due. If
Tenant's interest is acquired or sold by foreclosure, of the Deed of
Trust or otherwise during such 90-day period (as it may be extended),
the intended termination of the Lease by Landlord under the subject
notice will be automatically nullified, and the Lease will continue as
if the notice of termination had never been given so long an Trustee
has complied with the conditions set forth in clauses (i) through (v)
above and has commenced and is diligently pursuing the cure of all
defaults which Trustee can reasonably cure.
(d) If the Lease, without the consent of Trustee, is terminated for
any reason before the end of its stated term, as such stated term may be
extended, then Landlord shall, upon written request from Trustee made
within sixty (60) days after such termination, enter into a now lease of
the Premises with Trustee. The new lease shall be on the same terms and
conditions as the Lease (including without limitation any rights or options
to extend the term of the Lease or acquire the Premises) and shall have the
same priority as the Lease. Landlord's obligation to enter into such a now
lease shall be conditioned upon the following: (i) Trustee shall have cured
all monetary defaults and commenced, and diligently prosecuted, the cure of
all reasonably curable nonmonetary defaults and (ii) Trustee shall
reimburse Landlord for all reasonable costs and expenses incurred in
entering into such new lease.
<PAGE>
EXHIBIT 10.31
Execution Copy
--------------
STOCK PLEDGE AND SECURITY AGREEMENT
-----------------------------------
THIS STOCK PLEDGE AND SECURITY AGREEMENT (the "Stock Pledge Agreement"),
----------------------
dated as of November 21, 1997, is executed by COAST RESORTS, INC., a Nevada
corporation ("Shareholder"), in favor of FIRSTAR BANK OF MINNESOTA, N.A., as
-----------
trustee ("Trustee") for the holders of those certain $16,800,000 10 7/8% First
-------
Mortgage Notes due 2001 ("Noteholders"), as security for that certain Guarantee
-----------
(the "Guarantee") set forth in that certain Indenture dated as of November 21,
---------
1997 (the "Indenture") by and among Trustee, Coast Hotels and Casinos, Inc., a
---------
Nevada corporation (the "Borrower"), and Shareholder, as guarantor.
--------
RECITALS
--------
A. Shareholder owns 100% of the outstanding stock of each of Borrower and
Coast West, Inc., a Nevada corporation ("Coast West").
----------
B. The Noteholders are willing to purchase $16,800,000 10 7/8% First
Mortgage Notes due 2001 (the "Notes") for the purposes of, among other things,
-----
providing funds to the Borrower for working capital purposes.
C. Shareholder will derive substantial benefit from the purchase of the
Notes by the Noteholders.
D. It is a condition precedent to purchasing the Notes that (i)
Shareholder pledge 100% of its interest in Coast West to Trustee, and (ii) the
Shareholder agrees to pledge, subject to receipt of required approvals of the
Nevada Gaming Authorities, 100% of its interest in the Borrower for the benefit
of the Noteholders, as security for the Guarantee.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Shareholder hereby agrees with Trustee as follows:
1. Definitions and Interpretation. When used in this Stock Pledge
------------------------------
Agreement, the following terms shall have the following respective
meanings:
"Borrower" means Coast Hotels and Casinos, Inc., a Nevada corporation.
--------
<PAGE>
"Coast West" means Coast West, Inc., a Nevada corporation.
----------
"Collateral" shall have the meaning given to that term in Section 2
----------
hereof.
"Obligations" shall mean and include all obligations, howsoever
-----------
arising, owed by Shareholder to the Noteholders of every kind and
description, pursuant to the terms of the Guarantee and the Indenture
(whether or not evidenced by any note or instrument and whether or not
for the payment of money), direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, including
without limitation all interest, fees, charges, expenses, attorneys'
fees and accountants' fees chargeable to Shareholder and payable by
Shareholder hereunder and thereunder.
"Stock" shall mean all shares, options, warrants, interests,
-----
participations or other equivalents (regardless of how designated) of
or in Borrower and/or Coast West, as applicable, whether voting or
nonvoting, including, without limitation, common stock, preferred
stock, or any other equity ownership interest in Borrower and/or Coast
West, as applicable, subject, however, to the last sentence of Section
2.
"UCC" shall mean the Uniform Commercial Code as the same may, from
---
time to time, be in effect in the State of Nevada.
Unless otherwise defined herein, all other capitalized terms used
herein and defined in the Indenture shall have the respective meanings
given to those terms in the Indenture, and all terms defined in the UCC
shall have the respective meanings given to those terms in the UCC. To the
extent the meanings given herein are inconsistent with those given in the
UCC, the meanings given herein shall govern. Shareholder has previously
received a copy of the Indenture.
2. Pledge. Subject to Section 3 hereof, as security for the
------
Obligations, Shareholder hereby pledges and assigns to Trustee, for the
equal and ratable benefit of the Noteholders and grants to Trustee, for the
equal and ratable benefit of the Noteholders, a security interest in all
right, title and interests of Shareholder in and to the Stock, whether now
owned or hereafter acquired (collectively, the "Shareholder's Stock"),
-------------------
including without limitation the Shareholder's Stock described in Exhibit
-------
"A" hereto, and all proceeds thereof, including, without limitation,
---
dividends and other property received and receivable by Shareholder in
connection with the Shareholder's Stock other than dividends and other
distributions made by Borrower and/or Coast West, as applicable, and
expressly permitted by the Indenture, if any (the Shareholder's Stock and
such proceeds to be referred to herein collectively as the "Collateral").
----------
Notwithstanding the foregoing, the Collateral, Stock and Shareholder's
Stock shall not include the Stock of Coast West from and at any time after
the date on which the Stock
2
<PAGE>
is released from the pledge and security interest hereunder pursuant to
Section 10.3 of the Indenture (the "Release Provision").
-----------------
3. Condition Precedent. The pledge of the Stock of the Borrower
-------------------
provided for in Section 2 hereof shall be of no force and effect until such
time as such pledge shall have been approved by the Nevada Gaming
Authorities. The pledge of the Stock of the Borrower shall become
effective immediately upon the approval of such pledge by the Nevada Gaming
Authorities.
4. Representations and Warranties. Shareholder represents and
------------------------------
warrants to Trustee, for the benefit of the Noteholders, that: (a) the
execution, delivery and performance by Shareholder of this Stock Pledge
Agreement are within the power of Shareholder and have been duly authorized
by all necessary actions on the part of Shareholder; (b) this Stock Pledge
Agreement has been duly executed and delivered by Shareholder and
constitutes a legal, valid and binding obligation of Shareholder,
enforceable against it in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and general
principles of equity; (c) the execution, delivery and performance of this
Stock Pledge Agreement do not (i) violate any requirement of law,
regulation or statute, (ii) violate any provision of, or result in the
breach or the acceleration of or entitle any Person to accelerate (whether
after the giving of notice or lapse of time or both) any material
obligation under, any indenture, mortgage, lien, lease, agreement, license,
instrument, guaranty, or other document to which Shareholder is a party or
by which Shareholder or its property is bound, or (iii) result in the
creation or imposition of any lien upon any property, material asset or
revenue of Shareholder (except such liens as may be created in favor of
Trustee, for the benefit of the Noteholders, pursuant to this Stock Pledge
Agreement); (d) no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or
other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution, delivery and
performance by the Shareholder of this Stock Pledge Agreement, except such
consents, approvals, orders, authorizations, registrations, declarations
and filings that are so required and which have been obtained and are in
full force and effect; (e) Shareholder is the beneficial and, in the case
of capital stock, record owner of the Collateral (or, in the case of after-
acquired Collateral, at the time Shareholder acquires rights in the
Collateral, will be the beneficial and, in the case of capital stock,
record owner thereof) and no other Person has (or, in the case of after-
acquired Collateral, at the time Shareholder acquires rights therein, will
have) any right, title, claim or interest (by way of lien or otherwise) in,
against or to the Collateral, other than "Permitted Liens" (as such term is
defined in the Indenture); (f) all of the Collateral which are shares of
capital stock are and such future Collateral will be validly issued, fully
paid and nonassessable securities of Borrower and Coast West; (g) the
Collateral includes all of the issued and outstanding shares of capital
stock of Borrower and Coast West; (h) except for the Collateral, there are
no outstanding options, warrants or other rights to
3
<PAGE>
subscribe for or purchase voting or non-voting capital stock of Borrower or
Coast West, nor any notes, bonds, debentures or other evidences of
indebtedness that (1) are at any time convertible into capital stock of
Borrower or Coast West, or (2) have or at any time would have voting rights
with respect to Borrower or Coast West; (i) upon transfer to Trustee of all
Collateral consisting of securities, Trustee (on behalf of the Noteholders)
will have a first priority perfected security interest in such Collateral,
and (or in the case of all other after-acquired Collateral, at the time
Shareholder acquires rights therein, will have) a first priority perfected
security interest in all other Collateral, other than Permitted Liens; and
(j) Shareholder's principal place of business is 4500 West Tropicana
Avenue, Las Vegas, Nevada.
5. Covenants. Shareholder hereby agrees: (a) to use its best
---------
efforts to obtain all required approvals of the Nevada Gaming Authorities
relating to the pledge of the Stock of the Borrower hereunder, and to cause
such pledge to become effective pursuant to Section 3 hereof on or before
May 31, 1998; (b) to provide written notice to the Trustee immediately upon
the receipt of the approvals set forth in clause (a) above, and to furnish
the Trustee with an opinion of counsel in form and substance satisfactory
to the Trustee within 5 days following receipt of such approvals to the
effect that the pledge of stock of the Borrower hereunder complies with the
Gaming Control Act; (c) to perform all acts that may be necessary to
maintain, preserve, protect and perfect the Collateral, the lien granted to
Trustee hereunder and the first priority of such lien, subject only to
Permitted Liens; (d) to promptly deliver to Trustee all originals of
certificates and other documents, instruments and agreements evidencing the
Collateral which are now held or hereafter received by Shareholder,
together with such blank stock powers executed by Shareholder as Trustee
may request or, if required under the 1996 Notes Indenture to be delivered
to the 1996 Notes Trustee, or if in the possession of the 1996 Notes
Trustee, to provide appropriate notice to the 1996 Notes Trustee or take
any such other actions as are required to perfect the Trustee's security
interest in the Collateral; (e) to procure, execute and deliver from time
to time any endorsements, assignments, financing statements and other
documents, instruments and agreements and take other actions deemed
necessary, as Trustee may request, to perfect, maintain and protect its
lien hereunder and the priority thereof; (f) to appear in and defend any
action or proceeding which may affect its title to or Trustee's interest in
the Collateral; (g) to keep the Collateral free of all liens except those
created hereunder and the Permitted Liens; (h) not to vote to enable, or
take any other action to permit, Borrower or Coast West to issue any Stock
except as expressly permitted by the Indenture; (i) to pay, and to save
Trustee and the Noteholders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamps,
excise, sales or other similar taxes which may be payable or determined to
be payable with respect to any of the Collateral or in connection with any
of the transactions contemplated by this Stock Pledge Agreement; and (j)
not to, without the written consent of the Trustee pursuant to or otherwise
expressly permitted by the Indenture, sell, dispose of or transfer
(directly or indirectly) or covenant to sell, dispose of or transfer
(directly or indirectly) the Collateral.
4
<PAGE>
6. Dividends and Voting Rights Prior to Default. Until an Event of
--------------------------------------------
Default (as defined in the Indenture) shall have occurred and be continuing
and Trustee shall have given notice to Shareholder of Trustee's intent to
exercise its rights pursuant to Subparagraph 7(b) below, Shareholder shall
be permitted (a) to receive all dividends paid on Shareholder's Stock
(other than dividends paid in additional Stock unless such additional Stock
is pledged to Trustee, for the benefit of the Noteholders, pursuant to this
Stock Pledge Agreement which are expressly permitted by the Indenture and
(b) to exercise all voting and corporate rights with respect to the Stock;
provided, however, that no vote shall be cast or corporate right exercised
or other action taken which would be reasonably likely to impair the
Collateral or be inconsistent with or result in any violation of any
provision of the Indenture.
7. Default and Remedies.
--------------------
(a) Event of Default. The occurrence (whether as a result of
----------------
acts or omissions by Borrower, Coast West or any other Person) of an
Event of Default under the Indenture (subject to such cure rights as
may be expressly set forth in such Indenture), whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any
administrative or governmental body, shall constitute an "Event of
--------
Default" hereunder.
-------
(b) Dividends and Voting Rights. Upon the occurrence and
---------------------------
during the continuance of any Event of Default hereunder, Trustee may,
upon notice to Shareholder and subject to the terms of the 1996 Notes
Intercreditor Agreement and subject to any approval of the Nevada
Gaming Authorities as may be required, (i) notify Borrower and Coast
West to pay all dividends on Shareholder's Stock to Trustee, for the
benefit of the Noteholders, receive and collect all such dividends and
make application thereof to the obligations in such order as Trustee
may determine, and (ii) register all of Shareholder's Stock in the
name of Trustee or its nominee, for the benefit of the Noteholders,
and Trustee or its nominee may thereafter exercise (A) all voting,
corporate and other rights pertaining to Shareholder's Stock at any
meeting of shareholders of Borrower or Coast West or otherwise and (B)
any and all rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to Shareholder's Stock as if
it were the absolute owner thereof (including, without limitation,
after Trustee has commenced to exercise remedies (or such remedies are
deemed commenced) under the Indenture, the right to exchange at its
discretion any and all of Shareholder's Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of Borrower or Coast West, or upon
the exercise by Shareholder or Trustee of any right, privilege or
option pertaining to Shareholder's Stock, and
5
<PAGE>
in connection therewith, the right to deposit and deliver any and all
of Shareholder's Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as
it may determine), all without liability except to account for
property actually received by it, but Trustee shall have no duty to
Shareholder to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
Promptly after the waiver or cure of the Event of Default giving rise
to Trustee's election under this Paragraph 7(b), Trustee shall notify
Shareholder, Borrower and Coast West of such waiver or cure and for so
long as no subsequent continuing Event of Default exists, Shareholder
shall have all rights as a shareholder it had prior to the occurrence
of such Event of Default, the Shareholder's Stock shall again be
registered in the name of Shareholder and Borrower and Coast West
shall again make all payments and distributions with respect to
Shareholder's Stock to Shareholder.
(c) Additional Remedies. Subject to the terms of the
-------------------
Indenture, upon the occurrence and during the continuance of an Event
of Default, Trustee may exercise, in addition to all other rights and
remedies granted in this Stock Pledge Agreement and in any other
instrument or agreement securing, evidencing or relating to the
Obligations, any and all rights and remedies at law, including,
without limitation, all rights and remedies of a secured party under
the UCC. Without limiting the generality of the foregoing, Trustee
may, subject to the terms of the 1996 Notes Intercreditor Agreement,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind to or upon Shareholder, Borrower,
Coast West or any other Person (except notice of time and place of
sale and any other notice required by law and any notice referred to
below or in the Indenture) forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do
any of the foregoing), in one or more parcels at public or private
sale or sales, in the over-the-counter market, at any exchange,
broker's board or office of Trustee or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem
commercially reasonable, for cash or on credit or for future delivery
without assumption of any credit risk. Trustee shall have the right
upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any
part of the Collateral so sold, free of any right or equity of
redemption in Shareholder, which right or equity is hereby waived and
released. Trustee shall apply any proceeds from time to time held by
it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of Trustee hereunder,
including, without
6
<PAGE>
limitation, reasonable attorneys' fees and disbursements of counsel to
Trustee, to the payment in whole or in part of the Obligations, in
such order as specified by the Indenture, and only after such
application and after the payment by Trustee of any other amount
required by any provision of law, need Trustee account for the
surplus, if any, to Shareholder. To the extent permitted by applicable
law, Shareholder waives all claims, damages and demands it may acquire
against Trustee arising out of the exercise by it of any rights
hereunder except as may arise solely from Trustee's gross negligence
or willful misconduct. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall
be deemed reasonable and proper if given at least 5 business days
before such sale or other disposition. Shareholder further waives and
agrees not to assert any rights or privileges which it may acquire
under paragraphs (a) through (e) of Section 9112 of the UCC.
(d) No Consents Required. The Trustee may take any action or
--------------------
exercise any rights with respect to the Collateral pursuant to clauses
(b) or (c) of this Section 7, and each of the Shareholder, the
Borrower and Coast West agrees that it will comply with instructions
originated by the Trustee with respect to the taking of such action or
exercise of such rights without further consent by the Shareholder,
the Borrower or Coast West.
8. Authorized Actions. Shareholder acknowledges that the
------------------
Obligations hereunder may be supplemented, augmented and otherwise
increased as a result of changes in the underlying obligations of Borrower
guaranteed pursuant to the Guarantee. In that regard, Shareholder
authorizes Trustee, in its discretion, without notice to Shareholder,
irrespective of any change in the financial condition of Borrower, Coast
West or Shareholder since the date hereof, and without affecting or
impairing in any way the liability of Shareholder hereunder, from time to
time to (a) create new Obligations, and, either before or after receipt of
notice of revocation, renew, compromise, extend, accelerate or otherwise
change the time for payment or performance of, or otherwise change the
terms of the Obligations or any part thereof, including increase or
decrease of the rate of interest thereon; (b) take and hold additional
security for the payment or performance of the Obligations and exchange,
enforce, waive or release any such additional security; (c) apply such
additional security and direct the order or manner of sale thereof; (d)
purchase such additional security at public or private sale; (e) upon the
occurrence and during the continuance of an Event of Default, make any
payments and do any other acts Trustee shall deem necessary to protect the
Noteholders' security interest in the Collateral, including, without
limitation, pay, purchase, contest or compromise any encumbrance, charge or
lien (other than a Permitted Lien) which in the judgment of Trustee appears
to be prior to or superior to the security interest granted hereunder, and
appear in and defend any action or proceeding purporting to affect its
security interest in and/or the value of the Collateral, and in exercising
any such powers or authority, pay all expenses incurred in connection
therewith, including reasonable attorneys' fees, and Shareholder hereby
7
<PAGE>
agrees it shall be bound by any such payment made or act taken by Trustee
hereunder and shall reimburse Trustee for all reasonable payments made and
expenses incurred, which amounts shall be secured under this Stock Pledge
Agreement; provided, however, that Trustee shall have no obligation to make
any of the foregoing payments or perform any of the foregoing acts; (f)
otherwise exercise any right or remedy it may have against Borrower, Coast
West, Shareholder or any security, including, without limitation, the right
to foreclose upon any such security by judicial or nonjudicial sale; (g)
settle, compromise with, release or substitute any one or more makers,
endorsers or guarantors of the Obligations or underlying obligations of
Borrower; and (h) assign the Obligations, the underlying Obligations of
Borrower or this Stock Pledge Agreement in whole or in part (subject to the
terms and conditions of the Indenture).
9. Waivers. Shareholder waives (a) any right to require Trustee or
-------
the Noteholders to (i) proceed against Borrower or Coast West, (ii) proceed
against or exhaust any security received from Borrower or Coast West or
(iii) pursue any other remedy in Trustee's power whatsoever; (b) any
defense resulting from the absence, impairment or loss of any right of
reimbursement or subrogation or other right or remedy of Shareholder
against Borrower or Coast West, or any security, whether resulting from an
election by Trustee to foreclose upon security by nonjudicial sale, or
otherwise; (c) any set off or counterclaim of Borrower or Coast West or any
defense which results from any disability or other defense of Borrower or
Coast West or the cessation or stay of enforcement from any cause
whatsoever of the liability of Borrower or Coast West; (d) any right to
exoneration of sureties which would otherwise be applicable; (e) except to
the extent prohibited by NRS 40.495, any right of subrogation or
reimbursement and any right of contribution, and right to enforce any
remedy which Trustee now has or may hereafter have against Borrower or
Coast West, and any benefit of, and any right to participate in, any
security now or hereafter received by Trustee until the Obligations and the
underlying obligations of Borrower have been paid in full; (f) all
presentments, demands for performance, notices of nonperformance, protests,
notice of dishonor, and notices of acceptance of the Stock Pledge Agreement
and of the existence, creation or incurrence of new or additional
Obligations; (g) the benefit of any statute of limitations (to the extent
permitted by law) and (h) any right to be informed by Trustee of the
financial condition of Borrower or Coast West or any change therein or any
other circumstances bearing upon the risk of nonpayment or nonperformance
of the Obligations or the underlying obligations of Borrower. Shareholder
has the ability and assumes the responsibility for keeping informed of the
financial condition of Borrower and Coast West and of other circumstances
affecting such nonpayment and nonperformance risks.
10. Limitation on Duties Regarding Collateral. Trustee's sole duty
-----------------------------------------
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or otherwise,
shall be to deal with it in the same manner as Trustee deals with similar
securities and property for its own account and as would be dealt by a
prudent person in the reasonable administration of its
8
<PAGE>
affairs. Neither Trustee nor any of its directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon any
of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request
of Shareholder or otherwise.
11. Nevada Gaming Law. This agreement will be governed by the
-----------------
Gaming Control Act. Without limiting the generality of the foregoing, the
parties agree that:
(a) Notwithstanding approval by the Nevada Gaming Authorities
pursuant to paragraph 5, other approvals of the Gaming Authorities
may, and in some cases will, be required before certain transactions
relating to this Agreement may occur, including but not limited to the
following:
(i) any re-registration or action similar to re-
registration of the Stock (or any distribution in respect of, in
addition to, in substitution of, or in exchange for, the Stock or
any part thereof);
(ii) any foreclosure, sale, transfer or other disposition
of the Stock; and
(iii) pursuant to Regulation 8.050 of the Nevada Gaming
Commission, the payment or receipt of any money or other thing of
value constituting any part of the consideration for the transfer
or acquisition of the Stock, except that such consideration may
be placed in escrow pending the necessary approvals; and
(b) In the event that the Trustee takes possession of the Stock
of Borrower or Coast West, the Trustee shall retain all evidence of
ownership in the Stock of Borrower and if required, Coast West, or any
distribution of additional securities in respect of, in addition to,
in substitution of, or in exchange for, such Stock of Borrower and, if
required, Coast West, or any part thereof, in the State of Nevada
through its agent, Bank of America Nevada, N.A., or such substitute
agent as it may select in its reasonable discretion that is located in
and authorized to do business in the State of Nevada.
12. Termination. This Stock Pledge Agreement shall terminate upon
-----------
the satisfaction of all Obligations and underlying obligations of Borrower,
and Trustee shall promptly thereafter deliver the Stock certificates held
by it hereunder to Shareholder and, at Shareholder's expense, execute and
deliver to Shareholder such documents as Shareholder shall reasonably
request to evidence such termination. Upon any release of the Stock of
Coast West from the pledge and security interest hereunder pursuant to the
Release Provision, the Trustee shall promptly deliver to Shareholder all
certificates representing such Stock and, at Shareholder's expense, execute
and deliver to Shareholder such documents as Shareholder shall reasonably
request to evidence such
9
<PAGE>
release.
13. Power of Attorney. Shareholder hereby appoints and constitutes
-----------------
Trustee as Shareholder's attorney-in-fact for purposes of, at any time
while an Event of Default exists, (a) collecting any Collateral, (b)
conveying any item of Collateral to any purchaser thereof, and (c) making
any payments or taking any acts under Section 6 hereof. Trustee's
authority hereunder shall include, without limitation, upon the occurrence
and during the continuance of an Event of Default, the authority to endorse
and negotiate, for Trustee's own account, any checks or instruments in the
name of Trustee, to execute or receipt for any document, to transfer title
to any item of Collateral, and to take any other actions necessary or
incident to the powers granted to Trustee in this Stock Pledge Agreement.
This power of attorney is coupled with an interest and is irrevocable by
Shareholder.
14. Miscellaneous.
-------------
(a) Notices. Except as otherwise provided herein, all notices,
-------
requests, demands of other communications to or upon the parties
hereto shall be addressed to the parties at the respective addresses
indicated below or at such other address as either party hereto may
designate by written notice to the other party, and shall be deemed to
have been given (i) in the case of notice by letter, three (3) days
after deposited in the mails registered and return receipt requested,
or (ii) in the case of notice given by telecommunication, when sent:
Trustee: Firstar Bank of Minnesota, N.A.
-------
101 East 5th Street
St. Paul, Minnesota 55101
Attn: Frank Leslie, III
FAX: 612-229-6415
With a copy to:
National Trust and Savings Association
300 South Fourth Street
Las Vegas, Nevada 89101
Attn: Alan Gordon
Shareholder: Coast Resorts, Inc.
-----------
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
Ph: (702) 365-7111
Fax: (702) 365-7566
10
<PAGE>
With a copy to:
Barry Lieberman, Esq.
General Counsel
Coast Resorts, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Ph: (702) 365-7111
Fax: (702) 365-7566
Borrower: Coast Hotels and Casinos, Inc.
--------
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
Ph: (702) 367-7111
Fax: (702) 367-6312
With a copy to:
Barry Lieberman, Esq.
General Counsel
Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Ph: (702) 365-7111
Fax: (702) 365-7566
Coast West: Coast West, Inc.
----------
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
Ph: (702) 367-7111
FAX: (702) 367-7566
With a copy to:
Barry Lieberman, Esq.
General Counsel
Coast Resorts, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Ph: (702) 365-7111
Fax: (702) 365-7566
11
<PAGE>
(b) Nonwaiver. No failure or delay on Trustee's part in
---------
exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such
right preclude any other further exercise thereof or of any other
right.
(c) Amendments and Waivers. This Stock Pledge Agreement may
----------------------
not be amended or modified, nor may any of its terms be waived, except
by written instruments signed by the party or parties against which
enforcement thereof is sought. Each waiver or consent under any
provision hereof shall be effective only in the specific instances for
the purpose for which given.
(d) Assignment. This Stock Pledge Agreement shall be binding
---------
upon inure to the benefit of Trustee, the Noteholders and Shareholder
and their respective successors and assigns; provided, however, that
Shareholder may not assign its rights or delegate its duties hereunder
without the prior written consent of Trustee. Trustee may assign or
otherwise transfer all or any part of its interest under this Stock
Pledge Agreement, upon notice to Shareholder. Trustee may disclose
this Stock Pledge Agreement and any financial or other information
relating to Shareholder to any potential assignee or participant.
(e) Cumulative Rights, etc. The rights, powers and remedies of
----------------------
Trustee under this Stock Pledge Agreement shall be in addition to all
rights, powers and remedies given to Trustee by virtue of the
Indenture, any applicable governmental rule or regulation or any other
agreement, all of which rights, powers, and remedies shall be
cumulative and may be exercised successively or concurrently without
impairing Trustee's lien in the Collateral. Shareholder waives any
right to require Trustee to proceed against any Person or to exhaust
any Collateral or to pursue any remedy in Trustee's power.
(f) Governing Law. This Stock Pledge Agreement shall be
-------------
governed by and construed in accordance with the laws of the State of
New York, except (i) as the Nevada Gaming Control Act may apply, (ii)
as required by mandatory provisions of Nevada law and (iii) to the
extent that the validity or perfection of the lien and security
interest hereunder, or remedies hereunder, in respect of any
particular Collateral are governed by the laws of the State of Nevada.
(g) Intercreditor Agreement. Notwithstanding anything herein
-----------------------
to the contrary, all rights and remedies of the Trustee under this
Agreement are expressly subject to the terms and conditions of the
1996 Notes Intercreditor Agreement.
12
<PAGE>
IN WITNESS WHEREOF, Shareholder has caused this Stock Pledge and
Security Agreement to be executed in favor of Trustee as of the day and
year first above written.
SHAREHOLDER:
COAST RESORTS, INC., a Nevada corporation
By: /s/ Harlan D. Braaten
-------------------------
Name: Harlan D. Braaten
Title: President & COO
<PAGE>
ACKNOWLEDGMENT AND
CONSENT OF BORROWER AND COAST WEST
----------------------------------
Each of Coast Hotels and Casinos, Inc., a Nevada corporation ("Borrower"),
and Coast West, Inc. ("Coast West") hereby acknowledges receipt of a copy of the
above Stock Pledge and Security Agreement, agrees to be bound by and comply with
the terms thereof, including, without limitation, Section 6 thereof and agrees
to perform all covenants and obligations therein which, by their express or
implied terms are to be performed by Borrower and/or Coast West.
COAST HOTELS AND CASINOS, INC.,
a Nevada corporation
By: /s/ Harlan D. Braaten
-------------------------
Name: Harlan D. Braaten
Title: President & COO
COAST WEST, INC.,
a Nevada corporation
By: /s/ Harlan D. Braaten
-------------------------
Name: Harlan D. Braaten
Title: President & COO
<PAGE>
EXHIBIT "A"
-----------
DESCRIPTION OF SHAREHOLDER'S STOCK
----------------------------------
<TABLE>
<CAPTION>
Percentage of
Stock Outstanding
Issuer Class of Stock Certificate No. No. of Shares Shares
- ------------------- -------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Coast Hotels and Common No. 1 1,000 100%
Casinos, Inc.
Coast West, Inc. Common No. 1 10 1%
Coast West, Inc. Common No. 2 1,000 99%
</TABLE>
<PAGE>
EXHIBIT 10.32
Execution Copy
--------------
PARI PASSU INTERCREDITOR AGREEMENT
---- -----
PARI PASSU INTERCREDITOR AGREEMENT, dated as of November 21, 1997 among
Firstar Bank of Minnesota, N.A., as trustee (the "1996 Trustee") for the benefit
of the Holders of the 13% First Mortgage Notes under the 1996 Indenture (as
hereinafter defined), Coast Hotels and Casinos, Inc., a Nevada corporation (the
"Company"), Coast Resorts, Inc., a Nevada corporation (the "Guarantor"), Coast
West, Inc., a Nevada corporation ("Coast West"), Firstar Bank of Minnesota,
N.A., as trustee (the "1997 Trustee") for the benefit of the holders of the 10
7/8% First Mortgage Notes (the "Lenders") under the 1997 Indenture of even date
herewith between the Company, the Guarantor and the 1997 Trustee.
WHEREAS, the Company has issued its 13% First Mortgage Notes due December
15, 2002 (collectively, the "13% First Mortgage Notes") under the 1996
Indenture;
WHEREAS, the Company has provided the 1996 Trustee with a lien or security
interest in the 1996 Collateral as security for Indebtedness owing to the
Holders;
WHEREAS, it has been agreed by the 1996 Trustee, the Company and the
Guarantor in Section 4.09 of the 1996 Indenture that the Company and its
Subsidiaries, subject to the terms and provisions of the 1996 Indenture, are
permitted to obtain additional financing from other lenders to finance the costs
of various improvements and for other purposes;
WHEREAS, the Company has, in accordance with Section 4.09 of the 1996
Indenture, issued its 10 7/8% First Mortgage Notes due November 1, 2001
(collectively, the "10 7/8% First Mortgage Notes") under the Indenture;
WHEREAS, the 1996 Indenture permits the Company and its Subsidiaries, under
certain circumstances expressly set forth therein and subject to certain
limitations, to create or cause to be created additional liens and security
interests in the Collateral in favor of Persons, other than the 1996 Trustee,
which will pursuant to an Intercreditor Agreement have equal priority with the
lien of the applicable Security Documents securing the 13% First Mortgage Notes
and requires the 1996 Trustee, upon fulfillment of certain conditions precedent,
to execute and deliver an Intercreditor Agreement in substantially the form
hereof to the holder of the Indebtedness to be secured by such additional liens
and security interests (or such holder's agent, trustee or other authorized
representative);
WHEREAS, the Company and Guarantor have entered into the 1997 Security
Documents
<PAGE>
granting to the 1997 Trustee liens, mortgages, pledges and security
interests in Collateral, as that term is defined in the 1996 Indenture (such
Collateral, which constitutes a substantial part of the collateral held by 1996
Trustee, being defined herein as the Pari Passu Collateral);
---- -----
WHEREAS, the Pari Passu Collateral is not subject to any Liens (as defined
---- -----
in the 1996 Indenture), other than Permitted Liens (as defined in the 1996
Indenture), and title insurance and other confirmation of the foregoing has been
provided to the Pari Passu Parties (as hereinafter defined) in form and
---- -----
substance satisfactory to them;
WHEREAS, the parties hereto desire to set forth their agreement as to the
nature of priority of the liens, mortgages, pledges and security interests held
by the Pari Passu Parties in the Pari Passu Collateral and certain other matters
---- ----- ---- -----
related thereto;
NOW, THEREFORE, in consideration of the mutual premises and agreements
herein contained it is hereby agreed a follows:
1. DEFINITIONS - As used in this Agreement, the following terms have the
meanings hereinafter set forth:
"Bankruptcy Law" means Title 11, United States Code, and any other
state or federal insolvency, reorganization, moratorium or similar law for
the relief of debtors.
"Bankruptcy Proceeding" means any proceeding commenced under any
Bankruptcy Law.
"1996 Collateral" means the Collateral (as defined in the 1996
Indenture).
"1996 Indenture" means that certain indenture, dated as of January 30,
1996, among the Company, the Guarantor (as defined therein) and the 1996
Trustee, as amended or supplemented from time to time.
"1997 Indenture" means that certain indenture, dated as of the date
hereof, among the Company, the Guarantors and the 1997 Trustee, as amended
or supplemented from time to time.
"Pari Passu Collateral" means the Collateral (as defined in the 1997
----------
Indenture), including, without limitation, each item of collateral
described in the 1997 Security Documents.
"Pari Passu Parties" means, collectively, the 1996 Trustee and the
---- -----
1997 Trustee.
"Security Documents" has the meaning defined in the 1996 Indenture.
2
<PAGE>
"1997 Security Documents" means (i) the Security Agreement, dated as
of November 21, 1997, by and between the Company and the 1997 Trustee, (ii)
the Stock Pledge and Security Agreement, dated as of November 21, 1997,
executed by the Guarantor, (iii) Escrow Agreement, dated as of November 21,
1997 by and among the Guarantor, 1997 Trustee and Bank of America Nevada,
as escrow holder, (iv) the Deed of Trust, Assignment of Rents, Leases and
Security Agreement, dated as of November 21, 1997, by and among the
Company, National Title Company as trustee for the benefit of the holders
of the 10 7/8% First Mortgage Notes and the 1997 Trustee, and (v) the
certain financing statements filed with the Secretary of Sate of Nevada and
the Clark County, Nevada, Recorder.
All capitalized terms used herein which are not otherwise defined herein
shall have the meaning ascribed to such terms in the 1996 Indenture.
2. (a) The 1996 Trustee hereby agrees that each lien, mortgage, pledge
or security interest of the 1996 Trustee in the property and assets
constituting the Pari Passu Collateral pursuant to the Security Documents,
---- -----
to the extent of the obligations secured by such lien, mortgage, pledge or
security interest (provided that the aggregate principal amount of
Indebtedness secured by such lien, mortgage, pledge or security interest
shall not exceed $175,000,000), shall be equal in priority with each lien,
mortgage, pledge, or security interest of the 1997 Trustee in the property
and assets constituting the Pari Passu Collateral pursuant to the 1997
---- -----
Security Documents, to the extent of the obligations secured by such liens,
mortgages, pledges or security interests (provided that the aggregate
principal amount of the indebtedness secured by such liens, mortgages,
pledges or security interests shall not exceed $16,800,000).
(b) The 1997 Trustee hereby agrees that each lien, mortgage, pledge
and security interest held by the 1997 Trustee in the property and assets
constituting the Pari Passu Collateral pursuant to the 1997 Security
---- -----
Documents, to the extent of the obligations secured by such lien, mortgage,
pledge or security interest (provided that the aggregate principal amount
of the Indebtedness secured by such lien, mortgage, pledge or security
interest shall not exceed $16,800,000) shall be equal in priority with each
lien, mortgage, pledge or security interest of the 1996 Trustee in the
property and assets constituting the Pari Passu Collateral pursuant to the
---- -----
Security Documents, to the extent of the obligations secured by such lien,
mortgage, pledge or security interest (provided that the aggregate
principal amount of Indebtedness secured by such lien, mortgage, pledge or
security interest shall not exceed $175,000,000).
3. The priorities of the liens, mortgages, pledges or security interests
established, altered or specified herein are applicable irrespective of:
(i) the time or order of attachment or perfection thereof,
3
<PAGE>
(ii) the method of perfection;
(iii) the time or order of filing or recording of financing
statements, mortgages or other instruments; or
(iv) any amendments to the liens, mortgages, pledges or security
interest established, altered or specified herein, provided that such
amendment does not alter the aggregate principal amount of the Indebtedness
secured by such lien, mortgage, pledge or security interest; and
(v) the time or order of foreclosure, taking of possession or the
exercise of any remedy;
provided, however, that the priorities of any liens, mortgages, pledges or
- -------- -------
security interests which are not established, altered or specified herein shall
be unaffected and shall exist and continue in accordance with applicable law.
The agreements in paragraph 2 hereof are solely for the purpose of establishing
the relative priorities of the interests of the Pari Passu Parties in the Pari
---- ----- ----
Passu Collateral and shall not inure to the benefit of any other Person.
- -----
4. The Pari Passu Party or Parties holding a majority in principal amount
---- -----
of Indebtedness secured by the Pari Passu Collateral (the "Controlling Party")
---- -----
shall have the sole right, without the affirmative consent of, but with notice
to, any of the other Pari Passu Party or Parties (the "Minority Party"), and on
---- -----
behalf of itself and each Pari Passu Party, to (i) take any action, or fail to
---- -----
take any action, or direct any other Pari Passu Party to take any action, or
---- -----
fail to take any action, to enforce or exercise (or decline to exercise) any
right or remedy with respect to the Pari Passu Collateral and to foreclose upon,
---- -----
collect and dispose of the Pari Passu Collateral or any portion thereof in
---- -----
accordance with one or more of the applicable collateral documents and (ii)
exercise any right or remedy, or decline to exercise any right or remedy, with
respect to the Pari Passu Collateral in accordance with one or more of the
---- -----
applicable collateral documents in any Bankruptcy Proceeding, including, without
limitation, any right of election under Sections 1111(b) or 365(h) of the
Bankruptcy Code, any other rights of election, determinations, proofs of claims
or other rights or remedies in connection with any Bankruptcy Proceeding;
provided that each Minority Party shall have the right to file its own proof(s)
- --------
of claim in any Bankruptcy Proceeding. The Contracting Party will endeavor to
exercise any right or remedy with respect to the real property constituting part
of the Pari Passu Collateral in a manner that does not adversely affect under
---- -----
the Nevada One Action Rule the rights of either of the Pari Passu Parties.
---- -----
5. In accordance with paragraph 4 hereof, the Minority Party agrees
(regardless of whether any individual Pari Passu Party agrees, disagrees or
---- -----
abstains with respect to any action or failure to act by the Controlling Party)
that the Controlling Party shall have the authority to act or fail to act, as it
deems necessary in its sole discretion, with respect to the rights and remedies
of all of the Pari Passu Parties with respect to the Pari Passu Collateral and
---- ----- ---- -----
that the Controlling Party shall have no liability for acting or failing to act
(provided such action or failure to act does
4
<PAGE>
not conflict with the express terms of this Agreement). Each Pari Passu Party
---- -----
further acknowledges and agrees that, until the obligations under the 1996
Indenture and the 1997 Indenture are no longer outstanding, the only right of
such Pari Passu Party with respect to the Pari Passu Collateral is to be secured
---- ----- ---- -----
by the Pari Passu Collateral as and to the extent provided in its respective
---- -----
loan document or agreement and as provided herein and to receive a share of the
proceeds of the Pari Passu Collateral, if any, to the extent provided under
---- -----
paragraph 6 hereof; provided, however, that, until the obligations under the
-------- -------
1996 Indenture and the 1997 Indenture are no longer outstanding, in no event
shall any rights or benefits accorded any Pari Passu Party include any right to
---- -----
challenge, contest or dispute any action taken or not taken with respect to the
Pari Passu Collateral by the Controlling Party, the Collateral Agent (as
- ---- -----
hereinafter defined) or any other Pari Passu Party in accordance with this
---- -----
Agreement, and, until the obligations under the 1996 Indenture and the 1997
Indenture are no longer outstanding, in no event shall any security interest
granted to the 1996 Trustee or the 1997 Trustee entitle any Pari Passu Party to
---- -----
enforce its respective rights in respect of the Pari Passu Collateral except
---- -----
through the Controlling Party and the Collateral Agent (as hereinafter defined)
in accordance with this Agreement. In addition, the Minority Party agrees that
it (i) shall not attack nor challenge the validity, perfection or priority of
the Controlling Party's lien with respect to the Pari Passu Collateral; (ii)
---- -----
will release all liens, mortgages, pledges and security interests in all or any
portion of the Pari Passu Collateral (to the extent of its respective interest
---- -----
therein) in the event that the Controlling Party elects to sell all or any
portion of the Pari Passu Collateral in exercising any right or remedy with
---- -----
respect to the Pari Passu Collateral, (iii) waives any right of election it may
---- -----
have under Sections 1111(b) or 365(h) of the Bankruptcy Code, or any other
rights of election, determinations, proofs of claims (except as set forth in the
last proviso set forth in Section 4 hereto) or other rights or remedies in
connection with any Bankruptcy Proceeding with respect to the Pari Passu
---- -----
Collateral; (iv) waives any right of claim of equitable subordination which it
may have in connection with the Bankruptcy of any Person.
6. The Pari Passu Parties each agree that all money or funds collected
---- -----
with respect to the Pari Passu Collateral (including, without limitation, any
---- -----
net condemnation proceeds or other awards, insurance or other loss recoveries
which are required or permitted under each of the documents and agreements
governing the Pari Passu Collateral to be applied to the Indebtedness secured
---- -----
thereby and any property (real and personal) and any amounts in respect of any
deficiency recoveries) in connection with the enforcement or exercise of any
right or remedy with respect to the Pari Passu Collateral following the
---- -----
acceleration of the Indebtedness of the Company to any of the Pari Passu
---- -----
Parties, shall be directed to a collateral agent appointed by the Controlling
Party on behalf of all of the Pari Passu Parties (the "Collateral Agent"), which
---- -----
Collateral Agent shall be instructed by the Controlling Party to distribute such
money, funds or other property in the following order of priority: First: to
-----
the payment of each Pari Passu Party in respect of all reasonable expenses in
---- -----
connection with the collection or realization of such cash or funds or the
administration of this Agreement in connection with the collection or
realization of such cash or funds; Second: to each such Pari Passu Party a
------ ---- -----
proportion of such remaining money or funds as the total outstanding obligations
secured by a lien, mortgage, pledge or security interest on the Pari Passu
---- -----
Collateral held by such Pari Passu Party on the date on which
---- -----
5
<PAGE>
the payment of principal, premium, interest or any other monetary obligations on
the 13% First Mortgage Notes or the 10 7/8% First Mortgage Notes is accelerated
as a result of an Event of Default under either the 1996 Indenture or the 1997
Indenture bears to the total amount of outstanding obligations secured by liens,
mortgages, pledges or security interests on the Pari Passu Collateral held by
---- -----
all Pari Passu Parties until all such secured obligations of such Pari Passu
---- -----
Party have been paid in full (disregarding any reduction of any such secured
obligations arising or occurring because of a foreclosure sale or the exercise
of any other right or remedy with respect to the Pari Passu Collateral); Third:
---- ----- -----
to the Company or to whosoever may be lawfully entitled to receive the same as a
court of competent jurisdiction may direct.
7. The Collateral Agent may at any time request directions from the
Controlling Party with respect to any security document of any Pari Passu Party
---- -----
as to any course of action or other matter relating hereto or to such security
document of any Pari Passu Party. Directions given by the Controlling Party to
---- -----
the Collateral Agent hereunder shall be binding on all Pari Passu Parties for
---- -----
all purposes (provided such directions do not conflict with the express terms of
this Agreement).
8. Each Pari Passu Party agrees not to take any action whatsoever to
---- -----
enforce any of its rights in respect of the Pari Passu Collateral, except
---- -----
through the Controlling Party in accordance with paragraphs 4, 5 and 6 hereof;
provided, however, that this Agreement shall not prevent any Pari Passu Party
- -------- ------- ---- -----
from enforcing or exercising any right or remedy, to the extent that such
enforcement or exercise of rights or remedies does not impair the security
interest or the rights and/or remedies of the Controlling Party or any other
Pari Passu Party in the Pari Passu Collateral or otherwise, (i) with respect to
- ---- ----- ---- ------
Pari Passu Collateral granted to it by its respective documents and agreements,
- ---- -----
(ii) with respect to any collateral granted to it which is not Pari Passu
---- -----
Collateral or (iii) with respect to payment and/or performance obligations owing
to it; nor shall this Agreement grant any of the Pari Passu Parties any right or
---- -----
remedy under the documents or agreements of the other Pari Passu Parties. Each
---- -----
Pari Passu Party waives any requirement for marshaling of assets by the other
- ---- -----
Pari Passu Parties in connection with any foreclosure or realization of Liens on
- ---- -----
any collateral other than Pari Passu Collateral (including the proceeds thereof)
---- -----
and any other principle of election of remedies.
9. The Company and the Guarantor each agree that if any Pari Passu Party
---- -----
receives any money, funds or other property that are distributed pursuant to
paragraph 6 above, such money, funds or other property shall not discharge any
secured obligation held by the Person receiving such money, funds or other
property to the extent such money, funds or other property were distributed to
any other Person. In the event that any payment in respect of, or distribution
of, the Pari Passu Collateral required to be directed to the Collateral Agent
---- -----
pursuant to paragraph 6, of any kind or character, whether in cash, property or
securities, shall be received by any Pari Passu Party before all Indebtedness
---- -----
secured by Pari Passu Collateral is paid in full, such payment or distribution
---- -----
shall be held in trust for the benefit of, and shall be paid over to, the Pari
----
Passu Parties in accordance with paragraph 6 above.
- -----
6
<PAGE>
10. Each of the Pari Passu Parties agrees to transmit to the Controlling
---- -----
Party a copy of any communication sent by such Pari Passu Party to the Company,
---- -----
the Guarantor or any other Person (contemporaneously with the transmittal of any
such communication) with respect to any event of default, any acceleration of
Indebtedness, or any notice of sale of any Pari Passu Collateral as a result of
---- -----
a default. Any failure by any Pari Passu Party to furnish a notice pursuant to
---- -----
this paragraph 10 shall in no way diminish the rights of such party hereunder.
11. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AND SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF THE PARI PASSU PARTIES, THE COMPANY, THE GUARANTOR, AND THEIR
---- -----
RESPECTIVE SUCCESSORS, DESIGNEES AND ASSIGNS.
12. This Agreement is solely for the purpose of establishing the relative
interests of the 1996 Trustee, the holders of 13% First Mortgage Notes, the
1997 Trustee and the holders of 10 7/8% First Mortgage Notes and is not for the
benefit of any other party.
13. All terms used herein which are defined in the Nevada Uniform
Commercial Code shall have the meanings therein stated, unless the context
otherwise requires.
14. All notices or other communications required or permitted hereunder
shall be in writing and shall be given by personal delivery or United States
Mail, first class, registered or certified, postage prepaid, return receipt
requested, addressed to the parties at the addresses indicated on the signature
pages hereof. Each such notice or other communication shall be deemed given on
(a) the date of receipt of personal delivery thereof, or (b) if not by mail (as
aforesaid), the date which is three (3) business days after such communication
is deposited in the mail (postage prepaid as aforesaid). Any party may change
its address for notice by notice to the other parties hereto in accordance with
the foregoing.
15. Each of the Pari Passu Parties (including the 1996 Trustee), upon the
---- -----
request of any Pari Passu Party, shall execute and deliver and cause to be
---- -----
recorded in all applicable filing offices an Intercreditor Agreement
substantially in the form of this Agreement, which Intercreditor Agreement shall
be effective if and only if all Pari Passu Parties shall have executed and
---- -----
delivered the same or a counterpart thereof. Simultaneously with the repayment
or other discharge of Indebtedness secured by any Pari Passu Collateral, the
---- -----
Pari Passu Party whose Indebtedness is so repaid or discharged shall execute and
- ---- -----
deliver such instruments as may be reasonably required by any of the other Pari
----
Passu Parties to release or extinguish such Pari Passu Party's interest in the
- ----- ---- -----
Pari Passu Collateral.
- ---- -----
16. No Pari Passu Party shall be liable to any other Pari Passu Party for
---- ----- ---- -----
any action taken by it, including the payment of any monies hereunder, in
connection with this Agreement, provided the same was taken in good faith and
did not constitute gross negligence or willful misconduct.
7
<PAGE>
17. Each Pari Passu Party shall have the right to alter or amend its
---- -----
respective loan agreements and documents and to release or take additional
collateral pursuant thereto. Nothing in this agreement is intended to alter or
amend the obligations of any Pari Passu Party with respect to the Company or any
---- -----
of its Subsidiaries under its respective loan agreements and documents. Nothing
herein is intended to confer upon the Company, the Guarantor or any of their
respective Subsidiaries any right or benefit with respect to any Pari Passu
---- -----
Party and the Company, the Guarantor hereby acknowledges, for itself and its
respective Subsidiaries, that it has no right to enforce the terms hereunder
against any Pari Passu Party. Their signatures hereto are merely to acknowledge
---- -----
this agreement, which is for the sole benefit of the Pari Passu Parties.
---- -----
18. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the 1996 Trustee, as trustee, and the 1997 Trustee, as
trustee, have caused this Agreement to be duly executed as of the date first
above written.
FIRSTAR BANK OF MINNESOTA, N.A.,
as 1996 Trustee
By: /s/ Frank Leslie, III
----------------------------------------
Name: Frank Leslie, III
Title: Vice President
FIRSTAR BANK OF MINNESOTA, N.A.,
as 1997 Trustee
By: /s/ Frank Leslie, III
-----------------------------------------
Name: Frank Leslie, III
Title: Vice President
COAST HOTELS AND CASINOS, INC.
By: /s/ Michael J. Gaughan
--------------------------------
Name: Michael J. Gaughan
Title: Chief Executive Officer
COAST RESORTS, INC.
By: /s/ Michael J. Gaughan
-------------------------------
Name: Michael J. Gaughan
Title: Chief Executive Officer
COAST WEST, INC.
By: /s/ Michael J. Gaughan
-------------------------------
Name: Michael J. Gaughan
Title: President
<PAGE>
STATE OF ______________)
) ss:
COUNTY OF______________)
This instrument was acknowledged before me on _____________, 199_ by
__________ _________________ as _____________ of FIRSTAR BANK OF MINNESOTA, N.A.
as 1996 Trustee.
_______________________________
NOTARY PUBLIC
STATE OF ______________)
) ss:
COUNTY OF _____________)
This instrument was acknowledged before me on __________, 199_ by
__________ _________________ as _____________ of FIRSTAR BANK OF MINNESOTA, N.A.
as 1997 Trustee.
_______________________________
NOTARY PUBLIC
STATE OF NEVADA )
) ss.:
COUNTY OF CLARK )
This instrument was acknowledged before me on ____________, 199_ by MICHAEL
GAUGHAN as Chairman of the Board and Chief Executive Officer of COAST HOTELS AND
CASINOS, INC., a Nevada corporation.
_______________________________
NOTARY PUBLIC
STATE OF NEVADA )
) ss.:
COUNTY OF CLARK )
This instrument was acknowledged before me on ____________, 199_ by MICHAEL
GAUGHAN as Chief Executive Officer of COAST RESORTS, INC., a Nevada corporation.
_______________________________
<PAGE>
NOTARY PUBLIC
STATE OF NEVADA )
) ss.:
COUNTY OF CLARK )
This instrument was acknowledged before me on ____________, 199_ by MICHAEL
GAUGHAN as Chief Executive Officer of COAST WEST, INC., a Nevada corporation.
_______________________________
<PAGE>
SIGNATURE PAGE
--------------
Firstar Bank of Minnesota, N.A.
101 East 5th Street
St. Paul, Minnesota 55101
Atten: Frank Leslie, III
Coast Hotels and Casinos, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
Coast Resorts, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
Coast Resorts, Inc.
4500 West Tropicana Avenue
Las Vegas, Nevada 89103
Attn: Michael Gaughan
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMTAION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF COAST RESORTS AND IS QUALIFIED IN ITS
ENITRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997
<CASH> 61,567 29,430
<SECURITIES> 0 0
<RECEIVABLES> 3,659 5,617
<ALLOWANCES> 379 194
<INVENTORY> 6,364 5,085
<CURRENT-ASSETS> 80,662 53,022
<PP&E> 286,580 307,151
<DEPRECIATION> 68,058 81,733
<TOTAL-ASSETS> 374,022 366,619
<CURRENT-LIABILITIES> 67,641 47,355
<BONDS> 202,545 215,249
0 0
0 0
<COMMON> 15 15
<OTHER-SE> 99,034 94,424
<TOTAL-LIABILITY-AND-EQUITY> 374,022 366,619
<SALES> 0 0
<TOTAL-REVENUES> 195,987 293,883
<CGS> 0 0
<TOTAL-COSTS> 118,563 19,849
<OTHER-EXPENSES> 57,913 84,453
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 22,236 26,339
<INCOME-PRETAX> 9,588 (6,725)
<INCOME-TAX> 5,952 (2,115)
<INCOME-CONTINUING> 3,636 (4,610)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,636 4,610
<EPS-PRIMARY> 4.17 (3.08)
<EPS-DILUTED> 4.17 (3.08)
</TABLE>
