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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission File #333-4356
COAST HOTELS AND CASINOS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0345706
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4500 West Tropicana Avenue, 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: None
(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 29, 2000 was 1,000 shares, none of which was held by non-affiliates of the
Registrant.
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COAST HOTELS AND CASINOS, INC.
Table of Contents
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 1999
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PART I
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Item 1. Business...................................................................................... 2
Item 2. Properties.................................................................................... 13
Item 3. Legal Proceedings............................................................................. 14
Item 4. Submission of Matters to a Vote of Security Holders........................................... 15
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters..................... 16
Item 6. Selected Financial Data....................................................................... 16
Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations......... 19
Item 8. Financial Statements and Supplementary Data................................................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 23
PART III
Item 10 Executive Officers and Directors of the Registrant........................................... 24
Item 11. Executive Compensation...................................................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................. 27
Item 13. Certain Relationships and Related Transactions.............................................. 27
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.......................... 29
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1
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PART I
Item 1. Business
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The Company
We own and operate three Las Vegas hotel-casinos, the Orleans, the Gold
Coast and the Barbary Coast. Our primary target customers for the Orleans and
the Gold Coast are local Las Vegas residents. The Barbary Coast benefits from
foot traffic at its prime location on the Las Vegas Strip. Our growth strategy
includes expanding our existing facilities, as well as identifying and
developing new gaming opportunities, primarily in Las Vegas. We are currently
constructing a fourth hotel-casino, the Suncoast, on a 50-acre site in west Las
Vegas near Summerlin, a rapidly growing master-planned community. We also own an
approximately 29 acre gaming site in North Las Vegas that we may develop in the
future.
Our principal executive office is located at 4500 West Tropicana Road, Las
Vegas, Nevada 89103. The telephone number is (702) 365-7000.
Business and Marketing Strategy
Our business and marketing strategy is to attract gaming customers to our
casinos by offering consistently high quality gaming, hotel, entertainment and
dining experiences at affordable prices. We emphasize attracting and retaining
repeat customers. Our primary target market for the Orleans and Gold Coast
consists of value-oriented local middle-market gaming patrons who gamble
frequently.
Our operating strategy with respect to gaming revenue focuses on slot and
video poker machines because these games accounted for approximately 69% of our
gaming revenues and approximately 50% of our total revenues in the year ended
December 31, 1999. (It is customary in the gaming industry to include video
poker and other gaming machines when using the term "slots" or "slot machines.")
Our marketing efforts include many high profile programs, including slot clubs
and frequent prize drawings for slot players. Other promotions include the
original "Pick the Pros" $1,000,000 football contest, check cashing promotions
and direct mail campaigns.
We believe that the most important factors in successfully operating our
casinos are convenient locations with easy access, a friendly atmosphere, a
value-oriented approach and high quality entertainment and amenities. We believe
that our casinos strongly appeal to the Las Vegas residents who gamble.
Additionally, we offer Las Vegas visitors spacious, well-appointed and
competitively priced guest rooms.
. Convenient, Strategic Locations. We believe that our two locals-oriented
properties, the Orleans and the Gold Coast, offer our target customers
easily accessible, convenient locations for gaming and entertainment. The
Orleans and the Gold Coast are both located one to two miles west of the
Strip in high traffic areas close to fast-growing segments of the western
Las Vegas valley. The Orleans and Gold Coast are easily accessible and
offer ample parking, providing our customers with convenient alternatives
to the congestion on the Strip. The Suncoast will have a suburban location
conveniently located adjacent to the fast-growing Summerlin master-planned
community with strong demographics, approximately nine miles from the
Strip.
. Friendly Atmosphere. A key element of our strategy is to provide patrons
with friendly, personal service that is designed to foster customer loyalty
and generate repeat business. Locals appreciate a friendly, casual gaming
environment where employees make them feel at home.
2
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Item 1. Business (continued)
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Business and Marketing Strategy (continued)
. Value. We offer value to our gaming patrons by providing video poker and
slot machines with better odds than those traditionally found at Strip
casinos due to lower hold percentages on our slot machines. Locals'
perception of value is also influenced by such things as slot clubs that
reward frequent gamblers. The Orleans and Gold Coast slot clubs offer
customers an opportunity to earn cash and prizes based on their winnings.
Because locals and repeat visitors demand variety and quality in their slot
machine play, our casinos offer the latest slot and video poker technology,
including several games designed exclusively for us. In addition, in order
to appeal to our value-conscious customers, our many restaurants and bars
serve generous portions of quality food and beverages at attractive prices.
. Entertainment, Movie Theaters And Amenities. We believe we compete
effectively with other locals-oriented casinos by offering amenities and
entertainment that our customers demand and that accentuate the perception
of value for our customers. Our properties offer a number of amenities that
generate significant foot traffic through our casinos, including movie
theaters, bowling centers, quality restaurants and a variety of musical
entertainment.
. Entertainment. The Orleans features headliner entertainers in its 850-
seat theater, attracting both local customers and tourists alike.
Among the entertainers who have appeared are Willie Nelson, Ray
Charles and the Righteous Brothers. The entertainment lounges at our
hotel-casinos feature many popular lounge acts.
. Movie Theaters. The Gold Coast was the first hotel-casino in Las Vegas
to offer first-run movies in its twin theaters. The Orleans has twelve
"stadium-seating" movie theaters, which opened in December 1997. Our
theaters are operated through a long-term joint venture with Century
Theaters, one of Las Vegas' leading theater operators, allowing us to
offer a wide variety of first-run movies in our state-of-the-art
facilities.
. Restaurants. We believe that the value offered by the many restaurants
at our casino properties is a major factor in attracting local gaming
customers, as we believe dining is a primary motivation for casino
visits by many locals. All of the restaurants located in our casino
properties offer generous portions of quality food at reasonable
prices. In addition, the Barbary Coast features two award-winning
gourmet restaurants, Michael's and Drai's on the Strip.
. Other Amenities. In addition to the restaurants and theaters mentioned
above, we offer a variety of amenities directed to the locals market,
including our bowling centers at the Gold Coast and the Orleans, which
are among the most popular in Las Vegas. Other amenities include
banquet and meeting rooms and child care facilities.
Tourist Customers. While a significant portion of our customers at the
Orleans and the Gold Coast are local residents, the same factors that appeal to
local residents also appeal to visitors to Las Vegas, including better odds than
those traditionally found at Strip casinos and lower minimum wager limits on our
table games than Strip casinos. Additionally, our casinos are strategically
situated to benefit from a growing visitor market, with the Gold Coast and the
Orleans each located within two miles of the Strip and the Barbary Coast located
at one of the busiest corners on the Strip. In addition to the growing local
resident market, Las Vegas is one of the fastest growing entertainment markets
in the United States.
3
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Item 1. Business (continued)
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The Orleans
We designed the Orleans to differentiate it in the Las Vegas market by
combining an upscale, off-Strip experience in an exciting themed environment
reflecting the architectural heritage of the New Orleans French Quarter with a
wide variety of non-gaming amenities. The Orleans primarily targets middle to
upper-middle income gaming customers, both local residents and visitors to Las
Vegas. We believe that the Orleans is an attractive alternative for local
residents and Las Vegas visitors, offering a full-service hotel-casino and
entertainment experience complemented with a value-oriented pricing strategy.
The Orleans is strategically located on Tropicana Avenue, a short distance from
the Las Vegas Strip and McCarran International Airport. According to the Nevada
Department of Transportation 1998 Annual Traffic Report, approximately 65,000
vehicles travel by the Orleans each day. With easy access and ample parking, the
Orleans has quickly become a popular destination for locals.
The Orleans features an approximately 110,000 square foot casino, a 22-
story tower with 840 hotel rooms, 12 "stadium seating" first-run movie theaters,
a 70-lane bowling center, approximately 40,000 square feet of banquet and
meeting facilities, including an approximately 17,000 square foot grand
ballroom, five full-service restaurants, specialty themed bars, a swimming pool,
a barber shop, a child care facility, a video arcade, a beauty salon and
approximately 4,000 parking spaces. The casino includes approximately 2,450 slot
machines, 63 table games, a keno lounge, a poker parlor and race and sports
books. The Orleans also includes an 850-seat theater that features headliner
entertainment and other special events. Among the performers at the Orleans'
theater during the past year have been Willie Nelson, Ray Charles and the
Righteous Brothers. We believe that the high-quality entertainment at the
theater distinguishes us from most other locals casinos in Las Vegas and allows
us to attract more tourists who would otherwise gamble at Strip casinos.
The Orleans features five restaurants including the Canal Street Grille,
serving steaks and seafood in a gourmet atmosphere, Vito's Ristorante, an
Italian restaurant, Don Miguel's, a Mexican restaurant, the Courtyard Cafe, a
coffee shop featuring New Orleans favorites as well as Chinese and American
fare, and the French Market Buffet. Each of our restaurants serves generous
portions of quality food and beverages at competitive prices. For customers
desiring a quick meal or snack, we offer Terrible Mike's, a hamburger and
sandwich restaurant, Kate's Corner, an ice cream parlor, and a snack bar in our
bowling center. The Orleans employs a number of marketing programs, including a
slot club with over 200,000 members, football contests and grand prize drawings.
In order to capitalize on our strong presence in the locals market, we are
considering further expansion of the Orleans by adding additional movie
theaters, two restaurants, a new hotel tower and a parking garage. No definitive
plans for such an expansion have been made, nor have we arranged for the
financing for such a project. Because the proposed expansion is subject to a
number of factors, including financing capacity and continued growth of revenues
at the Orleans, we cannot assure you that all or any aspects of this expansion
will be commenced or completed.
4
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Item 1. Business (continued)
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Gold Coast
The Gold Coast, which opened in 1986, is located on West Flamingo Road
approximately one mile west of the Las Vegas Strip near Interstate 15, the major
highway linking Las Vegas and Southern California, offering easy access from all
four directions in the Las Vegas Valley. The Gold Coast is located in a high-
traffic area and, according to the Nevada Department of Transportation, an
average of approximately 78,000 vehicles travel by the Gold Coast each day. The
Gold Coast features an approximately 70,000 square foot casino, including
approximately 2,000 slot machines, 46 table games, a keno lounge, a 160-seat
race and sports book and a 700-seat bingo parlor. The Gold Coast also features
an 11-story tower with 712 hotel rooms and suites and a swimming pool with a
covered bar.
The Gold Coast features three full-service restaurants, a 380-seat buffet
restaurant, a fast-food restaurant, a snack bar and an ice cream parlor.
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 musical
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 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. Our 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. We believe this value-oriented
approach generates a high level of customer satisfaction, fostering customer
loyalty and repeat business. We have periodically renovated and upgraded the
Gold Coast in order to maintain its appeal to our target customers.
The Gold Coast has developed a number of innovative campaigns designed to
promote its business and attract local residents. The Gold Coast's slot club has
issued over 500,000 club cards to its members since inception and currently has
over 100,000 active members. We established the slot club in 1987 to encourage
repeat business by rewarding frequent slot players with cash and prizes. Our
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. 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.
Barbary Coast
The Barbary Coast, which opened in 1979, is located at the intersection of
Flamingo Road and Las Vegas Boulevard. The Barbary Coast is located on one of
the busiest intersections on the Strip, along with Caesars Palace, Bally's Las
Vegas and Bellagio. Historically, the Barbary Coast has relied on foot traffic
on the Las Vegas Strip for a significant amount of its revenues. As a result,
the Barbary Coast's customer base is primarily visitors to the Las Vegas area.
In addition to its favorable location on the Strip, the Barbary Coast has also
benefited from its more intimate gaming atmosphere, allowing it to develop a
loyal base of table games and slot customers. Our marketing efforts toward table
games customers include complimentary rooms, food and beverage, as well as
programs such as blackjack tournaments and golf outings. Slot players may also
receive complimentary rooms, food and beverage, as well as cash and prizes as
members of our slot club. The slot players' "Fun Club" has approximately 100,000
members who are rewarded for their frequent play.
5
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Item 1. Business (continued)
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Barbary Coast (continued)
The Barbary Coast features an approximately 30,000 square foot casino,
including approximately 660 slot machines, 36 table games, race and sports books
and other amenities. Our eight-story tower includes 197 spacious rooms and
suites. The Barbary Coast is furnished and decorated in an elegant turn-of-the-
century Victorian theme and includes three bars and three restaurants: Michael's
restaurant, Drai's on the Strip (leased to and operated by a third party) and
the Victorian Room. Michael's and Drai's both feature gourmet-quality cuisine
served in elegant settings. The Victorian Room features both American and
Chinese food served in an atmosphere of stained glass and turn-of-the-century
decor.
Suncoast
We are currently constructing the Suncoast to expand our presence in the
growing Las Vegas locals market. The Suncoast will serve one of the fastest
growing areas of the Las Vegas valley and will be located on approximately 50
acres in Peccole Ranch, a master-planned community adjacent to Summerlin.
Our new hotel-casino will be strategically located at the intersection of
Rampart Boulevard and Alta Drive, readily accessible from most major points in
Las Vegas, including downtown (approximately eight miles) and the Strip
(approximately nine miles). The site is approximately 1/4 mile from the Regent
Las Vegas, a luxury resort that opened in the third quarter of 1999.
The Suncoast is a Mediterranean-themed facility that will have
approximately 78,000 square feet of casino space, 216 spacious hotel rooms,
approximately 25,000 square feet of banquet and meeting facilities, 16 "stadium
seating" movie theaters, five full-service restaurants and approximately 3,400
parking spaces. We expect the casino to include approximately 2,000 slot
machines, 48 table games, race and sports books and a 64-lane bowling center.
The Suncoast room tower is being built to accommodate an additional 216 hotel
rooms, which will be completed on an as-needed basis.
We have an estimated construction and development budget of approximately
$185.0 million (excluding pre-opening expenditures, opening bankroll and
capitalized interest costs). Construction is expected to cost approximately
$126.0 million, including contingencies. The budget also includes $52.0 million
for fixtures and equipment and $7.0 million for architecture and design fees.
Gaming Security
Each of our 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 our 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 our gaming
operations, including analyses of our compliance with the internal control
standards established by the Nevada State Gaming Control Board (the "Nevada
Board"), are performed by us and our 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 Commission (the
"Nevada Commission") and the Nevada Board.
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Item 1. Business (continued)
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Potential Future Developments
From time to time in our ordinary course of business we review proposals
for new developments, joint ventures and other strategic transactions. Coast
Hotels and Coast Resorts have had preliminary discussions regarding a potential
investment in a casino development in Mississippi. No agreements have been
reached with respect to that casino development, and we cannot assure you that
that development or any other new developments, ventures or transactions will be
pursued or, if pursued, will be successful.
Neighborhood Casino Act
Nevada's Senate Bill 208, also known as SB 208 and the Neighborhood Casino
Act, was enacted in 1997 and affects the development of our Suncoast location as
well as other potential locations for casinos targeting Las Vegas residents. The
Neighborhood Casino Act, among other things, imposes more stringent requirements
for approval of new hotel-casinos in Clark County that are not located in the
vicinity of the Strip and downtown Las Vegas. Sites that were designated a
gaming overlay or gaming enterprise district no later than December 31, 1998 and
that receive approval from the Nevada Gaming Commission (the "Nevada
Commission") for a nonrestricted gaming license no later than December 31, 2002
will not be subject to the more stringent requirements of the Neighborhood
Casino Act. In addition, certain casino sites in master-planned communities have
no deadline on when they must be licensed by the Nevada Gaming Commission.
The site on which the Suncoast is being constructed has been designated as
a gaming overlay or gaming enterprise district by the City of Las Vegas, which
is the zoning designation necessary to construct and operate a hotel-casino. We
must receive approval for a nonrestricted gaming license, which is generally not
available until immediately prior to beginning gaming operations, by December
21, 2002, or we will be required to successfully petition the City of Las Vegas
to designate the Suncoast site as a gaming overlay or gaming enterprise district
in order to obtain a nonrestricted gaming license pursuant to the more stringent
standards of SB 208. These and other restrictions may limit our ability to
develop and operate the Suncoast and any future development projects in Clark
County, including the land we own in North Las Vegas.
Competition
There is intense competition among companies in the gaming industry. The
Orleans and the Gold Coast compete (and, when completed, the Suncoast will
compete) primarily with Las Vegas hotel-casinos and non-hotel gaming facilities
which target local residents. Some of these competitors have recently completed
expansions or new projects. In addition, there are currently gaming facilities
that have been announced or are under construction in the immediate vicinity of
our casinos. A hotel-casino has been proposed for a location adjacent to the
Gold Coast. Additionally, adjacent to the Suncoast site, a luxury hotel-casino
and spa called The Regent Las Vegas opened in the third quarter of 1999. The
construction of new properties and the expansion or enhancement of existing
properties near our casinos could have a negative impact on our business.
In contrast to our other casinos, the Barbary Coast competes for customers
primarily with the hotel-casinos located on the Strip. Several large hotel-
casinos have either recently opened or are under construction on the Strip,
including Bellagio, Mandalay Bay, Paris, Aladdin and The Venetian. The
construction of new properties and the expansion or enhancement of existing
properties on the Strip by competitors could materially adversely affect the
Barbary Coast.
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Item 1. Business (continued)
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Competition (continued)
In addition to those mentioned above, several new hotel-casino projects and
expansions have been announced or are under construction in Las Vegas. These
projects and expansions will add substantial additional rooms and gaming
capacity to the Las Vegas area over the next two years. This additional gaming
and room capacity may have a negative impact on our business.
Furthermore, we compete with other legalized forms of gaming and gaming
operations in other parts of the state of Nevada and elsewhere. Certain states
have recently legalized, and several other states are currently considering
legalizing, casino gaming in designated areas. We also face competition from
casinos located on Native American reservations. We believe that the development
by Native Americans and other casino properties similar to those in Las Vegas in
areas close to Nevada, particularly California and Arizona, could have a
material adverse effect on our business and results of operations. In March
2000, California voters passed Proposition 1-A, which exempts California Native
American tribes from constitutional prohibitions against casino gaming and
allows the California governor to compact with the tribes to conduct limited Las
Vegas-style gaming activities. The governor has entered into compacts with 53
tribes that allow the tribes to operate slot and video poker machines, banked
card games and lotteries. An increase in gaming in California as a result of
the passage of Proposition 1-A could have a material adverse effect on our
business and results of operations.
Employees
At March 20, 2000, we had approximately 5,125 employees. We have not
experienced any significant work stoppages and believe our labor relations are
good. The Las Vegas job market for employees is very competitive. Except for
approximately 350 employees at the Barbary Coast who are covered by a collective
bargaining agreement, none of our other employees are covered by a collective
bargaining agreement.
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.
Our gaming operations are subject to the licensing and regulatory control of the
Nevada Commission, 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 our gaming operations.
8
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Item 1. Business (continued)
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Nevada Regulation And Licensing (continued)
We operate the Gold Coast, the Barbary Coast and the Orleans, and are
licensed by the Nevada Gaming Authorities. The gaming licenses require the
periodic payment of fees and taxes and are not transferable. Coast Resorts is
registered with the Nevada Commission as a publicly traded corporation (a
"Registered Corporation") and Coast Resorts has been found suitable to own the
stock of Coast Hotels. Coast Resorts, as a Registered Corporation, and Coast
Hotels, as a Corporate Licensee, are 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
stockholder of, or receive any percentage of the profits from, Coast Hotels
without first obtaining licenses and approvals from the Nevada Gaming
Authorities. Coast Hotels and Coast Resorts 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, Coast Hotels or Coast
Resorts 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 Coast Hotels 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 Coast Hotels who are actively and directly involved in
gaming activities 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 Coast Hotels or Coast Resorts unsuitable for licensing or unsuitable
to continue having a relationship with Coast Hotels or Coast Resorts, we would
have to sever all relationships with such person. In addition, the Nevada
Commission may require the Company and Coast Resorts 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.
Coast Hotels and Coast Resorts 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, Coast Hotels, Coast Resorts 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 our gaming properties and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of our 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.
9
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Item 1. Business (continued)
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Nevada Regulation And Licensing (continued)
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 stockholders; (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 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 stockholder 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. Coast Hotels is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with Coast Hotels or Coast
Resorts, we (i) pay that person any dividend or interest upon voting securities
of our company, (ii) allow that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person, (iii) pay
remuneration in any form to that person for services rendered or otherwise, or
(iv) fail 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.
10
<PAGE>
Item 1. Business (continued)
--------------------
Nevada Regulation And Licensing (continued)
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.
Coast Hotels 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. Coast Hotels is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require our stock certificates to bear a legend
indicating that the securities are subject to the Nevada Act.
Licensed Corporations and Registered Corporations such as Coast Hotels and
Coast Resorts may not make public offering of their 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. The
Nevada Commission has previously granted exemptions from this prior approval
process for certain public offerings by Coast Hotels and Coast Resorts. Approval
of a public offering, if given, will 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 stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as a part of the approval process
relating to the transaction.
11
<PAGE>
Item 1. Business (continued)
--------------------
Nevada Regulation And Licensing (continued)
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 stockholders for the purposes of acquiring control
of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or 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.
Coast Hotels may pursue development opportunities in other jurisdictions
and expects that if it does so it will be subject to similar rigorous regulatory
standards in each other jurisdiction in which it seeks to conduct gaming
operations. There can be no assurance that regulations adopted, permits required
or taxes imposed, by other jurisdictions will permit profitable operations by
Coast Hotels in those jurisdictions.
12
<PAGE>
Item 1. Business (continued)
--------------------
Certain Forward-Looking Statements
This Form 10-K includes "forward-looking statements" within the meaning of
the securities laws. All statements regarding our expected financial position,
business strategies and financing plans under the headings "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
"Business" and elsewhere in this Form 10-K are forward-looking statements. In
addition, in those and other portions of this Form 10-K, the words
"anticipates," "believes," "estimates," "seeks," "expects," "plans," "intends"
and similar expressions, as they relate to Coast Hotels or its management, are
intended to identify forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, and
have based these expectations on our beliefs as well as assumptions we have
made, such expectations may prove to be incorrect. Important factors that could
cause actual results to differ materially from such expectations are disclosed
in this Form 10-K, including, without limitation, the following factors:
. increased competition, both in Nevada and other states, including increased
competition from California Native American gaming;
. dependence on the Las Vegas area and Southern California for a majority of
our customers;
. substantial leverage and uncertainty that we will be able to service our
debt;
. uncertainties associated with the Suncoast and other construction projects,
including the related disruption of operations and the availability of
financing, if necessary; and
. changes in laws or regulations, third party relations and approvals,
decisions of courts, regulators and governmental bodies.
All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
our cautionary statements. The forward-looking statements included are made only
as of the date of this Form 10-K. We do not intend, and undertake no obligation,
to update these forward-looking statements.
Item 2. Properties
----------
The Orleans occupies a portion of an approximately 80 acre site located on
West Tropicana Avenue, approximately one mile south of the Gold Coast. We lease
the real property under a ground lease entered into by Coast Hotels and the
Tiberti Company, a Nevada general partnership of which J. Tito Tiberti, a
director of Coast Hotels, is managing partner. See "Certain Transactions." The
lease had an effective commencement date of October 1, 1995, an initial term of
50 years, and includes an option, exercisable by us, to extend the initial term
for an additional 25 years. The lease provides for monthly rental payments of
$175,000 per month through February 1999, $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, we have 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 we exercise the option, provided that the purchase price will not be less
than 10 times, nor more than 12 times, annual rent at such time.
13
<PAGE>
Item 2. Properties (continued)
----------------------
We own the approximately 26 acres that the Gold Coast occupies on West
Flamingo Road. We also own 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, the Barbary Coast and the Orleans primarily
as a storage facility.
The Barbary Coast occupies approximately 1.8 acres at the intersection of
Flamingo Road and the Strip and occupies real property that we lease pursuant to
a lease that expires on May 1, 2003. The lease provides for rental payments of
$175,000 per year. The lease contains two options, exercisable by us, to extend
the term of the lease for 30-years each. Rental payments will increase to
$190,000 per year for the ten years following the first renewal option, $200,000
per year for the second ten-year period and $210,000 per year for the third ten-
year period. We have 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. We also have a right
of first refusal in the event the landlord desires to sell the real property
during the initial term of the lease. We also lease 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. We use the 2.5 acre property as a parking lot for our employees and for
valet parking. The landlord has the right to terminate the lease upon six months
prior notice to us 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).
We lease the approximately 50 acre Suncoast site located at the corner of
Rampart Boulevard and Alta Drive in the west Las Vegas valley pursuant to a
Ground Lease Agreement dated as of October 28, 1994. The initial term of the
lease expires on December 31, 2055. The lease contains three options,
exercisable by us, to extend 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 us 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 will 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. We have a right of first refusal in the
event the landlord desires to sell the property at any time during the lease
term.
We also own an approximately 29 acre parcel of undeveloped land located at
the corner of Rancho Drive and Carey Avenue in North Las Vegas, close to the
Fiesta Hotel and Casino and the Texas Station Hotel and Casino. Any future
developments on this site would be subject to, among other things, our ability
to obtain necessary financing and compliance with SB 208.
Item 3. Legal Proceedings
-----------------
We are currently, and are from time to time, involved in litigation arising
in the ordinary course of our business. We are currently subject to lawsuits in
which the plaintiffs have sought punitive damages. We intend to continue to
defend the lawsuits vigorously. We do not believe that such litigation,
including the foregoing proceedings, will, individually or in the aggregate,
have a material adverse effect on our financial position, results of operations
or cash flows.
14
<PAGE>
Item 4. Submission Of Matters To A Vote Of Security Holders
---------------------------------------------------
No matters were submitted to our shareholders during the quarter ended
December 31, 1999.
15
<PAGE>
PART II
Item 5. Market For The Registrant's Common Equity And Related Stockholder
-----------------------------------------------------------------
Matters
-------
We are a wholly-owned subsidiary of Coast Resorts. None of our equity
securities are publicly traded.
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, 1999 are derived
from the financial statements of Coast Hotels which have been audited by
PricewaterhouseCoopers LLP. The financial statements of Coast Hotels as of
December 31, 1998 and 1999 and for each of the three years in the period ended
December 31, 1999 are included in this report on Form 10-K.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1995 1996(1) 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Net revenues........................... $ 174,756 $ 195,987 $ 293,883 $ 332,363 $ 362,531
Departmental operating expenses(2)..... 118,534 121,628 197,200 209,104 220,289
General and administrative expenses.... 30,405 37,992 54,351 55,879 60,445
Guaranteed payments to former
partners(3)........................... 858 -- -- -- --
Pre-opening expenses................... -- 7,125 -- -- 235
Land leases............................ -- -- 2,100 3,190 3,770
Deferred (non-cash) rent............... -- -- 2,378 3,198 2,918
Depreciation and amortization.......... 7,280 7,883 18,278 20,607 21,613
---------- ---------- ---------- ---------- ----------
Operating income....................... 17,679 21,359 19,576 40,385 53,261
Interest expense, net.................. (3,545) (9,981) (25,228) (26,570) (21,441)
Other income (expense)................. 92 58 919 168 (192)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes
and extraordinary item................ 14,226 11,436 (4,733) 13,983 31,628
Provision (benefit) for income taxes... -- 6,617 (1,401) 5,225 10,382
---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary item..................... 14,226 4,819 (3,332) 8,758 21,246
Extraordinary item - loss on early
retirement of debt, net of applicable
income tax benefit ($14,543).......... -- -- -- -- (27,007)
---------- ---------- ---------- ---------- ----------
Net income (loss)...................... $ 14,226 $ 4,819 $ (3,332) $ 8,758 $ (5,761)
========== ========== ========== ========== ==========
PRO FORMA INFORMATION TO REFLECT
CHANGE IN TAX STATUS(4):
Provision (benefit) for income taxes... 4,979 4,117 (1,401) 5,225 10,382
---------- ---------- ---------- ---------- ----------
Net income (loss)...................... $ 9,247 $ 7,319 $ (3,332) $ 8,758 $ (5,761)
========== ========== ========== ========== ==========
</TABLE>
- -------------------------
See Footnotes to Selected Financial Data
16
<PAGE>
Item 6. Selected Financial Data (continued)
-----------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1995 1996(1) 1997 1998 1999
---------- ----------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(5).............................. $ 24,959 $ 36,367 $ 40,232 $ 64,190 $ 78,027
Cash provided by operating activities.. $ 22,841 $ 27,033 $ 16,046 $ 39,258 $ 67,160
Cash used in investing activities...... $ (31,968) $ (125,702) $ (56,666) $ (15,324) $ (48,805)
Cash provided by (used in) financing
activities............................ $ 6,699 $ 145,685 $ 8,491 $ (11,765) $ (21,334)
Capital expenditures................... $ 32,187 $ 125,722 $ 57,736 $ 15,492 $ 49,242
Distributions to partners(6)........... $ 58,660 $ -- $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------------------------------
1995 1996(1) 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents(7)............ $ 14,539 $ 61,555 $ 29,426 $ 41,595 $ 38,616
Total assets............................ $ 152,216 $ 374,122 $ 366,861 $ 367,034 $ 408,173
Total long-term debt(8)................. $ 83,357 $ 195,764 $ 207,173 $ 199,954 $ 234,766
Stockholder's equity.................... $ 43,334 $ 100,678 $ 97,346 $ 102,918 $ 97,157
</TABLE>
_____________________
See Footnotes to Selected Financial Data.
17
<PAGE>
Item 6. Selected Financial Data (continued)
----------------------------------
Footnotes To Selected Financial Data
(1) The Orleans opened in December 1996.
(2) Includes casino, food and beverage, hotel and other expenses.
(3) Prior to the formation of Coast Hotels in 1995, the Gold Coast and the
Barbary Coast were operated by two affiliated partnerships which were
consolidated into Coast Hotels and Coast Resorts effective January 1, 1996.
The partnership agreements for those partnerships required that guaranteed
payments be made to the partners.
(4) The partnerships that were predecessors to Coast Hotels were not subject to
federal income taxes. As a result of the reorganization in 1995, the
operations of the Gold Coast and the Barbary Coast are being conducted by
Coast Hotels, 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 all
periods presented as if the predecessor partnerships had been treated as a
C corporation during those periods.
(5) "EBITDA" means earnings before interest, taxes, depreciation, amortization,
deferred (non-cash) rent expense and certain non-recurring items, including
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 our 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 it is a widely used measure of
operating performance in the gaming industry. All companies do not
calculate EBITDA in the same manner. As a result, EBITDA as presented here
may not be comparable to the similarly titled measures presented by other
companies. The computation of EBITDA for each of the respective periods
shown is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------
1995 1996(1) 1997 1998 1999
------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
Income (loss) before income taxes and
extraordinary item................... $ 14,226 $ 11,436 $ (4,733) $ 13,983 $ 31,628
Add back:
Interest expense, net............... 3,545 9,981 25,228 26,570 21,441
Depreciation and amortization....... 7,280 7,883 18,278 20,607 21,613
Pre-opening expenses................ -- 7,125 -- -- 235
Non-recurring items - (gain) loss on
equipment dispositions.............. (92) (58) (919) (168) 192
Deferred (non-cash) rent expense... -- -- 2,378 3,198 2,918
------------- --------- --------- --------- ---------
EBITDA................................ $ 24,959 $ 36,367 $ 40,232 $ 64,190 $ 78,027
============= ========= ========= ========= =========
</TABLE>
(6) Because the Gold Coast Partnership and the Barbary Coast Partnership were
partnerships during the 1995 period, a substantial portion of their net
income was distributed to the partners. 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.
(7) Cash and cash equivalents at December 31, 1996 includes approximately $8.2
million in cash which was restricted to pay for construction of The
Orleans.
(8) Excludes current maturities.
18
<PAGE>
Item 7. Management's Discussion And Analysis Of Financial Condition And
---------------------------------------------------------------
Results Of Operations
---------------------
Results Of Operations
The following table sets forth, for the periods indicated, certain
financial information regarding the historical results of Coast Hotels:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
(dollars in thousands)
Hotel-casino operations:
Net operating revenues.............................. $ 293,883 $ 332,363 $ 362,531
Operating expenses.................................. 267,148 283,838 301,487
--------------- --------------- ---------------
Operating income from hotel-casino operations........ 26,735 48,525 61,044
Corporate expenses (1) 7,159 8,140 7,548
--------------- --------------- ---------------
Total operating profit before pre-opening expenses... $ 19,576 $ 40,385 $ 53,496
=============== =============== ===============
EBITDA, hotel-casino operations (2).................. $ 45,976 $ 70,000 $ 83,711
=============== =============== ===============
EBITDA, total (including corporate) (2).............. $ 40,232 $ 64,190 $ 78,027
=============== =============== ===============
</TABLE>
(1) Corporate expenses include corporate general and administrative expenses,
depreciation and amortization and, prior to July 1, 1999, land lease
expenses, both cash and deferred, on the Suncoast land. Suncoast land
lease expenses subsequent to July 1, 1999, the date we commenced
construction of the Suncoast, are being capitalized. Land lease expenses on
the Suncoast land were not included in Coast Hotels corporate expenses
until July 1998, at which time Coast Resorts transferred its interest in
its Coast West subsidiary, which previously held the Suncoast land lease,
to Coast Hotels.
(2) "EBITDA" means earnings before interest, taxes, depreciation, amortization,
deferred (non-cash) rent expense and certain non-recurring items, including
pre-opening expenses and extraordinary items. 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 our 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. All
companies do not calculate EBITDA in the same manner. As a result, EBITDA
as presented here may not be comparable to a similarly titled measure
presented by other companies.
Fiscal 1999 Compared To 1998
Net revenues and operating income improved in the year ended December 31,
1999, primarily due to improved revenues at our two largest hotel-casinos, the
Orleans and the Gold Coast. Net revenues in 1999 were $362.5 million compared to
$332.4 million in the year ended December 31, 1998, an increase of 9.1%.
Operating income in the year ended December 31, 1999 was $53.3 million compared
to $40.4 million in the prior year, an increase of 31.9% primarily due to the
increased revenues. Operating expenses increased $17.3 million, primarily as a
result of higher casino and food and beverage expenses related to increased
business at our hotel-casinos as well as July wage increases at our three hotel-
casinos. Additionally, an expansion completed at the Orleans in May 1999
resulted in higher utility costs and increased staffing in several ancillary
departments.
In 1999, we experienced a net loss of $5.8 million compared to net income
of $8.8 million in 1998. The loss was primarily due to a one-time charge of
$27.0 million, net of income tax benefit, as a result of the early retirement of
debt in March 1999. Interest expense decreased in 1999 as a result of lower
interest rates on replacement indebtedness.
19
<PAGE>
Item 7. Management's Discussion And Analysis Of Financial Condition And
---------------------------------------------------------------
Results Of Operations (continued)
---------------------------------
Fiscal 1999 Compared To 1998 (continued)
Casino. Casino revenues were $265.8 million in 1999, an increase of 9.4%
over 1998 casino revenues of $243.0 million. The increase was primarily due to a
22.9% increase in slot revenues at the Orleans. An expansion completed at the
Orleans in May 1999, which added a new buffet, other amenities and approximately
10,000 square feet of casino space, increased the number of slot machines by
approximately 220 units. Despite the increased number of slot machines, the
average win per machine increased at the Orleans. Slot revenues were also higher
in 1999 at our other two hotel-casinos, the Gold Coast and the Barbary Coast,
increasing 4.6% and 14.8%, respectively. Table games wagering volume increased
at all three properties in 1999, resulting in a combined increase of 7.0% in
table games revenues. Casino expenses increased $3.9 million (3.1%) in 1999
primarily due to July wage increases at each of our hotel-casinos as well as
increased staffing related to the expansion at the Orleans. The casino operating
margin improved to 50.6% from 47.5% in 1998 primarily due to the increases in
the higher-margin slot machine revenues.
Food and Beverage. For the year ended December 31, 1999, food and beverage
revenues were $72.7 million, an increase of 9.3% over 1998 revenues of $66.5
million. The increase was primarily due to the opening in May 1999 of a new
larger buffet at the Orleans. Food and beverage expenses increased 7.7% in 1999,
which is in line with the increase in revenues.
Hotel. Hotel room revenues were $30.3 million in 1999, an increase of 6.5%
over 1998 room revenues of $28.4 million. Each of our three hotels experienced
increases in room occupancy rates, contributing to a combined occupancy rate of
94.1% for the year compared to 91.8% in 1998. In addition, average daily room
rates increased at all three properties, resulting in a 4.6% increase in our
overall average room rate. The hotel operating margin decreased in 1999 to
57.3% compared to 58.3% in 1998, primarily due to wage increases and higher
advertising expenses.
Other. Other revenues increased 10.2% in 1999 to $29.1 million compared to
$26.4 million in 1998, primarily due to increases in revenues at the Gold Coast
and Orleans showrooms, bowling centers, gift shops and liquor stores. Costs
related to the other revenues increased 11.5% in 1999, in line with the
increases in revenues.
General and Administrative. General and administrative expenses were $60.4
million in 1999 compared to $55.9 million in 1998, an increase of 8.2%. The
increase was due, in part, to the July wage increases at our three hotel-
casinos. Additionally, an expansion completed in May at the Orleans resulted in
higher utility costs and increased staffing in several ancillary departments.
20
<PAGE>
Item 7. Management's Discussion And Analysis Of Financial Condition And
---------------------------------------------------------------
Results Of Operations (continued)
---------------------------------
Fiscal 1998 Compared To 1997
Net revenues, operating income and net income all improved in the year
ended December 31, 1998, primarily due to improved revenues at the Orleans. Net
revenues in 1998 were $332.4 million compared to $293.9 million in the year
ended December 31, 1997, an increase of 13.1%. Operating income in the year
ended December 31, 1998 was $40.4 million compared to $19.6 million in the prior
year, an increase of 106.1% primarily due to the increased revenues. Operating
expenses increased $17.7 million, mainly as a result of higher casino expenses
due to increased business at our hotel-casinos. Additionally, land lease and
deferred (non-cash) rent expenses increased due to the Suncoast land lease
expenses, which became consolidated expenses of Coast Hotels in July 1998 as a
result of Coast West, which previously held the Suncoast land lease, becoming a
subsidiary. Despite an increase in interest expense due to the issuance of the
$16.8 million principal amount of 10 7/8% first mortgage notes in November 1997
and an increase in the income tax expense, net income increased $12.1 million to
$8.8 million in 1998 compared to a net loss of $3.3 million in 1997.
Casino. Casino revenues were $243.0 million in 1998, an increase of 15.1%
over 1997 casino revenues of $211.0 million. The increase was primarily due to a
34.3% increase in casino revenues at the Orleans, including a 51.5% increase in
slot revenues. Casino revenues increased 4.8% at the Gold Coast, but decreased
at the Barbary Coast, primarily due to a decrease in table game wagering volume,
a lower table games win percentage, the removal of live keno and lower wagering
volume in the race book. Casino expenses increased 10.9% in 1998, primarily due
to increased promotional expenses related to the increase in slot revenues at
the Orleans.
Food and Beverage. For the year ended December 31, 1998, food and beverage
revenues were $66.5 million, an increase of 7.7% over 1997 revenues of $61.7
million, primarily due to the increased business at the Orleans. Despite the
increase in revenues, food and beverage expenses decreased 5.7%, primarily as a
result of consolidating our purchasing efforts at the three hotel-casinos, which
lowered the overall cost of sales.
Hotel. Hotel room revenues were $28.4 million in 1998, an increase of 1.2%
over 1997 room revenues of $28.1 million. The combined occupancy rate for our
three hotels was 91.8% in 1998, compared to 87.1% in 1997. Occupancy increased
at the Gold Coast and the Orleans, but declined slightly at the Barbary Coast.
The combined average daily room rate decreased approximately 1% in 1998 as the
rates increased approximately 1% at both the Barbary Coast and the Orleans, but
decreased approximately 4% at the Gold Coast.
Other. Other revenues increased 32.1% in 1998 to $26.4 million compared to
$20.0 million in 1997, primarily due to increases in showroom revenues at the
Gold Coast and Orleans, as well as increased movie theater revenues at the
Orleans. Other expenses increased 15.1%, consistent with the increase in
revenues.
General and Administrative. General and administrative expenses were $55.9
million in 1998 compared to $54.4 million in 1997, an increase of 2.8%. The
increase was primarily due to increased property taxes as well as higher utility
costs at the Orleans.
21
<PAGE>
Item 7. Management's Discussion And Analysis Of Financial Condition And
---------------------------------------------------------------
Results Of Operations (continued)
---------------------------------
Liquidity and Capital Resources
Our principal sources of liquidity have consisted of cash provided by
operating activities and debt financing. Cash provided by operating activities
was $67.2 million in the year ended December 31, 1999, compared to $39.3 million
in 1998. The increase was due primarily to the increased
operating income, as well as increases in current liabilities.
Cash used in investing activities in the year ended December 31, 1999 was
primarily for capital expenditures. During 1999, our capital expenditures were
approximately $57.5 million, including construction accounts payable of $8.3
million. Approximately $32.0 million was used for construction of the Suncoast,
which began in July 1999, and approximately $18.0 million was used at the
Orleans, including approximately $10.6 million related to the expansion that was
completed in May 1999. Capital expenditures at the Gold Coast were $4.8
million. $2.7 million was used at the Barbary Coast, primarily for construction
of pedestrian overpasses at the busy "Flamingo Four Corners" area.
Cash used in financing activities was $21.3 million in 1999 compared to
$11.8 million in 1998. In March 1999, we issued $175.0 million principal amount
of 9.5% senior subordinated notes with interest payable on April 1 and October 1
beginning October 1, 1999 and entered into a $75.0 million senior secured
revolving credit facility due 2004 to facilitate a refinancing. Availability
under the credit facility was increased to $200.0 million in September 1999.
Borrowings under the credit facility bear interest, at our option, at a premium
over the one-, two-, three- or six-month London Interbank Offered Rate
("LIBOR"). As of December 31, 1999, the interest rate was 8.46%. We incur a
commitment fee, payable quarterly in arrears, on the unused portion of the
credit facility. This variable fee is currently at the maximum rate of 0.5% per
annum times the average unused portion of the facility.
With the proceeds from the senior subordinated notes and borrowings under
the credit facility, we repurchased substantially all of the $175.0 million
principal amount outstanding of 13% first mortgage notes and all $16.8 million
principal amount of 10-7/8% first mortgage notes and amended the indenture under
which the 13% first mortgage notes were issued to eliminate substantially all of
its restrictive covenants. Approximately $2.0 million in principal amount of the
13% first mortgage notes remain outstanding and are governed by the terms of the
amended indenture. We are required by the terms of the indenture for the 9.5%
senior subordinated notes to redeem the 13% first mortgage notes that remain
outstanding no later than December 15, 2000 at a redemption price of 106.5% of
the principal amount, plus any accrued and unpaid interest. In connection with
the repurchase of the 13% notes and the 10-7/8% notes, we incurred repurchase
premiums of $31.0 million and $2.1 million, respectively. The repurchase
premiums and the write-offs of unamortized debt issuance costs and original
issue discount resulted in an extraordinary loss of $27.0 million, net of
applicable income tax benefit of $14.5 million.
The availability under the $200.0 million credit facility will be reduced
in quarterly amounts beginning in the fiscal quarter ending September 30, 2001.
The initial advance of $47.0 million under the credit facility was used in
connection with the repurchase of the 13% first mortgage notes and the 10-7/8%
first mortgage notes. Subsequent advances under the credit facility may be used
for working capital, general corporate purposes, construction of the Suncoast,
and certain improvements to our existing properties. As of December 31, 1999, we
had $55.0 million outstanding under the $200.0 million credit facility.
We believe that existing cash balances, operating cash flow and available
borrowings under our $200.0 million credit facility will provide sufficient
resources to meet our debt and lease payment obligations, foreseeable capital
expenditure requirements at our existing properties and construction,
development and opening costs of the Suncoast.
22
<PAGE>
Item 7. Management's Discussion And Analysis Of Financial Condition And
---------------------------------------------------------------
Results Of Operations (continued)
---------------------------------
Impact Of Inflation
Absent changes in competitive and economic conditions or in specific prices
affecting the industry, we do not expect that inflation will have a significant
impact on our 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.
Market Risk
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk
associated with our long-term debt. To date, we have not invested in derivative-
or foreign currency-based financial instruments. We attempt to limit our
exposure to interest rate risk by managing the mix of our long-term fixed-rate
borrowings and short-term borrowings under our revolving bank credit facility.
Regulation And Taxes
Coast Hotels is subject to extensive regulation by the Nevada gaming
authorities. Changes in applicable laws or regulations could have a significant
impact on our operations.
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.
We believe that our 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 our operating results.
Year 2000 Readiness
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
computer software may recognize a date using "00" as the year 1900 rather than
the year 2000. This is generally referred to as the "Year 2000 issue." If this
situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
We completed an extensive program to ensure that our computer systems are
Year 2000 compliant and have experienced no significant problems to date
associated with the Year 2000 issue. Additionally, there are no claims pending
or, to our knowledge, threatened against us arising out of the Year 2000 issue.
Item 8. Financial Statements And Supplementary Data
-------------------------------------------
The report of independent accountants, financial statements and financial
statement schedule listed in the accompanying index 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.
23
<PAGE>
PART III
Item 10. Executive Officers And Directors Of The Registrant
--------------------------------------------------
The following table sets forth the names and ages of the directors and
executive officers of Coast Hotels and their respective positions as of
December 31, 1999.
<TABLE>
<CAPTION>
Name Age Position(s) Held
- ----------------------------- ---------- ----------------------------------------------------------------
<S> <C> <C>
Michael J. Gaughan 56 Director, Chairman of the Board and Chief Executive Officer
Harlan D. Braaten 49 Director, President and Chief Operating Officer
Jerry Herbst 61 Director, Vice President, Treasurer and Assistant Secretary
J. Tito Tiberti 54 Director, Vice President and Secretary
Gage Parrish 46 Director, Vice President, Chief Financial Officer and
Assistant Secretary
Franklin Toti 61 Director, Vice President of Casino Operations
F. Michael Corrigan 63 Director
Charles Silverman 67 Director
Joseph Blasco 56 Director
</TABLE>
Michael J. Gaughan. Mr. Gaughan has been a director of Coast Hotels since
its formation in September 1995 and is the Chairman of the Board and Chief
Executive Officer of Coast Hotels. His current term as a director expires in
2000. He is also a director and Chairman of the Board and Chief Executive
Officer of Coast Resorts, Inc. Mr. Gaughan was a general partner of the Barbary
Coast Partnership from its inception in 1979 until January 1, 1996, the
effective date of the reorganization in which the Barbary Coast Partnership and
the Gold Coast Partnership consolidated with Coast Resorts and Coast Hotels (the
"Reorganization"). Mr. Gaughan served as the managing general partner of the
Gold Coast Partnership from its inception in December 1986 until the effective
date of the Reorganization. Mr. Gaughan and Mr. Herbst were the sole
stockholders of Gaughan-Herbst, Inc., which was the sole corporate general
partner of the Gold Coast Partnership prior to the Reorganization. Mr. Gaughan
has been involved in the gaming industry since 1960 and has been licensed as a
casino operator since 1967.
Harlan D. Braaten. Mr. Braaten joined Coast Hotels as the President, Chief
Financial Officer and a director in October 1995, and was appointed Chief
Operating Officer in February 1996. His current term as a director expires in
2000. Mr. Braaten is also the President and Chief Operating Officer of Coast
Resorts. Prior to joining Coast Hotels, Mr. Braaten was employed in various
capacities, including the general manager and, most recently, senior vice
president, treasurer and chief financial officer of Rio Hotel and Casino, Inc.
in Las Vegas. From March 1989 to February 1991, Mr. Braaten was vice president,
finance of MGM/Marina Hotel and Casino in Las Vegas, Nevada. Prior thereto, from
November 1983 to March 1989, Mr. Braaten was property controller for Harrah's in
Reno, Nevada. Mr. Braaten has over 21 years of experience in the Nevada gaming
industry.
24
<PAGE>
Item 10. Executive Officers And Directors Of The Registrant (continued)
--------------------------------------------------------------
Jerry Herbst. Mr. Herbst has been a director, Vice President, Treasurer and
Assistant Secretary of Coast Hotels since its formation in September 1995. His
current term as a director expires in 2002. Mr. Herbst has been the president of
Terrible Herbst Oil Company, an owner and operator of gas stations and car
washes, since 1959. Mr. Herbst and Mr. Gaughan were the sole stockholders of
Gaughan-Herbst, Inc., which was the sole corporate general partner of the Gold
Coast Partnership prior to the formation of Coast Hotels. Mr. Herbst has served
as a member of the board of directors of Bank of America-Nevada since 1977, of
Nevada Power Company since 1990 and of Edelbrock Corporation since 1994.
J. Tito Tiberti. Mr. Tiberti has been a director, Vice President and
Secretary of Coast Hotels since its formation in September 1995. His current
term as a director expires in 2002. He is also a director and Vice President and
Secretary of Coast Resorts. Mr. Tiberti is the president, a director and a
stockholder of, and together with his immediate family, controls Tiberti
Construction, a construction company which served as the general contractor for
the construction of the Orleans and is also serving as general contractor for
the Suncoast. He has also served as managing general partner of The Tiberti
Company, a real estate rental and development company, since 1971. The Tiberti
Company is the lessor of the real property site for the Orleans. Mr. Tiberti has
been involved in the gaming industry for 20 years and was a general partner of
the Barbary Coast Partnership prior to the formation of Coast Hotels.
Gage Parrish. Mr. Parrish was named Vice President, Finance, Assistant
Secretary and a director of Coast Hotels and Coast Resorts in October 1995 and
was promoted to Chief Financial Officer in February 1996. His current term as a
director expires in 2000. Since 1986, he had been the Controller and Chief
Financial Officer of the Gold Coast Partnership prior to the formation of Coast
Hotels. From 1981 to 1986, Mr. Parrish served as Assistant Controller of the
Barbary Coast Partnership. Mr. Parrish is a certified public accountant and has
approximately 22 years of experience in the gaming industry.
Franklin Toti. Mr. Toti has been a director of Coast Hotels and Coast
Resorts since October 5, 1998. His current term expires in 2002. He has been
Vice President of Casino Operations for Coast Hotels since January 1, 1996. Mr.
Toti was a general partner and Casino Manager of the Barbary Coast Partnership
from its inception in 1979 until January 1, 1996, the effective date of the
Reorganization. Mr. Toti has 39 years of experience in the gaming industry.
F. Michael Corrigan. Mr. Corrigan was elected as a director of Coast Hotels
and Coast Resorts effective as of March 1, 1996. His current term as a director
expires in 2001. Since July 1989, Mr. Corrigan has served as the chief executive
officer of Corrigan Investments, Inc., which owns and manages real estate in
Nevada and Arizona. In addition, Mr. Corrigan is the Chief Executive Officer of
Corstan, Inc., a mortgage banking company, and was previously the owner,
President and Chief Operating Officer of Stanwell Mortgage, a Las Vegas mortgage
company.
Charles Silverman. Mr. Silverman was elected as a director of Coast Hotels
and Coast Resorts effective as of March 1, 1996. His current term as a director
expires in 2001. Mr. Silverman is the President and sole stockholder of Yates-
Silverman, Inc., which specializes in developing theme-oriented interiors and
exteriors and is a leading designer of hotels and casinos. Completed projects of
Yates-Silverman, Inc. include New York-New York, Excalibur, Circus Circus,
Luxor, the Trump Taj Mahal, Trump Castle and Atlantic City Showboat. Yates-
Silverman, Inc. also served as the primary designer for the Orleans and is
serving in the same capacity for the Suncoast. Mr. Silverman has served as the
president of Yates-Silverman, Inc. since its inception in 1971.
25
<PAGE>
Item 10. Executive Officers And Directors Of The Registrant (continued)
--------------------------------------------------------------
Joseph Blasco. Mr. Blasco was elected as a director of Coast Hotels and
Coast Resorts effective as of December 16, 1996. His current term as a director
expires in 2001. Since 1984, Mr. Blasco has been a partner in the real estate
development partnership that developed the Spanish Trail community in Las Vegas,
a project which includes over 1,200 homes, a 27-hole golf course and a country
club. Mr. Blasco is currently the managing General Partner of United Realty
Investments, a real estate development and management company in Las Vegas. He
is also general partner in two real estate development partnerships, Summer
Trail LLC and Trop-Edmond Ltd.
Directors of Coast Hotels who are also employees of Coast Hotels or Coast
Resorts receive no compensation for service on the Board of Directors or its
committees. All other directors receive an annual director's fee of $24,000,
payable quarterly in arrears. Directors may also be reimbursed for out-of-pocket
expenses incurred in connection with attending Board of Director or committee
meetings.
Item 11. Executive Compensation
----------------------
The following table sets forth all compensation earned by or paid by Coast
Hotels during 1997, 1998 and 1999 to each executive officer (the "Named
Executive Officers") whose compensation exceeded $100,000 in all capacities in
which they served.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------------------
All Other
Name And Principal Position Year Salary Bonus Compensation(1)
--------------------------- ------- -------- --------- ---------------
<S> <C> <C> <C> <C>
Michael J. Gaughan......................... 1999 $ 300,000 $ -- $ 4,000
Chairman of the Board and Chief 1998 300,000 -- 5,000
Executive Officer of Coast Hotels 1997 300,000 -- 4,750
Harlan D. Braaten.......................... 1999 $ 275,000 $ 137,500 $ 3,150
President and Chief Operating 1998 250,000 125,000 5,000
Officer, Coast Hotels 1997 250,000 250,000(2) 4,750
Gage Parrish............................... 1999 $ 212,500 $ 15,000 $ 3,900
Vice President, Chief Financial Officer 1998 200,000 -- 5,000
and Assistant Secretary of the Company 1997 200,000 -- 4,750
</TABLE>
(1) The amounts reflect matching contributions paid to our 401(k) Profit
Sharing Plan and Trust.
(2) Pursuant to his previous employment agreement, Mr. Braaten received a bonus
of $250,000 because Coast Resorts had not made a public offering of its
common stock by December 31, 1997. Mr. Braaten entered into a new
employment agreement effective as of January 1, 1999.
26
<PAGE>
Item 11. Executive Compensation (continued)
----------------------
Employment Agreement
Effective as of January 1, 1999, Coast Hotels entered into an employment
agreement with Harlan Braaten, President and Chief Operating Officer. The
agreement has a term of three years and provides for Mr. Braaten to receive a
base salary of $250,000 for the first year and $300,000 for the second and third
years. The agreement may be terminated upon 30 days notice by Mr. Braaten and at
any time by Coast Hotels. In addition, in the event of a termination of Mr.
Braaten's employment other than for failure to comply with Nevada gaming
regulations, failure to perform his duties, medical incapacity or his arrest on
a felony offense, Mr. Braaten will be entitled to receive a severance payment in
the amount of $300,000 plus any pro rata bonus payment and unvested stock
options to which he is entitled. Pursuant to the arrangement, Coast Hotels
granted Mr. Braaten options to purchase 30,415 shares of Coast Resorts, Inc. for
$100 per share. The option vested as to one-third of the shares on the grant
date, January 1, 1999, vested as to an additional one-third of the shares on
January 1, 2000 and will vest with respect to the final one-third of the shares
on January 1, 2001.
Stock Options
Effective June 14, 1999, Coast Resorts issued options to purchase 5,000
shares of its common stock to its chief financial officer, who is also the chief
financial officer of the Company. The options vest in one-third increments on
June 14, 1999, June 14, 2000 and June 14, 2001. The exercise price on the
options is at $100 per share, which is equivalent to the estimated fair value
of Coast Resorts' common stock at the grant date, as estimated by Coast Resorts
from recent sales of common stock between shareholders.
Bonus Plan
In 1996, Coast Hotels established a bonus plan designed to reward executive
officers and other key employees for their contributions to our business
objectives and operating results. Bonuses may be awarded in the discretion of
the Board of Directors based upon achievement of financial targets established
by the Board of Directors on an annual basis, and generally will be equal to a
percentage of the recipient's base salary, depending on the target achieved.
Bonuses awarded under the plan for the years ended December 31, 1997, 1998 and
1999 were $0, $125,000 and $197,000, respectively.
Item 12. Security Ownership Of Certain Beneficial Owners And Management
--------------------------------------------------------------
All of our outstanding capital stock is owned by our parent company, Coast
Resorts, Inc.
Item 13. Certain Relationships And Related Transactions
----------------------------------------------
We maintain numerous racetrack dissemination contracts with Las Vegas
Dissemination Company, Inc. ("LVD"). Michael J. Gaughan's son is the president
and sole stockholder of LVD. LVD provides certain dissemination and pari-mutuel
services to the Orleans, the Gold Coast and the Barbary Coast. 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, we pay to LVD an
average of 3% of the wagers accepted for races held at the racetracks covered by
the respective contracts. We also pay to LVD a monthly fee for race wire
services. For the fiscal years ended December 31, 1997, 1998 and 1999, we
incurred expenses payable to LVD of approximately $1.1 million, $3.1 million and
$1.3 million, respectively. The terms on which such services are provided are
regulated by the Nevada Gaming Authorities.
27
<PAGE>
Item 13. Certain Relationships And Related Transactions (continued)
----------------------------------------------------------
Tiberti Construction served as the general contractor for the original
construction of the Gold Coast and for certain expansions thereof, and for the
original construction of the Barbary Coast and all expansions thereof. Tiberti
Construction was also the general contractor for the original construction of
the Orleans, and the 1997 and 1999 expansions. Tiberti Construction is
currently the general contractor for the Suncoast construction. J. Tito Tiberti
owns approximately 6.4% of the outstanding common stock of Coast Resorts, and is
a director, Vice President and Secretary of Coast Hotels and Coast Resorts. Mr.
Tiberti is the president, a director and stockholder of, and together with his
immediate family members, controls Tiberti Construction. For the years ended
December 31, 1997, 1998 and 1999, we incurred expenses payable to Tiberti
Construction of approximately $26.2 million, $3.7 million and $27.9 million,
respectively.
We have entered into a ground lease with The Tiberti Company, a Nevada
general partnership, with respect to the real property on which the Orleans is
located. Mr. Tiberti, a director of Coast Hotels and a director and stockholder
of Coast Resorts, is the managing partner of The Tiberti Company. For the fiscal
years ended December 31, 1997, 1998 and 1999, we paid rental expenses to The
Tiberti Company of approximately $2.1 million, $2.4 million and $2.4 million,
respectively.
Michael J. Gaughan and Franklin Toti are owners of LGT Advertising, which
serves as our advertising agency. LGT Advertising purchases advertising for our
casinos from third parties and passes any discounts directly through to us. LGT
Advertising receives no compensation or profit for such activities, and invoices
us for actual costs incurred. LGT Advertising uses our facilities and employees
in rendering its services, but does not pay any compensation to us for such use.
Messrs. Gaughan and Toti receive no compensation from LGT Advertising.
Advertising expenses payable to LGT Advertising were approximately $7.5 million,
$6.0 million and $5.4 million for the years ended December 31, 1997, 1998 and
1999, respectively.
We have purchased certain of our equipment and inventory for our operations
from RJS Inc., a Nevada corporation that is owned by Michael J. Gaughan's father
and Steven Delmont, our restaurant manager. RJS invoices us for actual costs
incurred. For the fiscal years ended December 31, 1997, 1998 and 1999, we
incurred expenses payable to RJS of approximately $1.4 million, $829,000 and
$2.1 million, respectively.
Michael J. Gaughan is the majority stockholder of Nevada Wallboards, Inc.,
a Nevada corporation ("Nevada Wallboards"), which prints wallboards and parlay
cards for the use in our race and sports books. Mr. Gaughan receives no
compensation from Nevada Wallboards. For the fiscal years ended December 31,
1997, 1998 and 1999, we incurred expenses payable to Nevada Wallboards of
approximately $198,000, $186,000 and $180,000, respectively.
Charles Silverman, a director of Coast Hotels and Coast Resorts, is the
president of Yates-Silverman, Inc., which served as the designer of the Orleans
and is serving as the designer for the Suncoast. For the fiscal years ended
December 31, 1997, 1998 and 1999, we incurred expenses payable to Yates-
Silverman of $177,000, $500,000 and $721,000, respectively.
Coast Hotels promotes the Orleans by advertising on NASCAR racecars
operated by Orleans Motorsports, Inc. In 1999, we spent $300,000 in connection
with this promotion. Brendan Gaughan, the main driver employed by Orleans
Motorsports, is the son of Michael J. Gaughan.
The foregoing transactions are believed to be on terms no less favorable to
us than could have been obtained from unaffiliated third parties and were
approved by a majority of our disinterested directors. Any future transactions
between us and our officers, directors, principal stockholders or affiliates
will be on terms no less favorable to us than may be obtained from unaffiliated
third parties, and will be approved by a majority of our disinterested
directors.
28
<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>
Page
----
<S> <C> <C>
1. Financial Statements Index F-1
2. Financial Statement Schedule Index:
Schedule II - Valuation and Qualifying Accounts F-29
3. Exhibits
</TABLE>
29
<PAGE>
ITEM 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
---------------------------------------------------------------
(continued)
-----------
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- -------- -------------------------------------------------------------------
<C> <S>
3.1 Amended Articles of Incorporation of Coast Hotels and Casinos, Inc.(5)
3.2 First Amended Bylaws of Coast Hotels and Casinos, Inc.(5)
3.3 Articles of Incorporation of Coast Resorts, Inc. (1)
3.4 First Amended Bylaws of Coast Resorts, Inc. (1)
4.1 Indenture dated as of January 30, 1996, among Coast Hotels and
Casinos, Inc., as issuer of 13% First Mortgage Notes due 2002, Coast
Resorts, Inc. and Coast West, Inc., as the Guarantors, and American
Bank National Association, as Trustee (4)
4.3 Form of 13% Note (included in Exhibit 4.1)
4.4 Indenture dated as of March 23, 1999 among Coast Hotels and Casinos,
Inc. as issuer of 9 1/2% Senior subordinated notes due 2009, Coast
Resorts, Inc., as guarantor, and Firstar Bank of Minnesota, N.A., as
Trustee (8)
4.5 Form of 9 1/2% Note (Included in Exhibit 4.4)
4.6 First Supplemental Indenture dated as of March 5, 1999, with respect
to the Indenture dated as of January 30, 1996 among Coast Hotels and
Casinos, Inc, as issuer of the 13% Notes, Coast Resorts, Inc. and
Coast West, Inc., as the Guarantors, and Firstar Bank of Minnesota,
N.A., as successor in interest to American Bank National Association,
as Trustee (8)
10.1 Registration Rights Agreement dated as of January 30, 1996 among
Coast Hotels and Casinos, Inc., as issuer of the 13% Notes, Coast
Resorts, Inc. and Coast West, Inc., as the Guarantors, and Bear,
Stearns & Co. Inc and BA Securities, Inc.(4)
10.2 13% Note Guarantee of Coast Resorts, Inc. (4)
10.3 (Intentionally left blank)
10.4 Deed of Trust, Assignment of Rents, Leases and Security Agreement
dated January 30, 1996 of Coast Hotels and Casinos, Inc. (4)
10.5 Leasehold Deed of Trust, Assignment of Rents, Leases and Security
Agreement dated January 30, 1996 of Coast West, Inc. (4)
10.6 Security Agreement dated January 30, 1996 by and between Coast Hotels
and Casinos, Inc. and American Bank National Association (4)
10.7 Security Agreement dated January 30, 1996 by and between Coast West,
Inc. and American Bank National Association (4)
10.8 Stock Pledge and Security Agreement dated January 30, 1996 by and
among Coast Resorts, Inc. and American Bank National Association (4)
10.9 Disbursement and Escrow Agreement dated January 30, 1996 among Nevada
Title Company, American Construction Services, Inc., American Bank
National Association and Coast Hotels and Casinos, Inc. (4)
10.10 Pledge and Escrow Agreement dated January 30, 1996 between American
Bank National Association and Coast Hotels and Casinos, Inc.(4)
10.11 Collateral Assignment of Contracts dated January 30, 1996(4)
</TABLE>
30
<PAGE>
ITEM 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
---------------------------------------------------------------
(continued)
-----------
Exhibit Index (continued)
<TABLE>
<C> <S> <C>
10.12 Escrow Agreement dated January 30, 1996 by and among Coast Resorts,
Inc., American Bank National Association and Bank of America Nevada(4)
10.13 Unsecured Environmental Indemnification Agreement among Coast Hotels
and Casinos, Inc. and American Bank National Association(4)
10.14 Unsecured Environmental Indemnification Agreement among Coast West,
Inc. and American Bank National Association (4)
10.15 Tax Sharing Agreement dated as of January 30, 1996 by and among Coast
Resorts, Inc., Coast Hotels and Casinos, Inc. and Coast West, Inc. (4)
10.16 (Intentionally left blank)
10.17 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) (3)
10.18 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 (1)
10.19 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(1)
10.20 Form of Subordination Agreement with former Gold Coast partners
holding Subordinated Notes (4)
10.21 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 (1)
10.22 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 (1)
10.23 (Intentionally left blank)
10.24 (Intentionally left blank)
10.25 10 7/8% First Mortgage Notes dated November 21, 1997 (6)
10.26 Indenture dated as of November 21, 1997 among Coast Hotels and
Casinos, Inc., as issuer of the 10 7/8% First Mortgage Notes due 2001,
the Guarantors, and Firstar Bank of Minnesota, N.A., as Trustee (6)
10.27 10 7/8% Note Guarantee of Coast Resorts, Inc. (6)
10.28 Purchase Agreement for 10 7/8% Notes dated November 21, 1997 (6)
10.29 Security Agreement dated November 21, 1997 (Coast Hotels and Casinos,
Inc.) (6)
10.30 Deed of Trust, Assignment of Rents, Leases and Security Agreement
dated November 21, 1997 (6)
10.31 Stock Pledge and Security Agreement dated November 21, 1997 (Coast
Resorts, Inc.) (6)
10.32 Pari Passu Intercreditor Agreement dated November 21, 1997 (6)
10.33 Master Security Agreement, dated as of October 24, 1996, by and
between Coast Hotels and Casinos, Inc. and the CIT Group/Equipment
Financing, Inc. (7)
</TABLE>
31
<PAGE>
ITEM 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
---------------------------------------------------------------
(continued)
-----------
Exhibit Index (continued)
<TABLE>
<C> <S>
10.34 Amendment No. 1, dated December 27, 1996, to Master Security Agreement
dated as of October 24, 1996 by and between Coast Hotels and Casinos,
Inc. And the CIT Group/Equipment Financing Inc. (7)
10.35 Agreement Between Owner and Contractor dated as of February 9, 1999,
between Coast Resorts, Inc., as owner, and J.A. Tiberti Construction
Co., Inc., as contractor (7)
10.36 Employment Agreement dated as of January 1, 1999, between Harlan
Braaten and Coast Hotels and Casinos, Inc. (8)
10.37 Amendment dated as of March 5, 1999 to the Deed of Trust, Assignment
of Rents, Leases and Security Agreement dated January 30, 1996 of
Coast Hotels and Casinos, Inc (8)
10.38 Amendment dated as of March 5, 1999 to the Leasehold Deed of Trust,
Assignment of Rents, Leases and Security Agreement dated January 30,
1996 of Coast West, Inc.(8)
10.39 Amendment dated as of March 5, 1999 to the Security Agreement dated
January 30, 1996 by and between Coast Hotels and Casinos, Inc. and
American Bank National Asso ciation (8)
10.40 Amendment dated as of March 5, 1999 to the Security Agreement dated
January 30, 1996 by and between Coast West, Inc. and American Bank
National Association (8)
10.41 Amendment dated as of March 5, 1999 to the Stock Pledge and Security
Agreement dated January 30, 1996 by and among Coast Resorts, Inc. and
American Bank National Association (8)
10.42 Amendment dated as of March 5, 1999 to the Collateral Assignment of
Contracts dated January 30, 1996 (8)
10.43 Amendment dated as of March 5, 1999 to the Unsecured Environmental
Indemnification Agreement among Coast Hotels and Casinos, Inc. and
American Bank National Association (8)
10.44 Amendment dated as of March 5, 1999 to the Unsecured Environmental
Indemnification Agreement among Coast West, Inc. and American Bank
National Association (8)
10.45 Placement Agreement for the 9 1/2% Notes, dated March 18, 1999, among
Coast Hotels and Casinos, Inc., Coast Resorts, Inc., Morgan Stanley &
Co., Inc. NationsBanc Montgomery Securities LLC (8)
10.46 Registration Rights Agreement dated March 23, 1999 among Coast Hotels
and Casinos, Inc.and Coast Resorts, Inc., and Morgan Stanley & Co.,
Inc. and NationsBanc Montgomery Securities LLC (8)
10.47 Loan Agreement dated as of March 18, 1999 among Coast Hotels and
Casinos, Inc., as Borrower, the Lenders referred to therein, and Bank
of America National Trust and Savings Association, as Administrative
Agent (8)
10.48 Amended and Restated Loan Agreement dated as of September 16, 1999
among Coast Hotels and Casinos, Inc., as Borrower, the Lenders
referred to therein, and Bank of America National Trust and Savings
Association, as Administrative Agent (9)
10.49 Security Agreement dated as of March 18, 1999 by Coast Hotels and
Casinos, Inc. in favor of Bank of America National Trust and Savings
Association, as administrative agent
10.50 Security Agreement dated as of March 18, 1999 by Coast Resorts, Inc.
in favor of Bank of America National Trust and Savings Association, as
administrative agent
10.51 Pledge Agreement dated as of September 1999 by Coast Resorts, Inc.
in favor of Bank of America National Trust and Savings Association, as
administrative agent
</TABLE>
32
<PAGE>
ITEM 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
---------------------------------------------------------------
(continued)
-----------
Exhibit Index (continued)
<TABLE>
<C> <S>
10.52 Leasehold Deed of Trust, Assignment of Rents and Fixture Filing dated
as of March 18, 1999, by Coast Hotels and Casinos, Inc in favor of
Bank of America National Trust and Savings Association, as
administrative agent (The Orleans Hotel and Casino)
10.53 Leasehold Deed of Trust, Assignment of Rents and Fixture Filing dated
as of March 18, 1999, by Coast Hotels and Casinos, Inc in favor of
Bank of America National Trust and Savings Association, as
administrative agent (The Gold Coast Hotel and Casino)
10.54 Leasehold Deed of Trust, Assignment of Rents and Fixture Filing dated
as of March 18, 1999, by Coast Hotels and Casinos, Inc in favor of
Bank of America National Trust and Savings Association, as
administrative agent (The Suncoast)
10.55 Guaranty dated March 18, 1999 by Coast Resorts in favor of Bank of
America National Trust and Savings Association, as administrative
agent
10.56 Trademark Security Interest Assignment dated as of March 18, 1999 by
Coast Hotels and Casinos, Inc. and Coast Resorts, Inc. in favor of
Bank of America National Trust and Savings Association, as
administrative agent
27 Financial Data Schedule
</TABLE>
____________
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to Coast Resorts, Inc.'s General Form for Registration of Securities on
Form 10 and incorporated herein by reference.
(2) Previously filed with the Securities and Exchange Commission as an exhibit
to Coast Resorts, Inc.'s Amendment No. 1 to General Form for Registration
of Securities on Form 10 and incorporated herein by reference.
(3) Previously filed with the Securities and Exchange Commission as an exhibit
to Coast Resorts, Inc.'s Amendment No. 2 to General Form for Registration
of Securities on Form 10 and incorporated herein by reference.
(4) Previously filed as an exhibit to Coast Resorts, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1995 and incorporated herein by
reference.
(5) Previously filed with the Securities and Exchange Commission as an exhibit
to Coast Resorts, Inc.'s Registration Statement on Form S-4 filed May 2,
1996 and incorporated herein by reference.
(6) Previously filed as an exhibit to Coast Resorts, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1997 and incorporated herein by
reference.
(7) Previously filed as an exhibit to Coast Resorts, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1998 and incorporated herein by
reference.
(8) Previously filed with the Securities and Exchange Commission as an exhibit
to Coast Hotels and Casinos, Inc.'s Registration Statement on Form S-4
(File no. 333-79657) dated May 28, 1999 and incorporated herein by
reference.
(9) Previously filed with the Securities and Exchange Commission as an exhibit
to Coast Resorts, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 and incorporated herein by reference.
(b) Reports on Form 8-K
None.
33
<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 29, 2000.
COAST HOTELS AND CASINOS, 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 March 29, 2000
- ----------------------------- Chief Executive Officer (Principal
Michael J. Gaughan Executive Officer) and Director
/s/ GAGE PARRISH Director and Chief Financial Officer March 29, 2000
- ----------------------------- (Principal Financial and Accounting Officer)
Gage Parrish
/s/ HARLAN D. BRAATEN Director March 29, 2000
- -----------------------------
Harlan D. Braaten
/s/ JERRY HERBST Director March 29, 2000
- -----------------------------
Jerry Herbst
/s/ J. TITO TIBERTI Director March 29, 2000
- -----------------------------
J. Tito Tiberti
/s/ CHARLES SILVERMAN Director March 29, 2000
- -----------------------------
Charles Silverman
/s/ F. MICHAEL CORRIGAN Director March 29, 2000
- ------------------------------
F. Michael Corrigan
/s/ JOSEPH A. BLASCO Director March 29, 2000
- -------------------------------
Joseph A. Blasco
/s/ FRANKLIN TOTI Director March 29, 2000
- -------------------------------
Franklin Toti
</TABLE>
34
<PAGE>
Index To Financial Statements
COAST HOTELS AND CASINOS, INC.
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants..................................................... F-2
Balance Sheets of Coast Hotels and Casinos, Inc., as
of December 31, 1998 and 1999................................................. F-3
Statements of Operations of Coast Hotels and Casinos, Inc. for
the years ended December 31, 1997, 1998 and 1999.............................. F-4
Statements of Stockholder's Equity of Coast Hotels and Casinos, Inc.
for the years ended December 31, 1997, 1998 and 1999.......................... F-5
Statements of Cash Flows of Coast Hotels and Casinos, Inc. for
the years ended December 31, 1997, 1998 and 1999.............................. F-6
Notes to Financial Statements......................................................... F-7
Coast Resorts, Inc. (Parent Company Only)
Report of Independent Accountants..................................................... F-22
Balance Sheets of Coast Resorts, Inc. (parent company only) as of December 31,
1998 and 1999................................................................. F-23
Statements of Operations of Coast Resorts, Inc. (parent company only) for the
years ended December 31, 1997, 1998 and 1999.................................. F-24
Statements of Stockholders' Equity of Coast Resorts, Inc. (parent company only)
for the years ended December 31, 1997, 1998 and 1999.......................... F-25
Statements of Cash Flows of Coast Resorts, Inc. (parent company only) for the
years ended December 31, 1997, 1998 and 1999.................................. F-26
Notes to Financial Statements......................................................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholder of
Coast Hotels and Casinos, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholder's equity and cash flows present fairly, in all material
respects, the financial position of Coast Hotels and Casinos, Inc. (a wholly
owned subsidiary of Coast Resorts, Inc.) at December 31, 1998 and 1999, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Las Vegas, Nevada
February 4, 2000
F-2
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary Of Coast Resorts, Inc.)
BALANCE SHEETS
December 31, 1998 and 1999
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
1998 1999
--------------- ---------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................... $ 41,595 $ 38,616
Accounts receivable, less allowance for doubtful
accounts $594 (1998) and $842 (1999)........................ 4,301 4,212
Inventories......................................................... 4,912 5,481
Due from Coast Resorts.............................................. -- 2,863
Prepaid expenses.................................................... 6,037 6,324
Other current assets................................................ 3,293 4,321
--------------- ---------------
TOTAL CURRENT ASSETS.............................................. 60,138 61,817
PROPERTY AND EQUIPMENT, net.......................................... 301,252 337,704
OTHER ASSETS......................................................... 5,644 8,652
--------------- ---------------
$ 367,034 $ 408,173
=============== ===============
LIABILITIES AND
STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................... $ 9,888 $ 11,738
Accrued liabilities................................................. 25,338 32,781
Due to Coast Resorts................................................ 1,353 --
Construction accounts payable....................................... -- 8,304
Current portion of long-term debt................................... 7,905 2,473
--------------- ---------------
TOTAL CURRENT LIABILITIES......................................... 44,484 55,296
LONG-TERM DEBT, less current portion.................................. 199,954 234,766
DEFERRED INCOME TAXES................................................. 6,654 4,222
DEFERRED RENT......................................................... 13,024 16,732
--------------- ---------------
TOTAL LIABILITIES................................................. 264,116 311,016
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par value, 25,000 shares authorized, 1,000
shares issued and outstanding....................................... 1 1
Additional paid-in capital.......................................... 86,903 86,903
Retained earnings................................................... 16,014 10,253
--------------- ---------------
TOTAL STOCKHOLDER'S EQUITY........................................ 102,918 97,157
--------------- ---------------
$ 367,034 $ 408,173
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1997, 1998 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING REVENUES:
Casino................................................... $ 211,026 $ 242,992 $ 265,753
Food and beverage........................................ 61,724 66,503 72,697
Hotel.................................................... 28,095 28,443 30,296
Other.................................................... 19,994 26,421 29,110
--------------- --------------- ---------------
GROSS OPERATING REVENUES.............................. 320,839 364,359 397,856
Less: promotional allowances............................. (26,956) (31,996) (35,325)
--------------- --------------- ---------------
NET OPERATING REVENUES................................ 293,883 332,363 362,531
--------------- --------------- ---------------
OPERATING EXPENSES:
Casino................................................... 114,932 127,512 131,402
Food and beverage........................................ 50,129 47,278 50,923
Hotel.................................................... 12,623 11,856 12,923
Other.................................................... 19,516 22,458 25,041
General and administrative............................... 54,351 55,879 60,445
Pre-opening expenses..................................... -- -- 235
Land lease............................................... 2,100 3,190 3,770
Deferred (non-cash) rent................................. 2,378 3,198 2,918
Depreciation and amortization............................ 18,278 20,607 21,613
--------------- --------------- ---------------
TOTAL OPERATING EXPENSES.............................. 274,307 291,978 309,270
--------------- --------------- ---------------
OPERATING INCOME...................................... 19,576 40,385 53,261
--------------- --------------- ---------------
OTHER INCOME (EXPENSES):
Interest expense:
Related parties....................................... (148) -- --
Other................................................. (26,194) (27,323) (22,503)
Interest income.......................................... 98 695 450
Interest capitalized..................................... 1,016 58 612
Gain (loss) on disposal of equipment..................... 919 168 (192)
--------------- --------------- ---------------
TOTAL OTHER INCOME (EXPENSES)......................... (24,309) (26,402) (21,633)
--------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.......................................... (4,733) 13,983 31,628
PROVISION (BENEFIT) FOR INCOME TAXES.......................... (1,401) 5,225 10,382
--------------- --------------- ---------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................... (3,332) 8,758 21,246
EXTRAORDINARY ITEM - loss on early retirement of
debt, net of applicable income tax benefit ($14,543)........ -- -- (27,007)
--------------- --------------- ---------------
NET INCOME (LOSS)............................................. $ (3,332) $ 8,758 $ (5,761)
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
For The Years Ended December 31, 1997, 1998 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
----------------------- Additional Retained
Shares Amount Paid-In Capital Earnings Total
-------- ---------- ------------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1996... 1,000 $ 1 $ 95,858 $ 4,819 $ 100,678
Net loss...................... -- -- -- (3,332) (3,332)
-------- ---------- ----------------- ------------- -------------
Balances at December 31, 1997... 1,000 1 95,858 1,487 97,346
Transfer of Coast West, Inc.
to Coast Hotels by Coast
Resorts, Inc. .............. -- -- (8,955) 5,769 (3,186)
Net income.................... -- -- -- 8,758 8,758
--------- ---------- ----------------- ------------- -------------
Balances at December 31, 1998... 1,000 1 86,903 16,014 102,918
Net loss...................... -- -- -- (5,761) (5,761)
--------- ---------- ----------------- ------------- -------------
Balances at December 31, 1999... 1,000 $ 1 $ 86,903 $ 10,253 $ 97,157
========= ========== ================= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1997, 1998 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................. $ (3,332) $ 8,758 $ (5,761)
---------- ---------- -----------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization........................... 18,278 20,607 21,613
Provision for bad debts................................. 1,935 1,490 248
Loss on early retirement of debt........................ -- -- 41,550
Loss (gain) on disposal of equipment.................... (919) (168) 192
Deferred rent........................................... 2,378 3,198 3,708
Deferred income taxes................................... 789 876 (3,099)
Amortization of original issue discount................. 616 706 124
(Increase) decrease in operating assets:
Accounts receivable............................... (1,773) 915 (159)
Refundable income taxes........................... (1,127) 1,772 --
Inventories....................................... 1,279 173 (569)
Prepaid expenses and other assets................. (1,493) 2,463 20
Increase (decrease) in operating liabilities:
Accounts payable.................................. (2,727) 781 1,850
Accrued liabilities............................... 2,142 (2,313) 7,443
---------- ---------- ----------
TOTAL ADJUSTMENTS................................. 19,378 30,500 72,921
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES........................................ 16,046 39,258 67,160
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of amounts in accounts payable...... (57,736) (15,492) (49,242)
Proceeds from sale of equipment............................... 1,070 168 437
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES............. (56,666) (15,324) (48,805)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of
issuance costs.............................................. 19,569 -- 167,808
Early retirement of debt...................................... (223,017)
Principal payments on long-term debt.......................... (7,913) (8,097) (15,545)
Proceeds from borrowings under bank lines of credit, net of
financing costs.............................................. -- -- 67,637
Repayments of borrowings under bank line of credit............ -- -- (14,000)
Advances to Coast Resorts .................................... (3,165) (3,668) (4,217)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES............................. 8,491 (11,765) (21,334)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (32,129) 12,169 (2,979)
CASH AND CASH EQUIVALENTS, at beginning of year.................... 61,555 29,426 41,595
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, at end of year.......................... $ 29,426 $ 41,595 $ 38,616
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Background Information And Basis Of Presentation
Background Information
Coast Hotels and Casinos, Inc. (the "Company") is a Nevada corporation and a
wholly owned subsidiary of Coast Resorts, Inc. ("Coast Resorts"), which is also
a Nevada corporation. Coast Hotels was formed in September 1995 and owns and
operates the following hotel-casinos in Las Vegas, Nevada:
. Gold Coast Hotel and Casino, which is located approximately one mile west of
the Las Vegas Strip on Flamingo Road.
. 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. The Orleans opened for business on
December 18, 1996.
. The Company began construction of a fourth hotel-casino, the Suncoast, in
July 1999.
Basis of Presentation
The financial statements include the accounts of Coast Hotels and, from July
21, 1998 through March 22, 1999, its subsidiary Coast West. On March 23, 1999
Coast West was merged into the Company, leaving no subsidiaries of Coast Hotels.
All intercompany balances and transactions have been eliminated for all periods
presented.
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.
F-7
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 2--Summary of Significant Accounting Policies (continued)
Property, Equipment and Depreciation
Property and equipment are stated at cost. Expenditures for additions,
renewals and betterments are capitalized, and 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.
During construction, Coast Hotels capitalizes interest and other direct and
indirect development costs. Interest is capitalized monthly by applying the
effective interest rate on certain borrowings to the average balance of
expenditures. The interest that was capitalized was $1,016,000 (1997), $58,000
(1998) and $612,000 (1999).
Pre-opening and Related Promotional Expense
Prior to January 1, 1999, costs associated with the opening of new hotel-
casinos or major additions to an existing hotel-casino, including personnel,
training, certain marketing and other costs, were 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. Effective
January 1, 1999, pre-opening costs are expensed as incurred, including $235,000
expensed in 1999 in connection with development of the Suncoast. There were no
capitalized pre-opening costs at December 31, 1997 or 1998.
Valuation of Long-Lived Assets
Long-lived assets and certain identifiable intangibles held and used by Coast
Hotels are reviewed for impairment whenever events or changes in circumstances
warrant such a review. The carrying value of a long-lived or intangible asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair value of the asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on long-lived assets to be disposed of are determined in a similar
manner, except that fair values are reduced for the cost to dispose.
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. Direct-response advertising costs consist primarily of mailing
costs associated with direct mail programs. Capitalized advertising costs were
immaterial at December 31, 1998 and 1999. Advertising expense was approximately
$7.5 million, $6.0 million and $5.4 million for the years ended December 31,
1997, 1998 and 1999, respectively.
F-8
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 2--Summary of Significant Accounting Policies (continued)
Casino Revenue
In accordance with common industry practice, Coast Hotels 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
Coast Hotels 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 payouts also increase
with the amount of play, to be paid out when hit. In accordance with common
industry practice, Coast Hotels has recorded the progressive jackpot as a
liability with a corresponding charge against casino revenue.
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 for the years ended
December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1997 1998 1999
--------------- --------------- ---------------
(in thousands)
<S> <C> <C> <C>
Hotel...................................... $ 2,023 $ 2,497 $ 2,167
Food and beverage.......................... 23,187 25,552 28,593
--------------- --------------- ---------------
Total cost of promotional allowances....... $ 25,210 $ 28,049 $ 30,760
=============== =============== ===============
</TABLE>
The cost of promotional allowances has been allocated to expense as follows
for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1997 1998 1999
--------------- --------------- ---------------
(in thousands)
<S> <C> <C> <C>
Casino..................................... $ 22,280 $ 25,290 $ 28,106
Other...................................... 2,930 2,759 2,654
--------------- -------------- ---------------
$ 25,210 $ 28,049 $ 30,760
=============== =============== ===============
</TABLE>
F-9
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 2--Summary of Significant Accounting Policies (continued)
Slot Club Promotion
Coast Hotels has established promotional clubs to encourage repeat business
from frequent and active slot machine 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 or cash. Coast Hotels 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
Coast Hotels is included in the consolidated federal income tax return filed by
Coast Resorts. Coast Hotels' tax allocation is based on the amount of tax it
would incur if it filed a separate return. Coast Resorts will pay Coast Hotels
an amount equal to the tax benefit arising from the utilization of net operating
losses of Coast Hotels to the extent that such losses result in a reduction in
the amount of tax payable by Coast Resorts.
Coast Hotels accounts for income taxes in accordance with 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.
Cash and Cash Equivalents
Coast Hotels 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,
our cash deposited in financial institutions may be in excess of federally
insured limits. These instruments are stated at cost, which approximates fair
value because of their short maturity.
Short-term Investments
Short-term investments purchased with an original maturity of over three
months but less than one year are stated at cost, which approximates fair value
because of their short maturity. There were no short-term investments at
December 31, 1998 or 1999.
F-10
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 2--Summary of Significant Accounting Policies (continued)
Concentration of Credit Risk
The Company extend credit to patrons after background checks and
investigations of creditworthiness and does not require collateral. Coast Hotels
has a concentration of credit risk in Southern Nevada. The Company records
provisions for potential credit losses and such losses have been within
management's expectations. Management believes that as of December 31, 1999, 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.
Stock Options
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"). Coast Hotels
has elected to account for stock options under APB No. 25 and to disclose the
pro forma impact on net income and earning per share as if Coast Hotels had used
the fair value method recommended by SFAS No. 123.
Reclassifications
Certain amounts in the 1997 and 1998 financial statements have been
reclassified to conform with the 1999 presentation.
F-11
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 3--Property and Equipment
Major classes of property and equipment consist of the following as of
December 31, 1998 and 1999:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1999
--------------- ---------------
(in thousands)
<S> <C> <C>
Building............................ $ 233,570 $ 241,605
Furniture and fixtures.............. 146,175 162,961
--------------- ---------------
379,745 404,566
Less accumulated depreciation....... (100,369) (118,249)
--------------- ---------------
279,376 286,317
Land................................ 15,232 15,232
Construction in progress............ 6,644 36,155
--------------- ---------------
Net property and equipment.......... $ 301,252 $ 337,704
=============== ===============
</TABLE>
NOTE 4--Leases
The Barbary Coast building is located on land that 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 that runs through January 2003. Annual rental payments under these
leases total $300,000.
During December 1995, Coast Hotels 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 10. The lease provides for an initial term of fifty years with
a twenty-five year renewal option and includes a purchase option, exercisable by
Coast Hotels, 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. Coast Hotels has
recorded deferred rent to reflect the excess of rent expense over cash payments
since the inception of the lease.
The Suncoast lease was entered into in September 1995 for a parcel of land
located in the western area of Las Vegas to be used for future development
opportunities. The Suncoast 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
Suncoast lease are being charged to expense (or capitalized during the
construction period) on the straight-line method over the term of the lease.
Coast Hotels has recorded deferred rent to reflect the excess of rent expense
over cash payments since the inception of the lease.
F-12
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 4--Leases (continued)
Future Minimum Lease Payments
The following is an annual schedule of future minimum cash lease payments
required under operating leases that have initial or remaining noncancelable
terms in excess of one year as of December 31, 1999:
Operating Leases
<TABLE>
<CAPTION>
Year Ending December 31, Payments
--------------------------------------- --------------------
(in thousands)
<S> <C>
2000................................... $ 5,000
2001................................... 5,060
2002................................... 5,370
2003................................... 5,363
2004................................... 5,240
Later years....................... 410,571
--------------------
Total minimum lease payments........... $ 436,604
====================
</TABLE>
Rent Expense
Rent expense for the years ended December 31, 1997, 1998 and 1999 is as
follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1997 1998 1999
-------------- -------------- --------------
(in thousands)
<S> <C> <C> <C>
Occupancy rentals.......................... $ 4,777 $ 6,688 $ 6,688
Other equipment............................ 900 115 120
-------------- -------------- --------------
$ 5,677 $ 6,803 $ 6,808
============== ============== ==============
</TABLE>
NOTE 5--Accrued Liabilities
Major classes of accrued liabilities consist of the following as of December
31, 1998 and 1999:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
(in thousands)
Slot club liability.............................. $ 7,548 $ 8,007
Compensation and benefits........................ 7,318 9,118
Progressive jackpot payouts...................... 4,511 4,380
Customer deposits and unpaid winners............. 2,640 3,524
Deferred sports book revenue..................... 914 1,229
Taxes............................................ 575 713
Accrued interest expense......................... 1,207 4,323
Outstanding chip and token liability............. 363 1,051
Other............................................ 262 436
--------------- ---------------
$ 25,338 $ 32,781
=============== ===============
</TABLE>
F-13
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 6--Long-Term Debt
Long-term debt consists of the following as of December 31, 1998 and 1999:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1999
------------- -------------
Related parties: (in thousands)
<S> <C> <C>
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........ $ 1,975 $ 1,975
Non-related parties:
9.5% senior subordinated notes due April 2009................................. -- 175,000
$200.0 million, reducing revolving credit facility due April 2004,
collateralized by substantially all of the assets of Coast Hotels and -- 55,000
Casinos, Inc. ................................................................
13% First Mortgage Notes, with interest payable semiannually on June 15 and
December 15, net of original issue discount of $3,971,000 in 1998 and $0
in 1999....................................................................... 171,029 1,960
10 7/8% First Mortgage Notes due November 1, 2001, with interest payable
quarterly on March 15, June 15, September 15 and December 15. Balance paid
in full in 1999............................................................... 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. Balance paid in full June 1999.......................... 14,987 --
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............................................................... 2,773 2,453
Other notes payable........................................................... 295 851
------------- -------------
207,859 237,239
Less: current portion......................................................... 7,905 2,473
------------- -------------
$ 199,954 $ 234,766
============= =============
</TABLE>
In March 1999, the Company issued $175.0 million principal amount of 9.5%
senior subordinated notes with interest payable on April 1 and October 1
beginning October 1, 1999 and entered into a $75.0 million senior secured
revolving credit facility due 2004 to facilitate a refinancing. Availability
under the credit facility was increased to $200.0 million in September 1999.
Coast Resorts is a guarantor of the indebtedness under both of these debt
agreements. Borrowings under the credit facility bear interest, at our option,
at a premium over the one-, two-, three- or six-month London Interbank Offered
Rate ("LIBOR"). As of December 31, 1999, the interest rate was 8.46%. The
Company incurs a commitment fee, payable quarterly in arrears, on the unused
portion of the credit facility. This variable fee is currently at the maximum
rate of 0.5% per annum times the average unused portion of the facility.
F-14
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 6--Long-Term Debt (continued)
The availability under the $200.0 million credit facility will be reduced
quarterly beginning in the fiscal quarter ending September 30, 2001. The
initial advance of $47.0 million under the credit facility was used in
connection with the repurchase of the 13% first mortgage notes and the 10-7/8%
first mortgage notes and is more fully described below. Subsequent advances
under the credit facility may be used for working capital, general corporate
purposes, construction of the Suncoast, and certain improvements to our existing
properties. As of December 31, 1999, the Company had $55.0 million outstanding
under the $200.0 million credit facility.
With the proceeds from the senior subordinated notes and borrowings under
the credit facility, the Company repurchased substantially all of the $175.0
million principal amount outstanding of 13% first mortgage notes and all $16.8
million principal amount outstanding of 10-7/8% first mortgage notes and amended
the indenture under which the 13% first mortgage notes were issued to eliminate
substantially all of its restrictive covenants. Approximately $2.0 million in
principal amount of the 13% first mortgage notes remain outstanding and are
governed by the terms of the amended indenture. The Company is required by the
indenture for the 9.5% senior subordinated notes to redeem the 13% first
mortgage notes that remain outstanding no later than December 15, 2000 at a
redemption price of 106.5% of the principal amount, plus any accrued and unpaid
interest. Interest on the remaining $2.0 million of first mortgage notes is
payable semiannually on June 1 and December 1. In connection with the repurchase
of the 13% notes and the 10-7/8% notes, the Company incurred repurchase premiums
of $31.0 million and $2.1 million, respectively. The repurchase premiums and the
write-offs of unamortized debt issuance costs and original issue discount
resulted in an extraordinary loss of $27.0 million, net of applicable income tax
benefit of $14.5 million.
The loan agreement governing the $200.0 million senior secured revolving
credit facility contains covenants that, among other things, limit the ability
of the Company to pay dividends or make advances to Coast Resorts, to make
certain capital expenditures, to repay certain existing indebtedness, to incur
additional indebtedness or to sell material assets of the Company. Additionally,
the loan agreement requires that the Company maintain certain financial ratios
with respect to its leverage and fixed charge coverage. The Company is also
subject to certain covenants associated with the indenture governing the $175
million principal amount of senior subordinated notes, including, in part,
limitations on certain restricted payments, the incurrence of additional
indebtedness and asset sales. Management believes that, at December 31, 1999,
the Company was in compliance with all covenants and required ratios.
Maturities on long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Maturities
------------------------------- ------------------
(in thousands)
<S> <C>
2000........................... $ 2,473
2001........................... 2,488
2002........................... 513
2003........................... 513
2004........................... 55,363
Thereafter..................... 175,889
------------------
$ 237,239
==================
</TABLE>
F-15
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 7--Income Taxes And Pro Forma Data
The components of the income tax provision (benefit) for the years ended
December 31, 1997, 1998 and 1999 were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------
1997 1998 1999
------------- ------------ -------------
Federal: (in thousands)
<S> <C> <C> <C>
Current................ $ (2,189) $ 4,349 $ (1,062)
Deferred............... 788 876 (3,099)
--------------- --------------- ---------------
$ (1,401) $ 5,225 $ (4,161)
=============== =============== ===============
</TABLE>
The income tax provision (benefit) before consideration of the extraordinary
loss for the years ended December 31, 1997, 1998 and 1999 differs from that
computed at the federal statutory corporate tax rate as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1997 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Federal statutory rate.............. (34.0%) 35.0% 35.0%
Other............................... 4.4% 2.4% (2.2%)
-------------- -------------- --------------
Effective tax rate............. (29.6%) 37.4% 32.8%
============== ============== ==============
</TABLE>
The tax effects of significant temporary differences representing net deferred
tax assets and liabilities at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
(in thousands)
Deferred tax assets:
Current:
Accrued vacation..................... $ 810 $ 894
Allowance for doubtful accounts...... 286 375
Accrued slot club points............. 444 714
Progressive liabilities.............. 1,103 1,075
Accrued medical and other benefits... 202 454
------------- --------------
Total current................... 2,845 3,512
------------- --------------
Non-current:
FICA, alternative minimum tax
and other tax credits............ 2,195 4,672
Deferred rent........................ 4,688 5,336
-------------- --------------
Total non-current................ 6,883 10,008
-------------- --------------
Total deferred tax assets.................. 9,728 13,520
-------------- --------------
Deferred tax liabilities:
Non-current:
Property, plant and equipment........ (13,537) (14,230)
-------------- --------------
Total deferred tax liabilities... (13,537) (14,230)
-------------- --------------
Net deferred tax liability................. $ (3,809) $ (710)
============== ==============
</TABLE>
F-16
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO 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, 1999 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------------- --------------
(in thousands)
Liabilities:
<S> <C> <C>
Current portion of long-term debt. $ 2,473 $ 2,473
============== ==============
Revolving credit facility......... $ 55,000 $ 55,000
============== ==============
9.5% Senior Subordinated Notes.... $ 175,000 $ 167,125
============== ==============
Other long-term debt.............. $ 4,766 $ 4,818
============== ==============
</TABLE>
The methods and assumptions are summarized as follows:
For the current portion of long-term debt, the carrying amount approximates
fair value due to the short-term nature of such debt. The carrying amount of the
Revolving Credit Facility is a reasonable estimate of fair value because this
debt is carried with a floating interest rate. The fair value of the 9.5% senior
subordinated 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--Coast West, Inc.
Prior to the July 1998 contribution of Coast West, Inc. stock to Coast Hotels,
the Company had agreed to provide advances to Coast West sufficient to make
payments on the Suncoast lease and other obligations, including project
development and site improvement. The 13% first mortgage note indenture limited
the amount outstanding under advances to Coast West to $8.0 million unless Coast
West became a subsidiary of the Company. Based on the cash requirements of Coast
West for lease payments and anticipated development costs, it was likely that by
September 1998 Coast West would require cash from the Company that, when added
to the outstanding advances from the Company, would exceed $8.0 million. On July
21, 1998, Coast Resorts contributed the capital stock of Coast West to the
Company, as a result of which Coast West became a wholly owned subsidiary of the
Company. On March 23, 1999 Coast West was merged into the Company.
As of the date of the stock transfer, Coast West had total assets of
$3,615,000, total liabilities of $12,570,000 (which included $7,699,000 due to
the Company and $4,871,000 of deferred rent), and an accumulated deficit of
$8,955,000. The Company had recorded an allowance for doubtful accounts in
connection with advances provided to Coast West for lease payments. On the date
of the stock transfer, the total allowance for bad debt expense recorded by the
Company in relation to those advances was $5,769,000. Upon the transfer of Coast
West stock, the Company wrote off this allowance for doubtful accounts to
retained earnings and recorded the assumption of the $8,955,000 of net
liabilities of Coast West as a decrease in additional paid-in capital.
F-17
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO 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. LGT purchases advertising for
the Company from third parties and passes along any discounts they receive. LGT
and its owners receive no compensation or profit for these services, as the
Company is invoiced for actual costs incurred. Advertising expense paid to LGT
amounted to approximately $7.5 million, $6.0 million and $5.4 million for the
years ended December 31, 1997, 1998 and 1999, respectively.
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 a director and officer of the Company and the
Company's restaurant manager. RJS invoices the Company based on actual costs
incurred. For the fiscal years ended December 31, 1997, 1998 and 1999, the
Company incurred expenses payable to RJS of approximately $1.4 million, $829,000
and $2.1 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 and a director and officer of the Company is the majority stockholder of
Nevada Wallboards, Inc. For the fiscal years ended December 31, 1997, 1998 and
1999, the Company incurred expenses payable to Nevada Wallboards of
approximately $198,000, $186,000 and $180,000, 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 Suncoast. For the fiscal years ended December 31, 1997, 1998 and 1999,
the Company incurred expenses payable to Yates-Silverman of approximately
$177,000, $500,000 and $721,000, 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 and a director and officer of the company 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, 1997, 1998 and 1999, the Company incurred
expenses payable to LVD of approximately $1.1 million, $3.1 million and $1.3
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. Tiberti Construction is also the general contractor
for the construction of the Suncoast. The president of Tiberti Construction is
a stockholder and director of Coast Resorts and a director of the Company. For
the years ended December 31, 1997, 1998 and 1999, the Company paid approximately
$26.2 million, $3.7 million and $27.9 million, respectively, to Tiberti
Construction in connection with such construction services.
F-18
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 10--Related Party Transactions (continued)
As more fully described in Note 4, the Company is a party to 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 stockholder of Coast Resorts.
Amounts paid to the Tiberti Company with respect to the lease were $2.1 million,
$2.4 million and $2.4 million for the years ended December 31, 1997, 1998 and
1999, respectively.
Coast Hotels spent $300,000 in 1999 to promote the Orleans by advertising on a
racecar operated by the son of a major shareholder of Coast Resorts.
NOTE 11-- Benefit Plans
401(k) Plans
The Company offers separate defined contribution 401(k) plans for eligible
employees. During 1996, previously separate plans of the Gold Coast and the
Barbary Coast were consolidated into one plan. All employees of the Gold Coast
and the Orleans, and 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 $842,000, $1.3 million and
$1.1 million for the years ended December 31, 1997, 1998 and 1999, respectively.
Defined Benefit Plan
Certain employees at the Barbary Coast are covered by a union-sponsored,
collectively bargained, multi-employer defined benefit pension plan. The Barbary
Coast contributed $313,000, $308,000 and $310,000 during the years ended
December 31, 1997, 1998 and 1999, respectively, to 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 of Coast Resorts 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 Coast Resorts 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 Coast Resorts and its subsidiary are eligible to participate
in the Plan.
F-19
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 11-- Benefit Plans (continued)
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 may 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 may be issued under the Plan after the twentieth anniversary of adoption
of the Plan.
Effective January 1, 1999, Coast Resorts issued options to purchase 30,415
shares of its common stock to its chief operating officer, who is also the
operating officer of the Company. The options vest in 1/3 increments on January
1, 1999, January 1, 2000 and January 1, 2001. Effective June 14, 1999, Coast
Resorts issued options to purchase 5,000 shares of its common stock to its chief
financial officer, who is also the chief financial officer of the Company. The
options vest in 1/3 increments on June 14, 1999, June 14, 2000 and June 14,
2001. The exercise price on the options is at $100 per share, which is
equivalent to the estimated fair value of Coast Resorts' common stock at the
grant date, as estimated by Coast Resorts from recent sales of common stock
between shareholders.
Pro forma information regarding net income (loss) is required by SFAS 123 and
has been determined as if the Company had accounted for its stock option plan
under the fair-value-based method of that Statement. The fair value for these
options was estimated at the date of grant using the minimum value method (which
is appropriate for valuing options of companies without publicly traded stock)
with the following weighted-average assumptions: risk-free rate of return of
approximately 5.0%, expected life of the options of 5 years and 0% dividend
yield. For the purpose of pro forma disclosures, the estimated fair value of the
options is amortized over the respective vesting periods of the options. For
fiscal 1999 the pro forma net loss would have been $5,989,000.
NOTE 12--Supplemental Cash Flows Information
For the years ended December 31, 1997, 1998 and 1999 supplemental cash flows
information amounts are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1997 1998 1999
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Interest paid................................................. $ 25,488 $ 26,764 $ 19,387
============= ============= =============
Income taxes paid............................................. $ -- $ 2,300 $ --
============= ============= =============
Supplemental schedule of non-cash investing and financing
activities:
Property and equipment acquisitions included in accounts
payable or financed through notes payable.................. $ 2,491 $ -- $ 8,304
============= ============= =============
Transfer of net liabilities of Coast West to the Company by
Coast Resorts ($8,955) less write-off of related allowance
For advances to Coast West ($5,769)........................ $ -- $ 3,186 $ --
============= ============= =============
</TABLE>
F-20
<PAGE>
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary of Coast Resorts, Inc.)
NOTES TO FINANCIAL STATEMENTS
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--Commitments and Contingencies
Coast Hotels 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 Coast Hotels.
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of Coast Resorts, Inc.
In our opinion, the accompanying balance sheets and related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of Coast Resorts, Inc. (parent company only) as
of December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The Company has no material business activity other than that conducted through
its wholly owned subsidiary, Coast Hotels and Casinos, Inc. ("CHC"). The
accompanying financial statements include the parent's investment in CHC using
the equity method of accounting, and have been prepared solely to accompany the
financial statements of CHC. The financial statements of Coast Resorts, Inc.
(parent company only) should be read in conjunction with the financial
statements of CHC included in this form 10-K.
PricewaterhouseCoopers LLP
Las Vegas, Nevada
February 4, 2000
F-22
<PAGE>
COAST RESORTS, INC.
(Parent Company Only)
BALANCE SHEETS
December 31, 1998 and 1999
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
1998 1999
------------- -------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents.................................. $ 3 $ 13
Other current assets....................................... -- 660
------------- -------------
TOTAL CURRENT ASSETS..................................... 3 673
INVESTMENT IN SUBSIDIARIES.................................... 103,054 97,293
------------- -------------
$ 103,057 $ 97,966
============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to Coast Hotels........................................ $ 601 $ 2,863
Accrued liabilities........................................ 30 --
------------- -------------
TOTAL CURRENT LIABILITIES................................ 631 2,863
------------- -------------
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 (1998) and 1,478,978 (1999) shares issued
and outstanding.......................................... 15 15
Treasury stock............................................. -- (1,538)
Additional paid-in capital................................. 95,398 95,398
Retained earnings.......................................... 7,013 1,228
------------- -------------
TOTAL STOCKHOLDERS' EQUITY............................... 102,426 95,103
------------- -------------
$ 103,057 $ 97,966
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
COAST RESORTS, INC.
(Parent Company Only)
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1997, 1998 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
1997 1998 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Equity interest in income (loss) from subsidiary... $ (4,335) $ 8,287 $ (5,761)
General and administrative expenses................ (261) (134) (35)
--------------- --------------- ---------------
Income (loss) before income taxes.................. (4,596) 8,153 (5,796)
Income tax provision (benefit)..................... 14 166 (11)
--------------- --------------- ---------------
NET INCOME (LOSS).................................. $ (4,610) $ 7,987 $ (5,785)
Basic and diluted net income (loss) per =============== =============== ===============
share of common stock.............................. $ (3.08) $ 5.34 $ (3.91)
=============== =============== ===============
Weighted average common shares outstanding......... 1,494,353 1,494,353 1,478,978
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
COAST RESORTS, INC.
(Parent Company Only)
STATEMENTS OF STOCKHOLDERS' EQUITY
For The Years Ended December 31, 1997, 1998, And 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
------------------------ Additional Retained Treasury
Shares Amount Paid-In Captial Earnings Stock Total
------------ ------ --------------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
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
Net income........................ -- -- -- 7,987 -- 7,987
-------------- ----- ----------- --------- --------- ----------
Balances at December 31, 1998....... 1,494,353 15 95,398 7,013 -- 102,426
Repurchase of common stock........ (15,375) -- -- -- (1,538) (1,538)
Net loss.......................... -- -- -- (5,785) -- (5,785)
-------------- ----- ----------- --------- --------- ----------
Balances at December 31, 1999....... 1,478,978 $ 15 $ 95,398 $ 1,228 $ (1,538) $ 95,103
============== ===== =========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
COAST RESORTS, INC.
(Parent Company Only)
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1997, 1998 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss)................................................. $ (4,610) $ 7,987 $ (5,785)
------------ ------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Equity interest in net (income) loss from subsidiary........... 4,335 (8,287) 5,761
Other current assets........................................... -- -- (660)
Accrued liabilities............................................ 30 -- (30)
Due to affiliates.............................................. 245 300 2,262
------------ ------------ ------------
TOTAL ADJUSTMENTS........................................... 4,610 (7,987) 7,333
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... -- -- 1,548
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock......................................... -- -- (1,538)
------------- ------------- -------------
NET CASH USED IN FINANCING ACTIVITIES.............................. -- -- (1,538)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................................ -- -- 10
CASH AND CASH EQUIVALENTS, at beginning of year....................... 3 3 3
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, at end of year............................. $ 3 $ 3 $ 13
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
COAST RESORTS, INC.
(Parent Company Only)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Summary Of Significant Accounting Policies
Background Information and Basis of Presentation
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"). The Company has no material business activity other than that
conducted through Coast Hotels.
On July 21, 1998, the Company contributed the common stock of Coast West to
Coast Hotels, as a result of which Coast West became a wholly owned subsidiary
of Coast Hotels. On March 23, 1999 Coast West was merged into the Company,
leaving no subsidiaries of Coast Hotels.
The accompanying financial statements present the financial position and
results of operations of Coast Resorts as a parent company only, and thus
include Coast Resort's investment in Coast Hotels, as well as Coast Resort's
equity interest in its results of operations. Accordingly, these financial
statements should be read in conjunction with the financial statements of Coast
Hotels.
Net Income (Loss) Per Common 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.
Net income per common share for the years ended December 31, 1997, 1998 and
1999 is computed by dividing net income by the weighted average number of shares
of common stock outstanding, which weighted average totaled 1,494,353 shares,
1,494,353 and 1,478,978 shares, respectively. There were no options to purchase
common stock issued in 1997 or 1998. The weighted-average number of options to
purchase common stock outstanding for the year ended December 31, 1999 was
10,971. However, these options were excluded from the calculation of diluted
earnings per share as their inclusion would have been antidilutive (by reducing
the loss per share).
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Directors and Stockholder of Coast Hotels and Casinos, Inc.
Our audits of the financial statements referred to in our opinion dated February
4, 2000 appearing in this Annual Report on Form 10-K also included an audit of
the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In
our opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related financial statements.
PricewaterhouseCoopers LLP
Las Vegas, Nevada
February 4, 2000
F-28
<PAGE>
SCHEDULE II
COAST HOTELS AND CASINOS, INC.
(A Wholly Owned Subsidiary Of Coast Resorts, Inc.)
VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended December 31, 1997, 1998 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER DEDUCTIONS END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (1) YEAR
- -------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
(casino receivables):
Year ended December 31, 1997........ $ 379 $ 448 $ -- $ 633 $ 194
============= ============= ============= ============= =============
Year ended December 31, 1998........ $ 194 $ 1,499 $ -- $ 1,099 $ 594
============= ============= ============= ============= =============
Year ended December 31, 1999........ $ 594 $ 1,281 $ -- $ 1,033 $ 842
============= ============= ============= ============= =============
Allowance for doubtful accounts
(advances to Coast West):
Year ended December 31, 1997........ $ 2,560 $ 2,120 $ -- $ -- $ 4,680
============= ============= ============= ============= =============
Year ended December 31, 1998........ $ 4,680 $ 1,090 $ -- $ 5,770 $ --
============= ============= ============= ============= =============
Year ended December 31, 1999........ $ -- $ -- $ -- $ -- $ --
============= ============= ============= ============= =============
</TABLE>
____________
(1) On July 21, 1998, Coast Resorts contributed the capital stock of Coast West
to the Company. The allowance for doubtful accounts on advances previously
made by the Company to Coast West ($5,770,000) was eliminated in connection
with such transactions.
F-29
<PAGE>
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT ("Agreement"), dated as of March 18, 1999, is
made by Coast Hotels and Casinos, Inc., a Nevada corporation ("Grantor"), in
favor of Bank of America National Trust and Savings Association, as
Administrative Agent under the Loan Agreement hereafter referred to, and in
favor of each of the Lenders therein named (collectively referred to herein as
"Secured Party"), with reference to the following facts:
RECITALS
--------
A. Pursuant to the Loan Agreement of even date herewith by and among
Grantor, the lenders from time to time party thereto (collectively, the
"Lenders" and individually, a "Lender"), and the Administrative Agent (as such
agreement may from time to time be amended, extended, renewed, supplemented or
otherwise modified, the "Loan Agreement"), the Lenders have agreed to extend
certain credit facilities to Grantor.
B. The Loan Agreement provides, as a condition of the availability
of such credit facilities, that Grantor shall enter into this Agreement and
shall grant security interests to Secured Party as herein provided.
AGREEMENT
---------
NOW, THEREFORE, in order to induce the Lenders to extend the
aforementioned credit facilities, and for other good and valuable consideration,
the receipt and adequacy of which hereby is acknowledged, Grantor hereby
represents, warrants, covenants, agrees, assigns and grants as follows:
1. Definitions. This Agreement is the Security Agreement referred
-----------
to in the Loan Agreement. This Agreement is one of the "Loan Documents"
referred to in the Loan Agreement. Terms defined in the Loan Agreement and not
otherwise defined in this Agreement shall have the meanings defined for those
terms in the Loan Agreement. Terms defined in the California Uniform Commercial
Code and not otherwise defined in this Agreement or in the Loan Agreement shall
have the meanings defined for those terms in the California Uniform Commercial
Code. As used in this Agreement, the following terms shall have the meanings
respectively set forth after each:
"Agreement" means this Security Agreement, and any extensions,
---------
modifications, renewals, restatements, supplements or amendments hereof.
"Collateral" means and includes all present and future right, title
----------
and interest of Grantor in or to any Property or assets whatsoever, and all
rights and powers of
-1-
<PAGE>
Grantor to transfer any interest in or to any Property or assets
whatsoever, including, without limitation, any and all of the
---------
following Property:
(a) All present and future accounts, accounts receivable,
agreements, contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements, guaranties,
letters of credit, undertakings, surety bonds, insurance policies (whether
or not required by the terms of the Loan Documents), notes and drafts, and
all forms of obligations owing to Grantor or in which Grantor may have any
interest, however created or arising and whether or not earned by
performance;
(b) All present and future general intangibles, all tax refunds
of every kind and nature to which Grantor now or hereafter may become
entitled, however arising, all other refunds, and all deposits, reserves,
loans, royalties, cost savings, deferred payments, goodwill, choses in
action, liquidated damages, rights to indemnification, trade secrets,
computer programs, software, customer lists, trademarks, trade names,
patents, licenses (except for gaming licenses and liquor licenses, which
are not transferable), copyrights, technology, processes, proprietary
information and insurance proceeds of which Grantor is a beneficiary;
(c) Whether characterized as accounts, general intangibles or
otherwise, all rents (including, without limitation, prepaid rents, fixed,
---------
additional and contingent rents), issues, profits, receipts, earnings,
revenue, income, security deposits, occupancy charges, hotel room charges,
cabana charges, casino revenues, show ticket revenues, food and beverage
revenues, room service revenues, merchandise sales revenues, parking,
maintenance, common area, tax, insurance, utility and service charges and
contributions, green fees, cart rental fees, instruction fees, membership
charges, restaurant, snack bar and pro shop revenues;
(d) All present and future deposit accounts of Grantor,
including, without limitation, any demand, time, savings, passbook or like
---------
account maintained by Grantor with any bank, savings and loan association,
credit union or like organization, and all money, Cash and Cash Equivalents
of Grantor, whether or not deposited in any such deposit account;
(e) All present and future books and records, including, without
---------
limitation, books of account and ledgers of every kind and nature, all
electronically recorded data relating to Grantor or the business thereof,
all receptacles and containers for such records, and all files and
correspondence;
(f) All present and future goods, including, without limitation,
---------
all consumer goods, farm products, inventory, equipment, gaming devices and
associated equipment (including, without limitation, gaming devices and
associated equipment as
-2-
<PAGE>
defined in Nevada Revised Statutes Chapter 463), machinery, tools, molds,
dies, furniture, furnishings, fixtures, trade fixtures, motor vehicles and
all other goods used in connection with or in the conduct of Grantor's
business;
(g) All present and future inventory and merchandise, including,
---------
without limitation, all present and future goods held for sale or lease or
to be furnished under a contract of service, all raw materials, work in
process and finished goods, all packing materials, supplies and containers
relating to or used in connection with any of the foregoing, and all bills
of lading, warehouse receipts or documents of title relating to any of the
foregoing;
(h) All present and future stocks, bonds, debentures, securities,
subscription rights, options, warrants, puts, calls, certificates,
partnership interests, joint venture interests, investment property,
Investments and/or brokerage accounts and all rights, preferences,
privileges, dividends, distributions, redemption payments, or liquidation
payments with respect thereto;
(i) All present and future accessions, appurtenances, components,
repairs, repair parts, spare parts, replacements, substitutions, additions,
issue and/or improvements to or of or with respect to any of the foregoing;
(j) All other tangible and intangible Property of Grantor;
(k) All rights, remedies, powers and/or privileges of Grantor
with respect to any of the foregoing; and
(l) Any and all proceeds and products of any of the foregoing,
including, without limitation, all money, accounts, general intangibles,
---------
deposit accounts, documents, instruments, chattel paper, goods, insurance
proceeds, and any other tangible or intangible property received upon the
sale or disposition of any of the foregoing;
provided that the term "Collateral", as used in this Agreement, shall not
- -------- ---------- ---
include (i) Real Property or any interest therein, (ii) any capital stock or
other equity interests in any gaming licensees, (iii) any aircraft owned by the
Grantor on the Closing Date, (iv) any agreement with a third party that,
pursuant to its terms, prohibits the grant of a lien on such agreement; provided
that the Grantor shall use its best efforts to obtain such third party's consent
to assignment of all material agreements; or (v) any Property the purchase of
which was financed by a purchase money security interest, including any Capital
Lease Obligation, permitted under Section 6.9 or 6.10 of the Loan Agreement.
"Secured Obligations" means any and all present and future Obligations
-------------------
of any type or nature of Grantor to Secured Party arising under or relating to
the Loan Documents or
-3-
<PAGE>
any one or more of them, whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or noncontingent, including
---------
Obligations of performance as well as Obligations of payment, and including
---------
interest that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against Grantor.
2. Further Assurances. At any time and from time to time at the
------------------
request of Secured Party, Grantor shall execute and deliver to Secured Party all
such financing statements and other instruments and documents in form and
substance satisfactory to Secured Party as shall be necessary or desirable to
fully perfect, when filed and/or recorded, Secured Party's security interests
granted pursuant to Section 3 of this Agreement, provided that nothing contained
herein shall require the Lien of this Agreement to be prior to that of the 13%
Indenture and the collateral documents securing the same to the extent that such
Indebtedness is permitted by the terms of the Loan Agreement. It is hereby
acknowledged and agreed that, notwithstanding anything contained herein or in
any other Collateral Document, Grantor shall not be required under any
circumstance to take any further action to perfect any interest granted to
Secured Party in any cage cash, deposit accounts, markers, instruments or other
cash items which are used in connection with the casino operations of Grantor.
At any time and from time to time, Secured Party shall be entitled to file
and/or record any or all such financing statements, instruments and documents
held by it, and any or all such further financing statements, documents and
instruments, and to take all such other actions, as Secured Party may deem
appropriate to perfect and to maintain perfected the security interests granted
in Section 3 of this Agreement. Before and after the occurrence of any Event of
Default, at Secured Party's request, Grantor shall execute all such further
financing statements, instruments and documents, and shall do all such further
acts and things, as may be deemed necessary or desirable by Secured Party to
create and perfect, and to continue and preserve, an indefeasible security
interest in the Collateral in favor of Secured Party, or the priority thereof.
With respect to any Collateral consisting of instruments, documents,
certificates of title or the like, as to which Secured Party's security interest
need be perfected by, or the priority thereof need be assured by, possession of
such Collateral, Grantor will upon demand of Secured Party deliver possession of
same in pledge to Secured Party. With respect to any Collateral consisting of
securities, instruments, partnership or joint venture interests or the like,
Grantor hereby consents and agrees that the issuers of, or obligors on, any such
Collateral, or any registrar or transfer agent or trustee for any such
Collateral, shall be entitled to accept the provisions of this Agreement as
conclusive evidence of the right of Secured Party to effect any transfer or
exercise any right hereunder or with respect to any such Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by Grantor or any other Person to such issuers or such obligors
or to any such registrar or transfer agent or trustee.
3. Security Agreement. For valuable consideration, Grantor hereby
------------------
assigns and pledges to Secured Party, and grants to Secured Party a security
interest in, all presently existing and hereafter acquired Collateral, as
security for the timely payment and performance of the Secured Obligations, and
each of them. This Agreement is a continuing
-4-
<PAGE>
and irrevocable agreement and all the rights, powers, privileges and remedies
hereunder shall apply to any and all Secured Obligations, including those
arising under successive transactions which shall either continue the Secured
Obligations, increase or decrease them, or from time to time create new Secured
Obligations after all or any prior Secured Obligations have been satisfied, and
notwithstanding the bankruptcy of Grantor or any other Person or any other event
or proceeding affecting any Person.
4. Grantor's Representations, Warranties and Agreements. Except as
----------------------------------------- ---------- ------
otherwise disclosed to Secured Party in writing concurrently herewith, Grantor
represents, warrants and agrees that: (a) Grantor will pay, prior to
delinquency, all taxes, charges, Liens and assessments against the portion of
the Collateral owned by it, except such as are timely contested in good faith,
------
and upon its failure to pay or so contest such taxes, charges, Liens and
assessments, Secured Party at its option may pay any of them, and Secured Party
shall be the sole judge of the legality or validity thereof and the amount
necessary to discharge the same; (b) the Collateral will not be used for any
unlawful purpose or in material violation of any Law, regulation or ordinance,
nor used in any way that will void or impair any insurance required to be
carried in connection therewith; (c) Grantor will, to the extent consistent with
good business practice, keep the portion of the Collateral owned by it in
reasonably good repair, working order and condition, and from time to time make
all needful and proper repairs, renewals, replacements, additions and
improvements thereto and, as appropriate and applicable, will otherwise deal
with such portion of the Collateral in all such ways as are considered good
practice by owners of like Property; (d) Grantor will take all reasonable steps
to preserve and protect the Collateral; (e) Grantor will maintain, with
responsible insurance companies, insurance covering the Collateral against such
insurable losses as is required by the Loan Agreement and as is consistent with
sound business practice, and will cause Secured Party to be designated as an
additional insured and loss payee with respect to all insurance (whether or not
required by the Loan Agreement), will obtain the written agreement of the
insurers that such insurance shall not be canceled, terminated or materially
modified to the detriment of Secured Party without at least 30 days prior
written notice to Secured Party, and will furnish copies of such insurance
policies or certificates to Secured Party promptly upon request therefor; (f)
Grantor will promptly notify Secured Party in writing in the event of any
substantial or material damage to the Collateral from any source whatsoever,
and, except for the disposition of collections and other proceeds of the
------
Collateral permitted by Section 6 hereof, Grantor will not remove or permit to
be removed any part of the Collateral from the State of Nevada without the prior
written consent of Secured Party, except for such items of the Collateral as are
------
removed in the ordinary course of business or in connection with any transaction
or disposition otherwise permitted by the Loan Documents; and (g) in the event
Grantor changes its name or its address as either are set forth herein or in the
Loan Agreement, Grantor will notify Secured Party of such name and/or address
change promptly, but in any event, within thirty days.
-5-
<PAGE>
5. Secured Party's Rights Re Collateral. If an Event of Default has
------------------------------------
occurred and remains continuing, then at any time without notice or demand and
at the sole expense of Grantor (or if no Event of Default is continuing, at
Secured Party's sole expense and upon reasonable advance notice and at any time
during regular business hours and as often as reasonably requested (but not so
as to materially interfere with the business of Grantor or any of its
Subsidiaries)), Secured Party may, to the extent it may be necessary or
desirable to protect the security hereunder, but Secured Party shall not be
obligated to: (a) enter upon any premises on which Collateral is situated and
examine the same or (b) perform any obligation of Grantor under this Agreement
or any obligation of any other Person under the Loan Documents. At any time and
from time to time, at the expense of Grantor, Secured Party may, to the extent
it may be necessary or desirable to protect the security hereunder, but Secured
Party shall not be obligated to: (i) notify obligors on the Collateral that the
Collateral has been assigned to Secured Party; (ii) at any time and from time to
time request from obligors on the Collateral, in the name of Grantor or in the
name of Secured Party, information concerning the Collateral and the amounts
owing thereon; and (iii) while an Event of Default is continuing (and subject to
any inconsistent rights of the Trustee under the 13% Indenture) cause the
Collateral to be registered in the name of Secured Party, as legal owner.
Grantor shall at any time at Secured Party's request mark the Collateral and/or
Grantor's ledger cards, books of account and other records relating to the
Collateral with appropriate notations satisfactory to Secured Party disclosing
that they are subject to Secured Party's security interests. Secured Party
shall be under no duty or obligation whatsoever to take any action to protect or
preserve the Collateral or any rights of Grantor therein, or to make collections
or enforce payment thereon, or to participate in any foreclosure or other
proceeding in connection therewith.
6. Collections on the Collateral. Except as otherwise provided in
----------------------------- ------
any Loan Document, Grantor shall have the right to use and to continue to make
collections on and receive dividends and other proceeds of all of the Collateral
in the ordinary course of business so long as no Event of Default shall have
occurred and be continuing. Upon the occurrence and during the continuance of
an Event of Default, at the option of Secured Party, Grantor's right to make
collections on and receive dividends and other proceeds of the Collateral and to
use or dispose of such collections and proceeds shall terminate, and (subject to
any prior rights of the Trustee under the 13% Indenture) any and all dividends,
proceeds and collections, including all partial or total prepayments, then held
or thereafter received on or on account of the Collateral will be held or
received by Grantor in trust for Secured Party and immediately delivered in kind
to Secured Party. Any remittance received by Grantor from any Person shall be
presumed to relate to the Collateral and to be subject to Secured Party's
security interests. Upon the occurrence and during the continuance of an Event
of Default, Secured Party shall have the right at all times (subject to any
inconsistent rights of the Trustee under the 13% Indenture) to receive, receipt
for, endorse, assign, deposit and deliver, in the name of Secured Party or in
the name of Grantor, any and all checks, notes, drafts and other instruments for
the payment of money constituting proceeds of or otherwise
-6-
<PAGE>
relating to the Collateral; and Grantor hereby authorizes Secured Party to
affix, by facsimile signature or otherwise, the general or special endorsement
of it, in such manner as Secured Party shall deem advisable, to any such
instrument in the event the same has been delivered to or obtained by Secured
Party without appropriate endorsement, and Secured Party and any collecting bank
are hereby authorized to consider such endorsement to be a sufficient, valid and
effective endorsement by Grantor, to the same extent as though it were manually
executed by the duly authorized officer of Grantor, regardless of by whom or
under what circumstances or by what authority such facsimile signature or other
endorsement actually is affixed, without duty of inquiry or responsibility as to
such matters, and Grantor hereby expressly waives demand, presentment, protest
and notice of protest or dishonor and all other notices of every kind and nature
with respect to any such instrument.
7. Possession of Collateral by Secured Party. Any or all of the
-----------------------------------------
Collateral delivered to Secured Party consisting of Cash shall be held in an
interest-bearing account and, when an Event of Default exists, Secured Party
may, in its discretion, apply any such interest to payment of the Secured
Obligations. Nothing herein shall obligate Secured Party to invest any
Collateral or obtain any particular return thereon. Upon the occurrence and
during the continuance of an Event of Default, whenever any of the Collateral is
in Secured Party's possession, custody or control, Secured Party may use,
operate and consume the Collateral, whether for the purpose of preserving and/or
protecting the Collateral or for the purpose of performing any of Grantor's
obligations with respect thereto. Secured Party may at any time deliver or
redeliver the Collateral or any part thereof to Grantor, and the receipt of any
of the same by Grantor shall be complete and full acquittance for the Collateral
so delivered, and Secured Party thereafter shall be discharged from any
liability or responsibility therefor. So long as Secured Party exercises
reasonable care with respect to any Collateral in its possession, custody or
control, Secured Party shall have no liability for any loss of or damage to such
Collateral, and in no event shall Secured Party have liability for any
diminution in value of Collateral occasioned by economic or market conditions or
events. Secured Party shall be deemed to have exercised reasonable care within
the meaning of the preceding sentence if the Collateral in the possession,
custody or control of Secured Party is accorded treatment substantially equal to
that which Secured Party accords its own property, it being understood that
Secured Party shall not have any responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Collateral, whether or not Secured Party has or is
deemed to have knowledge of such matters, or (b) taking any necessary steps to
preserve rights against any Person with respect to any Collateral.
8. Events of Default. There shall be an Event of Default hereunder
-----------------
upon the occurrence and during the continuance of an Event of Default under the
Loan Agreement.
-7-
<PAGE>
9. Rights Upon Event of Default. Upon the occurrence and during the
----------------------------
continuance of an Event of Default, Secured Party shall have, in any
jurisdiction where enforcement hereof is sought, in addition to all other rights
and remedies that Secured Party may have under applicable Law or in equity or
under this Agreement (including, without limitation, all rights set forth in
---------
Section 6 hereof) or under any other Loan Document, all rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any jurisdiction,
and, in addition, the following rights and remedies, all of which may be
exercised with or without notice to Grantor and without affecting the
Obligations of Grantor hereunder or under any other Loan Document, or the
enforceability of the Liens and security interests created hereby: (a) to
foreclose the Liens and security interests created hereunder or under any other
agreement relating to any Collateral by any available judicial procedure or
without judicial process; (b) to enter any premises where any Collateral may be
located for the purpose of securing, protecting, inventorying, appraising,
inspecting, repairing, preserving, storing, preparing, processing, taking
possession of or removing the same; (c) to sell, assign, lease or otherwise
dispose of any Collateral or any part thereof, either at public or private sale
or at any broker's board, in lot or in bulk, for cash, on credit or otherwise,
with or without representations or warranties and upon such terms as shall be
acceptable to Secured Party; (d) to notify obligors on the Collateral that the
Collateral has been assigned to Secured Party and that all payments thereon are
to be made directly and exclusively to Secured Party; (e) to collect by legal
proceedings or otherwise all dividends, distributions, interest, principal or
other sums now or hereafter payable upon or on account of the Collateral; (f) to
cause the Collateral to be registered in the name of Secured Party, as legal
owner; (g) to enter into any extension, reorganization, deposit, merger or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith Secured Party may deposit or surrender
control of the Collateral and/or accept other Property in exchange for the
Collateral; (h) to settle, compromise or release, on terms acceptable to Secured
Party, in whole or in part, any amounts owing on the Collateral and/or any
disputes with respect thereto; (i) to extend the time of payment, make
allowances and adjustments and issue credits in connection with the Collateral
in the name of Secured Party or in the name of Grantor; (j) to enforce payment
and prosecute any action or proceeding with respect to any or all of the
Collateral and take or bring, in the name of Secured Party or in the name of
Grantor, any and all steps, actions, suits or proceedings deemed by Secured
Party necessary or desirable to effect collection of or to realize upon the
Collateral, including any judicial or nonjudicial foreclosure thereof or
---------
thereon, and Grantor specifically consents to any nonjudicial foreclosure of any
or all of the Collateral or any other action taken by Secured Party which may
release any obligor from personal liability on any of the Collateral, and
Grantor waives any right not expressly provided for in this Agreement to receive
notice of any public or private judicial or nonjudicial sale or foreclosure of
any security or any of the Collateral; and any money or other property received
by Secured Party in exchange for or on account of the Collateral, whether
representing collections or proceeds of Collateral, and whether resulting from
voluntary payments or foreclosure proceedings or other legal action taken by
Secured Party or Grantor may be applied by Secured Party without notice to
Grantor to the Secured Obligations
-8-
<PAGE>
in such order and manner as Secured Party in its sole discretion shall
determine; (k) to insure, process and preserve the Collateral; (l) to exercise
all rights, remedies, powers or privileges provided under any of the Loan
Documents; (m) to remove, from any premises where the same may be located, the
Collateral and any and all documents, instruments, files and records, and any
receptacles and cabinets containing the same, relating to the Collateral, and
Secured Party may, at the cost and expense of Grantor, use such of its supplies,
equipment, facilities and space at its places of business as may be necessary or
appropriate to properly administer, process, store, control, prepare for sale or
disposition and/or sell or dispose of the portion of the Collateral owned by
Grantor or to properly administer and control the handling of collections and
realizations thereon, and Secured Party shall be deemed to have a rent-free
tenancy of premises of Grantor for such purposes and for such periods of time as
reasonably required by Secured Party; (n) to receive, open and dispose of all
mail addressed to Grantor and notify postal authorities to change the address
for delivery thereof to such address as Secured Party may designate; provided
--------
that Secured Party agrees that it will promptly deliver over to Grantor such
opened mail as does not relate to the Collateral; and (o) to exercise all other
rights, powers, privileges and remedies of an owner of the Collateral; all at
Secured Party's sole option and as Secured Party in its sole discretion may deem
advisable. Grantor will, at Secured Party's request, assemble the Collateral and
make it available to Secured Party at places which Secured Party may designate,
whether at the premises of Grantor or elsewhere, and will make available to
Secured Party, free of cost, all premises, equipment and facilities of Grantor
for the purpose of Secured Party's taking possession of the Collateral or
storing same or removing or putting the Collateral in salable form or selling or
disposing of same.
Upon the occurrence and during the continuance of an Event of Default,
Secured Party also shall have the right, without notice or demand, either in
person, by agent or by a receiver to be appointed by a court (and Grantor hereby
expressly consents upon the occurrence and during the continuance of an Event of
Default to the appointment of such a receiver), and without regard to the
adequacy of any security for the Secured Obligations, to take possession of the
Collateral or any part thereof and to collect and receive the rents, issues,
profits, income and proceeds thereof. Taking possession of the Collateral shall
not cure or waive any Event of Default or notice thereof or invalidate any act
done pursuant to such notice. The rights, remedies and powers of any receiver
appointed by a court shall be as ordered by said court.
Any public or private sale or other disposition of the Collateral may
be held at any office of Secured Party, or at Grantor's places of business, or
at any other place permitted by applicable Law, and without the necessity of the
Collateral's being within the view of prospective purchasers. The Secured Party
may also request, in connection therewith, the Nevada Gaming Commission to
petition a District Court of the State of Nevada for the appointment of a
supervisor to conduct the normal gaming activities on the premises following the
appointment of a receiver. Secured Party may direct the order and manner of
-9-
<PAGE>
sale of the Collateral, or portions thereof, as it in its sole and absolute
discretion may determine, and Grantor expressly waives any right to direct the
order and manner of sale of any Collateral. Secured Party or any Person on
Secured Party's behalf may bid and purchase at any such sale or other
disposition. The net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of the Collateral shall be applied, first, to
the expenses (including reasonable attorneys' fees and disbursements) of
retaking, holding, storing, processing and preparing for sale or lease, selling,
leasing, collecting, liquidating and the like, and then to the satisfaction of
the Secured Obligations in such order as shall be determined by Secured Party in
its sole and absolute discretion. Grantor and any other Person then obligated
therefor shall pay to Secured Party on demand any deficiency with regard thereto
which may remain after such sale, disposition, collection or liquidation of the
Collateral. Any surplus held by the Security Party and remaining after payment
in full of all the Secured Obligations shall immediately be reassigned and
redelivered to Grantor, or to the person or persons otherwise legally entitled
thereto.
Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
will send or otherwise make available to Grantor reasonable notice of the time
and place of any public sale thereof or of the time on or after which any
private sale thereof is to be made. The requirement of sending reasonable
notice conclusively shall be met if such notice is mailed, first class mail,
postage prepaid, to Grantor at its address set forth in the Loan Agreement, or
delivered or otherwise sent to Grantor, at least ten (10) days before the date
of the sale. Grantor expressly waives any right to receive notice of any public
or private sale of any Collateral or other security for the Secured Obligations
except as expressly provided for in this paragraph.
- ------
With respect to any Collateral consisting of securities, partnership
interests, joint venture interests, Investments or the like, and whether or not
any of such Collateral has been effectively registered under the Securities Act
of 1933, as amended, or other applicable Laws, Secured Party may, in its sole
and absolute discretion, sell all or any part of such Collateral at private sale
in such manner and under such circumstances as provided in the Uniform
Commercial Code of California. Without limiting the foregoing, Secured Party
may (i) approach and negotiate with a limited number of potential purchasers,
and (ii) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing such Collateral for their own
account for investment and not with a view to the distribution or resale
thereof. In the event that any such Collateral is sold at private sale, Grantor
agrees that if such Collateral is sold for a price which Secured Party in good
faith believes to be reasonable under the circumstances then existing, then (a)
the sale shall be deemed to be commercially reasonable in all respects, (b)
Grantor shall not be entitled to a credit against the Secured Obligations in an
amount in excess of the purchase price, and (c) Secured Party shall not incur
any liability or responsibility to Grantor in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale. Grantor recognizes that a ready market may not
exist for such Collateral if it is not regularly traded on a recognized
securities exchange, and that a sale by
-10-
<PAGE>
Secured Party of any such Collateral for an amount substantially less than a pro
rata share of the fair market value of the issuer's assets minus liabilities may
be commercially reasonable in view of the difficulties that may be encountered
in attempting to sell a large amount of such Collateral or Collateral that is
privately traded.
Upon consummation of any sale of Collateral hereunder, Secured Party
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the Collateral so sold absolutely free from any claim or right upon
the part of Grantor or any other Person, and Grantor hereby waives (to the
extent permitted by applicable Laws) all rights of redemption, stay and
appraisal which it now has or may at any time in the future have under any rule
of Law or statute now existing or hereafter enacted. If the sale of all or any
part of the Collateral is made on credit or for future delivery, Secured Party
shall not be required to apply any portion of the sale price to the Secured
Obligations until such amount actually is received by Secured Party, and any
Collateral so sold may be retained by Secured Party until the sale price is paid
in full by the purchaser or purchasers thereof. Secured Party shall not incur
any liability in case any such purchaser or purchasers shall fail to pay for the
Collateral so sold, and, in case of any such failure, the Collateral may be sold
again.
10. Voting Rights; Dividends; etc. With respect to any Collateral
-----------------------------
consisting of securities, partnership interests, joint venture interests,
Investments or the like (referred to collectively and individually in this
Section 10 and in Section 11 as the "Investment Collateral"), so long as no
---------------------
Event of Default occurs and remains continuing:
10.1 Voting Rights. Grantor shall be entitled to exercise any
-------------
and all voting and other consensual rights pertaining to the Investment
Collateral, or any part thereof, for any purpose not inconsistent with the terms
of this Agreement, the Loan Agreement, or the other Loan Documents; provided,
--------
however, that Grantor shall not exercise, or shall refrain from exercising, any
- -------
such right if it would result in a Default.
10.2 Dividend and Distribution Rights. Except as otherwise
--------------------------------
provided in any Loan Document, Grantor shall be entitled to receive and to
retain and use any and all dividends or distributions paid in respect of the
Investment Collateral; provided, however, that (subject to any inconsistent
-------- -------
prior rights of the Trustee under the 13% Indenture) any and all such dividends
or distributions received in the form of capital stock, certificated securities,
warrants, options or rights to acquire capital stock or certificated securities
forthwith shall be, and the certificates representing such capital stock or
certificated securities, if any, forthwith shall be delivered to Secured Party
to hold as pledged Collateral and shall, if received by Grantor, be received in
trust for the benefit of Secured Party, be segregated from the other Property of
Grantor, and forthwith be delivered to Secured Party as pledged Collateral in
the same form as so received (with any necessary endorsements).
11
<PAGE>
11. Rights During Event of Default. With respect to any Investment
------------------------------
Collateral, so long as an Event of Default has occurred and is continuing:
11.1 Voting, Dividend, and Distribution Rights. At the option of
-----------------------------------------
Secured Party, all rights of Grantor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section 10.1
above, and to receive the dividends and distributions which it would otherwise
be authorized to receive and retain pursuant to Section 10.2 above, shall cease,
and all such rights thereupon shall become vested in Secured Party which
thereupon shall have the sole right to exercise such voting and other consensual
rights and to receive and to hold as pledged Collateral such dividends and
distributions.
11.2 Dividends and Distributions Held in Trust. All dividends
-----------------------------------------
and other distributions which are received by Grantor contrary to the provisions
of this Agreement shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Grantor, and (subject to any
inconsistent prior rights of the Trustee under the 13% Indenture) forthwith
shall be paid over to Secured Party as pledged Collateral in the same form as so
received (with any necessary endorsements).
11.3 Irrevocable Proxy. Other than any such proxies granted to
-----------------
the Trustee under the 13% Indenture, Grantor does hereby revoke all previous
proxies with regard to the Investment Collateral and appoints Secured Party
(subject to any inconsistent prior rights of the Trustee under the 13%
Indenture) as its proxyholder, with power when an Event of Default exists to
attend and vote at any and all meetings of the shareholders or other equity
holders of the Persons that issued the Investment Collateral and any
adjournments thereof, held on or after the date of the giving of this proxy and
prior to the termination of this proxy, and to execute any and all written
consents of shareholders or equity holders of such Persons executed on or after
the date of the giving of this proxy and prior to the termination of this proxy,
with the same effect as if Grantor had personally attended the meetings or had
personally voted its shares or other interests or had personally signed the
written consents; provided, however, that the proxyholder shall have rights
-------- -------
hereunder only upon the occurrence and during the continuance of an Event of
Default. Grantor hereby authorizes Secured Party to substitute another Person
as the proxyholder and, upon the occurrence and during the continuance of any
Event of Default, hereby authorizes the proxyholder to file this proxy and any
substitution instrument with the secretary or other appropriate official of the
appropriate Person. This proxy is coupled with an interest and is irrevocable
until such time as all Secured Obligations have been paid and performed in full.
12. Attorney-in-Fact. Grantor hereby irrevocably nominates and
----------------
appoints Secured Party as its attorney-in-fact for the following purposes: (a)
upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of
12
<PAGE>
Default, to do any and every act which Grantor is obligated to do under this
Agreement, at the expense of Grantor and without any obligation to do so; (c) to
prepare, sign, file and/or record, for Grantor, in the name of Grantor, any
financing statement, application for registration, or like paper, and to take
any other action deemed by Secured Party necessary or desirable in order to
perfect or maintain perfected the security interests granted hereby; and (d)
upon the occurrence and during the continuance of an Event of Default, to
execute any and all papers and instruments and do all other things necessary or
desirable to preserve and protect the Collateral and to protect Secured Party's
security interests therein; provided, however, that Secured Party shall be under
-------- -------
no obligation whatsoever to take any of the foregoing actions, and, absent bad
faith or actual malice, Secured Party shall have no liability or responsibility
for any act taken or omission with respect thereto.
13. Costs and Expenses. Grantor agrees to pay to Secured Party all
------------------
costs and expenses (including, without limitation, reasonable attorneys' fees
---------
and disbursements) incurred by Secured Party in the enforcement or attempted
enforcement of this Agreement, whether or not an action is filed in connection
therewith, and in connection with any waiver or amendment of any term or
provision hereof. All advances, charges, costs and expenses, including
---------
reasonable attorneys' fees and disbursements, incurred or paid by Secured Party
in exercising any right, privilege, power or remedy conferred by this Agreement
(including, without limitation, the right to perform any Secured Obligation of
---------
Grantor under the Loan Documents), or in the enforcement or attempted
enforcement thereof, shall be secured hereby and shall become a part of the
Secured Obligations and shall be paid to Secured Party by Grantor, immediately
upon demand, together with interest from the date which is two Business Days
following such demand thereon at the rate(s) provided for under the Loan
Agreement.
14. Statute of Limitations and Other Laws. Until the Secured
-------------------------------------
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to Secured Party
hereunder shall continue to exist and may be exercised by Secured Party at any
time and from time to time irrespective of the fact that any of the Secured
Obligations may have become barred by any statute of limitations. Grantor
expressly waives the benefit of any and all statutes of limitation, and any and
all Laws providing for exemption of property from execution or for valuation and
appraisal upon foreclosure, to the maximum extent permitted by applicable Law.
15. Other Agreements. Nothing herein shall in any way modify or
----------------
limit the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or in connection with the Secured Obligations, but
each and every term and condition hereof shall be in addition thereto. All
provisions contained in the Loan Agreement or any other Loan Document that apply
to Loan Documents generally are fully applicable to this Agreement and are
incorporated herein by this reference.
13
<PAGE>
16. Continuing Effect. This Agreement shall remain in full force and
-----------------
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable Law, rescinded or reduced in amount, or must otherwise be
restored or returned by the Administrative Agent or any Lender, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though such
payment or performance had not been made. In the event that any payment or any
part thereof is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
17. Release of Grantor. This Agreement and all Secured Obligations
------------------
of Grantor hereunder shall be released when all Secured Obligations have been
paid in full in cash or otherwise performed in full and when no portion of the
Commitment remains outstanding. Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return and reassign any pledged
Collateral to Grantor, or to the Person or Persons legally entitled thereto, and
shall endorse, execute, deliver, record and file all instruments and documents,
and do all other acts and things, reasonably required for the return of the
Collateral to Grantor, or to the Person or Persons legally entitled thereto, and
to evidence or document the release of Secured Party's interests arising under
this Agreement, all as reasonably requested by, and at the sole expense of,
Grantor. The Secured Party shall take all action as reasonably required to
evidence or document the release of the Secured Party's interests to any
Collateral which the Grantor sells, transfers or otherwise disposes of as
permitted under the terms of the Loan Agreement, at the sole expense of Grantor.
18. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same agreement.
19. Additional Powers and Authorization. The Administrative Agent
-----------------------------------
has been appointed as the Administrative Agent hereunder pursuant to the Loan
Agreement and shall be entitled to the benefits of the Loan Agreement and the
other Loan Documents. Notwithstanding anything contained herein to the contrary,
the Administrative Agent may employ agents, trustees, or attorneys-in-fact and
may vest any of them with any Property (including, without limitation, any
Collateral pledged hereunder), title, right or power deemed necessary for the
purposes of such appointment.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH AND GOVERNED BY
14
<PAGE>
THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF.
21. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY EXPRESSLY WAIVE
--------------------
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE LOAN
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. GRANTOR AND SECURED PARTY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
15
<PAGE>
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, THE LOAN
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized officer as of the date first written above.
"Grantor"
COAST HOTELS AND CASINOS, INC.,
a Nevada corporation
By:______________________________
Gage Parrish, Vice President
and Chief Financial Officer
16
<PAGE>
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:
"Secured Party"
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent, and
for and on behalf of the Lenders
By:_____________________________
Janice Hammond, Vice President
17
<PAGE>
SECURITY AGREEMENT
------------------
(Coast Resorts)
This SECURITY AGREEMENT ("Agreement"), dated as of March 18, 1999, is
made by Coast Resorts Inc., a Nevada corporation ("Grantor"), in favor of Bank
of America National Trust and Savings Association, as Administrative Agent under
the Loan Agreement hereafter referred to, and in favor of each of the Lenders
therein named (collectively referred to herein as "Secured Party"), with
reference to the following facts:
RECITALS
--------
A. Pursuant to the Loan Agreement of even date herewith by and among
Coast Hotels and Casinos, Inc. ("Borrower"), the lenders from time to time party
thereto (collectively, the "Lenders" and individually, a "Lender"), and the
Administrative Agent (as such agreement may from time to time be amended,
extended, renewed, supplemented or otherwise modified, the "Loan Agreement"),
the Lenders have agreed to extend certain credit facilities to Borrower.
B. Grantor has issued a Guaranty of even date herewith with respect
to the obligations of Borrower under the Loan Agreement (as at any time amended,
renewed, replaced, extended or supplanted, the "Guaranty").
C. The Loan Agreement provides, as a condition of the availability
of such credit facilities to Borrower, that Grantor shall enter into this
Agreement to secure its obligations under the Guaranty and shall grant security
interests to Secured Party as herein provided.
AGREEMENT
---------
NOW, THEREFORE, in order to induce the Lenders to extend the
aforementioned credit facilities, and for other good and valuable consideration,
the receipt and adequacy of which hereby is acknowledged, Grantor hereby
represents, warrants, covenants, agrees, assigns and grants as follows:
1. Definitions. This Agreement is the Coast Resorts Security
-----------
Agreement referred to in the Loan Agreement. This Agreement is one of the "Loan
Documents" referred to in the Loan Agreement. Terms defined in the Loan
Agreement and not otherwise defined in this Agreement shall have the meanings
defined for those terms in the Loan Agreement. Terms defined in the California
Uniform Commercial Code and not otherwise defined in this Agreement or in the
Loan Agreement shall have the meanings defined for those terms in the California
Uniform Commercial Code. As used in this Agreement, the following terms shall
have the meanings respectively set forth after each:
-1-
<PAGE>
"Agreement" means this Security Agreement, and any extensions,
---------
modifications, renewals, restatements, supplements or amendments hereof.
"Collateral" means and includes all present and future right, title
----------
and interest of Grantor in or to any Property or assets whatsoever, and all
rights and powers of Grantor to transfer any interest in or to any Property
or assets whatsoever, including, without limitation, any and all of the
---------
following Property:
(a) All present and future accounts, accounts receivable,
agreements, contracts, leases, contract rights, rights to payment,
instruments, documents, chattel paper, security agreements, guaranties,
letters of credit, undertakings, surety bonds, insurance policies (whether
or not required by the terms of the Loan Documents), notes and drafts, and
all forms of obligations owing to Grantor or in which Grantor may have any
interest, however created or arising and whether or not earned by
performance;
(b) All present and future general intangibles, all tax
refunds of every kind and nature to which Grantor now or hereafter may
become entitled, however arising, all other refunds, and all deposits,
reserves, loans, royalties, cost savings, deferred payments, goodwill,
choses in action, liquidated damages, rights to indemnification, trade
secrets, computer programs, software, customer lists, trademarks, trade
names, patents, licenses (except for gaming licenses and liquor licenses,
which are not transferable), copyrights, technology, processes, proprietary
information and insurance proceeds of which Grantor is a beneficiary;
(c) Whether characterized as accounts, general intangibles or
otherwise, all rents (including, without limitation, prepaid rents, fixed,
---------
additional and contingent rents), issues, profits, receipts, earnings,
revenue, income, security deposits, occupancy charges, hotel room charges,
cabana charges, casino revenues, show ticket revenues, food and beverage
revenues, room service revenues, merchandise sales revenues, parking,
maintenance, common area, tax, insurance, utility and service charges and
contributions, green fees, cart rental fees, instruction fees, membership
charges, restaurant, snack bar and pro shop revenues;
(d) All present and future deposit accounts of Grantor,
including, without limitation, any demand, time, savings, passbook or like
---------
account maintained by Grantor with any bank, savings and loan association,
credit union or like organization, and all money, Cash and Cash Equivalents
of Grantor, whether or not deposited in any such deposit account;
(e) All present and future books and records, including,
---------
without limitation, books of account and ledgers of every kind and nature,
all electronically
-2-
<PAGE>
recorded data relating to Grantor or the business thereof, all receptacles
and containers for such records, and all files and correspondence;
(f) All present and future goods, including, without
---------
limitation, all consumer goods, farm products, inventory, equipment, gaming
devices and associated equipment (including, without limitation, gaming
devices and associated equipment as defined in Nevada Revised Statutes
Chapter 463), machinery, tools, molds, dies, furniture, furnishings,
fixtures, trade fixtures, motor vehicles and all other goods used in
connection with or in the conduct of Grantor's business;
(g) All present and future inventory and merchandise,
including, without limitation, all present and future goods held for sale
---------
or lease or to be furnished under a contract of service, all raw materials,
work in process and finished goods, all packing materials, supplies and
containers relating to or used in connection with any of the foregoing, and
all bills of lading, warehouse receipts or documents of title relating to
any of the foregoing;
(h) All present and future stocks, bonds, debentures,
securities, subscription rights, options, warrants, puts, calls,
certificates, partnership interests, joint venture interests, investment
property, Investments and/or brokerage accounts and all rights,
preferences, privileges, dividends, distributions, redemption payments, or
liquidation payments with respect thereto;
(i) All present and future accessions, appurtenances,
components, repairs, repair parts, spare parts, replacements,
substitutions, additions, issue and/or improvements to or of or with
respect to any of the foregoing;
(j) All other tangible and intangible Property of Grantor;
(k) All rights, remedies, powers and/or privileges of Grantor
with respect to any of the foregoing; and
(l) Any and all proceeds and products of any of the foregoing,
including, without limitation, all money, accounts, general intangibles,
---------
deposit accounts, documents, instruments, chattel paper, goods, insurance
proceeds, and any other tangible or intangible property received upon the
sale or disposition of any of the foregoing;
provided that the term "Collateral", as used in this Agreement, shall not
- -------- ---------- ---
include (i) Real Property or any interest therein, (ii) any capital stock or
other equity interests in any gaming licensees, (iii) any aircraft owned by the
Grantor on the Closing Date, (iv) any agreement with a third party that,
pursuant to its terms, prohibits the grant of a lien on such agreement;
-3-
<PAGE>
provided that the Grantor shall use its best efforts to obtain such third
party's consent to assignment of all material agreements; or (v) any Property
the purchase of which was financed by a purchase money security interest,
including any Capital Lease Obligation, permitted under Section 6.9 or 6.10 of
the Loan Agreement.
"Secured Obligations" means any and all present and future Obligations
-------------------
of any type or nature of Grantor to Secured Party arising under the Guaranty,
whether due or to become due, matured or unmatured, liquidated or unliquidated,
or contingent or noncontingent, including Obligations of performance as well as
---------
Obligations of payment, and including interest that accrues after the
---------
commencement of any bankruptcy or insolvency proceeding by or against Grantor or
any of its Subsidiaries.
2. Further Assurances. At any time and from time to time at the
------------------
request of Secured Party, Grantor shall execute and deliver to Secured Party all
such financing statements and other instruments and documents in form and
substance satisfactory to Secured Party as shall be necessary or desirable to
fully perfect, when filed and/or recorded, Secured Party's security interests
granted pursuant to Section 3 of this Agreement, provided that nothing contained
herein shall require the Lien of this Agreement to be prior to that of the 13%
Indenture and the collateral documents securing the same to the extent that such
Indebtedness is permitted by the terms of the Loan Agreement. It is hereby
acknowledged and agreed that, notwithstanding anything contained herein or in
any other Collateral Document, Grantor shall not be required under any
circumstance to take any further action to perfect any interest granted to
Secured Party in any cage cash, deposit accounts, markers, instruments or other
cash items which are used in connection with the casino operations of Grantor.
At any time and from time to time, Secured Party shall be entitled to file
and/or record any or all such financing statements, instruments and documents
held by it, and any or all such further financing statements, documents and
instruments, and to take all such other actions, as Secured Party may deem
appropriate to perfect and to maintain perfected the security interests granted
in Section 3 of this Agreement. Before and after the occurrence of any Event of
Default, at Secured Party's request, Grantor shall execute all such further
financing statements, instruments and documents, and shall do all such further
acts and things, as may be deemed necessary or desirable by Secured Party to
create and perfect, and to continue and preserve, an indefeasible security
interest in the Collateral in favor of Secured Party, or the priority thereof.
With respect to any Collateral consisting of instruments, documents,
certificates of title or the like, as to which Secured Party's security interest
need be perfected by, or the priority thereof need be assured by, possession of
such Collateral, Grantor will upon demand of Secured Party deliver possession of
same in pledge to Secured Party. With respect to any Collateral consisting of
securities, instruments, partnership or joint venture interests or the like,
Grantor hereby consents and agrees that the issuers of, or obligors on, any such
Collateral, or any registrar or transfer agent or trustee for any such
Collateral, shall be entitled to accept the provisions of this Agreement as
conclusive evidence of the right of Secured Party to effect any transfer or
exercise any right hereunder or with respect to any such Collateral,
-4-
<PAGE>
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by Grantor or any other Person to such issuers or such obligors
or to any such registrar or transfer agent or trustee.
3. Security Agreement. For valuable consideration, Grantor hereby
------------------
assigns and pledges to Secured Party, and grants to Secured Party a security
interest in, all presently existing and hereafter acquired Collateral, as
security for the timely payment and performance of the Secured Obligations, and
each of them. This Agreement is a continuing and irrevocable agreement and all
the rights, powers, privileges and remedies hereunder shall apply to any and all
Secured Obligations, including those arising under successive transactions which
shall either continue the Secured Obligations, increase or decrease them, or
from time to time create new Secured Obligations after all or any prior Secured
Obligations have been satisfied, and notwithstanding the bankruptcy of Grantor
or any other Person or any other event or proceeding affecting any Person.
4. Grantor's Representations, Warranties and Agreements. Except as
----------------------------------------- ---------- ------
otherwise disclosed to Secured Party in writing concurrently herewith, Grantor
represents, warrants and agrees that: (a) Grantor will pay, prior to
delinquency, all taxes, charges, Liens and assessments against the portion of
the Collateral owned by it, except such as are timely contested in good faith,
------
and upon its failure to pay or so contest such taxes, charges, Liens and
assessments, Secured Party at its option may pay any of them, and Secured Party
shall be the sole judge of the legality or validity thereof and the amount
necessary to discharge the same; (b) the Collateral will not be used for any
unlawful purpose or in material violation of any Law, regulation or ordinance,
nor used in any way that will void or impair any insurance required to be
carried in connection therewith; (c) Grantor will, to the extent consistent with
good business practice, keep the portion of the Collateral owned by it in
reasonably good repair, working order and condition, and from time to time make
all needful and proper repairs, renewals, replacements, additions and
improvements thereto and, as appropriate and applicable, will otherwise deal
with such portion of the Collateral in all such ways as are considered good
practice by owners of like Property; (d) Grantor will take all reasonable steps
to preserve and protect the Collateral; (e) Grantor will maintain, with
responsible insurance companies, insurance covering the Collateral against such
insurable losses as is required by the Loan Agreement and as is consistent with
sound business practice, and will cause Secured Party to be designated as an
additional insured and loss payee with respect to all insurance (whether or not
required by the Loan Agreement), will obtain the written agreement of the
insurers that such insurance shall not be canceled, terminated or materially
modified to the detriment of Secured Party without at least 30 days prior
written notice to Secured Party, and will furnish copies of such insurance
policies or certificates to Secured Party promptly upon request therefor; (f)
Grantor will promptly notify Secured Party in writing in the event of any
substantial or material damage to the Collateral from any source whatsoever,
and, except for the disposition of collections and other proceeds of the
------
Collateral permitted by Section 6 hereof, Grantor will not remove or permit to
be removed any part of the Collateral from the
-5-
<PAGE>
State of Nevada without the prior written consent of Secured Party, except for
------
such items of the Collateral as are removed in the ordinary course of business
or in connection with any transaction or disposition otherwise permitted by the
Loan Documents; and (g) in the event Grantor changes its name or its address as
either are set forth herein or in the Loan Agreement, Grantor will notify
Secured Party of such name and/or address change promptly, but in any event,
within thirty days.
5. Secured Party's Rights Re Collateral. If an Event of Default has
------------------------------------
occurred and remains continuing, then at any time without notice or demand and
at the sole expense of Grantor (or if no Event of Default is continuing, at
Secured Party's sole expense and upon reasonable advance notice and at any time
during regular business hours and as often as reasonably requested (but not so
as to materially interfere with the business of Grantor or any of its
Subsidiaries)), Secured Party may, to the extent it may be necessary or
desirable to protect the security hereunder, but Secured Party shall not be
obligated to: (a) enter upon any premises on which Collateral is situated and
examine the same or (b) perform any obligation of Grantor under this Agreement
or any obligation of any other Person under the Loan Documents. At any time and
from time to time, at the expense of Grantor, Secured Party may, to the extent
it may be necessary or desirable to protect the security hereunder, but Secured
Party shall not be obligated to: (i) notify obligors on the Collateral that the
Collateral has been assigned to Secured Party; (ii) at any time and from time to
time request from obligors on the Collateral, in the name of Grantor or in the
name of Secured Party, information concerning the Collateral and the amounts
owing thereon; and (iii) while an Event of Default is continuing (and subject to
any inconsistent rights of the Trustee under the 13% Indenture) cause the
Collateral to be registered in the name of Secured Party, as legal owner.
Grantor shall at any time at Secured Party's request mark the Collateral and/or
Grantor's ledger cards, books of account and other records relating to the
Collateral with appropriate notations satisfactory to Secured Party disclosing
that they are subject to Secured Party's security interests. Secured Party
shall be under no duty or obligation whatsoever to take any action to protect or
preserve the Collateral or any rights of Grantor therein, or to make collections
or enforce payment thereon, or to participate in any foreclosure or other
proceeding in connection therewith.
6. Collections on the Collateral. Except as otherwise provided in
----------------------------- ------
any Loan Document, Grantor shall have the right to use and to continue to make
collections on and receive dividends and other proceeds of all of the Collateral
in the ordinary course of business so long as no Event of Default shall have
occurred and be continuing. Upon the occurrence and during the continuance of
an Event of Default, at the option of Secured Party, Grantor's right to make
collections on and receive dividends and other proceeds of the Collateral and to
use or dispose of such collections and proceeds shall terminate, and (subject to
any prior rights of the Trustee under the 13% Indenture) any and all dividends,
proceeds and collections, including all partial or total prepayments, then held
or thereafter received on or on account of the Collateral will be held or
received by Grantor in trust for Secured Party
-6-
<PAGE>
and immediately delivered in kind to Secured Party. Any remittance received by
Grantor from any Person shall be presumed to relate to the Collateral and to be
subject to Secured Party's security interests. Upon the occurrence and during
the continuance of an Event of Default, Secured Party shall have the right at
all times (subject to any inconsistent rights of the Trustee under the 13%
Indenture) to receive, receipt for, endorse, assign, deposit and deliver, in the
name of Secured Party or in the name of Grantor, any and all checks, notes,
drafts and other instruments for the payment of money constituting proceeds of
or otherwise relating to the Collateral; and Grantor hereby authorizes Secured
Party to affix, by facsimile signature or otherwise, the general or special
endorsement of it, in such manner as Secured Party shall deem advisable, to any
such instrument in the event the same has been delivered to or obtained by
Secured Party without appropriate endorsement, and Secured Party and any
collecting bank are hereby authorized to consider such endorsement to be a
sufficient, valid and effective endorsement by Grantor, to the same extent as
though it were manually executed by the duly authorized officer of Grantor,
regardless of by whom or under what circumstances or by what authority such
facsimile signature or other endorsement actually is affixed, without duty of
inquiry or responsibility as to such matters, and Grantor hereby expressly
waives demand, presentment, protest and notice of protest or dishonor and all
other notices of every kind and nature with respect to any such instrument.
7. Possession of Collateral by Secured Party. Any or all of the
-----------------------------------------
Collateral delivered to Secured Party consisting of Cash shall be held in an
interest-bearing account and, when an Event of Default exists, Secured Party
may, in its discretion, apply any such interest to payment of the Secured
Obligations. Nothing herein shall obligate Secured Party to invest any
Collateral or obtain any particular return thereon. Upon the occurrence and
during the continuance of an Event of Default, whenever any of the Collateral is
in Secured Party's possession, custody or control, Secured Party may use,
operate and consume the Collateral, whether for the purpose of preserving and/or
protecting the Collateral or for the purpose of performing any of Grantor's
obligations with respect thereto. Secured Party may at any time deliver or
redeliver the Collateral or any part thereof to Grantor, and the receipt of any
of the same by Grantor shall be complete and full acquittance for the Collateral
so delivered, and Secured Party thereafter shall be discharged from any
liability or responsibility therefor. So long as Secured Party exercises
reasonable care with respect to any Collateral in its possession, custody or
control, Secured Party shall have no liability for any loss of or damage to such
Collateral, and in no event shall Secured Party have liability for any
diminution in value of Collateral occasioned by economic or market conditions or
events. Secured Party shall be deemed to have exercised reasonable care within
the meaning of the preceding sentence if the Collateral in the possession,
custody or control of Secured Party is accorded treatment substantially equal to
that which Secured Party accords its own property, it being understood that
Secured Party shall not have any responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Collateral, whether or not Secured Party has or is
deemed to have knowledge
-7-
<PAGE>
of such matters, or (b) taking any necessary steps to preserve rights against
any Person with respect to any Collateral.
8. Events of Default. There shall be an Event of Default hereunder
-----------------
upon the occurrence and during the continuance of an Event of Default under the
Loan Agreement.
9. Rights Upon Event of Default. Upon the occurrence and during the
----------------------------
continuance of an Event of Default, Secured Party shall have, in any
jurisdiction where enforcement hereof is sought, in addition to all other rights
and remedies that Secured Party may have under applicable Law or in equity or
under this Agreement (including, without limitation, all rights set forth in
---------
Section 6 hereof) or under any other Loan Document, all rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any jurisdiction,
and, in addition, the following rights and remedies, all of which may be
exercised with or without notice to Grantor and without affecting the
Obligations of Grantor hereunder or under any other Loan Document, or the
enforceability of the Liens and security interests created hereby: (a) to
foreclose the Liens and security interests created hereunder or under any other
agreement relating to any Collateral by any available judicial procedure or
without judicial process; (b) to enter any premises where any Collateral may be
located for the purpose of securing, protecting, inventorying, appraising,
inspecting, repairing, preserving, storing, preparing, processing, taking
possession of or removing the same; (c) to sell, assign, lease or otherwise
dispose of any Collateral or any part thereof, either at public or private sale
or at any broker's board, in lot or in bulk, for cash, on credit or otherwise,
with or without representations or warranties and upon such terms as shall be
acceptable to Secured Party; (d) to notify obligors on the Collateral that the
Collateral has been assigned to Secured Party and that all payments thereon are
to be made directly and exclusively to Secured Party; (e) to collect by legal
proceedings or otherwise all dividends, distributions, interest, principal or
other sums now or hereafter payable upon or on account of the Collateral; (f) to
cause the Collateral to be registered in the name of Secured Party, as legal
owner; (g) to enter into any extension, reorganization, deposit, merger or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith Secured Party may deposit or surrender
control of the Collateral and/or accept other Property in exchange for the
Collateral; (h) to settle, compromise or release, on terms acceptable to Secured
Party, in whole or in part, any amounts owing on the Collateral and/or any
disputes with respect thereto; (i) to extend the time of payment, make
allowances and adjustments and issue credits in connection with the Collateral
in the name of Secured Party or in the name of Grantor; (j) to enforce payment
and prosecute any action or proceeding with respect to any or all of the
Collateral and take or bring, in the name of Secured Party or in the name of
Grantor, any and all steps, actions, suits or proceedings deemed by Secured
Party necessary or desirable to effect collection of or to realize upon the
Collateral, including any judicial or nonjudicial foreclosure thereof or
---------
thereon, and Grantor specifically consents to any nonjudicial foreclosure of any
or all of the Collateral or any other action taken by Secured Party which may
release any obligor
-8-
<PAGE>
from personal liability on any of the Collateral, and Grantor waives any right
not expressly provided for in this Agreement to receive notice of any public or
private judicial or nonjudicial sale or foreclosure of any security or any of
the Collateral; and any money or other property received by Secured Party in
exchange for or on account of the Collateral, whether representing collections
or proceeds of Collateral, and whether resulting from voluntary payments or
foreclosure proceedings or other legal action taken by Secured Party or Grantor
may be applied by Secured Party without notice to Grantor to the Secured
Obligations in such order and manner as Secured Party in its sole discretion
shall determine; (k) to insure, process and preserve the Collateral; (l) to
exercise all rights, remedies, powers or privileges provided under any of the
Loan Documents; (m) to remove, from any premises where the same may be located,
the Collateral and any and all documents, instruments, files and records, and
any receptacles and cabinets containing the same, relating to the Collateral,
and Secured Party may, at the cost and expense of Grantor, use such of its
supplies, equipment, facilities and space at its places of business as may be
necessary or appropriate to properly administer, process, store, control,
prepare for sale or disposition and/or sell or dispose of the portion of the
Collateral owned by Grantor or to properly administer and control the handling
of collections and realizations thereon, and Secured Party shall be deemed to
have a rent-free tenancy of premises of Grantor for such purposes and for such
periods of time as reasonably required by Secured Party; (n) to receive, open
and dispose of all mail addressed to Grantor and notify postal authorities to
change the address for delivery thereof to such address as Secured Party may
designate; provided that Secured Party agrees that it will promptly deliver over
--------
to Grantor such opened mail as does not relate to the Collateral; and (o) to
exercise all other rights, powers, privileges and remedies of an owner of the
Collateral; all at Secured Party's sole option and as Secured Party in its sole
discretion may deem advisable. Grantor will, at Secured Party's request,
assemble the Collateral and make it available to Secured Party at places which
Secured Party may designate, whether at the premises of Grantor or elsewhere,
and will make available to Secured Party, free of cost, all premises, equipment
and facilities of Grantor for the purpose of Secured Party's taking possession
of the Collateral or storing same or removing or putting the Collateral in
salable form or selling or disposing of same.
Upon the occurrence and during the continuance of an Event of Default,
Secured Party also shall have the right, without notice or demand, either in
person, by agent or by a receiver to be appointed by a court (and Grantor hereby
expressly consents upon the occurrence and during the continuance of an Event of
Default to the appointment of such a receiver), and without regard to the
adequacy of any security for the Secured Obligations, to take possession of the
Collateral or any part thereof and to collect and receive the rents, issues,
profits, income and proceeds thereof. Taking possession of the Collateral shall
not cure or waive any Event of Default or notice thereof or invalidate any act
done pursuant to such notice. The rights, remedies and powers of any receiver
appointed by a court shall be as ordered by said court.
-9-
<PAGE>
Any public or private sale or other disposition of the Collateral may
be held at any office of Secured Party, or at Grantor's places of business, or
at any other place permitted by applicable Law, and without the necessity of the
Collateral's being within the view of prospective purchasers. The Secured Party
may also request, in connection therewith, the Nevada Gaming Commission to
petition a District Court of the State of Nevada for the appointment of a
supervisor to conduct the normal gaming activities on the premises following the
appointment of a receiver. Secured Party may direct the order and manner of
sale of the Collateral, or portions thereof, as it in its sole and absolute
discretion may determine, and Grantor expressly waives any right to direct the
order and manner of sale of any Collateral. Secured Party or any Person on
Secured Party's behalf may bid and purchase at any such sale or other
disposition. The net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of the Collateral shall be applied, first, to
the expenses (including reasonable attorneys' fees and disbursements) of
retaking, holding, storing, processing and preparing for sale or lease, selling,
leasing, collecting, liquidating and the like, and then to the satisfaction of
the Secured Obligations in such order as shall be determined by Secured Party in
its sole and absolute discretion. Grantor and any other Person then obligated
therefor shall pay to Secured Party on demand any deficiency with regard thereto
which may remain after such sale, disposition, collection or liquidation of the
Collateral. Any surplus held by the Security Party and remaining after payment
in full of all the Secured Obligations shall immediately be reassigned and
redelivered to Grantor, or to the person or persons otherwise legally entitled
thereto.
Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
will send or otherwise make available to Grantor reasonable notice of the time
and place of any public sale thereof or of the time on or after which any
private sale thereof is to be made. The requirement of sending reasonable
notice conclusively shall be met if such notice is mailed, first class mail,
postage prepaid, to Grantor at its address set forth in the Loan Agreement, or
delivered or otherwise sent to Grantor, at least ten (10) days before the date
of the sale. Grantor expressly waives any right to receive notice of any public
or private sale of any Collateral or other security for the Secured Obligations
except as expressly provided for in this paragraph.
- ------
With respect to any Collateral consisting of securities, partnership
interests, joint venture interests, Investments or the like, and whether or not
any of such Collateral has been effectively registered under the Securities Act
of 1933, as amended, or other applicable Laws, Secured Party may, in its sole
and absolute discretion, sell all or any part of such Collateral at private sale
in such manner and under such circumstances as provided in the Uniform
Commercial Code of California. Without limiting the foregoing, Secured Party
may (i) approach and negotiate with a limited number of potential purchasers,
and (ii) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing such Collateral for their own
account for investment and not with a view to the distribution or resale
thereof. In the event that any such Collateral is sold at private sale,
-10-
<PAGE>
Grantor agrees that if such Collateral is sold for a price which Secured Party
in good faith believes to be reasonable under the circumstances then existing,
then (a) the sale shall be deemed to be commercially reasonable in all respects,
(b) Grantor shall not be entitled to a credit against the Secured Obligations in
an amount in excess of the purchase price, and (c) Secured Party shall not incur
any liability or responsibility to Grantor in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale. Grantor recognizes that a ready market may not
exist for such Collateral if it is not regularly traded on a recognized
securities exchange, and that a sale by Secured Party of any such Collateral for
an amount substantially less than a pro rata share of the fair market value of
the issuer's assets minus liabilities may be commercially reasonable in view of
the difficulties that may be encountered in attempting to sell a large amount of
such Collateral or Collateral that is privately traded.
Upon consummation of any sale of Collateral hereunder, Secured Party
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the Collateral so sold absolutely free from any claim or right upon
the part of Grantor or any other Person, and Grantor hereby waives (to the
extent permitted by applicable Laws) all rights of redemption, stay and
appraisal which it now has or may at any time in the future have under any rule
of Law or statute now existing or hereafter enacted. If the sale of all or any
part of the Collateral is made on credit or for future delivery, Secured Party
shall not be required to apply any portion of the sale price to the Secured
Obligations until such amount actually is received by Secured Party, and any
Collateral so sold may be retained by Secured Party until the sale price is paid
in full by the purchaser or purchasers thereof. Secured Party shall not incur
any liability in case any such purchaser or purchasers shall fail to pay for the
Collateral so sold, and, in case of any such failure, the Collateral may be sold
again.
10. Voting Rights; Dividends; etc. With respect to any Collateral
-----------------------------
consisting of securities, partnership interests, joint venture interests,
Investments or the like (referred to collectively and individually in this
Section 10 and in Section 11 as the "Investment Collateral"), so long as no
---------------------
Event of Default occurs and remains continuing:
10.1 Voting Rights. Grantor shall be entitled to exercise any
-------------
and all voting and other consensual rights pertaining to the Investment
Collateral, or any part thereof, for any purpose not inconsistent with the terms
of this Agreement, the Loan Agreement, or the other Loan Documents; provided,
--------
however, that Grantor shall not exercise, or shall refrain from exercising, any
- -------
such right if it would result in a Default.
10.2 Dividend and Distribution Rights. Except as otherwise
--------------------------------
provided in any Loan Document, Grantor shall be entitled to receive and to
retain and use any and all dividends or distributions paid in respect of the
Investment Collateral; provided, however, that (subject to any inconsistent
-------- -------
prior rights of the Trustee under the 13% Indenture)
-11-
<PAGE>
any and all such dividends or distributions received in the form of capital
stock, certificated securities, warrants, options or rights to acquire capital
stock or certificated securities forthwith shall be, and the certificates
representing such capital stock or certificated securities, if any, forthwith
shall be delivered to Secured Party to hold as pledged Collateral and shall, if
received by Grantor, be received in trust for the benefit of Secured Party, be
segregated from the other Property of Grantor, and forthwith be delivered to
Secured Party as pledged Collateral in the same form as so received (with any
necessary endorsements).
11. Rights During Event of Default. With respect to any Investment
------------------------------
Collateral, so long as an Event of Default has occurred and is continuing:
11.1 Voting, Dividend, and Distribution Rights. At the option
-----------------------------------------
of Secured Party, all rights of Grantor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
Section 10.1 above, and to receive the dividends and distributions which it
would otherwise be authorized to receive and retain pursuant to Section 10.2
above, shall cease, and all such rights thereupon shall become vested in Secured
Party which thereupon shall have the sole right to exercise such voting and
other consensual rights and to receive and to hold as pledged Collateral such
dividends and distributions.
11.2 Dividends and Distributions Held in Trust. All dividends
-----------------------------------------
and other distributions which are received by Grantor contrary to the provisions
of this Agreement shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Grantor, and (subject to any
inconsistent prior rights of the Trustee under the 13% Indenture) forthwith
shall be paid over to Secured Party as pledged Collateral in the same form as so
received (with any necessary endorsements).
11.3 Irrevocable Proxy. Other than any such proxies granted
-----------------
to the Trustee under the 13% Indenture, Grantor does hereby revoke all previous
proxies with regard to the Investment Collateral and appoints Secured Party
(subject to any inconsistent prior rights of the Trustee under the 13%
Indenture) as its proxyholder, with power when an Event of Default exists to
attend and vote at any and all meetings of the shareholders or other equity
holders of the Persons that issued the Investment Collateral and any
adjournments thereof, held on or after the date of the giving of this proxy and
prior to the termination of this proxy, and to execute any and all written
consents of shareholders or equity holders of such Persons executed on or after
the date of the giving of this proxy and prior to the termination of this proxy,
with the same effect as if Grantor had personally attended the meetings or had
personally voted its shares or other interests or had personally signed the
written consents; provided, however, that the proxyholder shall have rights
-------- -------
hereunder only upon the occurrence and during the continuance of an Event of
Default. Grantor hereby authorizes Secured Party to substitute another Person as
the proxyholder and, upon the occurrence and during the continuance of any Event
of Default, hereby authorizes the proxyholder to file this proxy and
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<PAGE>
any substitution instrument with the secretary or other appropriate official of
the appropriate Person. This proxy is coupled with an interest and is
irrevocable until such time as all Secured Obligations have been paid and
performed in full.
12. Attorney-in-Fact. Grantor hereby irrevocably nominates and
----------------
appoints Secured Party as its attorney-in-fact for the following purposes: (a)
upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of Default, to do any and
every act which Grantor is obligated to do under this Agreement, at the expense
of Grantor and without any obligation to do so; (c) to prepare, sign, file
and/or record, for Grantor, in the name of Grantor, any financing statement,
application for registration, or like paper, and to take any other action deemed
by Secured Party necessary or desirable in order to perfect or maintain
perfected the security interests granted hereby; and (d) upon the occurrence and
during the continuance of an Event of Default, to execute any and all papers and
instruments and do all other things necessary or desirable to preserve and
protect the Collateral and to protect Secured Party's security interests
therein; provided, however, that Secured Party shall be under no obligation
-------- -------
whatsoever to take any of the foregoing actions, and, absent bad faith or actual
malice, Secured Party shall have no liability or responsibility for any act
taken or omission with respect thereto.
13. Costs and Expenses. Grantor agrees to pay to Secured Party all
------------------
costs and expenses (including, without limitation, reasonable attorneys' fees
---------
and disbursements) incurred by Secured Party in the enforcement or attempted
enforcement of this Agreement, whether or not an action is filed in connection
therewith, and in connection with any waiver or amendment of any term or
provision hereof. All advances, charges, costs and expenses, including
---------
reasonable attorneys' fees and disbursements, incurred or paid by Secured Party
in exercising any right, privilege, power or remedy conferred by this Agreement
(including, without limitation, the right to perform any Secured Obligation of
---------
Grantor under the Loan Documents), or in the enforcement or attempted
enforcement thereof, shall be secured hereby and shall become a part of the
Secured Obligations and shall be paid to Secured Party by Grantor, immediately
upon demand, together with interest from the date which is two Business Days
following such demand thereon at the rate(s) provided for under the Loan
Agreement.
14. Statute of Limitations and Other Laws. Until the Secured
-------------------------------------
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to Secured Party
hereunder shall continue to exist and may be exercised by Secured Party at any
time and from time to time irrespective of the fact that any of the Secured
Obligations may have become barred by any statute of limitations. Grantor
expressly waives the benefit of any and all statutes of limitation, and any and
all Laws providing for exemption of property from execution or for valuation and
appraisal upon foreclosure, to the maximum extent permitted by applicable Law.
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<PAGE>
15. Other Agreements. Nothing herein shall in any way modify or
----------------
limit the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or in connection with the Secured Obligations, but
each and every term and condition hereof shall be in addition thereto. All
provisions contained in the Loan Agreement or any other Loan Document that apply
to Loan Documents generally are fully applicable to this Agreement and are
incorporated herein by this reference.
16. Continuing Effect. This Agreement shall remain in full force and
-----------------
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable Law, rescinded or reduced in amount, or must otherwise be
restored or returned by the Administrative Agent or any Lender, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though such
payment or performance had not been made. In the event that any payment or any
part thereof is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
17. Release of Grantor. This Agreement and all Secured Obligations
------------------
of Grantor hereunder shall be released when all Secured Obligations have been
paid in full in cash or otherwise performed in full and when no portion of the
Commitment remains outstanding. Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return and reassign any pledged
Collateral to Grantor, or to the Person or Persons legally entitled thereto, and
shall endorse, execute, deliver, record and file all instruments and documents,
and do all other acts and things, reasonably required for the return of the
Collateral to Grantor, or to the Person or Persons legally entitled thereto, and
to evidence or document the release of Secured Party's interests arising under
this Agreement, all as reasonably requested by, and at the sole expense of,
Grantor. The Secured Party shall take all action as reasonably required to
evidence or document the release of the Secured Party's interests to any
Collateral which the Grantor sells, transfers or otherwise disposes of as
permitted under the terms of the Loan Agreement, at the sole expense of Grantor.
18. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same agreement.
19. Additional Powers and Authorization. The Administrative Agent
-----------------------------------
has been appointed as the Administrative Agent hereunder pursuant to the Loan
Agreement and shall be entitled to the benefits of the Loan Agreement and the
other Loan Documents.
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<PAGE>
Notwithstanding anything contained herein to the contrary, the Administrative
Agent may employ agents, trustees, or attorneys-in-fact and may vest any of them
with any Property (including, without limitation, any Collateral pledged
hereunder), title, right or power deemed necessary for the purposes of such
appointment.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF.
21. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY EXPRESSLY WAIVE
--------------------
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE LOAN
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WITH
-15-
<PAGE>
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. GRANTOR AND SECURED
PARTY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN AGREEMENT AND
THE OTHER LOAN DOCUMENTS. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized officer as of the date first written above.
"Grantor"
COAST RESORTS, INC.,
a Nevada corporation
By:______________________________
Gage Parrish, Vice President
and Chief Financial Officer
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<PAGE>
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:
"Secured Party"
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent, and
for and on behalf of the Lenders
By:_________________________________
Janice Hammond, Vice President
-17-
<PAGE>
EXHIBIT 10.51
PLEDGE AGREEMENT
----------------
This PLEDGE AGREEMENT ("Agreement"), dated as of September 24, 1999,
is made by COAST RESORTS, INC., a Nevada corporation, as Grantor, in favor of
and for the benefit of BANK OF AMERICA, N.A., as Administrative Agent under the
Amended and Restated Loan Agreement hereafter referred to, and in favor of each
of the Lenders therein named, collectively as Secured Party, with reference to
the following facts:
RECITALS
--------
A. Pursuant to the Amended and Restated Loan Agreement dated as of
September 9, 1999 among Coast Hotels and Casinos, Inc., a Nevada corporation
("Borrower"), the lenders from time to time a party thereto (collectively, the
"Lenders" and individually, a "Lender") and Bank of America, N.A., as
Administrative Agent (as such agreement may from time to time be extended,
modified, renewed, restated, supplemented or amended, the "Loan Agreement"), the
Lenders have agreed to extend certain credit facilities to Borrower.
B. The Loan Agreement requires Grantor to enter into this Agreement,
and to pledge certain Pledged Collateral to Secured Party, all under the terms
and conditions set forth in this Agreement.
C. Grantor expects to realize direct and indirect benefits as a
result of the availability of the aforementioned credit facilities.
AGREEMENT
---------
NOW, THEREFORE, in order to induce the Lenders to extend credit
facilities to Borrower under the Loan Agreement, and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged,
Grantor hereby represents, warrants, covenants, agrees, and pledges as follows:
1. Definitions. This Agreement is the Coast Resorts Pledge Agreement
-----------
referred to in the Loan Agreement. Terms defined in the Loan Agreement and not
otherwise defined in this Agreement shall have the meanings given those terms in
the Loan Agreement as though set forth herein in full. The following terms shall
have the meanings respectively set forth after each:
"Agreement" means this Pledge Agreement, and any extensions,
---------
modifications, renewals, restatements, supplements or amendments hereof.
"Certificates" means all certificates, instruments or other documents
------------
now or
-1-
<PAGE>
hereafter representing or evidencing any Pledged Securities.
"Pledged Collateral" means the Pledged Securities, any Certificates
------------------
representing or evidencing the same, any and all proceeds and products of
any of the foregoing, and any and all collections, dividends,
distributions, redemption payments, liquidation payments, interest or
premiums with respect to any of the foregoing (other than any dividends and
distributions which are Distributions made by Borrower in accordance with
the Loan Agreement).
"Pledged Securities" means (i) 100% of the shares of the issued and
------------------
outstanding capital stock of Borrower, (ii) any and all securities now or
hereafter issued in substitution, exchange or replacement therefor, or with
respect thereto, and (iii) any and all warrants, options or other rights to
subscribe to or acquire any additional capital stock of Borrower.
"Secured Party" means the Administrative Agent (acting as the
-------------
Administrative Agent and/or on behalf of the Lenders), and the Lenders, and
each of them, and any one or more of them. Subject to the terms hereof and
of the Loan Agreement, any right, remedy, privilege or power of Secured
Party may be exercised by the Administrative Agent, or by the Requisite
Lenders, or by any Lender acting with the consent of the Requisite Lenders.
2. Incorporation of Representations, Warranties, Covenants and Other
-----------------------------------------------------------------
Provisions of Loan Documents. This Agreement is one of the Loan Documents
- ----------------------------
referred to in the Loan Agreement. All representations, warranties, affirmative
and negative covenants and other provisions contained in any Loan Document that
are applicable to Loan Documents generally are fully applicable to this
Agreement and are incorporated herein by this reference as though set forth in
full. Grantor further represents and warrants that, other than as permitted
under the Loan Agreement, Grantor has full title to the Pledged Collateral, free
and clear of any Lien, security interest, encumbrance or claim.
3. Creation of Security Interest.
-----------------------------
3.1 Pledge of Pledged Collateral. Grantor hereby pledges to
----------------------------
Administrative Agent on behalf of Secured Party and grants to Administrative
Agent on behalf of Secured Party a security interest in and to all Pledged
Collateral for the benefit of Secured Party as security for the Obligations
specified in Section 4 below, together with all products, proceeds, dividends,
redemption payments, liquidation payments, instruments and other Property, and
any and all rights, titles, interests, privileges, benefits and preferences
appertaining or incidental to the Pledged Collateral. Grantor represents and
warrants that the security interests and pledge granted herein are in material
compliance with all applicable Laws, including without limitation all Gaming
Laws, and that any non-compliance with such Laws does not affect the Liens
granted hereby. The security interest and pledge created by this Section 3.1
-2-
<PAGE>
shall continue in effect so long as any Obligation is owed to Secured Party or
any commitment to extend credit to Borrower remains outstanding from Secured
Party.
3.2 Delivery of Certain Pledged Collateral. Pursuant to the Escrow
--------------------------------------
Agreement, Grantor has heretofore delivered the Certificates evidencing 100% of
the capital stock of the Borrower to Secured Party to be held by the
Administrative Agent in the State of Nevada. Subject to compliance with Gaming
Laws, additional Pledged Collateral may from time to time be delivered to
Administrative Agent for the benefit of Secured Party by agreement between
Secured Party and Grantor. All Certificates at any time delivered to
Administrative Agent for the benefit of Secured Party shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Administrative Agent shall hold all Certificates pledged
hereunder pursuant to this Agreement unless and until released in accordance
with Section 3.3 of this Agreement.
3.3 Release of Pledged Collateral. Pledged Collateral that is
-----------------------------
required to be released from the pledge and security interest created by this
Agreement in order to permit Grantor to consummate any disposition of stock or
assets, merger, consolidation, amalgamation, acquisition, or dividend payment or
distribution that Grantor is entitled to consummate pursuant to the Loan
Documents, if any, shall be so released by Administrative Agent at such times
and to the extent necessary to permit Grantor to consummate such permitted
transactions promptly following the Administrative Agent's receipt of written
request therefor by Grantor specifying the purpose for which release is
requested and such further certificates or other documents as Administrative
Agent on behalf of Secured Party reasonably shall request in its discretion to
confirm that Grantor is permitted to consummate such permitted transaction and
to confirm Secured Party's replacement lien on appropriate collateral. Any
request for any permitted release shall be transmitted to Administrative Agent
on behalf of Secured Party. Subject to compliance with Gaming Laws,
Administrative Agent, at the expense of Grantor, promptly shall redeliver all
Certificates and shall execute and deliver to Grantor all documents requested by
Grantor that are reasonably necessary to release Pledged Collateral of record
whenever Grantor shall be entitled to the release thereof in accordance with
this Section 3.3.
4. Security for Obligations. This Agreement and the pledge and security
------------------------
interests granted herein secure the prompt payment, in full in cash, and full
performance of, all Obligations of Grantor, whether now existing or hereafter
arising under the Guaranty, this Agreement and the Loan Documents, and all
interest that accrues on all or any part of any of the obligations of Grantor
after the filing of any petition or pleading against Grantor or any other Person
for a proceeding under any Debtor Relief Law.
5. Subordinate Lien. Notwithstanding anything to the contrary contained
----------------
in this Agreement, Administrative Agent shall hold all Pledged Securities
delivered to Administrative Agent hereunder for the benefit of Secured Party and
for the benefit of the
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<PAGE>
Trustee for the 13% Indenture, with the understanding that the security
interests of Secured Party created hereunder shall be of second priority,
subject only to the Lien of the Trustee for the benefit of the holders of the
Notes under the 13% Indenture (to the extent such Indebtedness is permitted
under the Loan Agreement) as further provided in that certain Escrow Agreement
dated as of January 30, 1996 among Grantor, American Bank National Association,
as Trustee under the Indenture referred to in such agreement, and Bank of
America Nevada, as such agreement is amended by that certain Amendment to Escrow
Agreement dated as of March 18, 1999.
6. Further Assurances.
------------------
6.1 Subject to compliance with applicable Gaming Laws, Grantor agrees
that at any time, and from time to time, at its own expense Grantor will
promptly execute, deliver and file or record all further financing statements,
instruments and documents, and will take all further actions, including, without
limitation, causing the Subsidiaries whose capital stock or other securities are
pledged hereunder to so execute, deliver, file or take other actions, that may
be necessary or desirable, or that Secured Party reasonably may request, in
order to perfect and protect any pledge or security interest granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral and to preserve, protect and
maintain the Pledged Collateral, including, without limitation, payment of all
taxes, assessments and other charges imposed on or relating to the Pledged
Collateral, provided that nothing contained herein shall require the Lien of
this Agreement to be prior to that of the 13% Indenture and the collateral
documents securing the same to the extent that such Indebtedness is permitted by
the terms of the Loan Agreement. It is hereby acknowledged and agreed that,
notwithstanding anything contained herein or in any other Collateral Document,
Grantor shall not be required under any circumstance to take any further action
to perfect any interest granted to Secured Party in any cage cash, deposit
accounts, markers, instruments or other cash items which are used in connection
with the casino operations of Grantor. Subject to compliance with applicable
Gaming Laws, Grantor hereby consents and agrees that the issuers of, or obligors
on, the Pledged Collateral, or any registrar or transfer agent or trustee for
any of the Pledged Collateral, shall be entitled to accept the provisions of
this Agreement as conclusive evidence of the right of Secured Party to effect
any transfer or exercise any right hereunder, notwithstanding any other notice
or direction to the contrary heretofore or hereafter given by Grantor or any
other Person to such issuers or such obligors or to any such registrar or
transfer agent or trustee.
6.2 Grantor agrees to assist Administrative Agent in obtaining all
approvals of any Gaming Board or other Governmental Authority that are required
by law for or in connection with any action or transaction contemplated by this
Agreement and, at Secured Party's request after and during the continuance of an
Event of Default, to prepare, sign and file with the appropriate Gaming Board
the transferor's portion of any application or applications for consent to the
transfer of control thereof necessary or appropriate under applicable Gaming
Laws for approval of any sale or transfer of the Pledged Collateral
-4-
<PAGE>
pursuant to the exercise of Secured Party's remedies hereunder and under the
Loan Documents.
7. Voting Rights; Dividends; etc. So long as no Event of Default under
-----------------------------
the Loan Agreement occurs and remains continuing:
7.1 Voting Rights. Grantor shall be entitled to exercise any and all
-------------
voting and other consensual rights pertaining to the Pledged Securities, or any
part thereof, for any purpose not inconsistent with the terms of this Agreement,
the Loan Agreement, or the other Loan Documents.
7.2 Interest, Dividend and Distribution Rights. Grantor shall be
------------------------------------------
entitled to receive and to retain and use any and all interest, premiums,
dividends or distributions paid in respect of the Pledged Collateral; provided,
--------
however, that (subject to any inconsistent prior rights of the Trustee under the
- -------
13% Indenture) any and all such dividends or distributions received in the form
of capital stock shall be, and the Certificates representing such capital stock
forthwith shall be delivered to Administrative Agent (or to Bank of America
Nevada on its behalf) to hold as, Pledged Collateral and shall, if received by
Grantor, be received in trust for the benefit of Secured Party, be segregated
from the other property of Grantor, and forthwith be delivered to Administrative
Agent for the benefit of Secured Party as Pledged Collateral in the same form as
so received (with any necessary endorsements). If Secured Party causes any
Certificates to be registered in the name of Secured Party, Secured Party agrees
to grant applicable proxies with respect to such Certificates in favor of
Grantor.
8. Rights During Event of Default. Following the occurrence of any Event
------------------------------
of Default, but subject to compliance with Gaming Laws (subject to any
inconsistent prior rights of the Trustee under the 13% Indenture):
8.1 Voting and Distribution Rights. At the option of Secured Party,
------------------------------
all rights of Grantor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 7.1 above, and to
receive the interest, premiums, dividends and distributions which it would
otherwise be authorized to receive and retain pursuant to Section 7.2 above,
shall cease, and all such rights shall thereupon become vested in Administrative
Agent for the benefit of Secured Party who shall thereupon, at the direction of
Administrative Agent, have the sole right to exercise such voting and other
consensual rights and to receive and to hold as Pledged Collateral such
dividends and distributions.
8.2 Distributions Held in Trust. All dividends and other
---------------------------
distributions which are received by Grantor contrary to the provisions of this
Agreement shall be received in trust for the benefit of Secured Party, shall be
segregated from other funds of Grantor, and forthwith shall be paid over to
Administrative Agent for the account of Secured Party as Pledged Collateral in
the same form as so received (with any necessary endorsements).
-5-
<PAGE>
8.3 Irrevocable Proxy. Other than any such proxies heretofore granted
-----------------
to the Trustee under the 13% Indenture, Grantor hereby revokes all previous
proxies with regard to the Pledged Securities and, to the extent allowable under
applicable Law (including, without limitation, applicable Gaming Laws), appoints
Administrative Agent for the benefit of Secured Party as its proxy holder to
attend and vote at any and all meetings of the shareholders of the Subsidiaries
whose capital stock or other securities are pledged hereunder, and any
adjournments thereof, held on or after the date of the occurrence of an Event of
Default and prior to the termination of this proxy and to execute any and all
written consents of shareholders of such corporations executed on or after the
date of the occurrence of an Event of Default and prior to the termination of
this proxy, with the same effect as if Grantor had personally attended the
meetings or had personally voted its shares or had personally signed the written
consents; provided, however, that the proxy holder shall have rights hereunder
only upon the occurrence and during the continuance of an Event of Default under
the Loan Agreement and that such rights shall be subject to compliance with all
applicable Gaming Laws. Grantor hereby authorizes Administrative Agent,
following the occurrence of an Event of Default and the acceleration of the
Obligations under the Loan Agreement, to substitute another person as the proxy
holder and, thereupon to file this proxy and the substitution instrument with
the secretary of the appropriate corporation. This proxy is coupled with an
interest and is irrevocable until such time as no commitment to extend credit to
Borrower remains outstanding from Secured Party and until such time as all
Obligations have been paid and performed in full.
8.4 Suspension of Rights. Promptly after the cure or written waiver
--------------------
of the Event of Default giving rise to Secured Party's rights under this Section
8, and if no other Event of Default then exists, Secured Party shall confirm to
Grantor and Borrower upon their request of such waiver or cure and the further
exercise by Secured Party of the rights and remedies granted under this Section
8 shall thereafter be suspended unless a subsequent Event of Default occurs.
9. Transfers and Other Liens. Subject to compliance with Gaming Laws,
-------------------------
Grantor agrees that, except as specifically permitted under the Loan Documents,
it will not (i) sell, assign, exchange, transfer or otherwise dispose of, or
contract to sell, assign, exchange, transfer or otherwise dispose of, or grant
any option with respect to, any of the Pledged Collateral, (ii) create or permit
to exist any Lien upon or with respect to any of the Pledged Collateral, or
(iii) take any action with respect to the Pledged Collateral which is
inconsistent with the provisions or purposes of this Agreement or any other Loan
Document.
10. Secured Party Appointed Attorney-in-Fact. Subject to compliance with
----------------------------------------
Gaming Laws and to any inconsistent prior rights of the Trustee under the 13%
Indenture, Grantor hereby irrevocably appoints Administrative Agent for the
benefit of Secured Party as Grantor's attorney-in-fact, with full authority in
the place and stead of Grantor, and in the name of Grantor, or otherwise, from
time to time, in Secured Party's sole and absolute discretion to do any of the
following acts or things: (a) to do all acts and things and to execute
-6-
<PAGE>
all documents necessary or advisable to perfect and continue perfected the
security interests created by this Agreement and to preserve, maintain and
protect the Pledged Collateral; (b) if Grantor fails to take any action within
ten days after request, to do any and every act which Grantor is obligated to do
under this Agreement; (c) to prepare, sign, file and record, in Grantor's name,
any financing statement covering the Pledged Collateral; and (d) to endorse and
transfer the Pledged Collateral upon foreclosure by Secured Party; provided,
however, that Administrative Agent shall be under no obligation whatsoever to
take any of the foregoing actions, and neither Administrative Agent nor any
Secured Party shall have any liability or responsibility for any act (other than
Administrative Agent's or any Secured Party's own gross negligence or willful
misconduct) or omission taken with respect thereto. Grantor hereby agrees to
repay immediately upon demand all reasonable costs and expenses incurred or
expended by Secured Party in exercising any right or taking any action under
this Agreement, together with interest from the date which is two Business Days
following such demand thereof at the Default Rate.
11. Administrative Agent May Perform Obligations. If Grantor fails to
--------------------------------------------
perform any Obligation contained herein for ten days after demand,
Administrative Agent, subject to compliance with applicable Gaming Laws and the
prior inconsistent rights of the Trustee under the 13% Indenture), may, but
without any obligation to do so and without notice to or demand upon Grantor,
perform the same and take such other action as Secured Party may deem necessary
or desirable to protect the Pledged Collateral or Secured Party's security
interests therein, Administrative Agent being hereby authorized (without
limiting the general nature of the authority hereinabove conferred) to pay,
purchase, contest and compromise any Lien which in the reasonable judgment of
Secured Party appears to be prior or superior to Secured Party's security
interests, and in exercising any such powers and authority to pay necessary
expenses, employ counsel and pay reasonable attorneys' fees. Grantor hereby
agrees to repay immediately upon demand all sums so expended by Secured Party,
together with interest from the date which is two Business Days following demand
at the Default Rate. Neither Administrative Agent nor any Secured Party shall be
under any duty or obligation to (i) preserve, maintain or protect the Pledged
Collateral or any of Grantor's rights or interest therein, (ii) exercise any
voting rights with respect to the Pledged Collateral, or (iii) make or give any
notices of default, presentments, demands for performance, notices of
nonperformance or dishonor, protests, notices of protest or notice of any other
nature whatsoever in connection with the Pledged Collateral on behalf of Grantor
or any other Person having any interest therein; and neither Administrative
Agent nor any Secured Party assumes and none shall be obligated to perform the
obligations of Grantor, if any, with respect to the Pledged Collateral.
12. Reasonable Care. Administrative Agent shall be deemed to have
---------------
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially similar to that which Administrative Agent accords its own
property, it being understood that Administrative Agent shall not have any
responsibility for (i) ascertaining or taking action with respect to maturities,
calls,
-7-
<PAGE>
conversions, exchanges, tenders or other matters relative to any Pledged
Collateral, whether or not Administrative Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral. The Administrative
Agent shall comply with the conditions, if any, imposed by any Gaming Board in
connection with the approvals of the security interest granted hereunder by
Grantor, including, without limitation, any conditions requiring Administrative
Agent to permit representatives of the Gaming Board to inspect such securities
and Certificates. Administrative Agent shall not surrender possession of any
Pledged Collateral to any party other than Grantor without the prior approval of
the applicable Gaming Board or as otherwise permitted by applicable Gaming Laws.
13. Events of Default and Remedies.
------------------------------
13.1 Rights Upon Event of Default. Upon the occurrence and during the
----------------------------
continuance of an Event of Default under the Loan Agreement, Grantor shall be in
default hereunder and, subject to compliance with applicable Gaming Laws,
Secured Party shall have in any jurisdiction where enforcement is sought, in
addition to all other rights and remedies that Secured Party may have under this
Agreement and under applicable law or in equity, all of its rights and remedies
as a secured party under the Uniform Commercial Code as enacted in any such
jurisdiction, and in addition, subject to compliance with Gaming Laws, the
following rights and remedies, all of which may be exercised with or without
further notice to Grantor:
(1) to notify any issuer of any Pledged Collateral that the same
has been pledged to Administrative Agent for the benefit of Secured Party
and that all dividends and other payments thereon are to be made directly
and exclusively to Administrative Agent for the account of Secured Party;
to renew, extend, modify, amend, accelerate, accept partial payments on,
make allowances and adjustments and issue credits with respect to, release,
settle, compromise, compound, collect or otherwise liquidate, on terms
acceptable to Secured Party, in whole or in part, the Pledged Collateral
and any amounts owing thereon; to enter into any other agreement relating
to or affecting the Pledged Collateral; and to give all consents, waivers
and ratifications with respect to the Pledged Collateral and exercise all
other rights (including voting rights), powers and remedies and otherwise
act with respect thereto as if Secured Party were the owner thereof;
(2) to enforce payment and prosecute any action or proceeding
with respect to any and all of the Pledged Collateral and take or bring, in
Secured Party's name(s) or in the name of Grantor, all steps, actions,
suits or proceedings deemed by Secured Party necessary or desirable to
effect collection of or to realize upon the Pledged Collateral;
(3) in accordance with applicable Law (including, without
-8-
<PAGE>
limitation, applicable Gaming Laws), to take possession of the Pledged
Collateral with or without judicial process;
(4) to endorse, in the name of Grantor, all checks, notes,
drafts, money orders, instruments and other evidences of payment relating
to the Pledged Collateral;
(5) to transfer any or all of the Pledged Collateral into the
name of Secured Party or its nominee or nominees; and
(6) in accordance with all applicable Laws (including, without
limitation, applicable Gaming Laws), to foreclose the liens and security
interests created under this Agreement or under any other agreement
relating to the Pledged Collateral by any available judicial procedure or
without judicial process, and to sell, assign or otherwise dispose of the
Pledged Collateral or any part thereof, either at public or private sale or
at any broker's board or securities exchange, in lots or in bulk, for cash,
on credit or on future delivery, or otherwise, with or without
representations or warranties, and upon such terms as shall be acceptable
to Secured Party; all at the sole option of and in the sole discretion of
Secured Party.
13.2 Notice of Sale. Secured Party shall give Grantor at least ten
--------------
days' written notice of sale of all or any part of the Pledged Collateral.
Subject to compliance with Gaming Laws, any sale of the Pledged Collateral shall
be held at such time or times and at such place or places as Secured Party may
determine in the exercise of its sole and absolute discretion. Secured Party may
bid (which bid may be, in whole or in part, in the form of cancellation of
Obligations) for and purchase for the account of Secured Party or any nominee of
Secured Party the whole or any part of the Pledged Collateral. Secured Party
shall not be obligated to make any sale of the Pledged Collateral if it shall
determine not to do so regardless of the fact that notice of sale of the Pledged
Collateral may have been given. Secured Party may, without notice or
publication, adjourn the sale from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned.
13.3 Private Sales. Subject to compliance with Gaming Laws, upon the
-------------
occurrence and during the continuance of an Event of Default under the Loan
Agreement, whether or not any of the Pledged Collateral has been effectively
registered under the Securities Act of 1933, as amended, or other applicable
Laws, Secured Party may, in its sole and absolute discretion, sell all or any
part of the Pledged Collateral at private sale in such manner and under such
circumstances as Secured Party may deem necessary or advisable in order that the
sale may be lawfully conducted. Without limiting the foregoing, Secured Party
may (i) approach and negotiate with a limited number of potential purchasers,
and (ii) restrict the prospective bidders or purchasers to Persons who will
represent and agree that they are
-9-
<PAGE>
purchasing the Pledged Collateral for their own account for investment and not
with a view to the distribution or resale thereof. In the event that any of the
Pledged Collateral is sold at private sale, Grantor agrees that if the Pledged
Collateral is sold for a price which Secured Party in good faith believes to be
reasonable, then (A) the sale shall not be deemed to be commercially
unreasonable by reason of price, (B) Grantor shall not be entitled to a credit
against the Obligations in an amount in excess of the purchase price, and (C)
Secured Party shall not incur any liability or responsibility to Grantor in
connection therewith, notwithstanding the possibility that a substantially
higher price might have been realized at a public sale. Grantor recognizes that
a ready market may not exist for Pledged Securities which are not regularly
traded on a recognized securities exchange or in another recognized market, and
that a sale by Secured Party of any such Pledged Securities for an amount
substantially less than a pro rata share of the fair market value of the
issuer's assets minus liabilities may be commercially reasonable in view of the
difficulties that may be encountered in attempting to sell a large amount of
Pledged Securities or Pledged Securities that are privately traded.
13.4 Title of Purchasers. Subject to applicable requirements of Law
-------------------
(including, without limitation, applicable Gaming Laws), upon consummation of
any sale of Pledged Collateral pursuant to this Section 13, Administrative Agent
on behalf of Secured Party shall have the right to assign, transfer and deliver
to the purchaser or purchasers thereof the Pledged Collateral so sold. Each such
purchaser at any such sale shall hold the Pledged Collateral sold absolutely
free from any claim or right on the part of Grantor, and Grantor hereby waives
all rights of redemption, stay and appraisal which it now has or may at any time
in the future have under any rule of Law or statute now existing or hereafter
enacted.
13.5 Disposition of Proceeds of Sale. The net cash proceeds resulting
-------------------------------
from the collection, liquidation, sale or other disposition of the Pledged
Collateral shall be applied, first, to the reasonable costs and expenses
-----
(including reasonable attorneys' fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting and liquidating the Pledged
Collateral, and the like; second, to the satisfaction of all Obligations, with
------
application as to any particular Obligations to be in the order set forth in the
Loan Agreement or other Loan Documents; third, to all other indebtedness secured
-----
hereby in such order and manner as Secured Party in its sole and absolute
discretion may determine, and fourth, if any balance remains, to Grantor or
------
Grantor's designee.
14. Regulatory Matters. Administrative Agent, on behalf of Secured Party,
------------------
acknowledges and agrees that:
(1) In the event that Secured Party exercises one or more of the
remedies set forth in Section 13 of this Agreement, including but not
limited to reregistration of the Pledged Collateral pursuant to applicable
Gaming Laws, such exercise of remedies would be deemed a separate transfer
of the Pledged Collateral and would require the separate and prior approval
of the applicable Gaming Board pursuant to applicable Gaming Laws as in
effect on the date hereof.
-10-
<PAGE>
(2) The approval by the applicable Gaming Board of this Agreement
shall not act or be construed as the approval, either express or implied,
for Secured Party to take any actions or steps provided for in this
Agreement for which prior approval of the Gaming Board is required, without
first obtaining such prior and separate approval of the Gaming Board to the
extent then required by applicable Law.
15. Continuing Effect. This Agreement shall remain in full force and
-----------------
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's assets.
16. Covenant Not to Issue Uncertificated Securities. Grantor represents
-----------------------------------------------
and warrants to Secured Party that all of the capital stock of each of its
Subsidiaries is and will be in certificated form (as contemplated by Article 8
of the Uniform Commercial Code), and, subject to compliance with applicable
Gaming Laws, covenants to Secured Party that it will not cause or permit its
Subsidiaries to issue any capital stock in uncertificated form or seek to
convert all or any part of its existing capital stock into uncertificated form
(as contemplated by Article 8 of the Uniform Commercial Code). The foregoing
representations, warranties and covenants shall survive the execution and
delivery of this Agreement.
17. Covenant Not to Dilute Interests of Secured Party in Pledged
------------------------------------------------------------
Securities. Subject to compliance with applicable Gaming Laws and except as
- ----------
otherwise permitted by the Loan Agreement, Grantor represents, warrants and
covenants to Secured Party that it will not at any time cause or permit its
Subsidiaries to issue any additional capital stock, or any warrants, options or
other rights to acquire any additional capital stock, if the effect thereof
would be to dilute in any way the interests of Secured Party in any Pledged
Securities or any corporation whose securities constitute Pledged Securities.
18. Indemnity. Grantor agrees to indemnify and hold harmless Secured
---------
Party, and each of them, from and against any and all claims, demands, losses,
judgments and liabilities (including, without limitation liabilities for
penalties) of whatsoever kind or nature, and to reimburse Secured Party for all
costs and expenses, including without limitation reasonable attorneys' fees and
expenses and/or costs and expenses associated with obtaining required approvals
of any Gaming Board, arising out of or in connection with this Agreement or the
exercise by Secured Party of any right or remedy granted to it hereunder or
under the Loan Documents, other than arising from the gross negligence or
willful misconduct of Secured Party or as to any claim asserted by Secured Party
against Grantor or any of its Subsidiaries to the extent that Grantor or such
Subsidiaries prevails on that claim in a final and non-appealable determination
by a court of competent jurisdiction or an arbitrator appointed in accordance
with the Loan Agreement. In no event shall Secured Party be liable for any
matter or thing in connection with this Agreement other than to account for
monies actually received
-11-
<PAGE>
by it in accordance with the terms hereof. If and to the extent that the
agreements of Grantor under this Section 18 are unenforceable for any reason,
Grantor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable Law.
19. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with and governed by the Laws of the State of California and in
accordance with applicable Gaming Laws; provided that in the event of a conflict
of such laws, applicable Gaming Laws will prevail to the extent required by the
mandatory provisions of such Gaming Laws.
20. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same agreement.
21. Additional Powers and Authorization. The Administrative Agent has been
-----------------------------------
appointed as the Administrative Agent hereunder pursuant to the Loan Agreement
and shall be entitled to the benefits of the Loan Agreement and the other Loan
Documents. Notwithstanding anything contained herein to the contrary, the
Administrative Agent may employ agents, trustees, or attorneys-in-fact and,
subject to compliance with applicable Gaming Laws, may vest any of them with any
property (including, without limitation, the Pledged Collateral), title, right
or power deemed necessary for the purposes of such appointment.
IN WITNESS WHEREOF, Grantor has caused this Agreement to be duly executed
as of the date first above written.
"Grantor"
COAST RESORTS, INC., a Nevada corporation
By: ___________________________
Gage Parrish, Vice President and Chief
Financial Officer
-12-
<PAGE>
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Class Stock Number Percentage
Stock of Certificate of of
Issuer Stock No(s). Shares Ownership
- --------- ----- ------ ------ ---------
<S> <C> <C> <C> <C>
Coast Hotels and Casinos, Inc. Common 001 1,000 100%
</TABLE>
-13-
<PAGE>
EXHIBIT 10.52
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
INSTRUCTIONS TO COUNTY RECORDER:
Please index this document as
(1) a construction deed of trust
(2) assignment of rents and leases; and
(3) a fixture filing.
________________________________________________________________________________
(Space above for Recorder's Use)
CONSTRUCTION DEED OF TRUST
with Assignment of Rents and Fixture Filing
NOTICE: THE OBLIGATIONS SECURED HEREBY PROVIDE FOR THE PERIODIC INCREASES
AND/OR DECREASES IN THE APPLICABLE INTEREST RATE.
NOTICE: THE OBLIGATIONS SECURED HEREBY INCLUDE REVOLVING CREDIT OBLIGATIONS
WHICH PERMIT BORROWING, REPAYMENT AND REBORROWING.
The parties to this Construction Deed of Trust with Assignment of Rents and
Fixture Filing ("Deed of Trust"), made as of March 18, 1999, are COAST HOTELS
AND CASINOS, INC., a Nevada corporation, as trustor ("Trustor"), EQUITABLE DEED
COMPANY, a California corporation, as trustee ("Trustee"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as
beneficiary ("Beneficiary"), as "Administrative Agent" for itself and the other
lenders (collectively, the "Lenders") now or hereafter a party to that certain
Loan Agreement (the "Loan Agreement") dated as of March 18, 1999 among
Beneficiary (in its individual capacity) and the Lenders as the lenders, Trustor
as the borrower, and Beneficiary as the administrative agent. Capitalized terms
used herein but not defined herein have the meanings given them in the Loan
Agreement.
Pursuant to the Loan Agreement, Beneficiary and the Lenders have agreed to
make loans and letters of credit available to Trustor in the aggregate maximum
principal amount (including future advances) of $75,000,000 (collectively, the
"Loan"). The Loan Agreement also provides for certain interest rate hedging
arrangements entered into with the Lenders with respect to the indebtedness
under the Loan Agreement (the "Secured Swap Agreements") to be secured by this
Deed of Trust.
1. Grant in Trust and Secured Obligations.
--------------------------------------
1.1 Grant in Trust. For the purpose of securing payment and
--------------
performance
-1-
<PAGE>
of the Secured Obligations defined and described in Section 1.2, Trustor hereby
---
irrevocably and unconditionally grants, conveys, transfers and assigns to
Trustee, in trust for the benefit of Beneficiary, with power of sale and right
of entry and possession, all estate, right, title and interest which Trustor now
has or may later acquire in and to the following property (all or any part of
such property, or any interest in all or any part of it, as the context may
require, the "Property"):
(a) The real property located in the County of Clark, State of
Nevada (the "County"), as described in Exhibit A, together with all
---------
existing and future easements and rights affording access to it (the
"Land"); together with
(b) All buildings, structures and improvements now located or
later to be constructed on the Land, all parking areas, roads, driveways,
walks, fences, walls, berms, landscaping, recreation facilities, lighting
facilities and other on site improvements (the "Improvements"); together
with
(c) All existing and future appurtenances, privileges,
easements, franchises, hereditaments and tenements of the Land, including
all minerals, oil, gas, other hydrocarbons and associated substances,
sulphur, nitrogen, carbon dioxide, helium and other commercially valuable
substances which may be in, under or produced from any part of the Land,
all development rights and credits, air rights, water, water courses, water
rights (whether riparian, appropriative or otherwise, and whether or not
appurtenant), water stock and water permits (together with the statutory
right to file applications to change, and any and all applications to
change the same), including any water permits, and any land lying in the
streets, roads or avenues, open or proposed, in front of or adjoining the
Land and Improvements; together with
(d) All existing and future leases, subleases, subtenancies,
licenses, occupancy agreements and concessions ("Leases") relating to the
use and enjoyment of all or any part of the Land and Improvements, whether
written or oral and whether in existence at or upon the recordation of this
Deed of Trust or entered into after the recordation of this Deed of Trust,
and all rents, security deposits, royalties, issues, profits, receipts,
earnings, revenue, income, products and proceeds and other benefits of the
Land and Improvements, whether now due, past due or to become due,
including all prepaid rents, security deposits, fixed, additional and
contingent rents, deficiency rents and liquidated damages, license fees,
occupancy charges, hotel room charges, cabana charges, casino revenues,
show ticket revenues, food and beverage revenues, room service revenues,
merchandise sales revenues, parking, maintenance, common area, tax,
insurance, utility and service charges and contributions, proceeds of sale
of electricity, gas, heating, air conditioning, cable and other utilities
and services, instruction fees, membership charges, restaurant, snack bar
and shop revenues, liquidated damages, and all other rights to payments;
together with and any and all guaranties and other agreements relating to
or made in connection with any of such leases; together with
-2-
<PAGE>
(e) All real property and improvements on it, and all
appurtenances and other property and interests of any kind or character,
whether described in Exhibit A or not, which are reasonably necessary or
---------
desirable to promote the present and any reasonable future beneficial use
and enjoyment of the Land and Improvements; together with
(f) All goods, materials, supplies, chattels, furniture,
fixtures, equipment and machinery now or later to be attached to, placed in
or on, or used in connection with the use, enjoyment, occupancy or
operation of all or any part of the Land and Improvements, whether stored
on the Land or elsewhere, including all pumping plants, engines, pipes,
ditches and flumes, and also all gas, electric, cooking, heating, cooling,
air conditioning, lighting, refrigeration and plumbing fixtures and
equipment, all water, sanitary and storm sewer, drainage, electricity,
steam, gas, telephone, cable and other utility equipment and facilities,
all plumbing, lighting, heating, ventilating, air conditioning,
refrigerating, incinerating, compacting, fire protection and sprinkler,
surveillance and security, vacuum cleaning, public address and
communications equipment and systems, all kitchen and laundry appliances,
screens, awnings, floor coverings, partitions, elevators, escalators,
motors, machinery, pipes, fittings and other items of equipment and
property of every kind and description, all of which shall be considered to
the fullest extent of the law to be real property for purposes of this Deed
of Trust; together with
(g) All building materials, equipment, work in process or other
personal property of any kind, whether stored on the Land or elsewhere,
which have been or later will be acquired for the purpose of being
delivered to, incorporated into or installed in or about the Land or
Improvements; together with
(h) All rights to the payment of money, accounts, accounts
receivable, reserves, deferred payments, refunds, cost savings, payments
and deposits, room revenues, food revenues, beverage revenues and casino
revenues, whether now or later to be received from third parties or
deposited by Trustor with third parties (including all utility deposits),
contract rights, development and use rights, governmental permits and
licenses, applications, architectural and engineering plans, specifications
and drawings, as-built drawings, chattel paper, instruments, documents,
notes, drafts and letters of credit (other than letters of credit in favor
of Beneficiary), which arise from or relate to construction on the Land or
to any business now or later to be conducted on it, or to the Land and
Improvements generally; together with
(i) All proceeds, including all claims to and demands for them,
of the voluntary or involuntary conversion of any of the Land, Improvements
or the other property described above into cash or liquidated claims,
including proceeds of all present and future fire, hazard or casualty
insurance policies and all condemnation awards or payments now or later to
be made by any public body or decree by any court of competent jurisdiction
for any taking or in connection with any condemnation or eminent domain
proceeding, and all causes of action and their proceeds for any
-3-
<PAGE>
damage or injury to the Land, Improvements or the other property described
above or any part of them, or breach of warranty in connection with the
construction of the Improvements, including causes of action arising in
tort, contract, fraud or concealment of a material fact; together with
(j) All books and records pertaining to any and all of the
property described above, including computer readable memory and any
computer hardware or software necessary to access and process such memory
("Books and Records"); together with
(k) All proceeds of, additions and accretions to, substitutions
and replacements for, and changes in any of the property described above,
including all proceeds of any voluntary or involuntary disposition or claim
respecting any such property (arising out of any judgment, condemnation or
award, or otherwise arising) and all goods, documents, general intangibles,
chattel paper and accounts, wherever located, acquired with cash proceeds
of any of the foregoing or its proceeds,
provided that the term "Property", as used in this Deed of Trust, shall not
- -------- ---
include (i) any personal property or fixtures, the purchase of which was
financed by a purchase money security interest, including any Capital Lease
Obligation, permitted under Section 6.9 or 6.10 of the Loan Agreement, (ii) any
--- ----
capital stock or other equity interests in any gaming licensees, and (iii) any
gaming licenses and liquor licenses which are not transferable.
Trustor shall and will warrant and forever defend the Property in the quiet and
peaceable possession of the Trustee, its successors and assigns against all and
every person or persons lawfully claiming or to claim the whole or any part
thereof. Trustor agrees that any greater title to the Property hereafter
acquired by Trustor during the term hereof shall be subject hereto.
1.2 Secured Obligations.
-------------------
(a) Trustor makes the grant, conveyance, transfer and assignment
set forth in Section 1.1 for the purpose of securing the following
---
obligations (the "Secured Obligations") in any order of priority that
Beneficiary may choose:
(i) Payment of all obligations at any time owing under each
of the promissory notes (collectively, the "Notes") issued from time
to time pursuant to the Loan Agreement, payable by Trustor, as maker,
in the aggregate principal amount of Seventy-Five Million Dollars
($75,000,000), including any and all obligations to pay interest
thereon;
(ii) Payment and performance of all obligations of Trustor
under this Deed of Trust;
(iii) Payment and performance of all obligations of Trustor
under the Loan Agreement;
-4-
<PAGE>
(iv) Payment and performance of any obligations of Trustor
under any of the "Loan Documents," as defined in the Loan Agreement,
which are executed by Trustor, provided that this Deed of Trust shall
--------
not secure the Hazardous Materials Indemnity set forth in Section
11.22 of the Loan Agreement;
-----
(v) Payment and performance of all future advances and
other obligations that Trustor or any successor in ownership of all or
part of the Property may agree to pay and/or perform (whether as
principal, surety or guarantor) for the benefit of Beneficiary and/or
any of the Lenders, when a writing evidences the parties' agreement
that the advance or obligation be secured by this Deed of Trust;
(vi) Payment and performance of the obligations of Trustor
under each Secured Swap Agreement; and
(vi) Payment and performance of all modifications,
amendments, extensions and renewals, however evidenced, of any of the
Secured Obligations.
(b) All persons who may have or acquire an interest in all or any
part of the Property will be considered to have notice of, and will be
bound by, the terms of the Secured Obligations and each other agreement or
instrument made or entered into in connection with each of the Secured
Obligations. Such terms include any provisions in the Notes or the Loan
Agreement which permit borrowing, repayment and reborrowing, or which
provide that the interest rate on one or more of the Secured Obligations
may vary from time to time.
1.3 Future Advances (NRS 106.300, et seq). It is the intention of
-------------------------------------
Trustor, Beneficiary and the Lenders that this Deed of Trust is an "instrument"
(as defined in NRS 106.330, as amended or recodified from time to time) which
secures "future advances" (as defined in NRS 106.320, as amended or recodified
from time to time) and which is governed pursuant to NRS 106.300 through
106.400, as amended or recodified from time to time ("NRS" means Nevada Revised
Statutes). It is the intention of the parties that the Secured Obligations
include the obligation of the Trustor to repay "future advances" of "principal"
(as defined in NRS 106.345, as amended or recodified from time to time) in an
amount up to the Commitment which is initially $75,000,000, and that the lien of
this Deed of Trust secures the obligation of Trustor to repay all such "future
advances" with the priority set forth in NRS 106.370(1), as amended or
recodified from time to time.
2. Assignment of Rents.
-------------------
2.1 Assignment. Subject to Section 2.2 hereof, effective upon the
---------- ---
recordation of this Deed of Trust, Trustor hereby irrevocably, absolutely,
presently and
-5-
<PAGE>
unconditionally assigns to Beneficiary all rents, royalties, issues, profits,
revenue, income and proceeds of the Property, including the fees, charges,
accounts or other payments for the use or occupancy of rooms and other public
facilities, whether now due, past due or to become due, including all prepaid
rents and security deposits (some or all collectively, as the context may
require, "Rents"). This is an absolute assignment, not an assignment for
security only.
2.2 Grant of License. Beneficiary hereby confers upon Trustor a
----------------
license ("License") to collect and retain the Rents as they become due and
payable, so long as no Event of Default, as defined in Section 6.2, shall exist
---
and be continuing. If an Event of Default has occurred and is continuing,
Beneficiary shall have the right, which it may choose to exercise in its sole
discretion, to terminate this License without notice to or demand upon Trustor,
and without regard to the adequacy of Beneficiary's security under this Deed of
Trust.
2.3 Collection and Application of Rents. Subject to the License
-----------------------------------
granted to Trustor under Section 2.2, Beneficiary has the right, power and
---
authority to collect any and all Rents. Subject to applicable Gaming Laws,
Trustor hereby appoints Beneficiary its attorney-in-fact to perform any and all
of the following acts, if and at the times when Beneficiary in its sole
discretion may so choose:
(a) Demand, receive and enforce payment of any and all Rents; or
(b) Give receipts, releases and satisfactions for any and all
Rents; or
(c) Sue either in the name of Trustor or in the name of
Beneficiary for any and all Rents.
Beneficiary's right to the Rents does not depend on whether or not Beneficiary
takes possession of the Property as permitted under Subsection 6.3(c). In
------
Beneficiary's sole discretion, Beneficiary may choose to collect Rents either
with or without taking possession of the Property. Beneficiary shall apply all
Rents collected by it in the manner provided under Section 6.6. If an Event of
---
Default occurs while Beneficiary is in possession of all or part of the Property
and is collecting and applying Rents as permitted under this Deed of Trust,
Beneficiary, Trustee and any receiver shall nevertheless be entitled to exercise
and invoke every right and remedy afforded any of them under this Deed of Trust
and at law and in equity, including the right to exercise the power of sale
granted under Section 1.1 and Subsection 6.3(g).
--- ------
2.4 Beneficiary Not Responsible. Under no circumstances shall
---------------------------
Beneficiary have any duty to produce Rents from the Property. Regardless of
whether or not Beneficiary, in person or by agent, takes actual possession of
the Land and Improvements, Beneficiary is not and shall not be deemed to be:
(a) A "mortgagee in possession" for any purpose; or
(b) Responsible for performing any of the obligations of the
lessor
-6-
<PAGE>
under any lease; or
(c) Responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any
negligence in the management, upkeep, repair or control of the Property; or
(d) Liable in any manner for the Property or the use, occupancy,
enjoyment or operation of all or any part of it.
2.5 Trustor shall not accept any deposit or prepayment of Rents for any
rental period exceeding two (2) months without Beneficiary's prior written
consent, which shall not be unreasonably withheld or delayed. Trustor shall not
lease the Property or any part of it in a manner which would violate the Loan
Agreement.
3. Grant of Security Interest.
--------------------------
3.1 Security Agreement. The parties intend for this Deed of Trust to
------------------
create a lien on and security interest in the Property, and an absolute
assignment of the Rents and the Leases, all in favor of Beneficiary. The
parties acknowledge that some of the Property and some of the Rents and Leases
may be determined under applicable law to be personal property or fixtures. To
the extent such Property, Rents or Leases constitute personal property, Trustor,
as debtor, hereby grants to Beneficiary, as secured party, a security interest
in all such Property, Rents and Leases, to secure payment and performance of the
Secured Obligations, and Trustor, as debtor, also has granted a security
interest in such Property, Rents and Leases pursuant to that certain Security
Agreement dated as of March 18, 1999, executed by Trustor, as debtor, in favor
of Beneficiary, as secured party. This Deed of Trust constitutes a security
agreement under the Nevada Uniform Commercial Code, as amended or recodified
from time to time, covering all such Property, Rents and Leases. To the extent
such Property, Rents or Leases are not real property encumbered by the lien
created by Section 1.1, above, and are not absolutely assigned by the assignment
---
set forth in Section 2.1, above, it is the intention of the parties that such
---
Property, Rents and/or Leases shall constitute "proceeds, product, offspring,
rents or profits" (as defined in and for the purposes of Section 552(b) of the
United States Bankruptcy Code, as such Section may be modified or supplemented)
of the Land and Improvements, and/or "fees, charges, accounts, or other payments
for the use or occupancy of rooms and other public facilities in . . . lodging
properties," as applicable (as such terms are defined in and for the purpose of
Section 552(b) of the United States Bankruptcy Code, as such Section may be
modified or supplemented).
3.2 Financing Statements. Trustor shall execute one or more
--------------------
financing statements and such other documents as Beneficiary may from time to
time reasonably require to perfect or continue the perfection of Beneficiary's
security interest in any Property, Rents or Leases. Notwithstanding anything
contained herein, Trustor shall not be required under any circumstance to take
any further action to perfect any interest granted to Beneficiary in any cage
cash, deposit accounts, markers, instruments or other cash items which are used
in connection with the casino operations of Trustor. Trustor shall pay all
reasonable fees and
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<PAGE>
costs that Beneficiary may incur in filing such documents in public offices and
in obtaining such record searches as Beneficiary may reasonably require. If
Trustor fails to execute any financing statements or other documents for the
perfection or continuation of any security interest, Trustor hereby appoints
Beneficiary as its true and lawful attorney-in-fact (which appointment is
irrevocable and coupled with an interest) to execute any such documents on its
behalf. If any financing statement or other document is filed in the records
normally pertaining to personal property, that filing shall never be construed
as in any way derogating from or impairing this Deed of Trust or the rights or
obligations of the parties under it.
4. Fixture Filing; Construction Mortgage.
-------------------------------------
4.1 Fixture Filing. This Deed of Trust constitutes a financing
--------------
statement filed as a fixture filing under NRS 104.9402(6) of the Nevada Uniform
Commercial Code, as amended or recodified from time to time, covering any
Property which now is or later may become fixtures attached to the Land or
Improvements. In connection therewith, the addresses of Trustor, as debtor, and
Beneficiary, as secured party, are as set forth in Section 7.12, below. The
----
foregoing address of Beneficiary, as secured party, is also the address from
which information concerning the security interest may be obtained by any
interested party. The property subject to this fixture filing is described in
Section 1.1, above. Portions of the property subject to this fixture filing as
---
identified in this Section are or are to become fixtures related to the real
estate described in Exhibit A attached hereto.
---------
4.2 Construction Mortgage. This Deed of Trust constitutes a
---------------------
"construction mortgage" as that term is defined in NRS 104.9313(1)(c), as
amended or recodified from time to time, and as used in the Nevada Uniform
Commercial Code, as amended or recodified from time to time.
5. Rights and Duties of the Parties.
--------------------------------
5.1 Representations and Warranties. Trustor represents and warrants
------------------------------
that, except as previously disclosed to Beneficiary in a writing making
reference to this Section 5.1:
---
(a) Trustor lawfully possesses and holds fee simple title to all
of the Land and Improvements;
(b) Trustor has or will have good title to all Property other
than the Land and Improvements;
(c) Trustor has the full and unlimited power, right and
authority to encumber the Property and assign the Rents;
(d) This Deed of Trust creates a second priority lien on the
Property, junior solely to no more than $2,000,000 principal indebtedness
under a deed of trust in favor of American Bank National Association,
recorded January 30, 1996 in Book
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<PAGE>
No. 960130 and as Document Nos. 00397 and 00398 in the Official Records of
Clark County, Nevada;
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<PAGE>
(e) Trustor's rights in the Property include all property and
rights which are reasonably necessary to promote the present and any
reasonable future beneficial use and enjoyment of the Land and Improvements
as a hotel casino;
(f) Trustor owns any Property which is personal property free
and clear of any security agreements (except as identified in Section 3.1
---
hereof), reservations of title or conditional sales contracts not of
record or not approved by or in favor of Beneficiary; and
(g) Trustor's place of business, or its chief executive office
if it has more than one place of business, is located at the address
specified below.
5.2 Taxes and Assessments. Trustor shall pay prior to delinquency
---------------------
all taxes, levies, charges and assessments, including assessments on appurtenant
water stock, imposed by any public or quasi-public authority or utility company
(collectively, "Impositions") which are (or if not paid, may become) a lien on
all or part of the Property or any interest in it, or which may cause any
decrease in the value of the Property or any part of it. If any such taxes,
levies, charges or assessments become delinquent, Beneficiary may require
Trustor to present evidence that they have been paid in full, on thirty (30)
days' written notice by Beneficiary to Trustor. Notwithstanding the foregoing,
Trustor shall not be required to pay any Imposition so long as (i) its validity
is being actively contested in good faith and by appropriate proceedings, and
(ii) Trustor has demonstrated to Beneficiary's reasonable satisfaction that
leaving such Imposition unpaid pending the outcome of such proceedings could not
result in conveyance of the Property in satisfaction of such Imposition or
otherwise impair Beneficiary's interest under this Deed of Trust.
5.3 Performance of Secured Obligations. Trustor shall promptly pay
----------------------------------
and perform each Secured Obligation in accordance with its terms.
5.4 Liens, Charges and Encumbrances. Trustor shall immediately
-------------------------------
discharge any Lien on the Property which Beneficiary has not consented to in
writing, except Permitted Encumbrances and Permitted Rights of Others. Trustor
shall pay when due each obligation secured by or reducible to a Lien, charge or
encumbrance which now does or later may encumber or appear to encumber all or
part of the Property or any interest in it, whether the Lien, charge or
encumbrance is or would be senior or subordinate to this Deed of Trust, except
any Permitted Encumbrances and Permitted Rights of Others. This Section 5.4 is
---
subject to Trustor's right, granted in the Loan Agreement, to contest in good
faith claims and liens for labor done and materials and services furnished in
connection with construction of the Improvements and the right of Trustor to
contest Liens by appropriate proceedings diligently pursued provided Trustor has
established and maintained reserves therefor which are reasonably acceptable to
the Administrative Agent.
5.5 Damages and Insurance and Condemnation Proceeds.
-----------------------------------------------
(a) Trustor hereby absolutely and irrevocably assigns to
Beneficiary,
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<PAGE>
and authorizes the payor to pay to Beneficiary the following claims, causes
of action, awards, payments and rights to payment:
(i) All awards of damages and all other compensation
payable directly or indirectly because of a condemnation, proposed
condemnation or taking for public or private use which affects all or
part of the Property or any interest in it;
(ii) All other awards, claims and causes of action, arising
out of any warranty affecting all or any part of the Property, or for
damage or injury to or decrease in value of all or part of the
Property or any interest in it;
(iii) All proceeds of any insurance policies payable because
of loss sustained to all or part of the Property in excess of
$250,000; and
(iv) All interest which may accrue on any of the foregoing.
(b) Trustor shall immediately notify Beneficiary in writing if:
(i) Any damage occurs or any injury or loss is sustained in
the amount of $250,000 or more to all or part of the Property, or any
action or proceeding relating to any such damage, injury or loss is
commenced; or
(ii) Any offer is made, or any action or proceeding is
commenced, which relates to any actual or proposed condemnation or
taking of all or part of the Property.
(c) If Beneficiary chooses to do so, Beneficiary may in its own
name appear in or prosecute any action or proceeding to enforce any cause
of action based on warranty, or for damage, injury or loss to all or part
of the Property, and Beneficiary may make any compromise or settlement of
the action or proceeding. Beneficiary, if it so chooses, may participate in
any action or proceeding relating to condemnation or taking of all or part
of the Property, and may join Trustor in adjusting any loss covered by
insurance.
(d) All proceeds of these assigned claims, other property and
rights which Trustor may receive or be entitled to shall be paid to
Beneficiary. In each instance, Beneficiary shall apply such proceeds first
toward reimbursement of all of Beneficiary's reasonable costs and expenses
of recovering the proceeds, including reasonable attorneys' fees. Such
attorneys' fees shall include the reasonably allocated costs for services
of in-house counsel. If, in any instance, each and all of the following
conditions are satisfied in Beneficiary's reasonable judgment, Beneficiary
must permit Trustor to use the balance of such proceeds ("Net Claims
Proceeds") to pay costs of repairing or reconstructing the Property in the
manner described below:
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<PAGE>
(i) The plans and specifications, cost breakdown,
construction contract, construction schedule, contractor and payment
and performance bond for the work of repair or reconstruction must all
be reasonably acceptable to Beneficiary;
(ii) Beneficiary must receive evidence reasonably
satisfactory to it that after repair or reconstruction, the Property
would be not substantially less valuable than prior to the damage or
condemnation;
(iii) The Net Claims Proceeds must be sufficient in
Beneficiary's reasonable determination to pay for the total cost of
repair or reconstruction, including all associated development costs
and interest projected to be payable on the Secured Obligations until
the repair or reconstruction is complete; or Trustor must provide its
own funds in an amount equal to the difference between the Net Claims
Proceeds and a reasonable estimate, made by Trustor and found
acceptable by Beneficiary, of the total cost of repair or
reconstruction; and
(iv) No Event of Default shall have occurred and be
continuing.
If Beneficiary finds that such conditions have been met, Beneficiary shall
hold the Net Claims Proceeds and any funds which Trustor is required to
provide in an interest-bearing account and shall disburse them to Trustor
to pay costs of repair or reconstruction monthly as incurred, subject to a
10% retention, to be disbursed upon presentation of evidence reasonably
satisfactory to Beneficiary that repair or reconstruction has been
completed satisfactorily and lien-free. Disbursements hereunder shall
first be made from Net Claims Proceeds prior to reducing amounts
contributed by Trustor. Any funds remaining upon the completion of the
repair or reconstruction shall be immediately returned to Trustor.
However, if Beneficiary finds that one or more of such conditions have not
been satisfied, Beneficiary may apply the Net Claims Proceeds to pay or
prepay (without premium) some or all of the Secured Obligations in such
order and proportions as Beneficiary in its sole discretion may choose.
(e) Trustor hereby specifically, unconditionally and irrevocably
waives all rights of a property owner under all laws, including NRS 37.115,
as amended or recodified from time to time, which provide for allocation of
condemnation proceeds between a property owner and a lienholder, and any
other law or successor statute of similar import. Trustor hereby
specifically, unconditionally and irrevocably waives all right to recover
against Beneficiary or any Lender (or any officer, employee, agent or
representative of Beneficiary or any Lender) for any loss incurred by
Trustor from any cause insured against or required by any Loan Document to
be insured against; provided, however, that this waiver of subrogation
shall not be effective with respect to any insurance policy if the coverage
thereunder would be materially reduced or impaired as a result.
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<PAGE>
5.6 Maintenance and Preservation of Property.
----------------------------------------
(a) Trustor shall insure the Property as required by the Loan
Agreement and keep the Property in good condition and repair, reasonable
wear and tear excepted.
(b) Trustor shall not remove or demolish the Property or any
part of it with a fair market value reasonably determined by Beneficiary to
be in excess of $2,000,000, or materially alter, restore or add to the
Property (except as permitted by the Loan Agreement), or initiate or allow
any change in any zoning or other land use classification which materially
affects the Property or any part of it, except as permitted or required by
the Loan Documents or with Beneficiary's express prior written consent in
each instance.
(c) If all or material part of the Property becomes damaged or
destroyed, Trustor shall promptly and completely repair and/or restore the
Property in a good and workmanlike manner in accordance with sound building
practices, provided that Beneficiary agrees to disburse insurance proceeds
to pay costs of the work of repair or reconstruction under Section 5.5.
---
(d) Trustor shall not commit or allow any act upon or use of the
Property which would violate: (i) any applicable law or order of any
governmental authority in any material respect, whether now existing or
later to be enacted; or (ii) any public or private covenant, condition,
restriction or equitable servitude affecting the Property. Trustor shall
not bring or keep any article on the Property or cause or allow any
condition to exist on it, if that could invalidate or would be prohibited
by any insurance coverage required to be maintained by Trustor on the
Property or any part of it under the Loan Agreement.
(e) Trustor shall not commit or allow waste of the Property.
(f) Trustor shall perform all other acts which from the
character or use of the Property may be reasonably necessary to maintain
and preserve its value.
5.7 Insurance.
---------
(a) Trustor shall maintain the following insurance with respect
to the Property:
(i) Trustor shall provide, maintain and keep in force at
all times during any period of construction with respect to the
portion of the Property affected by such construction a policy or
policies of builder's "all risk" insurance in nonreporting form in an
amount not less than the full insurable current value of such portion
of the Property on a replacement cost basis. The
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<PAGE>
policy or policies shall insure against loss or damage by hazards
customarily included within such "all risk" policies and any other
risks or hazards which Beneficiary may reasonably specify (and shall
include boiler and machinery insurance), and each shall contain a
Lender's Loss Payable Endorsement (Form 438 BFU or equivalent) in
favor of Beneficiary.
(ii) Trustor shall provide, maintain and keep in force at
all times for all portions of the Property not covered by a policy or
policies described in Section 5.7(a)(i), above, a policy or policies
---------
of fire and hazards "all risk" insurance providing extended coverage,
in an amount not less than the full insurable value of such portions
of the Property on a replacement cost basis. The policy or policies
shall insure against loss or damage by hazards customarily included
within "all risk" and "extended coverage" policies and any other risks
or hazards which Beneficiary may reasonably specify (and shall include
boiler and machinery insurance), and each shall contain a Lender's
Loss Payable Endorsement (Form 438 BFU or equivalent) in favor of
Beneficiary.
(iii) Trustor shall provide, maintain and keep in force at
all times for all portions of the Property any policy or policies of
business interruption insurance that Beneficiary reasonably requires
(including insurance against income loss during a period of at least
one (1) year), and each such policy shall contain a Lender's Loss
Payable Endorsement (Form 438 BFU or equivalent) in favor of
Beneficiary.
(iv) Trustor shall provide, maintain and keep in force at
all times a policy or policies of comprehensive liability insurance
naming Beneficiary as Administrative Agent as additional insured, on
an "occurrence" basis, against claims for "personal injury" liability,
including bodily injury, death or property damage liability, with a
limit of not less than One Hundred Million Dollars ($100,000,000).
Such insurance shall be primary and noncontributory with any other
insurance carried by Beneficiary.
(v) Trustor shall provide, maintain and keep in force at
all times such policies of worker's compensation insurance as may be
required by applicable laws (including employer's liability insurance,
if reasonably required by Beneficiary), covering all required
employees of Trustor and each required contractor and subcontractor.
(vi) Trustor shall provide, maintain and keep in force at
all times any and all additional insurance, as is carried by
responsible companies engaged in similar businesses and owning similar
assets in the general areas in which Trustor operates, that
Beneficiary in its reasonable judgment may from time to time require.
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<PAGE>
(b) All such policies of insurance shall be issued by companies
approved by Beneficiary having a minimum A.M. Best's rating of A-. The
limits, coverage, forms, deductibles, inception and expiration dates and
cancellation provisions of all such policies shall be reasonably acceptable
to Beneficiary. Each property insurance policy maintained in connection
with any of the Property shall contain a Lender's Loss Payable Endorsement
(Form 438 BFU or equivalent) in favor of Beneficiary, and shall provide
that all proceeds be payable to Beneficiary to the extent of its interest
in accordance with this Deed of Trust. Each liability insurance policy
maintained in connection with any of the Property shall name Beneficiary,
as Administrative Agent for the Lenders, as additional insured. An
approval by Beneficiary is not, and shall not be deemed to be, a
representation of the solvency of any insurer or the sufficiency of any
amount of insurance. Each policy of insurance required hereunder shall
provide that it may not be modified or canceled without at least thirty
days' prior written notice to Beneficiary, and shall permit a waiver of
subrogation by Trustor in favor of Beneficiary and the Lenders.
(c) Upon reasonable notice from Beneficiary, Trustor shall
supply Beneficiary with certificates of each policy required hereunder and
any other policy of insurance maintained in connection with any of the
Property, together with an original or underlyer of each such policy and
all endorsements thereto. When any insurance policy required hereunder
expires, Trustor shall furnish Beneficiary with proof acceptable to
Beneficiary that the policy has been reinstated or a new policy issued,
continuing in force the insurance covered by the policy which expired. If
Trustor fails to pay any such premium, Beneficiary shall have the right,
but not the obligation, to obtain current coverage and advance funds to pay
the premiums for it. Trustor shall repay Beneficiary immediately on demand
for any advance for such premiums, which shall be considered to be an
additional loan to Trustor bearing interest at the Default Rate, and
secured by this Deed of Trust and any other collateral held by Beneficiary
in connection with the Secured Obligations.
5.8 Trustee's Acceptance of Trust. Trustee accepts this trust when
-----------------------------
this Deed of Trust is recorded.
5.9 Releases, Extensions, Modifications and Additional Security.
-----------------------------------------------------------
(a) From time to time, Beneficiary may perform any of the
following acts without incurring any liability or giving notice to any
person, and without affecting the personal liability of any person for the
payment of the Secured Obligations (except as provided below), and without
affecting the security hereof for the full amount of the Secured
Obligations on all Property remaining subject hereto, and without the
necessity that any sum representing the value of any portion of the
Property affected by the Beneficiary's action be credited on the Secured
Obligations:
(i) Release any person liable for payment of any Secured
Obligation;
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<PAGE>
(ii) Extend the time for payment, or otherwise alter the
terms of payment, of any Secured Obligation;
(iii) Accept additional real or personal property of any
kind as security for any Secured Obligation, whether evidenced by
deeds of trust, mortgages, security agreements or any other
instruments of security; or
(iv) Alter, substitute or release any property securing the
Secured Obligations.
(b) From time to time when requested to do so by Beneficiary in
writing, Trustee may perform any of the following acts without incurring
any liability or giving notice to any person:
(i) Consent to the making of any plat or map of the
Property or any part of it;
(ii) Join in granting any easement or creating any
restriction affecting the Property;
(iii) Join in any subordination or other agreement affecting
this Deed of Trust or the lien of it; or
(iv) Reconvey the Property or any part of it without any
warranty.
5.10 Reconveyance. When all of the Secured Obligations have been paid
------------
in full, Beneficiary shall request Trustee in writing to reconvey the Property,
and shall surrender this Deed of Trust and all notes and instruments evidencing
the Secured Obligations to Trustee. When Trustee receives Beneficiary's written
request for reconveyance and all fees and other sums owing to Trustee by
Trustor, Trustee shall promptly reconvey the Property, or so much of it as is
then held under this Deed of Trust, without warranty to the person or persons
legally entitled to it. Such person or persons shall pay any costs of
recordation. In the reconveyance, the grantee may be described as "the person
or persons legally entitled thereto," and the recitals of any matters or facts
shall be conclusive proof of their truthfulness. Neither Beneficiary nor Trustee
shall have any duty to determine the rights of persons claiming to be rightful
grantees of any reconveyance. The Trustee shall confirm the release of its lien
on any personal property disposed of in accordance with the Loan Agreement.
5.11 Compensation, Exculpation.
-------------------------
(a) Trustor agrees to pay reasonable fees as may be charged by
Beneficiary and Trustee subject to the maximum amounts legally permitted,
or reasonable fees as may be charged by Beneficiary and Trustee when the
law provides
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<PAGE>
no maximum limit, for any services that Beneficiary or Trustee may render
in connection with this Deed of Trust, including Beneficiary's providing a
statement of the Secured Obligations or Trustee's rendering of services in
connection with a reconveyance. Trustor shall also pay or reimburse all of
Beneficiary's and Trustee's reasonable costs and expenses which may be
incurred in rendering any such services. Trustor further agrees to pay or
reimburse Beneficiary for all reasonable costs, expenses and other advances
which may be incurred or made by Beneficiary or Trustee in any efforts to
enforce any terms of this Deed of Trust, including any rights or remedies
afforded to Beneficiary or Trustee or both of them under Section 6.3,
whether any lawsuit is filed or not, or in defending any action or
proceeding arising under or relating to this Deed of Trust, including
reasonable attorneys' fees and other legal costs, costs of any Foreclosure
Sale (as defined in Subsection 6.3(h)) incurred in accordance------with
applicable law, and any cost of evidence of title. If Beneficiary chooses
to dispose of Property through more than one Foreclosure Sale, Trustor
shall pay all costs, expenses or other advances that may be incurred or
made by Trustee or Beneficiary in each of such Foreclosure Sales.
(b) Beneficiary shall not be directly or indirectly liable to
Trustor or any other person as a consequence of any of the following:
(i) Beneficiary's exercise of or failure to exercise any
rights, remedies or powers granted to Beneficiary in this Deed of
Trust;
(ii) Beneficiary's failure or refusal to perform or
discharge any obligation or liability of Trustor under any agreement
related to the Property or under this Deed of Trust; or
(iii) Any loss sustained by Trustor or any third party
resulting from Beneficiary's failure to lease the Property, or from
any other act or omission of Beneficiary in managing the Property,
after an Event of Default, unless the loss is caused by the gross
negligence, willful misconduct or bad faith of Beneficiary.
To the extent permitted by applicable law, Trustor hereby expressly waives
and releases all liability of the types described above, and agrees that no
such liability shall be asserted against or imposed upon Beneficiary.
(c) Trustor shall pay all obligations to pay money arising under
this Section within ten Banking Days of demand by Trustee or Beneficiary.
Each such obligation shall be added to, and considered to be part of, the
principal of the Notes, and shall bear interest from the date the
obligation arises at the Default Rate described in the Loan Agreement.
5.12 Defense and Notice of Claims and Actions. At Trustor's sole
----------------------------------------
expense, Trustor shall protect, preserve and defend the Property and title to
and right of possession of
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<PAGE>
the Property, and the security of this Deed of Trust and the rights and powers
of Beneficiary and Trustee created under it against all adverse claims. Trustor
shall give Beneficiary and Trustee prompt notice in writing if any claim is
asserted which does or could affect any of such matters, or if any action or
proceeding is commenced which alleges or relates to any such claim.
5.13 Substitution of Trustee. From time to time, Beneficiary may
-----------------------
substitute a successor to any Trustee named in or acting under this Deed of
Trust in any manner now or later to be provided at law, or by a written
instrument executed and acknowledged by Beneficiary and recorded in the office
of the Clark County Recorder. Any such instrument shall be conclusive proof of
the proper substitution of the successor Trustee, who shall, automatically upon
recordation of the instrument, succeed to all estate, title, rights, powers and
duties of the predecessor Trustee without conveyance from it.
5.14 Subrogation. Beneficiary shall be subrogated to the liens of all
-----------
encumbrances, whether released of record or not, which are discharged in whole
or in part by Beneficiary in accordance with this Deed of Trust or with the
proceeds of any loan secured by this Deed of Trust.
5.15 Site Visits, Observation and Testing. Subject to compliance with
------------------------------------
Gaming Laws, including restrictions on access to security and surveillance
systems and the casino cage, Beneficiary and its agents and representatives
shall have the right at any reasonable time and upon reasonable prior notice to
enter and visit the Property for the purpose of inspecting construction,
performing appraisals, observing the Property, taking and removing soil or
groundwater samples, and conducting tests on any part of the Property.
Beneficiary has no duty, however, to visit or observe the Property or to conduct
tests, and no site visit, observation or testing by Beneficiary, its agents or
its representatives shall impose any liability on Beneficiary, its agents or its
representatives, provided that Beneficiary shall indemnify Trustor against and
--------
hold Trustor harmless from all losses and damages which Trustor may suffer or
incur as a result of the gross negligence or willful misconduct of Beneficiary,
its agents or its representatives in connection with any site visit, observation
or testing conducted by Beneficiary, its agents or its representatives pursuant
to this Section. In no event shall any site visit, observation or testing by
Beneficiary, its agents or its representatives be a representation that
"Hazardous Materials" (as defined in the Loan Agreement) are or are not present
in, on, or under the Property, or that there has been or shall be compliance
with any law, regulation or ordinance pertaining to Hazardous Materials or any
other applicable governmental law. Neither Trustor nor any other party is
entitled to rely on any site visit, observation or testing by Beneficiary, its
agents or its representatives. Beneficiary owes no duty of care to protect
Trustor or any other party against, or to inform Trustor or any other party of,
any Hazardous Materials or any other adverse condition affecting the Property.
Beneficiary, its agents or its representatives shall give Trustor reasonable
notice before entering the Property. Beneficiary, its agents or its
representatives shall not interfere with Trustor's use of the Property in
exercising any rights provided in this Section except in the case of emergency.
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<PAGE>
5.16 Notice of Change. Trustor shall give Beneficiary written notice
----------------
within thirty days of any change in (a) the location of Trustor's place of
business or its chief executive office if it has more than one place of
business, (b) the location of any of the Property, including the Books and
Records and (c) Trustor's name or business structure. Unless otherwise
reasonably approved by Beneficiary in writing, all Property that consists of
personal property (other than the Books and Records) will be located on the Land
except in the ordinary course of business or as permitted in the Loan Agreement
and all Books and Records will be located at Trustor's place of business or
chief executive office if Trustor has more than one place of business.
5.17 Title Insurance. At any time and from time to time at the
---------------
reasonable request of Beneficiary, Trustor, at its sole cost and expense, shall
deliver to Beneficiary title insurance indorsements and reinsurance issued by
title insurance companies, all in form and substance reasonably satisfactory to
Beneficiary, with respect to this Deed of Trust, including CLTA 122 endorsements
insuring that each advance is secured by this Deed of Trust (without any
exception not set forth in the policy of title insurance insuring this Deed of
Trust other than (i) liens for real estate taxes and assessments not yet due and
payable, (ii) Permitted Encumbrances and (iii) any matters insured to be
subordinate to this Deed of Trust), and CLTA 101.4 endorsements insuring the
priority of the Deed of Trust over any mechanic's lien. Beneficiary consents to
the issuance of all title insurance by Nevada Title Company and the reinsurers
designated as of the Closing Date.
6. Accelerating Transfers, Default and Remedies.
--------------------------------------------
6.1 Accelerating Transfers.
----------------------
(a) "Accelerating Transfer" means any sale, contract to sell,
conveyance, encumbrance, lease or other transfer of all or any material
part of the Property or any interest in it (and not leases made in the
ordinary course of business and provided that no Default or Event of
Default exists), whether voluntary, involuntary, by operation of law or
otherwise which is not permitted under the Loan Agreement, and any "Change
of Control" described in the Loan Agreement.
(b) Trustor acknowledges that Beneficiary is making advances
under the Loan Agreement in reliance on the expertise, skill and experience
of Trustor; thus, the Secured Obligations include material elements similar
in nature to a personal service contract. In consideration of
Beneficiary's reliance, Trustor agrees that Trustor shall not make any
Accelerating Transfer, unless the transfer is preceded by Beneficiary's
express written consent to the particular transaction and transferee.
Beneficiary may withhold such consent in its sole discretion. If any
Accelerating Transfer occurs, Beneficiary, in its sole discretion may
declare all of the Secured Obligations to be immediately due and payable,
and Beneficiary and Trustee may invoke any rights and remedies provided by
Section 6.3 of this Deed of Trust.
---
6.2 Events of Default. Trustor will be in default under this Deed of
-----------------
Trust
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<PAGE>
upon the occurrence of any one or more of the following events (some or all
collectively, "Events of Default;" any one singly, an "Event of Default"):
(a) Trustor fails to pay any principal indebtedness secured
hereby when due; or
(b) Trustor fails to perform any obligation arising under this
Deed of Trust and does not cure that failure within any applicable cure
period provided for in the Loan Agreement; or
(c) Trustor or any other "borrower" (as that term is defined in
NRS 106.310, as amended or recodified from time to time) who may send a
notice pursuant to NRS 106.380(1), as amended or recodified from time to
time, with respect to this Deed of Trust, (i) delivers, sends by mail or
otherwise gives, or purports to deliver, send by mail or otherwise give, to
Beneficiary or any Lender (A) any notice of an election to terminate the
operation of this Deed of Trust as security for any Secured Obligation
(including, without limitation, any obligation to repay any "future
advance" (as defined in NRS 106.320, as amended or recodified from time to
time) of "principal" (as defined in NRS 106.345, as amended or recodified
from time to time)), or (B) any other notice pursuant to NRS 106.380(1), as
amended or recodified from time to time, (ii) records a statement pursuant
to NRS 106.380(3), as amended or recodified from time to time or (iii)
causes this Deed of Trust, any Secured Obligation, Beneficiary or any
Lender to be subject to NRS 106.380(2), 106(3) or 106.400, as amended or
recodified from time to time; or
(d) An Event of Default (as defined in the Loan Agreement)
occurs and remains continuing under the Loan Agreement.
6.3 Remedies. At any time after the occurrence of an Event of
--------
Default (following expiration of any applicable cure period), Beneficiary and
Trustee will be entitled to invoke any and all of the following rights and
remedies, all of which will be cumulative, and the exercise of any one or more
of which shall not constitute an election of remedies:
(a) Acceleration. Subject to applicable Gaming Laws,
------------
Beneficiary may declare any or all of the Secured Obligations to be due and
payable immediately.
(b) Receiver. Subject to applicable Gaming Laws, Beneficiary
--------
may apply to any court of competent jurisdiction for, and obtain
appointment of, a receiver for the Property; and Beneficiary may request,
in connection with any foreclosure proceeding hereunder, that the Nevada
Gaming Commission petition a District Court of the State of Nevada for the
appointment of a supervisor to conduct the normal gaming activities on the
Property following such foreclosure proceeding.
(c) Entry. Subject to applicable Gaming Laws, Beneficiary, in
-----
person, by agent or by court-appointed receiver, may enter, take possession
of, manage and operate all or any part of the Property, and may also do any
and all other things in
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<PAGE>
connection with those actions that Beneficiary may in its sole discretion
consider necessary and appropriate to protect the security of this Deed of
Trust. Such other things may include: taking and possessing all of
Trustor's or the then owner's Books and Records; entering into, enforcing,
modifying, or canceling leases on such terms and conditions as Beneficiary
may consider proper; obtaining and evicting tenants; fixing or modifying
Rents; collecting and receiving any payment of money owing to Trustor;
completing construction; and/or contracting for and making repairs and
alterations. If Beneficiary so requests, Trustor shall assemble all of the
Property that has been removed from the Land and make all of it available
to Beneficiary at the site of the Land. Trustor hereby irrevocably
constitutes and appoints Beneficiary as Trustor's attorney-in-fact to
perform such acts and execute such documents as Beneficiary in its sole
discretion may consider to be appropriate in connection with taking these
measures, including endorsement of Trustor's name on any instruments.
Regardless of any provision of this Deed of Trust or the Loan Agreement,
Beneficiary shall not be considered to have accepted any property other
than cash or immediately available funds in satisfaction of any obligation
of Trustor to Beneficiary, unless Beneficiary has given express written
notice of Beneficiary's election of that remedy in accordance with the
Nevada Uniform Commercial Code, as it may be amended or recodified from
time to time.
(d) Cure; Protection of Security. Either Beneficiary or
----------------------------
Trustee may cure any breach or default of Trustor, and if it chooses to do
so in connection with any such cure, Beneficiary or Trustee may also,
subject to applicable Gaming Laws, enter the Property and/or do any and all
other things which it may in its sole discretion consider necessary and
appropriate to protect the security of this Deed of Trust, including,
without limitation, the right to complete the Improvements. Such other
things may include: appearing in and/or defending any action or proceeding
which purports to affect the security of, or the rights or powers of
Beneficiary or Trustee under, this Deed of Trust; paying, purchasing,
contesting or compromising any encumbrance, charge, lien or claim of lien
which in Beneficiary's or Trustee's sole judgment is or may be senior in
priority to this Deed of Trust, such judgment of Beneficiary or Trustee to
be conclusive as among the parties to this Deed of Trust; obtaining
insurance and/or paying any premiums or charges for insurance required to
be carried under the Loan Agreement; otherwise caring for and protecting
any and all of the Property; and/or employing counsel, accountants,
contractors and other appropriate persons to assist Beneficiary or Trustee.
Beneficiary and Trustee may take any of the actions permitted under this
Subsection 6.3(d) either with or without giving notice to any person.
------
(e) Uniform Commercial Code Remedies. Subject to applicable
--------------------------------
Gaming Laws, Beneficiary may exercise any or all of the remedies granted to
a secured party under the NRS Article 104.9101 et seq. (the Nevada
enactment of the Uniform Commercial Code).
(f) Judicial Action. Beneficiary may bring an action in any
---------------
court of competent jurisdiction to foreclose this instrument or to obtain
specific enforcement of
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<PAGE>
any of the covenants or agreements of this Deed of Trust.
(g) Power of Sale. Under the power of sale hereby granted,
-------------
Beneficiary shall have the discretionary right to cause some or all of the
Property, including any Property which constitutes personal property to be
sold or otherwise disposed of in any combination and in any manner
permitted by applicable law and Gaming Laws.
(i) Sales of Personal Property.
--------------------------
(A) For purposes of this power of sale, Beneficiary
may elect to treat as personal property any Property which is
intangible or which can be severed from the Land or Improvements
without causing structural damage. If it chooses to do so,
Beneficiary may dispose of any personal property separately from
the sale of real property, in any manner permitted by or under
the NRS, including any public or private sale, or in any manner
permitted by any other applicable law.
(B) The following provision shall apply in the absence
of any specific statutory requirement which permits or requires a
different notice period: In connection with any sale or other
disposition of such Property, Trustor agrees that the following
procedures constitute a commercially reasonable sale:
Beneficiary shall mail written notice of the sale to Trustor not
later than forty-five (45) days prior to such sale. Once per
week during the four weeks immediately preceding such sale,
Beneficiary will publish notice of the sale in a local daily
newspaper of general circulation. Upon receipt of any written
request, Beneficiary will make the Property available to any bona
fide prospective purchaser for inspection during reasonable
business hours. Notwithstanding any provision to the contrary,
Beneficiary shall be under no obligation to consummate a sale if,
in its judgment, none of the offers received by it equals the
fair value of the Property offered for sale. The foregoing
procedures do not constitute the only procedures that may be
commercially reasonable.
(ii) Trustee's Sales of Real Property or Mixed Collateral.
----------------------------------------------------
(A) Beneficiary may choose to dispose of some or all
of the Property which consists solely of real property in any
manner then permitted by applicable law. In its discretion,
Beneficiary may also or alternatively choose to dispose of some
or all of the Property, in any combination consisting of both
real and personal property, together in one sale to be held in
accordance with the law and procedures applicable to real
property. Trustor agrees that such a sale of personal property
together with real property constitutes a commercially
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<PAGE>
reasonable sale of the personal property. For purposes of this
power of sale, either a sale of real property alone, or a sale of
both real and personal property together in accordance with law,
will sometimes be referred to as a "Trustee's Sale."
(B) Before any Trustee's Sale, Beneficiary or Trustee
shall give and record such notice of default and election to sell
as may then be required by law. When all time periods then
legally mandated have expired, and after such notice of sale as
may then be legally required has been given, Trustee may sell the
property being sold at a public auction to be held at the time
and place specified in the notice of sale. Neither Trustee nor
Beneficiary shall have any obligation to make demand on Trustor
before any Trustee's Sale. From time to time in accordance with
then applicable law, Trustee may, and in any event at
Beneficiary's request shall, postpone any Trustee's Sale by
public announcement at the time and place noticed for that sale.
(C) At any Trustee's Sale, Trustee shall sell to the
highest bidder at public auction for cash in lawful money of the
United States. Trustee shall execute and deliver to the
purchaser(s) a deed or deeds conveying the property being sold
without any covenant or warranty whatsoever, express or implied.
The recitals in any such deed of any matters or facts, including
any facts bearing upon the regularity or validity of any
Trustee's Sale, shall be conclusive proof of their truthfulness.
Any such deed shall be conclusive against all persons as to the
facts recited in it.
(h) Single or Multiple Foreclosure Sales. If the Property
------------------------------------
consists of more than one lot, parcel or item of property, Beneficiary may:
(i) Designate the order in which the lots, parcels and/or
items shall be sold or disposed of or offered for sale or disposition;
and
(ii) Elect to dispose of the lots, parcels and/or items
through a single consolidated sale or disposition to be held or made
under the power of sale granted in Subsections 6.3(g) and 6.7, or in
------ ---
connection with judicial proceedings, or by virtue of a judgment and
decree of foreclosure and sale; or through two or more such sales or
dispositions; or in any other manner Beneficiary may deem to be in its
best interests (any such sale or disposition, a "Foreclosure Sale;"
any two or more, "Foreclosure Sales").
If Beneficiary chooses to have more than one Foreclosure Sale, Beneficiary
at its option may cause the Foreclosure Sales to be held simultaneously or
successively, on the same day, or on such different days and at such
different times and in such order as Beneficiary may deem to be in its best
interests. No Foreclosure Sale shall terminate
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<PAGE>
or affect the liens of this Deed of Trust on any part of the Property which
has not been sold, until all of the Secured Obligations have been paid in
full.
6.4 Credit Bids. At any Foreclosure Sale, any person, including
-----------
Trustor, Trustee or Beneficiary, may bid for and acquire the Property or any
part of either to the extent permitted by then applicable law. Instead of
paying cash for such property, Beneficiary may settle for the purchase price by
crediting the sales price of the property against the following obligations:
(a) First, the portion of the Secured Obligations attributable
to the expenses of sale incurred in accordance with applicable law, costs
of any action and any other sums for which Trustor is obligated to pay or
reimburse Beneficiary or Trustee under this Deed of Trust; and
(b) Second, all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose.
6.5 Application of Foreclosure Sale Proceeds. Beneficiary and
----------------------------------------
Trustee shall apply the proceeds of any Foreclosure Sale in the following
manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the expenses of sale incurred in accordance with applicable
law, costs of any action and any other sums for which Trustor is obligated
to reimburse Beneficiary or Trustee under Section 5.11;
----
(b) Second, to pay the portion of the Secured Obligations
attributable to any sums expended or advanced by Beneficiary or Trustee
under the terms of this Deed of Trust which then remain unpaid;
(c) Third, to pay all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose; and
(d) Fourth, to remit the remainder, if any to the person or
persons entitled to it.
6.6 Application of Rents and Other Sums. Beneficiary shall apply any
-----------------------------------
and all Rents collected by it, and any and all sums other than proceeds of a
Foreclosure Sale which Beneficiary may receive or collect under Section 6.3, in
---
the following manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the costs and expenses of operation and collection that may
be incurred by Trustee, Beneficiary or any receiver in accordance with
applicable law;
(b) Second, to pay all other Secured Obligations in any order
and proportions as Beneficiary in its sole discretion may choose; and
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<PAGE>
(c) Third, to remit the remainder, if any, to the person or
persons entitled to it. Beneficiary shall have no liability for any funds
which it does not actually receive.
6.7 Incorporation of Certain Nevada Covenants. Covenants Nos. 1, 2
-----------------------------------------
(full replacement value), 3, 4 (at the applicable Default Rate), 5, 6, 7
(reasonable), 8 and 9 of NRS 107.030, where not in conflict with the provisions
of the Loan Documents, are hereby adopted and made a part of this Deed of Trust.
Upon any Event of Default by Trustor hereunder, Beneficiary may (a) declare all
sums secured immediately due and payable with out demand or notice or (b) have
a receiver appointed as a matter of right without regard to the sufficiency of
said property or any other security or guaranty and without any showing as
required by NRS (S)107.100. All remedies provided in this Deed of Trust are
distinct and cumulative to any other right or remedy under this Deed of Trust or
afforded by law or equity and may be exercised concurrently, independently or
successively. The sale of said property conducted pursuant to Covenants Nos. 6,
7 and 8 of NRS (S)107.030 may be conducted either as to the whole of said
property or in separate parcels and in such order as Trustee may determine.
7. Miscellaneous Provisions.
------------------------
7.1 Additional Provisions. The Loan Documents fully state all of the
---------------------
terms and conditions of the parties' agreement regarding the matters mentioned
in or incidental to this Deed of Trust. The Loan Documents also grant further
rights to Beneficiary and contain further agreements and affirmative and
negative covenants by Trustor which apply to this Deed of Trust and to the
Property.
7.2 No Waiver or Cure.
-----------------
(a) Each waiver by Beneficiary or Trustee must be in writing,
and no waiver shall be construed as a continuing waiver. No waiver shall
be implied from any delay or failure by Beneficiary or Trustee to take
action on account of any default of Trustor. Consent by Beneficiary or
Trustee to any act or omission by Trustor shall not be construed as a
consent to any other or subsequent act or omission or to waive the
requirement for Beneficiary's or Trustee's consent to be obtained in any
future or other instance.
(b) If any of the events described below occurs, that event
alone shall not: cure or waive any breach, Event of Default or notice of
default under this Deed of Trust or invalidate any act performed pursuant
to any such default or notice; or nullify the effect of any notice of
default or sale (unless all Secured Obligations then due have been paid and
performed and all other defaults under the Loan Documents have been cured);
or impair the security of this Deed of Trust; or prejudice Beneficiary,
Trustee or any receiver in the exercise of any right or remedy afforded any
of them under this Deed of Trust; or be construed as an affirmation by
Beneficiary of any tenancy, lease
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<PAGE>
or option, or a subordination of the lien of this Deed of Trust:
(i) Beneficiary, its agent or a receiver takes possession
of all or any part of the Property in the manner provided in
Subsection 6.3(c).
(ii) Beneficiary collects and applies Rents as permitted
under Sections 2.3 and 6.6, either with or without taking possession
--- ---
of all or any part of the Property.
(iii) Beneficiary receives and applies to any Secured
Obligation proceeds of any Property, including any proceeds of
insurance policies, condemnation awards, or other claims, property or
rights assigned to Beneficiary under Section 5.5.
---
(iv) Beneficiary makes a site visit, observes the Property
and/or conducts tests as permitted under this Deed of Trust or under
the Loan Agreement.
(v) Beneficiary receives any sums under this Deed of Trust
or any proceeds of any collateral held for any of the Secured
Obligations, and applies them to one or more Secured Obligations.
(vi) Beneficiary, Trustee or any receiver invokes any right
or remedy provided under this Deed of Trust.
7.3 Powers of Beneficiary and Trustee.
---------------------------------
(a) Trustee shall have no obligation to perform any act which it
is empowered to perform under this Deed of Trust unless it is requested to
do so in writing and is reasonably indemnified against loss, cost,
liability and expense.
(b) If either Beneficiary or Trustee performs any act which it
is empowered or authorized to perform under this Deed of Trust or the Loan
Agreement, that act alone shall not release or change the personal
liability of any person for the payment and performance of the Secured
Obligations then outstanding, or the lien of this Deed of Trust on all or
the remainder of the Property for full payment and performance of all
outstanding Secured Obligations. The liability of the original Trustor
shall not be released or changed if Beneficiary grants any successor in
interest to Trustor any extension of time for payment, or modification of
the terms of payment, of any Secured Obligation. Beneficiary shall not be
required to comply with any demand by the original Trustor that Beneficiary
refuse to grant such an extension or modification to, or commence
proceedings against, any such successor in interest.
(c) Beneficiary may take any of the actions permitted under
Subsections 6.3(b), 6.3(c), 6.7 and/or the Loan Agreement regardless of the
------ ------ ---
adequacy
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<PAGE>
of the security for the Secured Obligations, or whether any or all of the
Secured Obligations have been declared to be immediately due and payable,
or whether notice of default and election to sell has been given under this
Deed of Trust.
(d) From time to time, Trustor, Beneficiary or Trustee may apply
to any court of competent jurisdiction for aid and direction in executing
the trust and enforcing the rights and remedies created under this Deed of
Trust. Trustor, Beneficiary or Trustee may from time to time obtain orders
or decrees directing, confirming or approving acts in executing this trust
and enforcing these rights and remedies.
7.4 Merger. No merger shall occur as a result of Beneficiary's
------
acquiring any other estate in or any other lien on the Property unless
Beneficiary consents to a merger in writing.
7.5 Joint and Several Liability. If Trustor consists of more than
---------------------------
one person, each shall be jointly and severally liable for the faithful
performance of all of Trustor's obligations under this Deed of Trust.
7.6 Applicable Law. This Deed of Trust shall be governed by Nevada
--------------
law.
7.7 Successors in Interest. The terms, covenants and conditions of
----------------------
this Deed of Trust shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties. However, this Section 7.7 does not waive
---
the provisions of Section 6.1.
---
7.8 Interpretation.
--------------
(a) Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The captions of the
sections of this Deed of Trust are for convenience only and do not define
or limit any terms or provisions. The word "include(s)" means "include(s),
without limitation," and the word "including" means "including, but not
limited to."
(b) The word "obligations" is used in its broadest and most
comprehensive sense, and includes all primary, secondary, direct, indirect,
fixed and contingent obligations. It further includes all principal,
interest, prepayment charges, late charges, loan fees and any other fees
and charges accruing or assessed at any time, as well as all obligations to
perform acts or satisfy conditions.
(c) No listing of specific instances, items or matters in any
way limits the scope or generality of any language of this Deed of Trust.
The Exhibit to this Deed of Trust is hereby incorporated in this Deed of
Trust.
(d) The terms of the Loan Agreement shall prevail over the terms
of this Deed of Trust in the event of any conflict.
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<PAGE>
7.9 In-House Counsel Fees. Whenever Trustor is obligated to pay or
---------------------
reimburse Beneficiary or Trustee for any attorneys' fees, those fees shall
include the reasonably allocated costs for services of in-house counsel.
7.10 Waiver of Marshaling. Trustor waives all rights, legal and
--------------------
equitable, it may now or hereafter have to require marshaling of assets or to
require upon foreclosure sales of assets in a particular order, including any
rights provided by NRS 100.040 and 100.050, as such Sections may be amended or
recodified from time to time. Each successor and assign of Trustor, including
any holder of a lien subordinate to this Deed of Trust, by acceptance of its
interest or lien agrees that it shall be bound by the above waiver, as if it had
given the waiver itself.
7.11 Severability. If any provision of this Deed of Trust should be
------------
held unenforceable or void, that provision shall be deemed severable from the
remaining provisions and in no way affect the validity of this Deed of Trust.
7.12 Notices. Trustor hereby requests that a copy of notice of
-------
default and notice of sale be mailed to it at the address set forth below. That
address is also the mailing address of Trustor as debtor under the Nevada
Uniform Commercial Code. Beneficiary's address given below is the address for
Beneficiary as secured party under the Nevada Uniform Commercial Code.
"Trustor"
COAST HOTELS AND CASINOS, INC.,
a Nevada corporation
By __________________________________
Gage Parrish, Vice President and
Chief Financial Officer
Address Where Notices to Trustor
Are to Be Sent:
Coast Hotels and Casinos, Inc.
4500 West Tropicana Road
Las Vegas, Nevada 89103
Address Where Notices to Trustee
Are to Be Sent:
Equitable Deed Company
555 South Flower Street
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<PAGE>
Los Angeles, California 90071
Address Where Notices to Beneficiary
Are to Be Sent:
Bank of America National Trust and Savings
Association
555 South Flower Street
Los Angeles, California 90071
Attention: Janice Hammond, Vice President
STATE OF ________________ )
) SS.
COUNTY OF ______________ )
On ____________________ before me (here insert name and title of the
officer) personally appeared____________________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s),
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________ (Seal)
STATE OF ________________ )
) SS.
COUNTY OF ______________ )
On ____________________ before me (here insert name and title of the
officer) personally appeared____________________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s),
acted, executed the instrument.
WITNESS my hand and official seal.
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<PAGE>
Signature ___________________________ (Seal)
-30-
<PAGE>
EXHIBIT A
---------
EXHIBIT A to DEED OF TRUST executed as of ____________, 1999, by COAST
HOTELS AND CASINOS, INC., a Nevada corporation, as "Trustor", to EQUITABLE DEED
COMPANY, as "Trustee", for the benefit of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association, as "Beneficiary."
All that certain real property located in the County of Clark, State
of Nevada, described as follows:
Exhibit "A"
Page 1 of
----
<PAGE>
EXHIBIT 10.53
RECORDED REQUESTED BY
AND WHEN RECORDED MAIL TO:
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attention: Richard L. Sommers, Esquire
INSTRUCTIONS TO COUNTY RECORDER:
Please index this document as
(1) a construction deed of trust
(2) assignment of rents and leases; and
(3) a fixture filing.
___________________________________________________________________________
(Space above for Recorder's Use)
CONSTRUCTION DEED OF TRUST
with Assignment of Rents and Fixture Filing
NOTICE: THE OBLIGATIONS SECURED HEREBY PROVIDE FOR THE PERIODIC INCREASES
AND/OR DECREASES IN THE APPLICABLE INTEREST RATE.
NOTICE: THE OBLIGATIONS SECURED HEREBY INCLUDE REVOLVING CREDIT OBLIGATIONS
WHICH PERMIT BORROWING, REPAYMENT AND REBORROWING.
The parties to this Construction Deed of Trust with Assignment of Rents and
Fixture Filing ("Deed of Trust"), made as of March 18, 1999, are COAST HOTELS
AND CASINOS, INC., a Nevada corporation, as trustor ("Trustor"), EQUITABLE DEED
COMPANY, a California corporation, as trustee ("Trustee"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as
beneficiary ("Beneficiary"), as "Administrative Agent" for itself and the other
lenders (collectively, the "Lenders") now or hereafter a party to that certain
Loan Agreement (the "Loan Agreement") dated as of March 18, 1999 among
Beneficiary (in its individual capacity) and the Lenders as the lenders, Trustor
as the borrower, and Beneficiary as the administrative agent. Capitalized terms
used herein but not defined herein have the meanings given them in the Loan
Agreement.
Pursuant to the Loan Agreement, Beneficiary and the Lenders have agreed to
make loans and letters of credit available to Trustor in the aggregate maximum
principal amount (including future advances) of $75,000,000 (collectively, the
"Loan"). The Loan Agreement also provides for certain interest rate hedging
arrangements entered into with the Lenders with respect to the indebtedness
under the Loan Agreement (the "Secured Swap Agreements") to be secured by this
Deed of Trust.
1
<PAGE>
1. Grant in Trust and Secured Obligations.
--------------------------------------
1.1 Grant in Trust. For the purpose of securing payment and
--------------
performance of the Secured Obligations defined and described in Section 1.2,
---
Trustor hereby irrevocably and unconditionally grants, conveys, transfers and
assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale
and right of entry and possession, all estate, right, title and interest which
Trustor now has or may later acquire in and to the following property (all or
any part of such property, or any interest in all or any part of it, as the
context may require, the "Property"):
(a) The real property located in the County of Clark, State of
Nevada (the "County"), as described in Exhibit A, together with all
---------
existing and future easements and rights affording access to it (the
"Land"); together with
(b) All of Trustor's right, title and interest under and in
connection with that certain Ground Lease, dated as of October 1, 1995, by
and between The Tiberti Company, a Nevada general partnership, as lessor,
and Gold Coast Hotel and Casino, a Nevada limited partnership, as lessee
(the "Existing Ground Lease"), a memorandum of which was recorded on
December 29, 1995, in Book 951229 as Instrument No. 02697, in the Official
Records of Clark County, Nevada, including, without limitation, (i) all
options to extend or renew the Existing Ground Lease (and the leasehold
estate for the term of each extension or renewal), (ii) all options and
rights of first refusal contained in the Existing Ground Lease to purchase
the portion of the Land which is subject to the Existing Ground Lease, and
(iii) all of Trustor's other rights, titles and interests under the
Existing Ground Lease; together with
(c) All buildings, structures and improvements now located or
later to be constructed on the Land, all parking areas, roads, driveways,
walks, fences, walls, berms, landscaping, recreation facilities, lighting
facilities and other on site improvements (the "Improvements"); together
with
(d) All existing and future appurtenances, privileges,
easements, franchises, hereditaments and tenements of the Land, including
all minerals, oil, gas, other hydrocarbons and associated substances,
sulphur, nitrogen, carbon dioxide, helium and other commercially valuable
substances which may be in, under or produced from any part of the Land,
all development rights and credits, air rights, water, water courses, water
rights (whether riparian, appropriative or otherwise, and whether or not
appurtenant), water stock and water permits (together with the statutory
right to file applications to change, and any and all applications to
change the same), including any water permits, and any land lying in the
streets, roads or avenues, open or proposed, in front of or adjoining the
Land and Improvements; together with
(e) All existing and future leases, subleases, subtenancies,
licenses, occupancy agreements and concessions ("Leases", which shall not
include the Existing
2
<PAGE>
Ground Lease) relating to the use and enjoyment of all or any part of the
Land and Improvements, whether written or oral and whether in existence at
or upon the recordation of this Deed of Trust or entered into after the
recordation of this Deed of Trust, and all rents, security deposits,
royalties, issues, profits, receipts, earnings, revenue, income, products
and proceeds and other benefits of the Land and Improvements, whether now
due, past due or to become due, including all prepaid rents, security
deposits, fixed, additional and contingent rents, deficiency rents and
liquidated damages, license fees, occupancy charges, hotel room charges,
cabana charges, casino revenues, show ticket revenues, food and beverage
revenues, room service revenues, merchandise sales revenues, parking,
maintenance, common area, tax, insurance, utility and service charges and
contributions, proceeds of sale of electricity, gas, heating, air
conditioning, cable and other utilities and services, instruction fees,
membership charges, restaurant, snack bar and shop revenues, liquidated
damages, and all other rights to payments; together with and any and all
guaranties and other agreements relating to or made in connection with any
of such leases; together with
(f) All real property and improvements on it, and all
appurtenances and other property and interests of any kind or character,
whether described in Exhibit A or not, which are reasonably necessary or
---------
desirable to promote the present and any reasonable future beneficial use
and enjoyment of the Land and Improvements; together with
(g) All goods, materials, supplies, chattels, furniture,
fixtures, equipment and machinery now or later to be attached to, placed in
or on, or used in connection with the use, enjoyment, occupancy or
operation of all or any part of the Land and Improvements, whether stored
on the Land or elsewhere, including all pumping plants, engines, pipes,
ditches and flumes, and also all gas, electric, cooking, heating, cooling,
air conditioning, lighting, refrigeration and plumbing fixtures and
equipment, all water, sanitary and storm sewer, drainage, electricity,
steam, gas, telephone, cable and other utility equipment and facilities,
all plumbing, lighting, heating, ventilating, air conditioning,
refrigerating, incinerating, compacting, fire protection and sprinkler,
surveillance and security, vacuum cleaning, public address and
communications equipment and systems, all kitchen and laundry appliances,
screens, awnings, floor coverings, partitions, elevators, escalators,
motors, machinery, pipes, fittings and other items of equipment and
property of every kind and description, all of which shall be considered to
the fullest extent of the law to be real property for purposes of this Deed
of Trust; together with
(h) All building materials, equipment, work in process or other
personal property of any kind, whether stored on the Land or elsewhere,
which have been or later will be acquired for the purpose of being
delivered to, incorporated into or installed in or about the Land or
Improvements; together with
3
<PAGE>
(i) All rights to the payment of money, accounts, accounts
receivable, reserves, deferred payments, refunds, cost savings, payments
and deposits, room revenues, food revenues, beverage revenues and casino
revenues, whether now or later to be received from third parties or
deposited by Trustor with third parties (including all utility deposits),
contract rights, development and use rights, governmental permits and
licenses, applications, architectural and engineering plans, specifications
and drawings, as-built drawings, chattel paper, instruments, documents,
notes, drafts and letters of credit (other than letters of credit in favor
of Beneficiary), which arise from or relate to construction on the Land or
to any business now or later to be conducted on it, or to the Land and
Improvements generally; together with
(j) All proceeds, including all claims to and demands for them,
of the voluntary or involuntary conversion of any of the Land, Improvements
or the other property described above into cash or liquidated claims,
including proceeds of all present and future fire, hazard or casualty
insurance policies and all condemnation awards or payments now or later to
be made by any public body or decree by any court of competent jurisdiction
for any taking or in connection with any condemnation or eminent domain
proceeding, and all causes of action and their proceeds for any damage or
injury to the Land, Improvements or the other property described above or
any part of them, or breach of warranty in connection with the construction
of the Improvements, including causes of action arising in tort, contract,
fraud or concealment of a material fact; together with
(k) All books and records pertaining to any and all of the
property described above, including computer readable memory and any
computer hardware or software necessary to access and process such memory
("Books and Records"); together with
(l) All proceeds of, additions and accretions to, substitutions
and replacements for, and changes in any of the property described above,
including all proceeds of any voluntary or involuntary disposition or claim
respecting any such property (arising out of any judgment, condemnation or
award, or otherwise arising) and all goods, documents, general intangibles,
chattel paper and accounts, wherever located, acquired with cash proceeds
of any of the foregoing or its proceeds,
provided that the term "Property", as used in this Deed of Trust, shall not
- -------- ---
include (i) any personal property or fixtures, the purchase of which was
financed by a purchase money security interest, including any Capital Lease
Obligation, permitted under Section 6.9 or 6.10 of the Loan Agreement, (ii) any
--- ----
capital stock or other equity interests in any gaming licensees, and (iii) any
gaming licenses and liquor licenses which are not transferable.
Trustor shall and will warrant and forever defend the Property in the quiet and
peaceable possession of the Trustee, its successors and assigns against all and
every person or persons lawfully claiming or to claim the whole or any part
thereof. Trustor agrees that any greater
4
<PAGE>
title to the Property hereafter acquired by Trustor during the term hereof
shall be subject hereto.
1.2 Secured Obligations.
-------------------
(a) Trustor makes the grant, conveyance, transfer and assignment
set forth in Section 1.1 for the purpose of securing the following
---
obligations (the "Secured Obligations") in any order of priority that
Beneficiary may choose:
(i) Payment of all obligations at any time owing under each
of the promissory notes (collectively, the "Notes") issued from time
to time pursuant to the Loan Agreement, payable by Trustor, as maker,
in the aggregate principal amount of Seventy-Five Million Dollars
($75,000,000), including any and all obligations to pay interest
thereon;
(ii) Payment and performance of all obligations of Trustor
under this Deed of Trust;
(ii) Payment and performance of all obligations of Trustor
under the Loan Agreement;
(iv) Payment and performance of any obligations of Trustor
under any of the "Loan Documents," as defined in the Loan Agreement,
which are executed by Trustor, provided that this Deed of Trust shall
--------
not secure the Hazardous Materials Indemnity set forth in Section
11.22 of the Loan Agreement;
-----
(v) Payment and performance of all future advances and
other obligations that Trustor or any successor in ownership of all or
part of the Property may agree to pay and/or perform (whether as
principal, surety or guarantor) for the benefit of Beneficiary and/or
any of the Lenders, when a writing evidences the parties' agreement
that the advance or obligation be secured by this Deed of Trust;
(vi) Payment and performance of the obligations of Trustor
under each Secured Swap Agreement; and
(vi) Payment and performance of all modifications,
amendments, extensions and renewals, however evidenced, of any of the
Secured Obligations.
(b) All persons who may have or acquire an interest in all or any
part of the Property will be considered to have notice of, and will be
bound by, the terms of the Secured Obligations and each other agreement or
instrument made or entered into in
5
<PAGE>
connection with each of the Secured Obligations. Such terms include any
provisions in the Notes or the Loan Agreement which permit borrowing,
repayment and reborrowing, or which provide that the interest rate on one
or more of the Secured Obligations may vary from time to time.
1.3 Future Advances (NRS 106.300, et seq). It is the intention of
-------------------------------------
Trustor, Beneficiary and the Lenders that this Deed of Trust is an "instrument"
(as defined in NRS 106.330, as amended or recodified from time to time) which
secures "future advances" (as defined in NRS 106.320, as amended or recodified
from time to time) and which is governed pursuant to NRS 106.300 through
106.400, as amended or recodified from time to time ("NRS" means Nevada Revised
Statutes). It is the intention of the parties that the Secured Obligations
include the obligation of the Trustor to repay "future advances" of "principal"
(as defined in NRS 106.345, as amended or recodified from time to time) in an
amount up to the Commitment which is initially $75,000,000, and that the lien of
this Deed of Trust secures the obligation of Trustor to repay all such "future
advances" with the priority set forth in NRS 106.370(1), as amended or
recodified from time to time.
2. Assignment of Rents.
-------------------
2.1 Assignment. Subject to Section 2.2 hereof, effective upon the
---------- ---
recordation of this Deed of Trust, Trustor hereby irrevocably, absolutely,
presently and unconditionally assigns to Beneficiary all rents, royalties,
issues, profits, revenue, income and proceeds of the Property, including the
fees, charges, accounts or other payments for the use or occupancy of rooms and
other public facilities, whether now due, past due or to become due, including
all prepaid rents and security deposits (some or all collectively, as the
context may require, "Rents"). This is an absolute assignment, not an
assignment for security only.
2.2 Grant of License. Beneficiary hereby confers upon Trustor a
----------------
license ("License") to collect and retain the Rents as they become due and
payable, so long as no Event of Default, as defined in Section 6.2, shall exist
---
and be continuing. If an Event of Default has occurred and is continuing,
Beneficiary shall have the right, which it may choose to exercise in its sole
discretion, to terminate this License without notice to or demand upon Trustor,
and without regard to the adequacy of Beneficiary's security under this Deed of
Trust.
2.3 Collection and Application of Rents. Subject to the License
-----------------------------------
granted to Trustor under Section 2.2, Beneficiary has the right, power and
---
authority to collect any and all Rents. Subject to applicable Gaming Laws,
Trustor hereby appoints Beneficiary its attorney-in-fact to perform any and all
of the following acts, if and at the times when Beneficiary in its sole
discretion may so choose:
(a) Demand, receive and enforce payment of any and all Rents; or
(b) Give receipts, releases and satisfactions for any and all
Rents; or
6
<PAGE>
(c) Sue either in the name of Trustor or in the name of
Beneficiary for any and all Rents.
Beneficiary's right to the Rents does not depend on whether or not Beneficiary
takes possession of the Property as permitted under Subsection 6.3(c). In
------
Beneficiary's sole discretion, Beneficiary may choose to collect Rents either
with or without taking possession of the Property. Beneficiary shall apply all
Rents collected by it in the manner provided under Section 6.6. If an Event of
---
Default occurs while Beneficiary is in possession of all or part of the Property
and is collecting and applying Rents as permitted under this Deed of Trust,
Beneficiary, Trustee and any receiver shall nevertheless be entitled to exercise
and invoke every right and remedy afforded any of them under this Deed of Trust
and at law and in equity, including the right to exercise the power of sale
granted under Section 1.1 and Subsection 6.3(g).
--- ------
2.4 Beneficiary Not Responsible. Under no circumstances shall
---------------------------
Beneficiary have any duty to produce Rents from the Property. Regardless of
whether or not Beneficiary, in person or by agent, takes actual possession of
the Land and Improvements, Beneficiary is not and shall not be deemed to be:
(a) A "mortgagee in possession" for any purpose; or
(b) Responsible for performing any of the obligations of the
lessor under any lease; or
(c) Responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any
negligence in the management, upkeep, repair or control of the Property; or
(d) Liable in any manner for the Property or the use, occupancy,
enjoyment or operation of all or any part of it.
2.5 Trustor shall not accept any deposit or prepayment of Rents for any
rental period exceeding two (2) months without Beneficiary's prior written
consent, which shall not be unreasonably withheld or delayed. Trustor shall not
lease the Property or any part of it in a manner which would violate the Loan
Agreement.
3. Grant of Security Interest.
--------------------------
3.1 Security Agreement. The parties intend for this Deed of Trust to
------------------
create a lien on and security interest in the Property, and an absolute
assignment of the Rents and the Leases, all in favor of Beneficiary. The
parties acknowledge that some of the Property and some of the Rents and Leases
may be determined under applicable law to be personal property or fixtures. To
the extent such Property, Rents or Leases constitute personal property, Trustor,
as debtor, hereby grants to Beneficiary, as secured party, a security interest
in all such
7
<PAGE>
Property, Rents and Leases, to secure payment and performance of the Secured
Obligations, and Trustor, as debtor, also has granted a security interest in
such Property, Rents and Leases pursuant to that certain Security Agreement
dated as of March 18, 1999, executed by Trustor, as debtor, in favor of
Beneficiary, as secured party. This Deed of Trust constitutes a security
agreement under the Nevada Uniform Commercial Code, as amended or recodified
from time to time, covering all such Property, Rents and Leases. To the extent
such Property, Rents or Leases are not real property encumbered by the lien
created by Section 1.1, above, and are not absolutely assigned by the assignment
---
set forth in Section 2.1, above, it is the intention of the parties that such
---
Property, Rents and/or Leases shall constitute "proceeds, product, offspring,
rents or profits" (as defined in and for the purposes of Section 552(b) of the
United States Bankruptcy Code, as such Section may be modified or supplemented)
of the Land and Improvements, and/or "fees, charges, accounts, or other payments
for the use or occupancy of rooms and other public facilities in . . . lodging
properties," as applicable (as such terms are defined in and for the purpose of
Section 552(b) of the United States Bankruptcy Code, as such Section may be
modified or supplemented).
3.2 Financing Statements. Trustor shall execute one or more
--------------------
financing statements and such other documents as Beneficiary may from time to
time reasonably require to perfect or continue the perfection of Beneficiary's
security interest in any Property, Rents or Leases. Notwithstanding anything
contained herein, Trustor shall not be required under any circumstance to take
any further action to perfect any interest granted to Beneficiary in any cage
cash, deposit accounts, markers, instruments or other cash items which are used
in connection with the casino operations of Trustor. Trustor shall pay all
reasonable fees and costs that Beneficiary may incur in filing such documents in
public offices and in obtaining such record searches as Beneficiary may
reasonably require. If Trustor fails to execute any financing statements or
other documents for the perfection or continuation of any security interest,
Trustor hereby appoints Beneficiary as its true and lawful attorney-in-fact
(which appointment is irrevocable and coupled with an interest) to execute any
such documents on its behalf. If any financing statement or other document is
filed in the records normally pertaining to personal property, that filing shall
never be construed as in any way derogating from or impairing this Deed of Trust
or the rights or obligations of the parties under it.
4. Fixture Filing; Construction Mortgage.
-------------------------------------
4.1 Fixture Filing. This Deed of Trust constitutes a financing
--------------
statement filed as a fixture filing under NRS 104.9402(6) of the Nevada Uniform
Commercial Code, as amended or recodified from time to time, covering any
Property which now is or later may become fixtures attached to the Land or
Improvements. In connection therewith, the addresses of Trustor, as debtor, and
Beneficiary, as secured party, are as set forth in Section 8.12, below. The
----
foregoing address of Beneficiary, as secured party, is also the address from
which information concerning the security interest may be obtained by any
interested party. The property subject to this fixture filing is described in
Section 1.1, above. Portions of the property subject to this fixture filing as
---
identified in this Section are or are to become fixtures related to the real
estate described in Exhibit A attached hereto.
---------
8
<PAGE>
4.2 Construction Mortgage. This Deed of Trust constitutes a
---------------------
"construction mortgage" as that term is defined in NRS 104.9313(1)(c), as
amended or recodified from time to time, and as used in the Nevada Uniform
Commercial Code, as amended or recodified from time to time.
5. Rights and Duties of the Parties.
--------------------------------
5.1 Representations and Warranties. Trustor represents and warrants
------------------------------
that, except as previously disclosed to Beneficiary in a writing making
reference to this Section 5.1:
---
(a) Trustor lawfully possesses and holds the tenant's interest
in the Existing Ground Lease and title to all of the Improvements;
(b) Trustor has the full and unlimited power, right and
authority to encumber the Property and assign the Rents;
(c) This Deed of Trust creates a second priority lien on the
Property, junior solely to no more than $2,000,000 principal indebtedness
under a deed of trust in favor of American Bank National Association,
recorded January 30, 1996 in Book No. 960130 and as Document Nos. 00397 and
00398 in the Official Records of Clark County, Nevada;
(d) Trustor's rights in the Property include all property and
rights which are reasonably necessary to promote the present and any
reasonable future beneficial use and enjoyment of the Land and Improvements
as a hotel casino;
(e) Trustor owns any Property which is personal property free
and clear of any security agreements (except as identified in Section 3.1
---
hereof), reser vations of title or conditional sales contracts not of
record or not approved by or in favor of Beneficiary; and
(f) Trustor's place of business, or its chief executive office
if it has more than one place of business, is located at the address
specified below.
5.2 Taxes and Assessments. Trustor shall pay prior to delinquency
---------------------
all taxes, levies, charges and assessments, including assessments on appurtenant
water stock, imposed by any public or quasi-public authority or utility company
(collectively, "Impositions") which are (or if not paid, may become) a lien on
all or part of the Property or any interest in it, or which may cause any
decrease in the value of the Property or any part of it. If any such taxes,
levies, charges or assessments become delinquent, Beneficiary may require
Trustor to present evidence that they have been paid in full, on thirty (30)
days' written
9
<PAGE>
notice by Beneficiary to Trustor. Notwithstanding the foregoing, Trustor shall
not be required to pay any Imposition so long as (i) its validity is being
actively contested in good faith and by appropriate proceedings, and (ii)
Trustor has demonstrated to Beneficiary's reasonable satisfaction that leaving
such Imposition unpaid pending the outcome of such proceedings could not result
in conveyance of the Property in satisfaction of such Imposition or otherwise
impair Beneficiary's interest under this Deed of Trust.
5.3 Performance of Secured Obligations. Trustor shall promptly pay
----------------------------------
and perform each Secured Obligation in accordance with its terms.
5.4 Liens, Charges and Encumbrances. Trustor shall immediately
-------------------------------
discharge any Lien on the Property which Beneficiary has not consented to in
writing, except Permitted Encumbrances and Permitted Rights of Others. Trustor
shall pay when due each obligation secured by or reducible to a Lien, charge or
encumbrance which now does or later may encumber or appear to encumber all or
part of the Property or any interest in it, whether the Lien, charge or
encumbrance is or would be senior or subordinate to this Deed of Trust, except
any Permitted Encumbrances and Permitted Rights of Others. This Section 5.4 is
---
subject to Trustor's right, granted in the Loan Agreement, to contest in good
faith claims and liens for labor done and materials and services furnished in
connection with construction of the Improvements and the right of Trustor to
contest Liens by appropriate proceedings diligently pursued provided Trustor has
established and maintained reserves therefor which are reasonably acceptable to
the Administrative Agent.
5.5 Damages and Insurance and Condemnation Proceeds.
-----------------------------------------------
(a) Trustor hereby absolutely and irrevocably assigns to
Beneficiary, and authorizes the payor to pay to Beneficiary the following
claims, causes of action, awards, payments and rights to payment:
(i) All awards of damages and all other compensation
payable directly or indirectly because of a condemnation, proposed
condemnation or taking for public or private use which affects all or
part of the Property or any interest in it;
(ii) All other awards, claims and causes of action, arising
out of any warranty affecting all or any part of the Property, or for
damage or injury to or decrease in value of all or part of the
Property or any interest in it;
(iii)All proceeds of any insurance policies payable because
of loss sustained to all or part of the Property in excess of
$250,000; and
(iv) All interest which may accrue on any of the foregoing.
(b) Trustor shall immediately notify Beneficiary in writing if:
10
<PAGE>
(i) Any damage occurs or any injury or loss is sustained in
the amount of $250,000 or more to all or part of the Property, or any
action or proceeding relating to any such damage, injury or loss is
commenced; or
(ii) Any offer is made, or any action or proceeding is
commenced, which relates to any actual or proposed condemnation or
taking of all or part of the Property.
(c) If Beneficiary chooses to do so, Beneficiary may in its own
name appear in or prosecute any action or proceeding to enforce any cause
of action based on warranty, or for damage, injury or loss to all or part
of the Property, and Beneficiary may make any compromise or settlement of
the action or proceeding. Beneficiary, if it so chooses, may participate in
any action or proceeding relating to condemnation or taking of all or part
of the Property, and may join Trustor in adjusting any loss covered by
insurance.
(d) All proceeds of these assigned claims, other property and
rights which Trustor may receive or be entitled to shall be paid to
Beneficiary. In each instance, Beneficiary shall apply such proceeds first
toward reimbursement of all of Beneficiary's reasonable costs and expenses
of recovering the proceeds, including reasonable attorneys' fees. Such
attorneys' fees shall include the reasonably allocated costs for services
of in-house counsel. If, in any instance, each and all of the following
conditions are satisfied in Beneficiary's reasonable judgment, Beneficiary
must permit Trustor to use the balance of such proceeds ("Net Claims
Proceeds") to pay costs of repairing or reconstructing the Property in the
manner described below:
(i) The plans and specifications, cost breakdown,
construction contract, construction schedule, contractor and payment
and performance bond for the work of repair or reconstruction must all
be reasonably acceptable to Beneficiary;
(ii) Beneficiary must receive evidence reasonably
satisfactory to it that after repair or reconstruction, the Property
would be not substantially less valuable than prior to the damage or
condemnation;
(iii)The Net Claims Proceeds must be sufficient in
Beneficiary's reasonable determination to pay for the total cost of
repair or reconstruction, including all associated development costs
and interest projected to be payable on the Secured Obligations until
the repair or reconstruction is complete; or Trustor must provide its
own funds in an amount equal to the difference between the Net Claims
Proceeds and a reasonable estimate, made by Trustor and found
acceptable by Beneficiary, of the total cost of repair or
reconstruction; and
11
<PAGE>
(iv) No Event of Default shall have occurred and be
continuing.
If Beneficiary finds that such conditions have been met, Beneficiary shall
hold the Net Claims Proceeds and any funds which Trustor is required to
provide in an interest-bearing account and shall disburse them to Trustor
to pay costs of repair or reconstruction monthly as incurred, subject to a
10% retention, to be disbursed upon presentation of evidence reasonably
satisfactory to Beneficiary that repair or reconstruction has been
completed satisfactorily and lien-free. Disbursements hereunder shall
first be made from Net Claims Proceeds prior to reducing amounts
contributed by Trustor. Any funds remaining upon the completion of the
repair or reconstruction shall be immediately returned to Trustor.
However, if Beneficiary finds that one or more of such conditions have not
been satisfied, Beneficiary may apply the Net Claims Proceeds to pay or
prepay (without premium) some or all of the Secured Obligations in such
order and proportions as Beneficiary in its sole discretion may choose.
(e) Trustor hereby specifically, unconditionally and irrevocably
waives all rights of a property owner under all laws, including NRS 37.115,
as amended or recodified from time to time, which provide for allocation of
condemnation proceeds between a property owner and a lienholder, and any
other law or successor statute of similar import. Trustor hereby
specifically, unconditionally and irrevocably waives all right to recover
against Beneficiary or any Lender (or any officer, employee, agent or
representative of Beneficiary or any Lender) for any loss incurred by
Trustor from any cause insured against or required by any Loan Document to
be insured against; provided, however, that this waiver of subrogation
shall not be effective with respect to any insurance policy if the coverage
thereunder would be materially reduced or impaired as a result.
5.6 Maintenance and Preservation of Property.
----------------------------------------
(a) Trustor shall insure the Property as required by the Loan
Agreement and keep the Property in good condition and repair, reasonable
wear and tear excepted.
(b) Trustor shall not remove or demolish the Property or any
part of it with a fair market value reasonably determined by Beneficiary to
be in excess of $2,000,000, or materially alter, restore or add to the
Property (except as permitted by the Loan Agreement), or initiate or allow
any change in any zoning or other land use classification which materially
affects the Property or any part of it, except as permitted or required by
the Loan Documents or with Beneficiary's express prior written consent in
each instance.
(c) If all or material part of the Property becomes damaged or
destroyed, Trustor shall promptly and completely repair and/or restore the
Property in
12
<PAGE>
a good and workmanlike manner in accordance with sound building practices,
provided that Beneficiary agrees to disburse insurance proceeds to pay
costs of the work of repair or reconstruction under Section 5.5.
---
(d) Trustor shall not commit or allow any act upon or use of the
Property which would violate: (i) any applicable law or order of any
governmental authority in any material respect, whether now existing or
later to be enacted; or (ii) any public or private covenant, condition,
restriction or equitable servitude affecting the Property. Trustor shall
not bring or keep any article on the Property or cause or allow any
condition to exist on it, if that could invalidate or would be prohibited
by any insurance coverage required to be maintained by Trustor on the
Property or any part of it under the Loan Agreement.
(e) Trustor shall not commit or allow waste of the Property.
(f) Trustor shall perform all other acts which from the
character or use of the Property may be reasonably necessary to maintain
and preserve its value.
5.7 Insurance.
---------
(a) Trustor shall maintain the following insurance with respect
to the Property:
(i) Trustor shall provide, maintain and keep in force at
all times during any period of construction with respect to the
portion of the Property affected by such construction a policy or
policies of builder's "all risk" insurance in nonreporting form in an
amount not less than the full insurable current value of such portion
of the Property on a replacement cost basis. The policy or policies
shall insure against loss or damage by hazards customarily included
within such "all risk" policies and any other risks or hazards which
Beneficiary may reasonably specify (and shall include boiler and
machinery insurance), and each shall contain a Lender's Loss Payable
Endorsement (Form 438 BFU or equivalent) in favor of Beneficiary.
(ii Trustor shall provide, maintain and keep in force at
all times for all portions of the Property not covered by a policy or
policies described in Section 5.7(a)(i), above, a policy or policies
---------
of fire and hazards "all risk" insurance providing extended coverage,
in an amount not less than the full insurable value of such portions
of the Property on a replacement cost basis. The policy or policies
shall insure against loss or damage by hazards customarily included
within "all risk" and "extended coverage" policies and any other risks
or hazards which Beneficiary may reasonably specify (and shall include
boiler and machinery insurance), and each shall contain a Lender's
13
<PAGE>
Loss Payable Endorsement (Form 438 BFU or equivalent) in favor of
Beneficiary.
(iii)Trustor shall provide, maintain and keep in force at
all times for all portions of the Property any policy or policies of
business interruption insurance that Beneficiary reasonably requires
(including insurance against income loss during a period of at least
one (1) year), and each such policy shall contain a Lender's Loss
Payable Endorsement (Form 438 BFU or equivalent) in favor of
Beneficiary.
(iv) Trustor shall provide, maintain and keep in force at
all times a policy or policies of comprehensive liability insurance
naming Beneficiary as Administrative Agent as additional insured, on
an "occurrence" basis, against claims for "personal injury" liability,
including bodily injury, death or property damage liability, with a
limit of not less than One Hundred Million Dollars ($100,000,000).
Such insurance shall be primary and noncontributory with any other
insurance carried by Beneficiary.
(v) Trustor shall provide, maintain and keep in force at
all times such policies of worker's compensation insurance as may be
required by applicable laws (including employer's liability insurance,
if reasonably required by Beneficiary), covering all required
employees of Trustor and each required contractor and subcontractor.
(vi) Trustor shall provide, maintain and keep in force at
all times any and all additional insurance, as is carried by
responsible companies engaged in similar businesses and owning similar
assets in the general areas in which Trustor operates, that
Beneficiary in its reasonable judgment may from time to time require.
(b) All such policies of insurance shall be issued by companies
approved by Beneficiary having a minimum A.M. Best's rating of A-. The
limits, coverage, forms, deductibles, inception and expiration dates and
cancellation provisions of all such policies shall be reasonably acceptable
to Beneficiary. Each property insurance policy maintained in connection
with any of the Property shall contain a Lender's Loss Payable Endorsement
(Form 438 BFU or equivalent) in favor of Beneficiary, and shall provide
that all proceeds be payable to Beneficiary to the extent of its interest
in accordance with this Deed of Trust. Each liability insurance policy
maintained in connection with any of the Property shall name Beneficiary,
as Administrative Agent for the Lenders, as additional insured. An
approval by Beneficiary is not, and shall not be deemed to be, a
representation of the solvency of any insurer or the sufficiency of any
amount of insurance. Each policy of insurance required hereunder shall
provide that it may not be modified or canceled without at
14
<PAGE>
least thirty days' prior written notice to Beneficiary, and shall permit
a waiver of subrogation by Trustor in favor of Beneficiary and the Lenders.
(c) Upon reasonable notice from Beneficiary, Trustor shall
supply Beneficiary with certificates of each policy required hereunder and
any other policy of insurance maintained in connection with any of the
Property, together with an original or underlyer of each such policy and
all endorsements thereto. When any insurance policy required hereunder
expires, Trustor shall furnish Beneficiary with proof acceptable to
Beneficiary that the policy has been reinstated or a new policy issued,
continuing in force the insurance covered by the policy which expired. If
Trustor fails to pay any such premium, Beneficiary shall have the right,
but not the obligation, to obtain current coverage and advance funds to pay
the premiums for it. Trustor shall repay Beneficiary immediately on demand
for any advance for such premiums, which shall be considered to be an
additional loan to Trustor bearing interest at the Default Rate, and
secured by this Deed of Trust and any other collateral held by Beneficiary
in connection with the Secured Obligations.
5.8 Trustee's Acceptance of Trust. Trustee accepts this trust when
-----------------------------
this Deed of Trust is recorded.
5.9 Releases, Extensions, Modifications and Additional Security.
-----------------------------------------------------------
(a) From time to time, Beneficiary may perform any of the
following acts without incurring any liability or giving notice to any
person, and without affecting the personal liability of any person for the
payment of the Secured Obligations (except as provided below), and without
affecting the security hereof for the full amount of the Secured
Obligations on all Property remaining subject hereto, and without the
necessity that any sum representing the value of any portion of the
Property affected by the Beneficiary's action be credited on the Secured
Obligations:
(i) Release any person liable for payment of any Secured
Obligation;
(ii) Extend the time for payment, or otherwise alter the
terms of payment, of any Secured Obligation;
(iii)Accept additional real or personal property of any kind
as security for any Secured Obligation, whether evidenced by deeds of
trust, mortgages, security agreements or any other instruments of
security; or
(iv) Alter, substitute or release any property securing the
Secured Obligations.
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(b) From time to time when requested to do so by Beneficiary in
writing, Trustee may perform any of the following acts without incurring
any liability or giving notice to any person:
(i) Consent to the making of any plat or map of the
Property or any part of it;
(ii) Join in granting any easement or creating any
restriction affecting the Property;
(iii)Join in any subordination or other agreement affecting
this Deed of Trust or the lien of it; or
(iv) Reconvey the Property or any part of it without any
warranty.
5.1 Reconveyance. When all of the Secured Obligations have been paid
------------
in full, Beneficiary shall request Trustee in writing to reconvey the Property,
and shall surrender this Deed of Trust and all notes and instruments evidencing
the Secured Obligations to Trustee. When Trustee receives Beneficiary's written
request for reconveyance and all fees and other sums owing to Trustee by
Trustor, Trustee shall promptly reconvey the Property, or so much of it as is
then held under this Deed of Trust, without warranty to the person or persons
legally entitled to it. Such person or persons shall pay any costs of
recordation. In the reconveyance, the grantee may be described as "the person
or persons legally entitled thereto," and the recitals of any matters or facts
shall be conclusive proof of their truthfulness. Neither Beneficiary nor Trustee
shall have any duty to determine the rights of persons claiming to be rightful
grantees of any reconveyance. The Trustee shall confirm the release of its lien
on any personal property disposed of in accordance with the Loan Agreement.
5.1 Compensation, Exculpation.
-------------------------
(a) Trustor agrees to pay reasonable fees as may be charged by
Beneficiary and Trustee subject to the maximum amounts legally permitted,
or reasonable fees as may be charged by Beneficiary and Trustee when the
law provides no maximum limit, for any services that Beneficiary or Trustee
may render in connection with this Deed of Trust, including Beneficiary's
providing a statement of the Secured Obligations or Trustee's rendering of
services in connection with a reconveyance. Trustor shall also pay or
reimburse all of Beneficiary's and Trustee's reasonable costs and expenses
which may be incurred in rendering any such services. Trustor further
agrees to pay or reimburse Beneficiary for all reasonable costs, expenses
and other advances which may be incurred or made by Beneficiary or Trustee
in any efforts to enforce any terms of this Deed of Trust, including any
rights or remedies afforded to Beneficiary or Trustee or both of them under
Section 6.3, whether any lawsuit is filed or not, or in defending any
action or proceeding arising
16
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under or relating to this Deed of Trust, including reasonable attorneys'
fees and other legal costs, costs of any Foreclosure Sale (as defined in
Subsection 6.3(h)) incurred in accordance with applicable law, and any
------
cost of evidence of title. If Beneficiary chooses to dispose of Property
through more than one Foreclosure Sale, Trustor shall pay all costs,
expenses or other advances that may be incurred or made by Trustee or
Beneficiary in each of such Foreclosure Sales.
(b) Beneficiary shall not be directly or indirectly liable to
Trustor or any other person as a consequence of any of the following:
(i) Beneficiary's exercise of or failure to exercise any
rights, remedies or powers granted to Beneficiary in this Deed of
Trust;
(ii) Beneficiary's failure or refusal to perform or
discharge any obligation or liability of Trustor under any agreement
related to the Property or under this Deed of Trust; or
(iii)Any loss sustained by Trustor or any third party
resulting from Beneficiary's failure to lease the Property, or from
any other act or omission of Beneficiary in managing the Property,
after an Event of Default, unless the loss is caused by the gross
negligence, willful misconduct or bad faith of Beneficiary.
To the extent permitted by applicable law, Trustor hereby expressly waives
and releases all liability of the types described above, and agrees that no
such liability shall be asserted against or imposed upon Beneficiary.
(c) Trustor shall pay all obligations to pay money arising under
this Section within ten Banking Days of demand by Trustee or Beneficiary.
Each such obligation shall be added to, and considered to be part of, the
principal of the Notes, and shall bear interest from the date the
obligation arises at the Default Rate described in the Loan Agreement.
5.1 Defense and Notice of Claims and Actions. At Trustor's sole
----------------------------------------
expense, Trustor shall protect, preserve and defend the Property and title to
and right of possession of the Property, and the security of this Deed of Trust
and the rights and powers of Beneficiary and Trustee created under it against
all adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in
writing if any claim is asserted which does or could affect any of such matters,
or if any action or proceeding is commenced which alleges or relates to any such
claim.
5.1 Substitution of Trustee. From time to time, Beneficiary may
-----------------------
substitute a successor to any Trustee named in or acting under this Deed of
Trust in any manner now or later to be provided at law, or by a written
instrument executed and acknowledged by
17
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Beneficiary and recorded in the office of the Clark County Recorder. Any such
instrument shall be conclusive proof of the proper substitution of the
successor Trustee, who shall, automatically upon recordation of the instrument,
succeed to all estate, title, rights, powers and duties of the predecessor
Trustee without conveyance from it.
5.14 Subrogation. Beneficiary shall be subrogated to the liens of all
-----------
encumbrances, whether released of record or not, which are discharged in whole
or in part by Beneficiary in accordance with this Deed of Trust or with the
proceeds of any loan secured by this Deed of Trust.
5.15 Site Visits, Observation and Testing. Subject to compliance with
------------------------------------
Gaming Laws, including restrictions on access to security and surveillance
systems and the casino cage, Beneficiary and its agents and representatives
shall have the right at any reasonable time and upon reasonable prior notice to
enter and visit the Property for the purpose of inspecting construction,
performing appraisals, observing the Property, taking and removing soil or
groundwater samples, and conducting tests on any part of the Property.
Beneficiary has no duty, however, to visit or observe the Property or to conduct
tests, and no site visit, observation or testing by Beneficiary, its agents or
its representatives shall impose any liability on Beneficiary, its agents or its
representatives, provided that Beneficiary shall indemnify Trustor against and
--------
hold Trustor harmless from all losses and damages which Trustor may suffer or
incur as a result of the gross negligence or willful misconduct of Beneficiary,
its agents or its representatives in connection with any site visit, observation
or testing conducted by Beneficiary, its agents or its representatives pursuant
to this Section. In no event shall any site visit, observation or testing by
Beneficiary, its agents or its representatives be a representation that
"Hazardous Materials" (as defined in the Loan Agreement) are or are not present
in, on, or under the Property, or that there has been or shall be compliance
with any law, regulation or ordinance pertaining to Hazardous Materials or any
other applicable governmental law. Neither Trustor nor any other party is
entitled to rely on any site visit, observation or testing by Beneficiary, its
agents or its representatives. Beneficiary owes no duty of care to protect
Trustor or any other party against, or to inform Trustor or any other party of,
any Hazardous Materials or any other adverse condition affecting the Property.
Beneficiary, its agents or its representatives shall give Trustor reasonable
notice before entering the Property. Beneficiary, its agents or its
representatives shall not interfere with Trustor's use of the Property in
exercising any rights provided in this Section except in the case of emergency.
5.16 Notice of Change. Trustor shall give Beneficiary written notice
----------------
within thirty days of any change in (a) the location of Trustor's place of
business or its chief executive office if it has more than one place of
business, (b) the location of any of the Property, including the Books and
Records and (c) Trustor's name or business structure. Unless otherwise
reasonably approved by Beneficiary in writing, all Property that consists of
personal property (other than the Books and Records) will be located on the Land
except in the ordinary course of business or as permitted in the Loan Agreement
and all Books and
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Records will be located at Trustor's place of business or chief executive office
if Trustor has more than one place of business.
5.1 Title Insurance. At any time and from time to time at the
---------------
reasonable request of Beneficiary, Trustor, at its sole cost and expense, shall
deliver to Beneficiary title insurance indorsements and reinsurance issued by
title insurance companies, all in form and substance reasonably satisfactory to
Beneficiary, with respect to this Deed of Trust, including CLTA 122 endorsements
insuring that each advance is secured by this Deed of Trust (without any
exception not set forth in the policy of title insurance insuring this Deed of
Trust other than (i) liens for real estate taxes and assessments not yet due and
payable, (ii) Permitted Encumbrances and (iii) any matters insured to be
subordinate to this Deed of Trust), and CLTA 101.4 endorsements insuring the
priority of the Deed of Trust over any mechanic's lien. Beneficiary consents to
the issuance of all title insurance by Nevada Title Company and the reinsurers
designated as of the Closing Date.
6. Accelerating Transfers, Default and Remedies.
--------------------------------------------
6.1 Accelerating Transfers.
----------------------
(a) "Accelerating Transfer" means any sale, contract to sell,
conveyance, encumbrance, lease or other transfer of all or any material
part of the Property or any interest in it (and not leases made in the
ordinary course of business and provided that no Default or Event of
Default exists), whether voluntary, involuntary, by operation of law or
otherwise which is not permitted under the Loan Agreement, and any "Change
of Control" described in the Loan Agreement.
(b) Trustor acknowledges that Beneficiary is making advances
under the Loan Agreement in reliance on the expertise, skill and experience
of Trustor; thus, the Secured Obligations include material elements similar
in nature to a personal service contract. In consideration of
Beneficiary's reliance, Trustor agrees that Trustor shall not make any
Accelerating Transfer, unless the transfer is preceded by Beneficiary's
express written consent to the particular transaction and transferee.
Beneficiary may withhold such consent in its sole discretion. If any
Accelerating Transfer occurs, Beneficiary, in its sole discretion may
declare all of the Secured Obligations to be immediately due and payable,
and Beneficiary and Trustee may invoke any rights and remedies provided by
Section 6.3 of this Deed of Trust.
---
6.2 Events of Default. Trustor will be in default under this Deed of
-----------------
Trust upon the occurrence of any one or more of the following events (some or
all collectively, "Events of Default;" any one singly, an "Event of Default"):
(a) Trustor fails to pay any principal indebtedness secured
hereby when due; or
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(b) Trustor fails to perform any obligation arising under this
Deed of Trust and does not cure that failure within any applicable cure
period provided for in the Loan Agreement; or
(c) Trustor or any other "borrower" (as that term is defined in
NRS 106.310, as amended or recodified from time to time) who may send a
notice pursuant to NRS 106.380(1), as amended or recodified from time to
time, with respect to this Deed of Trust, (i) delivers, sends by mail or
otherwise gives, or purports to deliver, send by mail or otherwise give, to
Beneficiary or any Lender (A) any notice of an election to terminate the
operation of this Deed of Trust as security for any Secured Obligation
(including, without limitation, any obligation to repay any "future
advance" (as defined in NRS 106.320, as amended or recodified from time to
time) of "principal" (as defined in NRS 106.345, as amended or recodified
from time to time)), or (B) any other notice pursuant to NRS 106.380(1), as
amended or recodified from time to time, (ii) records a statement pursuant
to NRS 106.380(3), as amended or recodified from time to time or (iii)
causes this Deed of Trust, any Secured Obligation, Beneficiary or any
Lender to be subject to NRS 106.380(2), 106(3) or 106.400, as amended or
recodified from time to time; or
(d) An Event of Default (as defined in the Loan Agreement)
occurs and remains continuing under the Loan Agreement.
6.3 Remedies. At any time after the occurrence of an Event of
--------
Default (following expiration of any applicable cure period), Beneficiary and
Trustee will be entitled to invoke any and all of the following rights and
remedies, all of which will be cumulative, and the exercise of any one or more
of which shall not constitute an election of remedies:
(a) Acceleration. Subject to applicable Gaming Laws,
------------
Beneficiary may declare any or all of the Secured Obligations to be due and
payable immediately.
(b) Receiver. Subject to applicable Gaming Laws, Beneficiary
--------
may apply to any court of competent jurisdiction for, and obtain
appointment of, a receiver for the Property; and Beneficiary may request,
in connection with any foreclosure proceeding hereunder, that the Nevada
Gaming Commission petition a District Court of the State of Nevada for the
appointment of a supervisor to conduct the normal gaming activities on the
Property following such foreclosure proceeding.
(c) Entry. Subject to applicable Gaming Laws, Beneficiary, in
-----
person, by agent or by court-appointed receiver, may enter, take possession
of, manage and operate all or any part of the Property, and may also do any
and all other things in connection with those actions that Beneficiary may
in its sole discretion consider necessary and appropriate to protect the
security of this Deed of Trust. Such other things may include: taking and
possessing all of Trustor's or the then owner's Books and Records; entering
into, enforcing, modifying, or canceling leases on such terms
20
<PAGE>
and conditions as Beneficiary may consider proper; obtaining and evicting
tenants; fixing or modifying Rents; collecting and receiving any payment of
money owing to Trustor; completing construction; and/or contracting for and
making repairs and alterations. If Beneficiary so requests, Trustor shall
assemble all of the Property that has been removed from the Land and make
all of it available to Beneficiary at the site of the Land. Trustor hereby
irrevocably constitutes and appoints Beneficiary as Trustor's attorney-in-
fact to perform such acts and execute such documents as Beneficiary in its
sole discretion may consider to be appropriate in connection with taking
these measures, including endorsement of Trustor's name on any instruments.
Regardless of any provision of this Deed of Trust or the Loan Agreement,
Beneficiary shall not be considered to have accepted any property other
than cash or immediately available funds in satisfaction of any obligation
of Trustor to Beneficiary, unless Beneficiary has given express written
notice of Beneficiary's election of that remedy in accordance with the
Nevada Uniform Commercial Code, as it may be amended or recodified from
time to time.
(d) Cure; Protection of Security. Either Beneficiary or Trustee
----------------------------
may cure any breach or default of Trustor, and if it chooses to do so in
connection with any such cure, Beneficiary or Trustee may also, subject to
applicable Gaming Laws, enter the Property and/or do any and all other
things which it may in its sole discretion consider necessary and
appropriate to protect the security of this Deed of Trust, including,
without limitation, the right to complete the Improvements. Such other
things may include: appearing in and/or defending any action or proceeding
which purports to affect the security of, or the rights or powers of
Beneficiary or Trustee under, this Deed of Trust; paying, purchasing,
contesting or compromising any encumbrance, charge, lien or claim of lien
which in Beneficiary's or Trustee's sole judgment is or may be senior in
priority to this Deed of Trust, such judgment of Beneficiary or Trustee to
be conclusive as among the parties to this Deed of Trust; obtaining
insurance and/or paying any premiums or charges for insurance required to
be carried under the Loan Agreement; otherwise caring for and protecting
any and all of the Property; and/or employing counsel, accountants,
contractors and other appropriate persons to assist Beneficiary or Trustee.
Beneficiary and Trustee may take any of the actions permitted under this
Subsection 6.3(d) either with or without giving notice to any person.
------
(e) Uniform Commercial Code Remedies. Subject to applicable
--------------------------------
Gaming Laws, Beneficiary may exercise any or all of the remedies granted to
a secured party under the NRS Article 104.9101 et seq. (the Nevada
enactment of the Uniform Commercial Code).
(f) Judicial Action. Beneficiary may bring an action in any
---------------
court of competent jurisdiction to foreclose this instrument or to obtain
specific enforcement of any of the covenants or agreements of this Deed of
Trust.
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(g) Power of Sale. Under the power of sale hereby granted,
-------------
Beneficiary shall have the discretionary right to cause some or all of the
Property, including any Property which constitutes personal property to be
sold or otherwise disposed of in any combination and in any manner
permitted by applicable law and Gaming Laws.
(i) Sales of Personal Property.
--------------------------
(A) For purposes of this power of sale, Beneficiary
may elect to treat as personal property any Property which is
intangible or which can be severed from the Land or Improvements
without causing structural damage. If it chooses to do so,
Beneficiary may dispose of any personal property separately from
the sale of real property, in any manner permitted by or under
the NRS, including any public or private sale, or in any manner
permitted by any other applicable law.
(B) The following provision shall apply in the absence
of any specific statutory requirement which permits or requires a
different notice period: In connection with any sale or other
disposition of such Property, Trustor agrees that the following
procedures constitute a commercially reasonable sale:
Beneficiary shall mail written notice of the sale to Trustor not
later than forty-five (45) days prior to such sale. Once per
week during the four weeks immediately preceding such sale,
Beneficiary will publish notice of the sale in a local daily
newspaper of general circulation. Upon receipt of any written
request, Beneficiary will make the Property available to any bona
fide prospective purchaser for inspection during reasonable
business hours. Notwithstanding any provision to the contrary,
Beneficiary shall be under no obligation to consummate a sale if,
in its judgment, none of the offers received by it equals the
fair value of the Property offered for sale. The foregoing
procedures do not constitute the only procedures that may be
commercially reasonable.
(ii) Trustee's Sales of Real Property or Mixed Collateral.
----------------------------------------------------
(A) Beneficiary may choose to dispose of some or all
of the Property which consists solely of real property in any
manner then permitted by applicable law. In its discretion,
Beneficiary may also or alternatively choose to dispose of some
or all of the Property, in any combination consisting of both
real and personal property, together in one sale to be held in
accordance with the law and procedures applicable to real
property. Trustor agrees that such a sale of personal property
together with real property constitutes a commercially reasonable
sale of the personal property. For purposes of this power of
22
<PAGE>
sale, either a sale of real property alone, or a sale of both
real and personal property together in accordance with law, will
sometimes be referred to as a "Trustee's Sale."
(B) Before any Trustee's Sale, Beneficiary or Trustee
shall give and record such notice of default and election to sell
as may then be required by law. When all time periods then
legally mandated have expired, and after such notice of sale as
may then be legally required has been given, Trustee may sell the
property being sold at a public auction to be held at the time
and place specified in the notice of sale. Neither Trustee nor
Beneficiary shall have any obligation to make demand on Trustor
before any Trustee's Sale. From time to time in accordance with
then applicable law, Trustee may, and in any event at
Beneficiary's request shall, postpone any Trustee's Sale by
public announcement at the time and place noticed for that sale.
(C) At any Trustee's Sale, Trustee shall sell to the
highest bidder at public auction for cash in lawful money of the
United States. Trustee shall execute and deliver to the
purchaser(s) a deed or deeds conveying the property being sold
without any covenant or warranty whatsoever, express or implied.
The recitals in any such deed of any matters or facts, including
any facts bearing upon the regularity or validity of any
Trustee's Sale, shall be conclusive proof of their truthfulness.
Any such deed shall be conclusive against all persons as to the
facts recited in it.
(h) Single or Multiple Foreclosure Sales. If the Property
------------------------------------
consists of more than one lot, parcel or item of property, Beneficiary may:
(i) Designate the order in which the lots, parcels and/or
items shall be sold or disposed of or offered for sale or disposition;
and
(ii) Elect to dispose of the lots, parcels and/or items
through a single consolidated sale or disposition to be held or made
under the power of sale granted in Subsections 6.3(g) and 6.7, or in
------ ---
connection with judicial proceedings, or by virtue of a judgment and
decree of foreclosure and sale; or through two or more such sales or
dispositions; or in any other manner Beneficiary may deem to be in its
best interests (any such sale or disposition, a "Foreclosure Sale;"
any two or more, "Foreclosure Sales").
If Beneficiary chooses to have more than one Foreclosure Sale, Beneficiary
at its option may cause the Foreclosure Sales to be held simultaneously or
successively, on the same day, or on such different days and at such
different times and in such order as Beneficiary may deem to be in its best
interests. No Foreclosure Sale shall terminate
23
<PAGE>
or affect the liens of this Deed of Trust on any part of the Property
which has not been sold, until all of the Secured Obligations have been
paid in full.
6.4 Credit Bids. At any Foreclosure Sale, any person, including
-----------
Trustor, Trustee or Beneficiary, may bid for and acquire the Property or any
part of either to the extent permitted by then applicable law. Instead of
paying cash for such property, Beneficiary may settle for the purchase price by
crediting the sales price of the property against the following obligations:
(a) First, the portion of the Secured Obligations attributable
to the expenses of sale incurred in accordance with applicable law, costs
of any action and any other sums for which Trustor is obligated to pay or
reimburse Beneficiary or Trustee under this Deed of Trust; and
(b) Second, all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose.
6.5 Application of Foreclosure Sale Proceeds. Beneficiary and
----------------------------------------
Trustee shall apply the proceeds of any Foreclosure Sale in the following
manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the expenses of sale incurred in accordance with applicable
law, costs of any action and any other sums for which Trustor is obligated
to reimburse Beneficiary or Trustee under Section 5.11;
----
(b) Second, to pay the portion of the Secured Obligations
attributable to any sums expended or advanced by Beneficiary or Trustee
under the terms of this Deed of Trust which then remain unpaid;
(c) Third, to pay all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose; and
(d) Fourth, to remit the remainder, if any to the person or
persons entitled to it.
6.6 Application of Rents and Other Sums. Beneficiary shall apply any
-----------------------------------
and all Rents collected by it, and any and all sums other than proceeds of a
Foreclosure Sale which Beneficiary may receive or collect under Section 6.3, in
---
the following manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the costs and expenses of operation and collection that may
be incurred by Trustee, Beneficiary or any receiver in accordance with
applicable law;
24
<PAGE>
(b) Second, to pay all other Secured Obligations in any order
and proportions as Beneficiary in its sole discretion may choose; and
(c) Third, to remit the remainder, if any, to the person or
persons entitled to it. Beneficiary shall have no liability for any funds
which it does not actually receive.
6.7 Incorporation of Certain Nevada Covenants. Covenants Nos. 1, 2
-----------------------------------------
(full replacement value), 3, 4 (at the applicable Default Rate), 5, 6, 7
(reasonable), 8 and 9 of NRS 107.030, where not in conflict with the provisions
of the Loan Documents, are hereby adopted and made a part of this Deed of Trust.
Upon any Event of Default by Trustor hereunder, Beneficiary may (a) declare all
sums secured immediately due and payable without demand or notice or (b) have a
receiver appointed as a matter of right without regard to the sufficiency of
said property or any other security or guaranty and without any showing as
required by NRS (S)107.100. All remedies provided in this Deed of Trust are
distinct and cumulative to any other right or remedy under this Deed of Trust or
afforded by law or equity and may be exercised concurrently, independently or
successively. The sale of said property conducted pursuant to Covenants Nos. 6,
7 and 8 of NRS (S)107.030 may be conducted either as to the whole of said
property or in separate parcels and in such order as Trustee may determine.
7. Leasehold Mortgage Provisions. The provisions of this Section 7 shall
----------------------------- -
apply in the event that, and so long as, any portion of the Property consists of
Trustor's interests as tenant under any lease or leases (collectively, including
the Existing Ground Lease, the "Ground Leases"). Unless otherwise expressly
provided, the lien of this Deed of Trust shall encumber all of Trustor's rights
and interests under and in connection with any Ground Lease, including without
limitation renewal and extension rights, options to expand, and purchase options
(all of which rights shall be collectively referred to herein as a "Ground
Leasehold"). Trustor hereby agrees, with respect to each Ground Lease, as
follows:
7.1 Trustor shall timely perform its obligations in connection with
each Ground Lease. Without limiting the generality of Section 6.3(d), above,
------
Trustor specifically acknowledges Beneficiary's right, while any default by
Trustor under any Ground Lease remains uncured, to perform the defaulted
obligations and take all other actions which Beneficiary deems necessary to
protect its interests with respect thereto, and Trustor hereby irrevocably
appoints Beneficiary its true and lawful attorney-in-fact (which appointment is
irrevocable and coupled with an interest) in its name or otherwise to execute
all documents, and perform all other acts, which Beneficiary reasonably deems
necessary to preserve its or Trustor's rights with respect to any Ground Lease.
7.2 Trustor shall not, without Beneficiary's prior written consent,
modify, or cause or permit the termination of, any Ground Lease, or waive or in
any way release the landlord under any Ground Lease of or from any obligation or
condition.
25
<PAGE>
7.3 Trustor shall notify Beneficiary promptly in writing of (i) the
occurrence of any default by the landlord under any Ground Lease and (ii) the
receipt by Trustor of any notice claiming the occurrence of any default by
Trustor under any Ground Lease or the occurrence of any event which, with the
passage of time or the giving of notice or both, would constitute a default by
Trustor under any Ground Lease (and Trustor shall also promptly deliver a copy
of any such notice to Beneficiary).
7.4 Unless Beneficiary otherwise consents in writing, so long as any
Secured Obligation remains outstanding, neither the fee title to, nor any other
estate or interest in, the real property subject to any Ground Lease shall merge
with any Ground Leasehold, notwithstanding the union of such estates in the
landlord or the tenant or in a third party. Any acquisition of the landlord's
interest in any Ground Lease by Trustor or any affiliate of Trustor shall be
accomplished in such a manner as to avoid a merger of the interests of landlord
and tenant unless Beneficiary consents to such merger in writing.
7.5 If Trustor acquires fee title to any portion of the real property
subject to any Ground Lease, this Deed of Trust shall automatically be a lien on
such fee title.
7.6 Trustor shall not subordinate any Ground Lease or Ground
Leasehold to any deed of trust or other encumbrance of, or lien on, any interest
in the real property subject to such Ground Leasehold without the prior written
consent of Beneficiary. Any such subordination without such consent shall, at
Beneficiary's option, be void.
7.7 All subleases entered into by Trustor with respect to all or any
portion of the Property (and all existing subleases modified by Trustor) shall
provide that such subleases are subordinate to the lien of this Deed of Trust
and any modifications of this Deed of Trust and the obligations secured hereby
and that, if Beneficiary forecloses under this Deed of Trust or enters into a
new lease with any landlord under any Ground Lease pursuant to the provisions
for a new lease, if any, contained in the applicable Ground Lease or in any
other document or agreement, the subtenant shall attorn to Beneficiary or its
assignee and the sublease shall remain in full force and effect in accordance
with its terms notwithstanding the termination of the applicable Ground Lease.
7.8 Trustor shall exercise any option or right to renew or extend the
term of any Ground Lease at least six months prior to the date of termination of
any such option or right, shall give immediate written notice thereof to
Beneficiary, and shall execute, deliver and record any documents requested by
Beneficiary to evidence the lien of this Deed of Trust on such extended or
renewed lease term. If Trustor fails to exercise any such option or right as
required herein, Beneficiary may exercise the option or right as Trustor's agent
and attorney-in-fact pursuant to this Deed of Trust, or in Beneficiary's own
name or in the name of and on behalf of a nominee of Beneficiary, as Beneficiary
chooses in its absolute discretion.
7.9 As security for the Secured Obligations, Trustor hereby assigns
to Beneficiary a security interest in all prepaid rents and security deposits
and all other security
26
<PAGE>
which the landlords under the Ground Leases hold for the performance of
Trustor's obligations thereunder.
7.10 Promptly upon demand by Beneficiary, Trustor shall use reasonable
efforts to obtain from the landlord under any Ground Lease and furnish to
Beneficiary an estoppel certificate of such landlord stating the date through
which rent has been paid, whether or not there are any defaults, and the
specific nature of any claimed defaults.
7.11 Trustor shall notify Beneficiary promptly in writing of any
request by either party to any Ground Lease for arbitration, appraisal or other
proceedings relating to any Ground Lease and of the institution of any such
proceeding, and shall promptly deliver to Beneficiary a copy of all
determinations in any such proceeding. Beneficiary shall have the right,
following written notice to Trustor, to participate in any such proceeding in
association with Trustor or on its own behalf as an interested party. Trustor
shall notify Beneficiary promptly in writing of the institution of any legal
proceeding involving obligations under any Ground Lease, and Beneficiary may
intervene in any such legal proceeding and be made a party. Trustor shall
promptly provide Beneficiary with a copy of any decision rendered in connection
with any such proceeding.
7.12 To the extent permitted by law, the price payable by Trustor or
any other party in the exercise of the right of redemption, if any, from any
sale under, or decree of foreclosure of, this Deed of Trust shall include all
rents and other amounts paid and other sums advanced by Beneficiary on behalf of
Trustor as the tenant under the Ground Leases.
7.13 In addition to all other Events of Default described in this Deed
of Trust, the occurrence of any of the following shall be an Event of Default
hereunder:
(a) A breach or default by Trustor under any Ground Lease,
subject to any applicable cure period; or
(b) The occurrence of any event or circumstance which gives the
landlord under any Ground Lease a right to terminate such Ground Lease.
7.14 As used in this Deed of Trust, the "Bankruptcy Code" shall mean
11 U.S.C. (S)(S) 101 et seq., as modified and/or recodified from time to time.
-- ---
Notwithstanding anything to the contrary contained herein with respect to any
Ground Lease:
(a) The lien of this Deed of Trust attaches to all of Trustor's
rights under Subsection 365(h) of the Bankruptcy Code, including without
limitation any and all elections to be made thereunder, any and all rights
under any Ground Lease which Trustor is entitled to retain pursuant to 11
U.S.C. (S) 365(h)(1)(A)(ii) in the event of a rejection under the
Bankruptcy Code of such Ground Lease by the landlord thereunder (or any
trustee thereof), and any and all rights of offset under or as described in
11 U.S.C. (S) 365(h)(1)(B).
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<PAGE>
(b) Trustor acknowledges and agrees that, as the beneficiary
under this Deed of Trust and by operation of 11 U.S.C. (S)365(h)(1)(D),
Beneficiary has, and until this Deed of Trust has been fully reconveyed
continuously shall have, whether before or after any default under any of
the Secured Obligations or the taking of any action to enforce any of
Beneficiary's rights and remedies under this Deed of Trust or any
foreclosure sale hereunder, the complete, unfettered and exclusive right,
in its sole and absolute discretion, to elect (the "365(h) Election")
whether (i) any Ground Lease that has been rejected under the Bankruptcy
Code by the landlord thereunder (or any trustee therefor) shall be treated
as terminated under 11 U.S.C. (S)365(h)(1)(A)(i), or (ii) the rights under
such Ground Lease that are in or appurtenant to the real property, as
described in 11 U.S.C. (S)365(h)(1)(A)(ii), should be retained pursuant to
that subsection. To the extent that, notwithstanding the preceding
sentence and 11 U.S.C. (S)365(h)(1)(D), Trustor now or at any time in the
future has any right to make, or to participate in or otherwise in any
manner affect the making of, the 365(h) Election with respect to any Ground
Lease, Trustor hereby absolutely assigns and conveys to Beneficiary any and
all such rights, and all of Trustor's right, title, and interest therein,
which may be used and exercised by Beneficiary completely, exclusively, and
without any restriction whatsoever, in Beneficiary's sole and absolute
discretion, whether before or after any default upon any of the Secured
Obligations, the taking of any action to enforce any of Beneficiary's
rights and remedies under this Deed of Trust, or any foreclosure sale
hereunder. Trustor hereby unconditionally and irrevocably appoints
Beneficiary as its attorney-in-fact (which appointment is coupled with an
interest) to exercise Trustor's right, if any, to make, or participate in
or otherwise in any matter affect the making of, the 365(h) Election with
respect to any Ground Lease. Trustor shall not in any manner impede or
interfere with any action taken by Beneficiary and, at the request of
Beneficiary, Trustor shall take or join in the taking of any action to
make, or participate in or otherwise in any manner affect the making of,
the 365(h) Election with respect to any Ground Lease, in such manner as
Beneficiary determines in its sole and absolute discretion. Unless and
until instructed to do so by Beneficiary (as determined by Beneficiary in
its sole and absolute discretion), Trustor shall not take any action to
make, or participate in or otherwise in any manner affect the making of,
the 365(h) Election with respect to any Ground Lease, including in
particular, but without limitation, any election to treat any Ground Lease
as terminated. Beneficiary shall have no obligation whatsoever to Trustor
or any other person or entity in connection with the making of the 365(h)
Election with respect to any Ground Lease or any instruction by Beneficiary
to Trustor given, withheld or delayed in respect thereof, nor shall
Beneficiary have any liability to Trustor or any other person or entity
arising from any of the same.
(c) As security for the Secured Obligations, Trustor hereby
irrevocably assigns to Beneficiary all of Trustor's rights to damages
arising from any rejection by any landlord (or any trustee thereof) of any
Ground Lease under the Bankruptcy Code. Beneficiary and Trustor shall
proceed jointly or in the name of Trustor in respect of
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<PAGE>
any claim or proceeding relating to the rejection of any Ground Lease,
including without limitation the right to file and prosecute any proofs of
claim, complaints, motions and other documents in any case in respect of
such landlord under the Bankruptcy Code. This assignment shall continue in
effect until all of the Secured Obligations have been satisfied in full.
Any amounts received by Beneficiary or Trustor as damages arising from the
rejection of any Ground Lease as aforesaid shall be applied first to all
costs reasonably incurred by Beneficiary (including attorneys' fees) in
connection with this subsection (c) and then in accordance with other
applicable provisions of this Deed of Trust.
(d) If, pursuant to the Bankruptcy Code, Trustor seeks to offset
against the rent reserved in any Ground Lease the amount of any damages
caused by the nonperformance of the landlord's obligations after the
rejection by the landlord (or any trustee thereof) of such Ground Lease,
Trustor shall, prior to effecting such offset, notify Beneficiary in
writing of its intent to do so, setting forth the amounts proposed to be
offset and, in the event that Beneficiary objects, Trustor shall not effect
any offset of the amounts to which Beneficiary objects. If Beneficiary
fails to object within 10 days following receipt of such notice, Trustor
may offset the amounts set forth in Trustor's notice.
(e) If any legal proceeding is commenced with respect to any
Ground Lease in connection with any case under the Bankruptcy Code,
Beneficiary and Trustor shall cooperatively conduct any such proceeding
with counsel reasonably agreed upon between Trustor and Beneficiary.
Trustor shall, upon demand, pay to Beneficiary all costs (including
attorneys' fees) reasonably incurred by Beneficiary in connection with any
such proceeding.
(f) Trustor shall immediately notify Beneficiary orally upon
learning of any filing by or against any landlord of a petition under the
Bankruptcy Code. Trustor shall thereafter promptly give written notice of
such filing to Beneficiary, setting forth any information available to
Trustor with respect to the date of such filing, the court in which such
petition was filed, and the relief sought therein. Trustor shall promptly
deliver to Beneficiary all notices, pleadings and other documents received
by Trustor in connection with any such proceeding.
7.15 No maintenance, repair or other obligation of Trustor hereunder
which relates to the "Property" shall apply to any Ground Leasehold with respect
to which the applicable Ground Lease imposes such obligation on the landlord so
long as (a) Trustor does not own the landlord's interest; (b) such landlord is
performing such obligation in accordance with the terms of such Ground Lease;
and (c) the Ground Lease has not been rejected by the landlord (or any trustee
thereof) under the Bankruptcy Code.
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<PAGE>
7.16 The generality of the provisions of this Deed of Trust shall not
be limited by any provision of this Section 7 that sets forth particular
-
obligations of Trustor as the tenant under the Ground Leases.
7.17 Trustor hereby represents and warrants to Beneficiary as follows:
(a) The Existing Ground Lease is in full force and effect;
(b) Trustor owns the entire tenant's interest under the Existing
Ground Lease and has the right under the Existing Ground Lease to execute
this Deed of Trust; and
(c) No default under the Existing Ground Lease remains uncured,
nor has any event occurred which, with the passage of time or service of
notice or both, would constitute such a default.
8. Miscellaneous Provisions.
------------------------
8.1 Additional Provisions. The Loan Documents fully state all of the
---------------------
terms and conditions of the parties' agreement regarding the matters mentioned
in or incidental to this Deed of Trust. The Loan Documents also grant further
rights to Beneficiary and contain further agreements and affirmative and
negative covenants by Trustor which apply to this Deed of Trust and to the
Property.
8.2 No Waiver or Cure.
-----------------
(a) Each waiver by Beneficiary or Trustee must be in writing,
and no waiver shall be construed as a continuing waiver. No waiver shall
be implied from any delay or failure by Beneficiary or Trustee to take
action on account of any default of Trustor. Consent by Beneficiary or
Trustee to any act or omission by Trustor shall not be construed as a
consent to any other or subsequent act or omission or to waive the
requirement for Beneficiary's or Trustee's consent to be obtained in any
future or other instance.
(b) If any of the events described below occurs, that event
alone shall not: cure or waive any breach, Event of Default or notice of
default under this Deed of Trust or invalidate any act performed pursuant
to any such default or notice; or nullify the effect of any notice of
default or sale (unless all Secured Obligations then due have been paid and
performed and all other defaults under the Loan Documents have been cured);
or impair the security of this Deed of Trust; or prejudice Beneficiary,
Trustee or any receiver in the exercise of any right or remedy afforded any
of them under this Deed of Trust; or be construed as an affirmation by
Beneficiary of any tenancy, lease or option, or a subordination of the lien
of this Deed of Trust:
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<PAGE>
(i) Beneficiary, its agent or a receiver takes possession
of all or any part of the Property in the manner provided in
Subsection 6.3(c).
(ii) Beneficiary collects and applies Rents as permitted
under Sections 2.3 and 6.6, either with or without taking possession
--- ---
of all or any part of the Property.
(iii) Beneficiary receives and applies to any Secured
Obligation proceeds of any Property, including any proceeds of
insurance policies, condemnation awards, or other claims, property or
rights assigned to Beneficiary under Section 5.5.
---
(iv) Beneficiary makes a site visit, observes the Property
and/or conducts tests as permitted under this Deed of Trust or under
the Loan Agreement.
(v) Beneficiary receives any sums under this Deed of Trust
or any proceeds of any collateral held for any of the Secured
Obligations, and applies them to one or more Secured Obligations.
(vi) Beneficiary, Trustee or any receiver invokes any right
or remedy provided under this Deed of Trust.
8.3 Powers of Beneficiary and Trustee.
---------------------------------
(a) Trustee shall have no obligation to perform any act which it
is empowered to perform under this Deed of Trust unless it is requested to
do so in writing and is reasonably indemnified against loss, cost,
liability and expense.
(b) If either Beneficiary or Trustee performs any act which it
is empowered or authorized to perform under this Deed of Trust or the Loan
Agreement, that act alone shall not release or change the personal
liability of any person for the payment and performance of the Secured
Obligations then outstanding, or the lien of this Deed of Trust on all or
the remainder of the Property for full payment and performance of all
outstanding Secured Obligations. The liability of the original Trustor
shall not be released or changed if Beneficiary grants any successor in
interest to Trustor any extension of time for payment, or modification of
the terms of payment, of any Secured Obligation. Beneficiary shall not be
required to comply with any demand by the original Trustor that Beneficiary
refuse to grant such an extension or modification to, or commence
proceedings against, any such successor in interest.
(c) Beneficiary may take any of the actions permitted under
Subsections 6.3(b), 6.3(c), 6.7 and/or the Loan Agreement regardless of the
------ ------ ---
adequacy of the security for the Secured Obligations, or whether any or all
of the Secured
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<PAGE>
Obligations have been declared to be immediately due and payable, or
whether notice of default and election to sell has been given under this
Deed of Trust.
(d) From time to time, Trustor, Beneficiary or Trustee may apply
to any court of competent jurisdiction for aid and direction in executing
the trust and enforcing the rights and remedies created under this Deed of
Trust. Trustor, Beneficiary or Trustee may from time to time obtain orders
or decrees directing, confirming or approving acts in executing this trust
and enforcing these rights and remedies.
8.4 Merger. No merger shall occur as a result of Beneficiary's
------
acquiring any other estate in or any other lien on the Property unless
Beneficiary consents to a merger in writing.
8.5 Joint and Several Liability. If Trustor consists of more than
---------------------------
one person, each shall be jointly and severally liable for the faithful
performance of all of Trustor's obligations under this Deed of Trust.
8.6 Applicable Law. This Deed of Trust shall be governed by Nevada
--------------
law.
8.7 Successors in Interest. The terms, covenants and conditions of
----------------------
this Deed of Trust shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties. However, this Section 8.7 does not waive
---
the provisions of Section 6.1.
---
8.8 Interpretation.
--------------
(a) Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The captions of the
sections of this Deed of Trust are for convenience only and do not define
or limit any terms or provisions. The word "include(s)" means "include(s),
without limitation," and the word "including" means "including, but not
limited to."
(b) The word "obligations" is used in its broadest and most
comprehensive sense, and includes all primary, secondary, direct, indirect,
fixed and contingent obligations. It further includes all principal,
interest, prepayment charges, late charges, loan fees and any other fees
and charges accruing or assessed at any time, as well as all obligations to
perform acts or satisfy conditions.
(c) No listing of specific instances, items or matters in any
way limits the scope or generality of any language of this Deed of Trust.
The Exhibit to this Deed of Trust is hereby incorporated in this Deed of
Trust.
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<PAGE>
(d) The terms of the Loan Agreement shall prevail over the terms
of this Deed of Trust in the event of any conflict.
8.9 In-House Counsel Fees. Whenever Trustor is obligated to pay or
---------------------
reimburse Beneficiary or Trustee for any attorneys' fees, those fees shall
include the reasonably allocated costs for services of in-house counsel.
8.10 Waiver of Marshaling. Trustor waives all rights, legal and
--------------------
equitable, it may now or hereafter have to require marshaling of assets or to
require upon foreclosure sales of assets in a particular order, including any
rights provided by NRS 100.040 and 100.050, as such Sections may be amended or
recodified from time to time. Each successor and assign of Trustor, including
any holder of a lien subordinate to this Deed of Trust, by acceptance of its
interest or lien agrees that it shall be bound by the above waiver, as if it had
given the waiver itself.
8.11 Severability. If any provision of this Deed of Trust should be
------------
held unenforceable or void, that provision shall be deemed severable from the
remaining provisions and in no way affect the validity of this Deed of Trust.
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<PAGE>
8.12 Notices. Trustor hereby requests that a copy of notice of
-------
default and notice of sale be mailed to it at the address set forth below. That
address is also the mailing address of Trustor as debtor under the Nevada
Uniform Commercial Code. Beneficiary's address given below is the address for
Beneficiary as secured party under the Nevada Uniform Commercial Code.
"Trustor"
COAST HOTELS AND CASINOS, INC.,
a Nevada corporation
By ______________________________
Gage Parrish, Vice President and
Chief Financial Officer
Address Where Notices to Trustor
Are to Be Sent:
Coast Hotels and Casinos, Inc.
4500 West Tropicana Road
Las Vegas, Nevada 89103
Address Where Notices to Trustee
Are to Be Sent:
Equitable Deed Company
555 South Flower Street
Los Angeles, California 90071
Address Where Notices to Beneficiary
Are to Be Sent:
Bank of America National Trust and Savings
Association
555 South Flower Street
Los Angeles, California 90071
Attention: Janice Hammond, Vice President
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<PAGE>
STATE OF _____________ )
) SS.
COUNTY OF ____________ )
On ____________________ before me (here insert name and title of the
officer) personally appeared ________________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s),
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________ (Seal)
STATE OF ______________ )
) SS.
COUNTY OF ____________ )
On ____________________ before me (here insert name and title of the
officer) personally appeared ______________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s),
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________ (Seal)
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<PAGE>
EXHIBIT A
EXHIBIT A to DEED OF TRUST executed as of ________, 1999, by COAST
HOTELS AND CASINOS, INC., a Nevada corporation, as "Trustor", to EQUITABLE DEED
COMPANY, as "Trustee", for the benefit of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association, as "Beneficiary."
All that certain real property located in the County of Clark, State
of Nevada, described as follows:
Exhibit A
Page 1 of
----
<PAGE>
EXHIBIT 10.54
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Sheppard, Mullin, Richter & Hampton, LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attention: Richard L. Sommers, Esquire
INSTRUCTIONS TO COUNTY RECORDER:
Please index this document as
(1) a construction deed of trust
(2) assignment of rents and leases; and
(3) a fixture filing.
___________________________________________________________________________
(Space above for Recorder's Use)
CONSTRUCTION DEED OF TRUST
with Assignment of Rents and Fixture Filing
NOTICE: THE OBLIGATIONS SECURED HEREBY PROVIDE FOR THE PERIODIC INCREASES
AND/OR DECREASES IN THE APPLICABLE INTEREST RATE.
NOTICE: THE OBLIGATIONS SECURED HEREBY INCLUDE REVOLVING CREDIT OBLIGATIONS
WHICH PERMIT BORROWING, REPAYMENT AND REBORROWING.
The parties to this Construction Deed of Trust with Assignment of Rents and
Fixture Filing ("Deed of Trust"), made as of March 18, 1999, are COAST HOTELS
AND CASINOS, INC., a Nevada corporation, as trustor ("Trustor"), EQUITABLE DEED
COMPANY, a California corporation, as trustee ("Trustee"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as
beneficiary ("Beneficiary"), as "Administrative Agent" for itself and the other
lenders (collectively, the "Lenders") now or hereafter a party to that certain
Loan Agreement (the "Loan Agreement") dated as of March 18, 1999 among
Beneficiary (in its individual capacity) and the Lenders as the lenders, Trustor
as the borrower, and Beneficiary as the administrative agent. Capitalized terms
used herein but not defined herein have the meanings given them in the Loan
Agreement.
Pursuant to the Loan Agreement, Beneficiary and the Lenders have agreed to
make loans and letters of credit available to Trustor in the aggregate maximum
principal amount (including future advances) of $75,000,000 (collectively, the
"Loan"). The Loan Agreement also provides for certain interest rate hedging
arrangements entered into with the Lenders with respect to the indebtedness
under the Loan Agreement (the "Secured Swap Agreements") to be secured by this
Deed of Trust.
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<PAGE>
1. Grant in Trust and Secured Obligations.
--------------------------------------
1.1 Grant in Trust. For the purpose of securing payment and
--------------
performance of the Secured Obligations defined and described in Section 1.2,
---
Trustor hereby irrevocably and unconditionally grants, conveys, transfers and
assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale
and right of entry and possession, all estate, right, title and interest which
Trustor now has or may later acquire in and to the following property (all or
any part of such property, or any interest in all or any part of it, as the
context may require, the "Property"):
(a) The real property located in the County of Clark, State of
Nevada (the "County"), as described in Exhibit A, together with all
---------
existing and future easements and rights affording access to it (the
"Land"); together with
(b) All of Trustor's right, title and interest under and in
connection with that certain Ground Lease Agreement, dated as of October
28, 1994, by and among Wanda Peccole, as successor Trustee of The Peccole
1982 Trust dated February 15, 1982 and The William Peter And Wanda Ruth
Peccole Family Limited Partnership, a Nevada limited partnership
(collectively, as "Owner") and 21 Stars, Ltd., a Nevada limited liability
company (as "Landlord") and Barbary Coast Hotel & Casino, a Nevada general
partnership (as "Tenant") (the "Existing Ground Lease"), a memorandum of
which was recorded on November 1, 1994, in Book 941101, as Instrument No.
01375, in the Official Records of Clark County, Nevada, including, without
limitation, (i) all options to extend or renew the Existing Ground Lease
(and the leasehold estate for the term of each extension or renewal), (ii)
all options and rights of first refusal contained in the Existing Ground
Lease to purchase the portion of the Land which is subject to the Existing
Ground Lease, and (iii) all of Trustor's other rights, titles and interests
under the Existing Ground Lease; together with
(c) All buildings, structures and improvements now located or
later to be constructed on the Land, all parking areas, roads, driveways,
walks, fences, walls, berms, landscaping, recreation facilities, lighting
facilities and other on site improvements (the "Improvements"); together
with
(d) All existing and future appurtenances, privileges,
easements, franchises, hereditaments and tenements of the Land, including
all minerals, oil, gas, other hydrocarbons and associated substances,
sulphur, nitrogen, carbon dioxide, helium and other commercially valuable
substances which may be in, under or produced from any part of the Land,
all development rights and credits, air rights, water, water courses, water
rights (whether riparian, appropriative or otherwise, and whether or not
appurtenant), water stock and water permits (together with the statutory
right to file applications to change, and any and all applications to
change the same), including any water permits, and any land lying in the
streets, roads or avenues, open or proposed, in front of or adjoining the
Land and Improvements; together with
-2-
<PAGE>
(e) All existing and future leases, subleases, subtenancies,
licenses, occupancy agreements and concessions ("Leases", which shall not
include the Existing Ground Lease) relating to the use and enjoyment of all
or any part of the Land and Improvements, whether written or oral and
whether in existence at or upon the recordation of this Deed of Trust or
entered into after the recordation of this Deed of Trust, and all rents,
security deposits, royalties, issues, profits, receipts, earnings, revenue,
income, products and proceeds and other benefits of the Land and
Improvements, whether now due, past due or to become due, including all
prepaid rents, security deposits, fixed, additional and contingent rents,
deficiency rents and liquidated damages, license fees, occupancy charges,
hotel room charges, cabana charges, casino revenues, show ticket revenues,
food and beverage revenues, room service revenues, merchandise sales
revenues, parking, maintenance, common area, tax, insurance, utility and
service charges and contributions, proceeds of sale of electricity, gas,
heating, air conditioning, cable and other utilities and services,
instruction fees, membership charges, restaurant, snack bar and shop
revenues, liquidated damages, and all other rights to payments; together
with and any and all guaranties and other agreements relating to or made in
connection with any of such leases; together with
(f) All real property and improvements on it, and all
appurtenances and other property and interests of any kind or character,
whether described in Exhibit A or not, which are reasonably necessary or
---------
desirable to promote the present and any reasonable future beneficial use
and enjoyment of the Land and Improvements; together with
(g) All goods, materials, supplies, chattels, furniture,
fixtures, equipment and machinery now or later to be attached to, placed in
or on, or used in connection with the use, enjoyment, occupancy or
operation of all or any part of the Land and Improvements, whether stored
on the Land or elsewhere, including all pumping plants, engines, pipes,
ditches and flumes, and also all gas, electric, cooking, heating, cooling,
air conditioning, lighting, refrigeration and plumbing fixtures and
equipment, all water, sanitary and storm sewer, drainage, electricity,
steam, gas, telephone, cable and other utility equipment and facilities,
all plumbing, lighting, heating, ventilating, air conditioning,
refrigerating, incinerating, compacting, fire protection and sprinkler,
surveillance and security, vacuum cleaning, public address and
communications equipment and systems, all kitchen and laundry appliances,
screens, awnings, floor coverings, partitions, elevators, escalators,
motors, machinery, pipes, fittings and other items of equipment and
property of every kind and description, all of which shall be considered to
the fullest extent of the law to be real property for purposes of this Deed
of Trust; together with
(h) All building materials, equipment, work in process or other
personal property of any kind, whether stored on the Land or elsewhere,
which have
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<PAGE>
been or later will be acquired for the purpose of being delivered to,
incorporated into or installed in or about the Land or Improvements;
together with
(i) All rights to the payment of money, accounts, accounts
receivable, reserves, deferred payments, refunds, cost savings, payments
and deposits, room revenues, food revenues, beverage revenues and casino
revenues, whether now or later to be received from third parties or
deposited by Trustor with third parties (including all utility deposits),
contract rights, development and use rights, governmental permits and
licenses, applications, architectural and engineering plans, specifications
and drawings, as-built drawings, chattel paper, instruments, documents,
notes, drafts and letters of credit (other than letters of credit in favor
of Beneficiary), which arise from or relate to construction on the Land or
to any business now or later to be conducted on it, or to the Land and
Improvements generally; together with
(j) All proceeds, including all claims to and demands for them,
of the voluntary or involuntary conversion of any of the Land, Improvements
or the other property described above into cash or liquidated claims,
including proceeds of all present and future fire, hazard or casualty
insurance policies and all condemnation awards or payments now or later to
be made by any public body or decree by any court of competent jurisdiction
for any taking or in connection with any condemnation or eminent domain
proceeding, and all causes of action and their proceeds for any damage or
injury to the Land, Improvements or the other property described above or
any part of them, or breach of warranty in connection with the construction
of the Improvements, including causes of action arising in tort, contract,
fraud or concealment of a material fact; together with
(k) All books and records pertaining to any and all of the
property described above, including computer readable memory and any
computer hardware or software necessary to access and process such memory
("Books and Records"); together with
(l) All proceeds of, additions and accretions to, substitutions
and replacements for, and changes in any of the property described above,
including all proceeds of any voluntary or involuntary disposition or claim
respecting any such property (arising out of any judgment, condemnation or
award, or otherwise arising) and all goods, documents, general intangibles,
chattel paper and accounts, wherever located, acquired with cash proceeds
of any of the foregoing or its proceeds,
provided that the term "Property", as used in this Deed of Trust, shall not
- -------- ---
include (i) any personal property or fixtures, the purchase of which was
financed by a purchase money security interest, including any Capital Lease
Obligation, permitted under Section 6.9 or 6.10 of the Loan Agreement, (ii) any
--- ----
capital stock or other equity interests in any gaming licensees, and (iii) any
gaming licenses and liquor licenses which are not transferable.
-4-
<PAGE>
Trustor shall and will warrant and forever defend the Property in the quiet and
peaceable possession of the Trustee, its successors and assigns against all and
every person or persons lawfully claiming or to claim the whole or any part
thereof. Trustor agrees that any greater title to the Property hereafter
acquired by Trustor during the term hereof shall be subject hereto.
1.2 Secured Obligations.
-------------------
(a) Trustor makes the grant, conveyance, transfer and assignment
set forth in Section 1.1 for the purpose of securing the following
---
obligations (the "Secured Obligations") in any order of priority that
Beneficiary may choose:
(i) Payment of all obligations at any time owing under each
of the promissory notes (collectively, the "Notes") issued from time
to time pursuant to the Loan Agreement, payable by Trustor, as maker,
in the aggregate principal amount of Seventy-Five Million Dollars
($75,000,000), including any and all obligations to pay interest
thereon;
(ii) Payment and performance of all obligations of Trustor
under this Deed of Trust;
(iii) Payment and performance of all obligations of Trustor
under the Loan Agreement;
(iv) Payment and performance of any obligations of Trustor
under any of the "Loan Documents," as defined in the Loan Agreement,
which are executed by Trustor, provided that this Deed of Trust shall
--------
not secure the Hazardous Materials Indemnity set forth in Section
11.22 of the Loan Agreement;
-----
(v) Payment and performance of all future advances and
other obligations that Trustor or any successor in ownership of all or
part of the Property may agree to pay and/or perform (whether as
principal, surety or guarantor) for the benefit of Beneficiary and/or
any of the Lenders, when a writing evidences the parties' agreement
that the advance or obligation be secured by this Deed of Trust;
(vi) Payment and performance of the obligations of Trustor
under each Secured Swap Agreement; and
(vii) Payment and performance of all modifications,
amendments, extensions and renewals, however evidenced, of any of the
Secured Obligations.
-5-
<PAGE>
(b) All persons who may have or acquire an interest in all or any
part of the Property will be considered to have notice of, and will be
bound by, the terms of the Secured Obligations and each other agreement or
instrument made or entered into in connection with each of the Secured
Obligations. Such terms include any provisions in the Notes or the Loan
Agreement which permit borrowing, repayment and reborrowing, or which
provide that the interest rate on one or more of the Secured Obligations
may vary from time to time.
1.3 Future Advances (NRS 106.300, et seq). It is the intention of
-------------------------------------
Trustor, Beneficiary and the Lenders that this Deed of Trust is an "instrument"
(as defined in NRS 106.330, as amended or recodified from time to time) which
secures "future advances" (as defined in NRS 106.320, as amended or recodified
from time to time) and which is governed pursuant to NRS 106.300 through
106.400, as amended or recodified from time to time ("NRS" means Nevada Revised
Statutes). It is the intention of the parties that the Secured Obligations
include the obligation of the Trustor to repay "future advances" of "principal"
(as defined in NRS 106.345, as amended or recodified from time to time) in an
amount up to the Commitment which is initially $75,000,000, and that the lien of
this Deed of Trust secures the obligation of Trustor to repay all such "future
advances" with the priority set forth in NRS 106.370(1), as amended or
recodified from time to time.
2. Assignment of Rents.
-------------------
2.1 Assignment. Subject to Section 2.2 hereof, effective upon the
---------- ---
recordation of this Deed of Trust, Trustor hereby irrevocably, absolutely,
presently and unconditionally assigns to Beneficiary all rents, royalties,
issues, profits, revenue, income and proceeds of the Property, including the
fees, charges, accounts or other payments for the use or occupancy of rooms and
other public facilities, whether now due, past due or to become due, including
all prepaid rents and security deposits (some or all collectively, as the
context may require, "Rents"). This is an absolute assignment, not an
assignment for security only.
2.2 Grant of License. Beneficiary hereby confers upon Trustor a
----------------
license ("License") to collect and retain the Rents as they become due and
payable, so long as no Event of Default, as defined in Section 6.2, shall exist
---
and be continuing. If an Event of Default has occurred and is continuing,
Beneficiary shall have the right, which it may choose to exercise in its sole
discretion, to terminate this License without notice to or demand upon Trustor,
and without regard to the adequacy of Beneficiary's security under this Deed of
Trust.
2.3 Collection and Application of Rents. Subject to the License
-----------------------------------
granted to Trustor under Section 2.2, Beneficiary has the right, power and
---
authority to collect any and all Rents. Subject to applicable Gaming Laws,
Trustor hereby appoints Beneficiary its attorney-in-fact to perform any and all
of the following acts, if and at the times when Beneficiary in its sole
discretion may so choose:
(a) Demand, receive and enforce payment of any and all Rents; or
-6-
<PAGE>
(b) Give receipts, releases and satisfactions for any and all
Rents; or
(c) Sue either in the name of Trustor or in the name of
Beneficiary for any and all Rents.
Beneficiary's right to the Rents does not depend on whether or not Beneficiary
takes possession of the Property as permitted under Subsection 6.3(c). In
------
Beneficiary's sole discretion, Beneficiary may choose to collect Rents either
with or without taking possession of the Property. Beneficiary shall apply all
Rents collected by it in the manner provided under Section 6.6. If an Event of
---
Default occurs while Beneficiary is in possession of all or part of the Property
and is collecting and applying Rents as permitted under this Deed of Trust,
Beneficiary, Trustee and any receiver shall nevertheless be entitled to exercise
and invoke every right and remedy afforded any of them under this Deed of Trust
and at law and in equity, including the right to exercise the power of sale
granted under Section 1.1 and Subsection 6.3(g).
--- ------
2.4 Beneficiary Not Responsible. Under no circumstances shall
---------------------------
Beneficiary have any duty to produce Rents from the Property. Regardless of
whether or not Beneficiary, in person or by agent, takes actual possession of
the Land and Improvements, Beneficiary is not and shall not be deemed to be:
(a) A "mortgagee in possession" for any purpose; or
(b) Responsible for performing any of the obligations of the
lessor under any lease; or
(c) Responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any
negligence in the management, upkeep, repair or control of the Property; or
(d) Liable in any manner for the Property or the use, occupancy,
enjoyment or operation of all or any part of it.
2.5 Trustor shall not accept any deposit or prepayment of Rents for any
rental period exceeding two (2) months without Beneficiary's prior written
consent, which shall not be unreasonably withheld or delayed. Trustor shall not
lease the Property or any part of it in a manner which would violate the Loan
Agreement.
3. Grant of Security Interest.
--------------------------
3.1 Security Agreement. The parties intend for this Deed of Trust to
------------------
create a lien on and security interest in the Property, and an absolute
assignment of the Rents and the Leases, all in favor of Beneficiary. The
parties acknowledge that some of the Property and
-7-
<PAGE>
some of the Rents and Leases may be determined under applicable law to be
personal property or fixtures. To the extent such Property, Rents or Leases
constitute personal property, Trustor, as debtor, hereby grants to Beneficiary,
as secured party, a security interest in all such Property, Rents and Leases, to
secure payment and performance of the Secured Obligations, and Trustor, as
debtor, also has granted a security interest in such Property, Rents and Leases
pursuant to that certain Security Agreement dated as of March 18, 1999, executed
by Trustor, as debtor, in favor of Beneficiary, as secured party. This Deed of
Trust constitutes a security agreement under the Nevada Uniform Commercial Code,
as amended or recodified from time to time, covering all such Property, Rents
and Leases. To the extent such Property, Rents or Leases are not real property
encumbered by the lien created by Section 1.1, above, and are not absolutely
---
assigned by the assignment set forth in Section 2.1, above, it is the intention
---
of the parties that such Property, Rents and/or Leases shall constitute
"proceeds, product, offspring, rents or profits" (as defined in and for the
purposes of Section 552(b) of the United States Bankruptcy Code, as such Section
may be modified or supplemented) of the Land and Improvements, and/or "fees,
charges, accounts, or other payments for the use or occupancy of rooms and other
public facilities in . . . lodging properties," as applicable (as such terms are
defined in and for the purpose of Section 552(b) of the United States Bankruptcy
Code, as such Section may be modified or supplemented).
3.2 Financing Statements. Trustor shall execute one or more
--------------------
financing statements and such other documents as Beneficiary may from time to
time reasonably require to perfect or continue the perfection of Beneficiary's
security interest in any Property, Rents or Leases. Notwithstanding anything
contained herein, Trustor shall not be required under any circumstance to take
any further action to perfect any interest granted to Beneficiary in any cage
cash, deposit accounts, markers, instruments or other cash items which are used
in connection with the casino operations of Trustor. Trustor shall pay all
reasonable fees and costs that Beneficiary may incur in filing such documents in
public offices and in obtaining such record searches as Beneficiary may
reasonably require. If Trustor fails to execute any financing statements or
other documents for the perfection or continuation of any security interest,
Trustor hereby appoints Beneficiary as its true and lawful attorney-in-fact
(which appointment is irrevocable and coupled with an interest) to execute any
such documents on its behalf. If any financing statement or other document is
filed in the records normally pertaining to personal property, that filing shall
never be construed as in any way derogating from or impairing this Deed of Trust
or the rights or obligations of the parties under it.
4. Fixture Filing; Construction Mortgage.
-------------------------------------
4.1 Fixture Filing. This Deed of Trust constitutes a financing
--------------
statement filed as a fixture filing under NRS 104.9402(6) of the Nevada Uniform
Commercial Code, as amended or recodified from time to time, covering any
Property which now is or later may become fixtures attached to the Land or
Improvements. In connection therewith, the addresses of Trustor, as debtor, and
Beneficiary, as secured party, are as set forth in Section 8.12, below. The
----
foregoing address of Beneficiary, as secured party, is also the address from
which information concerning the security interest may be obtained by any
-8-
<PAGE>
interested party. The property subject to this fixture filing is described in
Section 1.1, above. Portions of the property subject to this fixture filing as
---
identified in this Section are or are to become fixtures related to the real
estate described in Exhibit A attached hereto.
---------
4.2 Construction Mortgage. This Deed of Trust constitutes a
---------------------
"construction mortgage" as that term is defined in NRS 104.9313(1)(c), as
amended or recodified from time to time, and as used in the Nevada Uniform
Commercial Code, as amended or recodified from time to time.
5. Rights and Duties of the Parties.
--------------------------------
5.1 Representations and Warranties. Trustor represents and warrants
------------------------------
that, except as previously disclosed to Beneficiary in a writing making
reference to this Section 5.1:
---
(a) Trustor lawfully possesses and holds the tenant's interest
in the Existing Ground Lease and title to all of the Improvements;
(b) Trustor has the full and unlimited power, right and
authority to encumber the Property and assign the Rents;
(c) This Deed of Trust creates a second priority lien on the
Property, junior solely to no more than $2,000,000 principal indebtedness
under a deed of trust in favor of American Bank National Association,
recorded January 30, 1996 in Book No. 960130 and as Document Nos. 00397 and
00398 in the Official Records of Clark County, Nevada;
(d) Trustor's rights in the Property include all property and
rights which are reasonably necessary to promote the present and any
reasonable future beneficial use and enjoyment of the Land and Improvements
as a hotel casino;
(e) Trustor owns any Property which is personal property free
and clear of any security agreements (except as identified in Section 3.1
---
hereof), reservations of title or conditional sales contracts not of
record or not approved by or in favor of Beneficiary; and
(f) Trustor's place of business, or its chief executive office
if it has more than one place of business, is located at the address
specified below.
5.2 Taxes and Assessments. Trustor shall pay prior to delinquency
---------------------
all taxes, levies, charges and assessments, including assessments on appurtenant
water stock, imposed by any public or quasi-public authority or utility company
(collectively, "Impositions") which are (or if not paid, may become) a lien on
all or part of the Property or any interest in it, or which may cause any
decrease in the value of the Property or any part of
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<PAGE>
it. If any such taxes, levies, charges or assessments become delinquent,
Beneficiary may require Trustor to present evidence that they have been paid in
full, on thirty (30) days' written notice by Beneficiary to Trustor.
Notwithstanding the foregoing, Trustor shall not be required to pay any
Imposition so long as (i) its validity is being actively contested in good faith
and by appropriate proceedings, and (ii) Trustor has demonstrated to
Beneficiary's reasonable satisfaction that leaving such Imposition unpaid
pending the outcome of such proceedings could not result in conveyance of the
Property in satisfaction of such Imposition or otherwise impair Beneficiary's
interest under this Deed of Trust.
5.3 Performance of Secured Obligations. Trustor shall promptly pay
----------------------------------
and perform each Secured Obligation in accordance with its terms.
5.4 Liens, Charges and Encumbrances. Trustor shall immediately
-------------------------------
discharge any Lien on the Property which Beneficiary has not consented to in
writing, except Permitted Encumbrances and Permitted Rights of Others. Trustor
shall pay when due each obligation secured by or reducible to a Lien, charge or
encumbrance which now does or later may encumber or appear to encumber all or
part of the Property or any interest in it, whether the Lien, charge or
encumbrance is or would be senior or subordinate to this Deed of Trust, except
any Permitted Encumbrances and Permitted Rights of Others. This Section 5.4 is
---
subject to Trustor's right, granted in the Loan Agreement, to contest in good
faith claims and liens for labor done and materials and services furnished in
connection with construction of the Improvements and the right of Trustor to
contest Liens by appropriate proceedings diligently pursued provided Trustor has
established and maintained reserves therefor which are reasonably acceptable to
the Administrative Agent.
5.5 Damages and Insurance and Condemnation Proceeds.
-----------------------------------------------
(a) Trustor hereby absolutely and irrevocably assigns to
Beneficiary, and authorizes the payor to pay to Beneficiary the following
claims, causes of action, awards, payments and rights to payment:
(i) All awards of damages and all other compensation
payable directly or indirectly because of a condemnation, proposed
condemnation or taking for public or private use which affects all or
part of the Property or any interest in it;
(ii) All other awards, claims and causes of action, arising
out of any warranty affecting all or any part of the Property, or for
damage or injury to or decrease in value of all or part of the
Property or any interest in it;
(iii) All proceeds of any insurance policies payable because
of loss sustained to all or part of the Property in excess of
$250,000; and
(iv) All interest which may accrue on any of the foregoing.
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<PAGE>
(b) Trustor shall immediately notify Beneficiary in writing if:
(i) Any damage occurs or any injury or loss is sustained in
the amount of $250,000 or more to all or part of the Property, or any
action or proceeding relating to any such damage, injury or loss is
commenced; or
(ii) Any offer is made, or any action or proceeding is
commenced, which relates to any actual or proposed condemnation or
taking of all or part of the Property.
(c) If Beneficiary chooses to do so, Beneficiary may in its own
name appear in or prosecute any action or proceeding to enforce any cause
of action based on warranty, or for damage, injury or loss to all or part
of the Property, and Beneficiary may make any compromise or settlement of
the action or proceeding. Beneficiary, if it so chooses, may participate in
any action or proceeding relating to condemnation or taking of all or part
of the Property, and may join Trustor in adjusting any loss covered by
insurance.
(d) All proceeds of these assigned claims, other property and
rights which Trustor may receive or be entitled to shall be paid to
Beneficiary. In each instance, Beneficiary shall apply such proceeds first
toward reimbursement of all of Beneficiary's reasonable costs and expenses
of recovering the proceeds, including reasonable attorneys' fees. Such
attorneys' fees shall include the reasonably allocated costs for services
of in-house counsel. If, in any instance, each and all of the following
conditions are satisfied in Beneficiary's reasonable judgment, Beneficiary
must permit Trustor to use the balance of such proceeds ("Net Claims
Proceeds") to pay costs of repairing or reconstructing the Property in the
manner described below:
(i) The plans and specifications, cost breakdown,
construction contract, construction schedule, contractor and payment
and performance bond for the work of repair or reconstruction must all
be reasonably acceptable to Beneficiary;
(ii) Beneficiary must receive evidence reasonably
satisfactory to it that after repair or reconstruction, the Property
would be not substantially less valuable than prior to the damage or
condemnation;
(iii) The Net Claims Proceeds must be sufficient in
Beneficiary's reasonable determination to pay for the total cost of
repair or reconstruction, including all associated development costs
and interest projected to be payable on the Secured Obligations until
the repair or reconstruction is complete; or Trustor must provide its
own funds in an amount equal to the difference between the Net Claims
Proceeds and a reasonable
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<PAGE>
estimate, made by Trustor and found acceptable by Beneficiary, of the
total cost of repair or reconstruction; and
(iv) No Event of Default shall have occurred and be
continuing. If Beneficiary finds that such conditions have been met,
Beneficiary shall hold the Net Claims Proceeds and any funds which Trustor
is required to provide in an interest-bearing account and shall disburse
them to Trustor to pay costs of repair or reconstruction monthly as
incurred, subject to a 10% retention, to be disbursed upon presentation of
evidence reasonably satisfactory to Beneficiary that repair or
reconstruction has been completed satisfactorily and lien-free.
Disbursements hereunder shall first be made from Net Claims Proceeds prior
to reducing amounts contributed by Trustor. Any funds remaining upon the
completion of the repair or reconstruction shall be immediately returned to
Trustor. However, if Beneficiary finds that one or more of such conditions
have not been satisfied, Beneficiary may apply the Net Claims Proceeds to
pay or prepay (without premium) some or all of the Secured Obligations in
such order and proportions as Beneficiary in its sole discretion may
choose.
(e) Trustor hereby specifically, unconditionally and irrevocably
waives all rights of a property owner under all laws, including NRS 37.115,
as amended or recodified from time to time, which provide for allocation of
condemnation proceeds between a property owner and a lienholder, and any
other law or successor statute of similar import. Trustor hereby
specifically, unconditionally and irrevocably waives all right to recover
against Beneficiary or any Lender (or any officer, employee, agent or
representative of Beneficiary or any Lender) for any loss incurred by
Trustor from any cause insured against or required by any Loan Document to
be insured against; provided, however, that this waiver of subrogation
shall not be effective with respect to any insurance policy if the coverage
thereunder would be materially reduced or impaired as a result.
5.6 Maintenance and Preservation of Property.
----------------------------------------
(a) Trustor shall insure the Property as required by the Loan
Agreement and keep the Property in good condition and repair, reasonable
wear and tear excepted.
(b) Trustor shall not remove or demolish the Property or any
part of it with a fair market value reasonably determined by Beneficiary to
be in excess of $2,000,000, or materially alter, restore or add to the
Property (except as permitted by the Loan Agreement), or initiate or allow
any change in any zoning or other land use classification which materially
affects the Property or any part of it, except as permitted or required by
the Loan Documents or with Beneficiary's express prior written consent in
each instance.
-12-
<PAGE>
(c) If all or material part of the Property becomes damaged or
destroyed, Trustor shall promptly and completely repair and/or restore the
Property in a good and workmanlike manner in accordance with sound building
practices, provided that Beneficiary agrees to disburse insurance proceeds
to pay costs of the work of repair or reconstruction under Section 5.5.
---
(d) Trustor shall not commit or allow any act upon or use of the
Property which would violate: (i) any applicable law or order of any
governmental authority in any material respect, whether now existing or
later to be enacted; or (ii) any public or private covenant, condition,
restriction or equitable servitude affecting the Property. Trustor shall
not bring or keep any article on the Property or cause or allow any
condition to exist on it, if that could invalidate or would be prohibited
by any insurance coverage required to be maintained by Trustor on the
Property or any part of it under the Loan Agreement.
(e) Trustor shall not commit or allow waste of the Property.
(f) Trustor shall perform all other acts which from the
character or use of the Property may be reasonably necessary to maintain
and preserve its value.
5.7 Insurance.
---------
(a) Trustor shall maintain the following insurance with respect
to the Property:
(i) Trustor shall provide, maintain and keep in force at
all times during any period of construction with respect to the
portion of the Property affected by such construction a policy or
policies of builder's "all risk" insurance in nonreporting form in an
amount not less than the full insurable current value of such portion
of the Property on a replacement cost basis. The policy or policies
shall insure against loss or damage by hazards customarily included
within such "all risk" policies and any other risks or hazards which
Beneficiary may reasonably specify (and shall include boiler and
machinery insurance), and each shall contain a Lender's Loss Payable
Endorsement (Form 438 BFU or equivalent) in favor of Beneficiary.
(ii) Trustor shall provide, maintain and keep in force at
all times for all portions of the Property not covered by a policy or
policies described in Section 5.7(a)(i), above, a policy or policies
---------
of fire and hazards "all risk" insurance providing extended coverage,
in an amount not less than the full insurable value of such portions
of the Property on a replacement cost basis. The policy or policies
shall insure against loss or damage by hazards customarily included
within "all risk" and "extended coverage" policies and any other risks
or hazards which Beneficiary may reasonably specify (and shall include
boiler and machinery insurance), and each shall contain a Lender's
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<PAGE>
Loss Payable Endorsement (Form 438 BFU or equivalent) in favor of
Beneficiary.
(iii) Trustor shall provide, maintain and keep in force at
all times for all portions of the Property any policy or policies of
business interruption insurance that Beneficiary reasonably requires
(including insurance against income loss during a period of at least
one (1) year), and each such policy shall contain a Lender's Loss
Payable Endorsement (Form 438 BFU or equivalent) in favor of
Beneficiary.
(iv) Trustor shall provide, maintain and keep in force at
all times a policy or policies of comprehensive liability insurance
naming Beneficiary as Administrative Agent as additional insured, on
an "occurrence" basis, against claims for "personal injury" liability,
including bodily injury, death or property damage liability, with a
limit of not less than One Hundred Million Dollars ($100,000,000).
Such insurance shall be primary and noncontributory with any other
insurance carried by Beneficiary.
(v) Trustor shall provide, maintain and keep in force at
all times such policies of worker's compensation insurance as may be
required by applicable laws (including employer's liability insurance,
if reasonably required by Beneficiary), covering all required
employees of Trustor and each required contractor and subcontractor.
(vi) Trustor shall provide, maintain and keep in force at
all times any and all additional insurance, as is carried by
responsible companies engaged in similar businesses and owning similar
assets in the general areas in which Trustor operates, that
Beneficiary in its reasonable judgment may from time to time require.
(b) All such policies of insurance shall be issued by companies
approved by Beneficiary having a minimum A.M. Best's rating of A-. The
limits, coverage, forms, deductibles, inception and expiration dates and
cancellation provisions of all such policies shall be reasonably acceptable
to Beneficiary. Each property insurance policy maintained in connection
with any of the Property shall contain a Lender's Loss Payable Endorsement
(Form 438 BFU or equivalent) in favor of Beneficiary, and shall provide
that all proceeds be payable to Beneficiary to the extent of its interest
in accordance with this Deed of Trust. Each liability insurance policy
maintained in connection with any of the Property shall name Beneficiary,
as Administrative Agent for the Lenders, as additional insured. An
approval by Beneficiary is not, and shall not be deemed to be, a
representation of the solvency of any insurer or the sufficiency of any
amount of insurance. Each policy of insurance required hereunder shall
provide that it may not be modified or canceled without at
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<PAGE>
least thirty days' prior written notice to Beneficiary, and shall permit a
waiver of subrogation by Trustor in favor of Beneficiary and the Lenders.
(c) Upon reasonable notice from Beneficiary, Trustor shall
supply Beneficiary with certificates of each policy required hereunder and
any other policy of insurance maintained in connection with any of the
Property, together with an original or underlyer of each such policy and
all endorsements thereto. When any insurance policy required hereunder
expires, Trustor shall furnish Beneficiary with proof acceptable to
Beneficiary that the policy has been reinstated or a new policy issued,
continuing in force the insurance covered by the policy which expired. If
Trustor fails to pay any such premium, Beneficiary shall have the right,
but not the obligation, to obtain current coverage and advance funds to pay
the premiums for it. Trustor shall repay Beneficiary immediately on demand
for any advance for such premiums, which shall be considered to be an
additional loan to Trustor bearing interest at the Default Rate, and
secured by this Deed of Trust and any other collateral held by Beneficiary
in connection with the Secured Obligations.
5.8 Trustee's Acceptance of Trust. Trustee accepts this trust when
-----------------------------
this Deed of Trust is recorded.
5.9 Releases, Extensions, Modifications and Additional Security.
-----------------------------------------------------------
(a) From time to time, Beneficiary may perform any of the
following acts without incurring any liability or giving notice to any
person, and without affecting the personal liability of any person for the
payment of the Secured Obligations (except as provided below), and without
affecting the security hereof for the full amount of the Secured
Obligations on all Property remaining subject hereto, and without the
necessity that any sum representing the value of any portion of the
Property affected by the Beneficiary's action be credited on the Secured
Obligations:
(i) Release any person liable for payment of any Secured
Obligation;
(ii) Extend the time for payment, or otherwise alter the
terms of payment, of any Secured Obligation;
(iii) Accept additional real or personal property of any
kind as security for any Secured Obligation, whether evidenced by
deeds of trust, mortgages, security agreements or any other
instruments of security; or
(iv) Alter, substitute or release any property securing the
Secured Obligations.
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<PAGE>
(b) From time to time when requested to do so by Beneficiary in
writing, Trustee may perform any of the following acts without incurring
any liability or giving notice to any person:
(i) Consent to the making of any plat or map of the
Property or any part of it;
(ii) Join in granting any easement or creating any
restriction affecting the Property;
(iii) Join in any subordination or other agreement affecting
this Deed of Trust or the lien of it; or
(iv) Reconvey the Property or any part of it without any
warranty.
5.10 Reconveyance. When all of the Secured Obligations have been paid
------------
in full, Beneficiary shall request Trustee in writing to reconvey the Property,
and shall surrender this Deed of Trust and all notes and instruments evidencing
the Secured Obligations to Trustee. When Trustee receives Beneficiary's written
request for reconveyance and all fees and other sums owing to Trustee by
Trustor, Trustee shall promptly reconvey the Property, or so much of it as is
then held under this Deed of Trust, without warranty to the person or persons
legally entitled to it. Such person or persons shall pay any costs of
recordation. In the reconveyance, the grantee may be described as "the person or
persons legally entitled thereto," and the recitals of any matters or facts
shall be conclusive proof of their truthfulness. Neither Beneficiary nor Trustee
shall have any duty to determine the rights of persons claiming to be rightful
grantees of any reconveyance. The Trustee shall confirm the release of its lien
on any personal property disposed of in accordance with the Loan Agreement.
5.11 Compensation, Exculpation.
-------------------------
(a) Trustor agrees to pay reasonable fees as may be charged by
Beneficiary and Trustee subject to the maximum amounts legally permitted,
or reasonable fees as may be charged by Beneficiary and Trustee when the
law provides no maximum limit, for any services that Beneficiary or Trustee
may render in connection with this Deed of Trust, including Beneficiary's
providing a statement of the Secured Obligations or Trustee's rendering of
services in connection with a reconveyance. Trustor shall also pay or
reimburse all of Beneficiary's and Trustee's reasonable costs and expenses
which may be incurred in rendering any such services. Trustor further
agrees to pay or reimburse Beneficiary for all reasonable costs, expenses
and other advances which may be incurred or made by Beneficiary or Trustee
in any efforts to enforce any terms of this Deed of Trust, including any
rights or remedies afforded to Beneficiary or Trustee or both of them under
Section 6.3, whether any lawsuit is filed or not, or in defending any
action or proceeding arising
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<PAGE>
under or relating to this Deed of Trust, including reasonable attorneys'
fees and other legal costs, costs of any Foreclosure Sale (as defined in
Subsection 6.3(h)) incurred in accordance with applicable law, and any cost
------
of evidence of title. If Beneficiary chooses to dispose of Property through
more than one Foreclosure Sale, Trustor shall pay all costs, expenses or
other advances that may be incurred or made by Trustee or Beneficiary in
each of such Foreclosure Sales.
(b) Beneficiary shall not be directly or indirectly liable to
Trustor or any other person as a consequence of any of the following:
(i) Beneficiary's exercise of or failure to exercise any
rights, remedies or powers granted to Beneficiary in this Deed of
Trust;
(ii) Beneficiary's failure or refusal to perform or
discharge any obligation or liability of Trustor under any agreement
related to the Property or under this Deed of Trust; or
(iii) Any loss sustained by Trustor or any third party
resulting from Beneficiary's failure to lease the Property, or from
any other act or omission of Beneficiary in managing the Property,
after an Event of Default, unless the loss is caused by the gross
negligence, willful misconduct or bad faith of Beneficiary.
To the extent permitted by applicable law, Trustor hereby expressly waives
and releases all liability of the types described above, and agrees that no
such liability shall be asserted against or imposed upon Beneficiary.
(c) Trustor shall pay all obligations to pay money arising under
this Section within ten Banking Days of demand by Trustee or Beneficiary.
Each such obligation shall be added to, and considered to be part of, the
principal of the Notes, and shall bear interest from the date the
obligation arises at the Default Rate described in the Loan Agreement.
5.12 Defense and Notice of Claims and Actions. At Trustor's sole
----------------------------------------
expense, Trustor shall protect, preserve and defend the Property and title to
and right of possession of the Property, and the security of this Deed of Trust
and the rights and powers of Beneficiary and Trustee created under it against
all adverse claims. Trustor shall give Beneficiary and Trustee prompt notice in
writing if any claim is asserted which does or could affect any of such matters,
or if any action or proceeding is commenced which alleges or relates to any such
claim.
5.13 Substitution of Trustee. From time to time, Beneficiary may
-----------------------
substitute a successor to any Trustee named in or acting under this Deed of
Trust in any manner now or later to be provided at law, or by a written
instrument executed and acknowledged by
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Beneficiary and recorded in the office of the Clark County Recorder. Any such
instrument shall be conclusive proof of the proper substitution of the successor
Trustee, who shall, automatically upon recordation of the instrument, succeed to
all estate, title, rights, powers and duties of the predecessor Trustee without
conveyance from it.
5.14 Subrogation. Beneficiary shall be subrogated to the liens of all
-----------
encumbrances, whether released of record or not, which are discharged in whole
or in part by Beneficiary in accordance with this Deed of Trust or with the
proceeds of any loan secured by this Deed of Trust.
5.15 Site Visits, Observation and Testing. Subject to compliance with
------------------------------------
Gaming Laws, including restrictions on access to security and surveillance
systems and the casino cage, Beneficiary and its agents and representatives
shall have the right at any reasonable time and upon reasonable prior notice to
enter and visit the Property for the purpose of inspecting construction,
performing appraisals, observing the Property, taking and removing soil or
groundwater samples, and conducting tests on any part of the Property.
Beneficiary has no duty, however, to visit or observe the Property or to conduct
tests, and no site visit, observation or testing by Beneficiary, its agents or
its representatives shall impose any liability on Beneficiary, its agents or its
representatives, provided that Beneficiary shall indemnify Trustor against and
--------
hold Trustor harmless from all losses and damages which Trustor may suffer or
incur as a result of the gross negligence or willful misconduct of Beneficiary,
its agents or its representatives in connection with any site visit, observation
or testing conducted by Beneficiary, its agents or its representatives pursuant
to this Section. In no event shall any site visit, observation or testing by
Beneficiary, its agents or its representatives be a representation that
"Hazardous Materials" (as defined in the Loan Agreement) are or are not present
in, on, or under the Property, or that there has been or shall be compliance
with any law, regulation or ordinance pertaining to Hazardous Materials or any
other applicable governmental law. Neither Trustor nor any other party is
entitled to rely on any site visit, observation or testing by Beneficiary, its
agents or its representatives. Beneficiary owes no duty of care to protect
Trustor or any other party against, or to inform Trustor or any other party of,
any Hazardous Materials or any other adverse condition affecting the Property.
Beneficiary, its agents or its representatives shall give Trustor reasonable
notice before entering the Property. Beneficiary, its agents or its
representatives shall not interfere with Trustor's use of the Property in
exercising any rights provided in this Section except in the case of emergency.
5.16 Notice of Change. Trustor shall give Beneficiary written notice
----------------
within thirty days of any change in (a) the location of Trustor's place of
business or its chief executive office if it has more than one place of
business, (b) the location of any of the Property, including the Books and
Records and (c) Trustor's name or business structure. Unless otherwise
reasonably approved by Beneficiary in writing, all Property that consists of
personal property (other than the Books and Records) will be located on the Land
except in the ordinary course of business or as permitted in the Loan Agreement
and all Books and
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Records will be located at Trustor's place of business or chief executive
office if Trustor has more than one place of business.
5.17 Title Insurance. At any time and from time to time at the
---------------
reasonable request of Beneficiary, Trustor, at its sole cost and expense, shall
deliver to Beneficiary title insurance indorsements and reinsurance issued by
title insurance companies, all in form and substance reasonably satisfactory to
Beneficiary, with respect to this Deed of Trust, including CLTA 122 endorsements
insuring that each advance is secured by this Deed of Trust (without any
exception not set forth in the policy of title insurance insuring this Deed of
Trust other than (i) liens for real estate taxes and assessments not yet due and
payable, (ii) Permitted Encumbrances and (iii) any matters insured to be
subordinate to this Deed of Trust), and CLTA 101.4 endorsements insuring the
priority of the Deed of Trust over any mechanic's lien. Beneficiary consents to
the issuance of all title insurance by Nevada Title Company and the reinsurers
designated as of the Closing Date.
6. Accelerating Transfers, Default and Remedies.
--------------------------------------------
6.1 Accelerating Transfers.
----------------------
(a) "Accelerating Transfer" means any sale, contract to sell,
conveyance, encumbrance, lease or other transfer of all or any material
part of the Property or any interest in it (and not leases made in the
ordinary course of business and provided that no Default or Event of
Default exists), whether voluntary, involuntary, by operation of law or
otherwise which is not permitted under the Loan Agreement, and any "Change
of Control" described in the Loan Agreement.
(b) Trustor acknowledges that Beneficiary is making advances
under the Loan Agreement in reliance on the expertise, skill and experience
of Trustor; thus, the Secured Obligations include material elements similar
in nature to a personal service contract. In consideration of
Beneficiary's reliance, Trustor agrees that Trustor shall not make any
Accelerating Transfer, unless the transfer is preceded by Beneficiary's
express written consent to the particular transaction and transferee.
Beneficiary may withhold such consent in its sole discretion. If any
Accelerating Transfer occurs, Beneficiary, in its sole discretion may
declare all of the Secured Obligations to be immediately due and payable,
and Beneficiary and Trustee may invoke any rights and remedies provided by
Section 6.3 of this Deed of Trust.
---
6.2 Events of Default. Trustor will be in default under this Deed of
-----------------
Trust upon the occurrence of any one or more of the following events (some or
all collectively, "Events of Default;" any one singly, an "Event of Default"):
(a) Trustor fails to pay any principal indebtedness secured
hereby when due; or
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(b) Trustor fails to perform any obligation arising under this
Deed of Trust and does not cure that failure within any applicable cure
period provided for in the Loan Agreement; or
(c) Trustor or any other "borrower" (as that term is defined in
NRS 106.310, as amended or recodified from time to time) who may send a
notice pursuant to NRS 106.380(1), as amended or recodified from time to
time, with respect to this Deed of Trust, (i) delivers, sends by mail or
otherwise gives, or purports to deliver, send by mail or otherwise give, to
Beneficiary or any Lender (A) any notice of an election to terminate the
operation of this Deed of Trust as security for any Secured Obligation
(including, without limitation, any obligation to repay any "future
advance" (as defined in NRS 106.320, as amended or recodified from time to
time) of "principal" (as defined in NRS 106.345, as amended or recodified
from time to time)), or (B) any other notice pursuant to NRS 106.380(1), as
amended or recodified from time to time, (ii) records a statement pursuant
to NRS 106.380(3), as amended or recodified from time to time or (iii)
causes this Deed of Trust, any Secured Obligation, Beneficiary or any
Lender to be subject to NRS 106.380(2), 106(3) or 106.400, as amended or
recodified from time to time; or
(d) An Event of Default (as defined in the Loan Agreement)
occurs and remains continuing under the Loan Agreement.
6.3 Remedies. At any time after the occurrence of an Event of
--------
Default (following expiration of any applicable cure period), Beneficiary and
Trustee will be entitled to invoke any and all of the following rights and
remedies, all of which will be cumulative, and the exercise of any one or more
of which shall not constitute an election of remedies:
(a) Acceleration. Subject to applicable Gaming Laws,
------------
Beneficiary may declare any or all of the Secured Obligations to be due and
payable immediately.
(b) Receiver. Subject to applicable Gaming Laws, Beneficiary
--------
may apply to any court of competent jurisdiction for, and obtain
appointment of, a receiver for the Property; and Beneficiary may request,
in connection with any foreclosure proceeding hereunder, that the Nevada
Gaming Commission petition a District Court of the State of Nevada for the
appointment of a supervisor to conduct the normal gaming activities on the
Property following such foreclosure proceeding.
(c) Entry. Subject to applicable Gaming Laws, Beneficiary, in
-----
person, by agent or by court-appointed receiver, may enter, take possession
of, manage and operate all or any part of the Property, and may also do any
and all other things in connection with those actions that Beneficiary may
in its sole discretion consider necessary and appropriate to protect the
security of this Deed of Trust. Such other things may include: taking and
possessing all of Trustor's or the then owner's Books and Records; entering
into, enforcing, modifying, or canceling leases on such terms
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<PAGE>
and conditions as Beneficiary may consider proper; obtaining and evicting
tenants; fixing or modifying Rents; collecting and receiving any payment of
money owing to Trustor; completing construction; and/or contracting for and
making repairs and alterations. If Beneficiary so requests, Trustor shall
assemble all of the Property that has been removed from the Land and make
all of it available to Beneficiary at the site of the Land. Trustor hereby
irrevocably constitutes and appoints Beneficiary as Trustor's attorney-in-
fact to perform such acts and execute such documents as Beneficiary in its
sole discretion may consider to be appropriate in connection with taking
these measures, including endorsement of Trustor's name on any instruments.
Regardless of any provision of this Deed of Trust or the Loan Agreement,
Beneficiary shall not be considered to have accepted any property other
than cash or immediately available funds in satisfaction of any obligation
of Trustor to Beneficiary, unless Beneficiary has given express written
notice of Beneficiary's election of that remedy in accordance with the
Nevada Uniform Commercial Code, as it may be amended or recodified from
time to time.
(d) Cure; Protection of Security. Either Beneficiary or Trustee
----------------------------
may cure any breach or default of Trustor, and if it chooses to do so in
connection with any such cure, Beneficiary or Trustee may also, subject to
applicable Gaming Laws, enter the Property and/or do any and all other
things which it may in its sole discretion consider necessary and
appropriate to protect the security of this Deed of Trust, including,
without limitation, the right to complete the Improvements. Such other
things may include: appearing in and/or defending any action or proceeding
which purports to affect the security of, or the rights or powers of
Beneficiary or Trustee under, this Deed of Trust; paying, purchasing,
contesting or compromising any encumbrance, charge, lien or claim of lien
which in Beneficiary's or Trustee's sole judgment is or may be senior in
priority to this Deed of Trust, such judgment of Beneficiary or Trustee to
be conclusive as among the parties to this Deed of Trust; obtaining
insurance and/or paying any premiums or charges for insurance required to
be carried under the Loan Agreement; otherwise caring for and protecting
any and all of the Property; and/or employing counsel, accountants,
contractors and other appropriate persons to assist Beneficiary or Trustee.
Beneficiary and Trustee may take any of the actions permitted under this
Subsection 6.3(d) either with or without giving notice to any person.
------
(e) Uniform Commercial Code Remedies. Subject to applicable
--------------------------------
Gaming Laws, Beneficiary may exercise any or all of the remedies granted to
a secured party under the NRS Article 104.9101 et seq. (the Nevada
enactment of the Uniform Commercial Code).
(f) Judicial Action. Beneficiary may bring an action in any
---------------
court of competent jurisdiction to foreclose this instrument or to obtain
specific enforcement of any of the covenants or agreements of this Deed of
Trust.
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<PAGE>
(g) Power of Sale. Under the power of sale hereby granted,
-------------
Beneficiary shall have the discretionary right to cause some or all of the
Property, including any Property which constitutes personal property to be
sold or otherwise disposed of in any combination and in any manner
permitted by applicable law and Gaming Laws.
(i) Sales of Personal Property.
--------------------------
(A) For purposes of this power of sale, Beneficiary
may elect to treat as personal property any Property which is
intangible or which can be severed from the Land or Improvements
without causing structural damage. If it chooses to do so,
Beneficiary may dispose of any personal property separately from
the sale of real property, in any manner permitted by or under
the NRS, including any public or private sale, or in any manner
permitted by any other applicable law.
(B) The following provision shall apply in the absence
of any specific statutory requirement which permits or requires a
different notice period: In connection with any sale or other
disposition of such Property, Trustor agrees that the following
procedures constitute a commercially reasonable sale:
Beneficiary shall mail written notice of the sale to Trustor not
later than forty-five (45) days prior to such sale. Once per
week during the four weeks immediately preceding such sale,
Beneficiary will publish notice of the sale in a local daily
newspaper of general circulation. Upon receipt of any written
request, Beneficiary will make the Property available to any bona
fide prospective purchaser for inspection during reasonable
business hours. Notwithstanding any provision to the contrary,
Beneficiary shall be under no obligation to consummate a sale if,
in its judgment, none of the offers received by it equals the
fair value of the Property offered for sale. The foregoing
procedures do not constitute the only procedures that may be
commercially reasonable.
(ii) Trustee's Sales of Real Property or Mixed Collateral.
----------------------------------------------------
(A) Beneficiary may choose to dispose of some or all
of the Property which consists solely of real property in any
manner then permitted by applicable law. In its discretion,
Beneficiary may also or alternatively choose to dispose of some
or all of the Property, in any combination consisting of both
real and personal property, together in one sale to be held in
accordance with the law and procedures applicable to real
property. Trustor agrees that such a sale of personal property
together with real property constitutes a commercially reasonable
sale of the personal property. For purposes of this power of
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<PAGE>
sale, either a sale of real property alone, or a sale of both
real and personal property together in accordance with law, will
sometimes be referred to as a "Trustee's Sale."
(B) Before any Trustee's Sale, Beneficiary or Trustee
shall give and record such notice of default and election to sell
as may then be required by law. When all time periods then
legally mandated have expired, and after such notice of sale as
may then be legally required has been given, Trustee may sell the
property being sold at a public auction to be held at the time
and place specified in the notice of sale. Neither Trustee nor
Beneficiary shall have any obligation to make demand on Trustor
before any Trustee's Sale. From time to time in accordance with
then applicable law, Trustee may, and in any event at
Beneficiary's request shall, postpone any Trustee's Sale by
public announcement at the time and place noticed for that sale.
(C) At any Trustee's Sale, Trustee shall sell to the
highest bidder at public auction for cash in lawful money of the
United States. Trustee shall execute and deliver to the
purchaser(s) a deed or deeds conveying the property being sold
without any covenant or warranty whatsoever, express or implied.
The recitals in any such deed of any matters or facts, including
any facts bearing upon the regularity or validity of any
Trustee's Sale, shall be conclusive proof of their truthfulness.
Any such deed shall be conclusive against all persons as to the
facts recited in it.
(h) Single or Multiple Foreclosure Sales. If the Property
------------------------------------
consists of more than one lot, parcel or item of property, Beneficiary may:
(i) Designate the order in which the lots, parcels and/or
items shall be sold or disposed of or offered for sale or disposition;
and
(ii) Elect to dispose of the lots, parcels and/or items
through a single consolidated sale or disposition to be held or made
under the power of sale granted in Subsections 6.3(g) and 6.7, or in
------ ---
connection with judicial proceedings, or by virtue of a judgment and
decree of foreclosure and sale; or through two or more such sales or
dispositions; or in any other manner Beneficiary may deem to be in its
best interests (any such sale or disposition, a "Foreclosure Sale;"
any two or more, "Foreclosure Sales").
If Beneficiary chooses to have more than one Foreclosure Sale, Beneficiary
at its option may cause the Foreclosure Sales to be held simultaneously or
successively, on the same day, or on such different days and at such
different times and in such order as Beneficiary may deem to be in its best
interests. No Foreclosure Sale shall terminate
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or affect the liens of this Deed of Trust on any part of the Property which
has not been sold, until all of the Secured Obligations have been paid in
full.
6.4 Credit Bids. At any Foreclosure Sale, any person, including
-----------
Trustor, Trustee or Beneficiary, may bid for and acquire the Property or any
part of either to the extent permitted by then applicable law. Instead of
paying cash for such property, Beneficiary may settle for the purchase price by
crediting the sales price of the property against the following obligations:
(a) First, the portion of the Secured Obligations attributable
to the expenses of sale incurred in accordance with applicable law, costs
of any action and any other sums for which Trustor is obligated to pay or
reimburse Beneficiary or Trustee under this Deed of Trust; and
(b) Second, all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose.
6.5 Application of Foreclosure Sale Proceeds. Beneficiary and
----------------------------------------
Trustee shall apply the proceeds of any Foreclosure Sale in the following
manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the expenses of sale incurred in accordance with applicable
law, costs of any action and any other sums for which Trustor is obligated
to reimburse Beneficiary or Trustee under Section 5.11;
----
(b) Second, to pay the portion of the Secured Obligations
attributable to any sums expended or advanced by Beneficiary or Trustee
under the terms of this Deed of Trust which then remain unpaid;
(c) Third, to pay all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose; and
(d) Fourth, to remit the remainder, if any to the person or
persons entitled to it.
6.6 Application of Rents and Other Sums. Beneficiary shall apply any
-----------------------------------
and all Rents collected by it, and any and all sums other than proceeds of a
Foreclosure Sale which Beneficiary may receive or collect under Section 6.3, in
---
the following manner:
(a) First, to pay the portion of the Secured Obligations
attributable to the costs and expenses of operation and collection that may
be incurred by Trustee, Beneficiary or any receiver in accordance with
applicable law;
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(b) Second, to pay all other Secured Obligations in any order
and proportions as Beneficiary in its sole discretion may choose; and
(c) Third, to remit the remainder, if any, to the person or
persons entitled to it. Beneficiary shall have no liability for any funds
which it does not actually receive.
6.7 Incorporation of Certain Nevada Covenants. Covenants Nos. 1, 2
-----------------------------------------
(full replacement value), 3, 4 (at the applicable Default Rate), 5, 6, 7
(reasonable), 8 and 9 of NRS 107.030, where not in conflict with the provisions
of the Loan Documents, are hereby adopted and made a part of this Deed of Trust.
Upon any Event of Default by Trustor hereunder, Beneficiary may (a) declare all
sums secured immediately due and payable with out demand or notice or (b) have
a receiver appointed as a matter of right without regard to the sufficiency of
said property or any other security or guaranty and without any showing as
required by NRS (S)107.100. All remedies provided in this Deed of Trust are
distinct and cumulative to any other right or remedy under this Deed of Trust or
afforded by law or equity and may be exercised concurrently, independently or
successively. The sale of said property conducted pursuant to Covenants Nos. 6,
7 and 8 of NRS (S)107.030 may be conducted either as to the whole of said
property or in separate parcels and in such order as Trustee may determine.
7. Leasehold Mortgage Provisions. The provisions of this Section 7 shall
----------------------------- -
apply in the event that, and so long as, any portion of the Property consists of
Trustor's interests as tenant under any lease or leases (collectively, including
the Existing Ground Lease, the "Ground Leases"). Unless otherwise expressly
provided, the lien of this Deed of Trust shall encumber all of Trustor's rights
and interests under and in connection with any Ground Lease, including without
limitation renewal and extension rights, options to expand, and purchase options
(all of which rights shall be collectively referred to herein as a "Ground
Leasehold"). Trustor hereby agrees, with respect to each Ground Lease, as
follows:
7.1 Trustor shall timely perform its obligations in connection with
each Ground Lease. Without limiting the generality of Section 6.3(d), above,
------
Trustor specifically acknowledges Beneficiary's right, while any default by
Trustor under any Ground Lease remains uncured, to perform the defaulted
obligations and take all other actions which Beneficiary deems necessary to
protect its interests with respect thereto, and Trustor hereby irrevocably
appoints Beneficiary its true and lawful attorney-in-fact (which appointment is
irrevocable and coupled with an interest) in its name or otherwise to execute
all documents, and perform all other acts, which Beneficiary reasonably deems
necessary to preserve its or Trustor's rights with respect to any Ground Lease.
7.2 Trustor shall not, without Beneficiary's prior written consent,
modify, or cause or permit the termination of, any Ground Lease, or waive or in
any way release the landlord under any Ground Lease of or from any obligation or
condition.
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<PAGE>
7.3 Trustor shall notify Beneficiary promptly in writing of (i) the
occurrence of any default by the landlord under any Ground Lease and (ii) the
receipt by Trustor of any notice claiming the occurrence of any default by
Trustor under any Ground Lease or the occurrence of any event which, with the
passage of time or the giving of notice or both, would constitute a default by
Trustor under any Ground Lease (and Trustor shall also promptly deliver a copy
of any such notice to Beneficiary).
7.4 Unless Beneficiary otherwise consents in writing, so long as any
Secured Obligation remains outstanding, neither the fee title to, nor any other
estate or interest in, the real property subject to any Ground Lease shall merge
with any Ground Leasehold, notwithstanding the union of such estates in the
landlord or the tenant or in a third party. Any acquisition of the landlord's
interest in any Ground Lease by Trustor or any affiliate of Trustor shall be
accomplished in such a manner as to avoid a merger of the interests of landlord
and tenant unless Beneficiary consents to such merger in writing.
7.5 If Trustor acquires fee title to any portion of the real property
subject to any Ground Lease, this Deed of Trust shall automatically be a lien on
such fee title.
7.6 Trustor shall not subordinate any Ground Lease or Ground
Leasehold to any deed of trust or other encumbrance of, or lien on, any interest
in the real property subject to such Ground Leasehold without the prior written
consent of Beneficiary. Any such subordination without such consent shall, at
Beneficiary's option, be void.
7.7 All subleases entered into by Trustor with respect to all or any
portion of the Property (and all existing subleases modified by Trustor) shall
provide that such subleases are subordinate to the lien of this Deed of Trust
and any modifications of this Deed of Trust and the obligations secured hereby
and that, if Beneficiary forecloses under this Deed of Trust or enters into a
new lease with any landlord under any Ground Lease pursuant to the provisions
for a new lease, if any, contained in the applicable Ground Lease or in any
other document or agreement, the subtenant shall attorn to Beneficiary or its
assignee and the sublease shall remain in full force and effect in accordance
with its terms notwithstanding the termination of the applicable Ground Lease.
7.8 Trustor shall exercise any option or right to renew or extend the
term of any Ground Lease at least six months prior to the date of termination of
any such option or right, shall give immediate written notice thereof to
Beneficiary, and shall execute, deliver and record any documents requested by
Beneficiary to evidence the lien of this Deed of Trust on such extended or
renewed lease term. If Trustor fails to exercise any such option or right as
required herein, Beneficiary may exercise the option or right as Trustor's agent
and attorney-in-fact pursuant to this Deed of Trust, or in Beneficiary's own
name or in the name of and on behalf of a nominee of Beneficiary, as Beneficiary
chooses in its absolute discretion.
7.9 As security for the Secured Obligations, Trustor hereby assigns
to Beneficiary a security interest in all prepaid rents and security deposits
and all other security
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<PAGE>
which the landlords under the Ground Leases hold for the performance of
Trustor's obligations thereunder.
7.10 Promptly upon demand by Beneficiary, Trustor shall use reasonable
efforts to obtain from the landlord under any Ground Lease and furnish to
Beneficiary an estoppel certificate of such landlord stating the date through
which rent has been paid, whether or not there are any defaults, and the
specific nature of any claimed defaults.
7.11 Trustor shall notify Beneficiary promptly in writing of any
request by either party to any Ground Lease for arbitration, appraisal or other
proceedings relating to any Ground Lease and of the institution of any such
proceeding, and shall promptly deliver to Beneficiary a copy of all
determinations in any such proceeding. Beneficiary shall have the right,
following written notice to Trustor, to participate in any such proceeding in
association with Trustor or on its own behalf as an interested party. Trustor
shall notify Beneficiary promptly in writing of the institution of any legal
proceeding involving obligations under any Ground Lease, and Beneficiary may
intervene in any such legal proceeding and be made a party. Trustor shall
promptly provide Beneficiary with a copy of any decision rendered in connection
with any such proceeding.
7.12 To the extent permitted by law, the price payable by Trustor or
any other party in the exercise of the right of redemption, if any, from any
sale under, or decree of foreclosure of, this Deed of Trust shall include all
rents and other amounts paid and other sums advanced by Beneficiary on behalf of
Trustor as the tenant under the Ground Leases.
7.13 In addition to all other Events of Default described in this Deed
of Trust, the occurrence of any of the following shall be an Event of Default
hereunder:
(a) A breach or default by Trustor under any Ground Lease,
subject to any applicable cure period; or
(b) The occurrence of any event or circumstance which gives the
landlord under any Ground Lease a right to terminate such Ground Lease.
7.14 As used in this Deed of Trust, the "Bankruptcy Code" shall mean
11 U.S.C. (S)(S) 101 et seq., as modified and/or recodified from time to time.
-- ---
Notwithstanding anything to the contrary contained herein with respect to any
Ground Lease:
(a) The lien of this Deed of Trust attaches to all of Trustor's
rights under Subsection 365(h) of the Bankruptcy Code, including without
limitation any and all elections to be made thereunder, any and all rights
under any Ground Lease which Trustor is entitled to retain pursuant to 11
U.S.C. (S) 365(h)(1)(A)(ii) in the event of a rejection under the
Bankruptcy Code of such Ground Lease by the landlord thereunder (or any
trustee thereof), and any and all rights of offset under or as described in
11 U.S.C. (S) 365(h)(1)(B).
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(b) Trustor acknowledges and agrees that, as the beneficiary
under this Deed of Trust and by operation of 11 U.S.C. (S)365(h)(1)(D),
Beneficiary has, and until this Deed of Trust has been fully reconveyed
continuously shall have, whether before or after any default under any of
the Secured Obligations or the taking of any action to enforce any of
Beneficiary's rights and remedies under this Deed of Trust or any
foreclosure sale hereunder, the complete, unfettered and exclusive right,
in its sole and absolute discretion, to elect (the "365(h) Election")
whether (i) any Ground Lease that has been rejected under the Bankruptcy
Code by the landlord thereunder (or any trustee therefor) shall be treated
as terminated under 11 U.S.C. (S)365(h)(1)(A)(i), or (ii) the rights under
such Ground Lease that are in or appurtenant to the real property, as
described in 11 U.S.C. (S)365(h)(1)(A)(ii), should be retained pursuant to
that subsection. To the extent that, notwithstanding the preceding
sentence and 11 U.S.C. (S)365(h)(1)(D), Trustor now or at any time in the
future has any right to make, or to participate in or otherwise in any
manner affect the making of, the 365(h) Election with respect to any Ground
Lease, Trustor hereby absolutely assigns and conveys to Beneficiary any and
all such rights, and all of Trustor's right, title, and interest therein,
which may be used and exercised by Beneficiary completely, exclusively, and
without any restriction whatsoever, in Beneficiary's sole and absolute
discretion, whether before or after any default upon any of the Secured
Obligations, the taking of any action to enforce any of Beneficiary's
rights and remedies under this Deed of Trust, or any foreclosure sale
hereunder. Trustor hereby unconditionally and irrevocably appoints
Beneficiary as its attorney-in-fact (which appointment is coupled with an
interest) to exercise Trustor's right, if any, to make, or participate in
or otherwise in any matter affect the making of, the 365(h) Election with
respect to any Ground Lease. Trustor shall not in any manner impede or
interfere with any action taken by Beneficiary and, at the request of
Beneficiary, Trustor shall take or join in the taking of any action to
make, or participate in or otherwise in any manner affect the making of,
the 365(h) Election with respect to any Ground Lease, in such manner as
Beneficiary determines in its sole and absolute discretion. Unless and
until instructed to do so by Beneficiary (as determined by Beneficiary in
its sole and absolute discretion), Trustor shall not take any action to
make, or participate in or otherwise in any manner affect the making of,
the 365(h) Election with respect to any Ground Lease, including in
particular, but without limitation, any election to treat any Ground Lease
as terminated. Beneficiary shall have no obligation whatsoever to Trustor
or any other person or entity in connection with the making of the 365(h)
Election with respect to any Ground Lease or any instruction by Beneficiary
to Trustor given, withheld or delayed in respect thereof, nor shall
Beneficiary have any liability to Trustor or any other person or entity
arising from any of the same.
(c) As security for the Secured Obligations, Trustor hereby
irrevocably assigns to Beneficiary all of Trustor's rights to damages
arising from any rejection by any landlord (or any trustee thereof) of any
Ground Lease under the Bankruptcy Code. Beneficiary and Trustor shall
proceed jointly or in the name of Trustor in respect of
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<PAGE>
any claim or proceeding relating to the rejection of any Ground Lease,
including without limitation the right to file and prosecute any proofs of
claim, complaints, motions and other documents in any case in respect of
such landlord under the Bankruptcy Code. This assignment shall continue in
effect until all of the Secured Obligations have been satisfied in full.
Any amounts received by Beneficiary or Trustor as damages arising from the
rejection of any Ground Lease as aforesaid shall be applied first to all
costs reasonably incurred by Beneficiary (including attorneys' fees) in
connection with this subsection (c) and then in accordance with other
applicable provisions of this Deed of Trust.
(d) If, pursuant to the Bankruptcy Code, Trustor seeks to offset
against the rent reserved in any Ground Lease the amount of any damages
caused by the nonperformance of the landlord's obligations after the
rejection by the landlord (or any trustee thereof) of such Ground Lease,
Trustor shall, prior to effecting such offset, notify Beneficiary in
writing of its intent to do so, setting forth the amounts proposed to be
offset and, in the event that Beneficiary objects, Trustor shall not effect
any offset of the amounts to which Beneficiary objects. If Beneficiary
fails to object within 10 days following receipt of such notice, Trustor
may offset the amounts set forth in Trustor's notice.
(e) If any legal proceeding is commenced with respect to any
Ground Lease in connection with any case under the Bankruptcy Code,
Beneficiary and Trustor shall cooperatively conduct any such proceeding
with counsel reasonably agreed upon between Trustor and Beneficiary.
Trustor shall, upon demand, pay to Beneficiary all costs (including
attorneys' fees) reasonably incurred by Beneficiary in connection with any
such proceeding.
(f) Trustor shall immediately notify Beneficiary orally upon
learning of any filing by or against any landlord of a petition under the
Bankruptcy Code. Trustor shall thereafter promptly give written notice of
such filing to Beneficiary, setting forth any information available to
Trustor with respect to the date of such filing, the court in which such
petition was filed, and the relief sought therein. Trustor shall promptly
deliver to Beneficiary all notices, pleadings and other documents received
by Trustor in connection with any such proceeding.
7.15 No maintenance, repair or other obligation of Trustor hereunder
which relates to the "Property" shall apply to any Ground Leasehold with respect
to which the applicable Ground Lease imposes such obligation on the landlord so
long as (a) Trustor does not own the landlord's interest; (b) such landlord is
performing such obligation in accordance with the terms of such Ground Lease;
and (c) the Ground Lease has not been rejected by the landlord (or any trustee
thereof) under the Bankruptcy Code.
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<PAGE>
7.16 The generality of the provisions of this Deed of Trust shall not
be limited by any provision of this Section 7 that sets forth particular
-
obligations of Trustor as the tenant under the Ground Leases.
7.17 Trustor hereby represents and warrants to Beneficiary as follows:
(a) The Existing Ground Lease is in full force and effect;
(b) Trustor owns the entire tenant's interest under the Existing
Ground Lease and has the right under the Existing Ground Lease to execute
this Deed of Trust; and
(c) No default under the Existing Ground Lease remains uncured,
nor has any event occurred which, with the passage of time or service of
notice or both, would constitute such a default.
8. Miscellaneous Provisions.
------------------------
8.1 Additional Provisions. The Loan Documents fully state all of the
---------------------
terms and conditions of the parties' agreement regarding the matters mentioned
in or incidental to this Deed of Trust. The Loan Documents also grant further
rights to Beneficiary and contain further agreements and affirmative and
negative covenants by Trustor which apply to this Deed of Trust and to the
Property.
8.2 No Waiver or Cure.
-----------------
(a) Each waiver by Beneficiary or Trustee must be in writing,
and no waiver shall be construed as a continuing waiver. No waiver shall
be implied from any delay or failure by Beneficiary or Trustee to take
action on account of any default of Trustor. Consent by Beneficiary or
Trustee to any act or omission by Trustor shall not be construed as a
consent to any other or subsequent act or omission or to waive the
requirement for Beneficiary's or Trustee's consent to be obtained in any
future or other instance.
(b) If any of the events described below occurs, that event
alone shall not: cure or waive any breach, Event of Default or notice of
default under this Deed of Trust or invalidate any act performed pursuant
to any such default or notice; or nullify the effect of any notice of
default or sale (unless all Secured Obligations then due have been paid and
performed and all other defaults under the Loan Documents have been cured);
or impair the security of this Deed of Trust; or prejudice Beneficiary,
Trustee or any receiver in the exercise of any right or remedy afforded any
of them under this Deed of Trust; or be construed as an affirmation by
Beneficiary of any tenancy, lease or option, or a subordination of the lien
of this Deed of Trust:
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<PAGE>
(i) Beneficiary, its agent or a receiver takes possession
of all or any part of the Property in the manner provided in
Subsection 6.3(c).
(ii) Beneficiary collects and applies Rents as permitted
under Sections 2.3 and 6.6, either with or without taking possession
--- ---
of all or any part of the Property.
(iii) Beneficiary receives and applies to any Secured
Obligation proceeds of any Property, including any proceeds of
insurance policies, condemnation awards, or other claims, property or
rights assigned to Beneficiary under Section 5.5.
---
(iv) Beneficiary makes a site visit, observes the Property
and/or conducts tests as permitted under this Deed of Trust or under
the Loan Agreement.
(v) Beneficiary receives any sums under this Deed of Trust
or any proceeds of any collateral held for any of the Secured
Obligations, and applies them to one or more Secured Obligations.
(vi) Beneficiary, Trustee or any receiver invokes any right
or remedy provided under this Deed of Trust.
8.3 Powers of Beneficiary and Trustee.
---------------------------------
(a) Trustee shall have no obligation to perform any act which it
is empowered to perform under this Deed of Trust unless it is requested to
do so in writing and is reasonably indemnified against loss, cost,
liability and expense.
(b) If either Beneficiary or Trustee performs any act which it
is empowered or authorized to perform under this Deed of Trust or the Loan
Agreement, that act alone shall not release or change the personal
liability of any person for the payment and performance of the Secured
Obligations then outstanding, or the lien of this Deed of Trust on all or
the remainder of the Property for full payment and performance of all
outstanding Secured Obligations. The liability of the original Trustor
shall not be released or changed if Beneficiary grants any successor in
interest to Trustor any extension of time for payment, or modification of
the terms of payment, of any Secured Obligation. Beneficiary shall not be
required to comply with any demand by the original Trustor that Beneficiary
refuse to grant such an extension or modification to, or commence
proceedings against, any such successor in interest.
(c) Beneficiary may take any of the actions permitted under
Subsections 6.3(b), 6.3(c), 6.7 and/or the Loan Agreement regardless of the
------ ------ ---
adequacy of the security for the Secured Obligations, or whether any or all
of the Secured
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<PAGE>
Obligations have been declared to be immediately due and payable, or
whether notice of default and election to sell has been given under this
Deed of Trust.
(d) From time to time, Trustor, Beneficiary or Trustee may apply
to any court of competent jurisdiction for aid and direction in executing
the trust and enforcing the rights and remedies created under this Deed of
Trust. Trustor, Beneficiary or Trustee may from time to time obtain orders
or decrees directing, confirming or approving acts in executing this trust
and enforcing these rights and remedies.
8.4 Merger. No merger shall occur as a result of Beneficiary's
------
acquiring any other estate in or any other lien on the Property unless
Beneficiary consents to a merger in writing.
8.5 Joint and Several Liability. If Trustor consists of more than
---------------------------
one person, each shall be jointly and severally liable for the faithful
performance of all of Trustor's obligations under this Deed of Trust.
8.6 Applicable Law. This Deed of Trust shall be governed by Nevada
--------------
law.
8.7 Successors in Interest. The terms, covenants and conditions of
----------------------
this Deed of Trust shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties. However, this Section 8.7 does not waive
---
the provisions of Section 6.1.
---
8.8 Interpretation.
--------------
(a) Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The captions of the
sections of this Deed of Trust are for convenience only and do not define
or limit any terms or provisions. The word "include(s)" means "include(s),
without limitation," and the word "including" means "including, but not
limited to."
(b) The word "obligations" is used in its broadest and most
comprehensive sense, and includes all primary, secondary, direct, indirect,
fixed and contingent obligations. It further includes all principal,
interest, prepayment charges, late charges, loan fees and any other fees
and charges accruing or assessed at any time, as well as all obligations to
perform acts or satisfy conditions.
(c) No listing of specific instances, items or matters in any
way limits the scope or generality of any language of this Deed of Trust.
The Exhibit to this Deed of Trust is hereby incorporated in this Deed of
Trust.
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<PAGE>
(d) The terms of the Loan Agreement shall prevail over the terms
of this Deed of Trust in the event of any conflict.
8.9 In-House Counsel Fees. Whenever Trustor is obligated to pay or
---------------------
reimburse Beneficiary or Trustee for any attorneys' fees, those fees shall
include the reasonably allocated costs for services of in-house counsel.
8.10 Waiver of Marshaling. Trustor waives all rights, legal and
--------------------
equitable, it may now or hereafter have to require marshaling of assets or to
require upon foreclosure sales of assets in a particular order, including any
rights provided by NRS 100.040 and 100.050, as such Sections may be amended or
recodified from time to time. Each successor and assign of Trustor, including
any holder of a lien subordinate to this Deed of Trust, by acceptance of its
interest or lien agrees that it shall be bound by the above waiver, as if it had
given the waiver itself.
8.11 Severability. If any provision of this Deed of Trust should be
------------
held unenforceable or void, that provision shall be deemed severable from the
remaining provisions and in no way affect the validity of this Deed of Trust.
8.12 Notices. Trustor hereby requests that a copy of notice of
-------
default and notice of sale be mailed to it at the address set forth below. That
address is also the mailing address of Trustor as debtor under the Nevada
Uniform Commercial Code. Beneficiary's address given below is the address for
Beneficiary as secured party under the Nevada Uniform Commercial Code.
"Trustor"
COAST HOTELS AND CASINOS, INC.,
a Nevada corporation
By _________________________
Gage Parrish, Vice President and
Chief Financial Officer
Address Where Notices to Trustor
Are to Be Sent:
Coast Hotels and Casinos, Inc.
4500 West Tropicana Road
Las Vegas, Nevada 89103
Address Where Notices to Trustee
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<PAGE>
Are to Be Sent:
Equitable Deed Company
555 South Flower Street
Los Angeles, California 90071
Address Where Notices to Beneficiary
Are to Be Sent:
Bank of America National Trust and Savings
Association
555 South Flower Street
Los Angeles, California 90071
Attention: Janice Hammond, Vice President
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<PAGE>
STATE OF _____________ )
SS.
COUNTY OF ____________ )
On ____________________ before me (here insert name and title of the
officer) personally appeared ___________________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s),
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________ (Seal)
STATE OF ______________ )
SS.
COUNTY OF ____________ )
On ____________________ before me (here insert name and title of the
officer) personally appeared ___________________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s),
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________ (Seal)
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<PAGE>
EXHIBIT A
---------
EXHIBIT A to DEED OF TRUST executed as of March 18, 1999, by COAST
HOTELS AND CASINOS, INC., a Nevada corporation, as "Trustor", to EQUITABLE DEED
COMPANY, as "Trustee", for the benefit of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association, as "Beneficiary."
All that certain real property located in the County of Clark, State
of Nevada, described as follows:
A portion of Sections 31 and 32, Township 20 South, Range 60 East, M.D.B. &
M., more particularly described as Parcel 1, as shown by Parcel Map in File
83, Page 86, recorded November 9, 1995 in Book 951109 as Document No. 02011
of Official Records, Clark County, Nevada.
Exhibit A
Page 1 of 1
<PAGE>
GUARANTY
--------
This GUARANTY ("Guaranty"), dated as of March 18, 1999, is made by
Coast Resorts, Inc., a Nevada corporation ("Guarantor") in favor of Bank of
America National Trust and Savings Association, as Administrative Agent for the
benefit of the Lenders that are party to the Loan Agreement referred to below
(collectively with the Lenders, "Lender"), with reference to the following
facts:
RECITALS
--------
A. Pursuant to the Loan Agreement dated as of March 18, 1999 by and
among Coast Hotels and Casinos, Inc., a Nevada corporation (the "Borrower"), the
lenders from time to time party thereto (collectively, the "Lenders" and
individually, a "Lender"), and Bank of America National Trust and Savings
Association, as Administrative Agent (as such agreement may from time to time be
extended, modified, renewed, restated, supplemented or amended, the "Loan
Agreement"), the Lenders are making certain credit facilities available to
Borrower.
B. As a condition to the availability of such credit facilities,
Guarantor is required to enter into this Guaranty and to guaranty the Guarantied
Obligations as hereinafter provided.
C. Guarantor expects to realize direct and indirect benefits as the
result of the availability of the aforementioned credit facilities to Borrower.
AGREEMENT
---------
NOW, THEREFORE, in order to induce Lender to continue to extend the
aforementioned credit facilities, and for other good and valuable consideration,
the receipt and adequacy of which hereby are acknowledged, Guarantor hereby
represents, warrants, covenants, agrees and guaranties as follows:
1. Definitions. This Guaranty is one of the Guaranties referred to
-----------
in the Loan Agreement and is one of the Loan Documents. Terms defined in the
Loan Agreement and not otherwise defined in this Guaranty shall have the
meanings given those terms in the Loan Agreement when used herein and such
definitions are incorporated herein as though set forth in full. In addition,
as used herein, the following terms shall have the meanings respectively set
forth after each:
"Guarantied Obligations" means all Obligations of Borrower or any
----------------------
other Obligor at any time and from time to time owed to Lender under
one or more of the Loan Documents (but not including Obligations
-1-
<PAGE>
owed to Lender under this Guaranty), whether due or to become due,
matured or unmatured, liquidated or unliquidated, or contingent or non
contingent, including obligations of performance as well as
---------
obligations of payment, and including interest that accrues after the
---------
commencement of any bankruptcy or insolvency proceeding by or against
Guarantor, any other Obligor or any other Person.
"Guarantor" means Coast Resorts, Inc., a Nevada corporation.
---------
"Guaranty" means this Guaranty, and any extensions, modifications,
--------
renewals, restatements, reaffirmations, supplements or amendments
hereof.
"Lender" means the Administrative Agent (acting as the Administrative
------
Agent and/or on behalf of the Lenders), and the Lenders, and each of
them, and any one or more of them. Subject to the terms of the Loan
Agreement, any right, remedy, privilege or power of Lender may be
exercised by the Administrative Agent, or by the Requisite Lenders, or
by any Lender acting with the consent of the Requisite Lenders.
2. Guaranty of Guarantied Obligations. Guarantor hereby
----------------------------------
irrevocably, unconditionally guaranties and promises to pay and perform on
demand the Guarantied Obligations and each and every one of them, including all
---------
amendments, modifications, supplements, renewals or extensions of any of them,
whether such amendments, modifications, supplements, renewals or extensions are
evidenced by new or additional instruments, documents or agreements or change
the rate of interest on any Guarantied Obligation or the security therefor, or
otherwise.
3. Nature of Guaranty. This Guaranty is irrevocable and continuing
------------------
in nature and relates to any Guarantied Obligations now existing or hereafter
arising. This Guaranty is a guaranty of prompt and punctual payment and
performance and is not merely a guaranty of collection.
4. Relationship to Other Agreements. Nothing herein shall in any
--------------------------------
way modify or limit the effect of terms or conditions set forth in any other
document, instrument or agreement executed by Guarantor or in connection with
the Guarantied Obligations, but each and every term and condition hereof shall
be in addition thereto. All provisions contained in the Loan Agreement or any
other Loan Document that apply to Loan Documents generally are fully applicable
to this Guaranty and are incorporated herein by this reference.
5. Subordination of Indebtedness of Borrower to Guarantor to the
-------------------------------------------------------------
Guarantied Obligations. Guarantor agrees that:
- ----------------------
-2-
<PAGE>
(a) Any indebtedness of Borrower now or hereafter owed to
Guarantor hereby is subordinated to the Guarantied Obligations.
(b) If Lender so requests, upon the occurrence and during the
continuance of any Event of Default, any such indebtedness of Borrower now
or hereafter owed to Guarantor shall be collected, enforced and received by
Guarantor as trustee for Lender and shall be paid over to Lender in kind on
account of the Guarantied Obligations, but without reducing or affecting in
any manner the obligations of Guarantor under the other provisions of this
Guaranty.
(c) Should Guarantor fail to collect or enforce any such
indebtedness of Borrower now or hereafter owed to Guarantor and pay the
proceeds thereof to Lender in accordance with Section 5(b) hereof, Lender
----
as Guarantor's attorney-in-fact may do such acts and sign such documents in
Guarantor's name as Lender considers necessary or desirable to effect such
collection, enforcement and/or payment.
6. Statutes of Limitations and Other Laws. Until the Guarantied
--------------------------------------
Obligations shall have been paid and performed in full, all the rights,
privileges, powers and remedies granted to Lender hereunder shall continue to
exist and may be exercised by Lender at any time and from time to time
irrespective of the fact that any of the Guarantied Obligations may have become
barred by any statute of limitations. Guarantor expressly waives the benefit of
any and all statutes of limitation, and any and all Laws providing for exemption
of property from execution or for evaluation and appraisal upon foreclosure, to
the maximum extent permitted by applicable Laws.
7. Waivers and Consents. Guarantor acknowledges that the
--------------------
obligations undertaken herein involve the guaranty of obligations of Persons
other than Guarantor and, in full recognition of that fact, consents and agrees
that Lender may, at any time and from time to time, without notice or demand,
and without affecting the enforceability or continuing effectiveness hereof:
(a) supplement, modify, amend, extend, renew, accelerate or otherwise change the
time for payment or the terms of the Guarantied Obligations or any part thereof,
including any increase or decrease of the rate(s) of interest thereon; (b)
- ---------
supplement, modify, amend or waive, or enter into or give any agreement,
approval or consent with respect to, the Guarantied Obligations or any part
thereof, or any of the Loan Documents to which Guarantor is not a party or any
additional security or guaranties, or any condition, covenant, default, remedy,
right, representation or term thereof or thereunder; (c) accept new or
additional instruments, documents or agreements in exchange for or relative to
any of the Loan Documents or the Guarantied Obligations or any part thereof; (d)
accept partial payments on the Guarantied Obligations; (e) receive and hold
additional security or guaranties for the Guarantied Obligations or any part
thereof; (f) release, reconvey, terminate, waive, abandon, fail to perfect,
subordinate, exchange, substitute, transfer and/or enforce any security or
guaranties, and apply any security and direct the order or manner of sale
thereof as Lender in
-3-
<PAGE>
its sole and absolute discretion may determine; (g) release any Person from any
personal liability with respect to the Guarantied Obligations or any part
thereof; (h) settle, release on terms satisfactory to Lender or by operation of
applicable Laws or otherwise liquidate or enforce any Guarantied Obligations and
any security or guaranty therefor in any manner, consent to the transfer of any
security and bid and purchase at any sale; and/or (i) consent to the merger,
change or any other restructuring or termination of the corporate existence of
Borrower, Guarantor or any other Person, and correspondingly restructure the
Guarantied Obligations, and any such merger, change, restructuring or
termination shall not affect the liability of Guarantor or the continuing
effectiveness hereof, or the enforceability hereof with respect to all or any
part of the Guarantied Obligations.
Upon the occurrence and during the continuance of any Event of
Default, Lender may enforce this Guaranty independently as to Guarantor and
independently of any other remedy or security Lender at any time may have or
hold in connection with the Guarantied Obligations. Guarantor expressly waives
any right to require Lender to marshal assets in favor of Guarantor, and agrees
that Lender may proceed against Borrower, or upon or against any security or
remedy, before proceeding to enforce this Guaranty, in such order as it shall
determine in its sole and absolute discretion. Lender may file a separate
action or actions against Borrower and/or Guarantor without respect to whether
action is brought or prosecuted with respect to any security or against any
other Person, or whether any other Person is joined in any such action or
actions. Guarantor agrees that Lender, Borrower and any Affiliates of Borrower
or Borrower may deal with each other in connection with the Guarantied
Obligations or otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without in any way
altering or affecting the security of this Guaranty. Lender's rights hereunder
shall be reinstated and revived, and the enforceability of this Guaranty shall
continue, with respect to any amount at any time paid on account of the
Guarantied Obligations which thereafter shall be required to be restored or
returned by Lender upon the bankruptcy, insolvency or reorganization of Borrower
or any other Person, or otherwise, all as though such amount had not been paid.
The rights of Lender created or granted herein and the enforceability of this
Guaranty with respect to Guarantor at all times shall remain effective to
guaranty the full amount of all the Guarantied Obligations even though the
Guarantied Obligations, or any part thereof, or any security or guaranty
therefor, may be or hereafter may become invalid or otherwise unenforceable as
against Borrower or any other guarantor or surety and whether or not Borrower
shall have any personal liability with respect thereto. To the maximum extent
permitted by law, Guarantor expressly waives any and all defenses now or
hereafter arising or asserted by reason of (a) any disability or other defense
of Borrower with respect to the Guarantied Obligations, (b) the unenforceability
or invalidity of any security or guaranty for the Guarantied Obligations or the
lack of perfection or continuing perfection or failure of priority of any
security for the Guarantied Obligations, (c) the cessation for any cause
whatsoever of the liability of Borrower (other than by reason of the full
payment and performance of all Guarantied Obligations), (d) any failure of
Lender to marshal assets in favor of Borrower or any other Person, (e) except as
otherwise provided in this Guaranty, any
-4-
<PAGE>
failure of Lender to give notice of sale or other disposition of Collateral to
Guarantor or any other Person or any defect in any notice that may be given in
connection with any sale or disposition of Collateral, (f) any failure of Lender
to comply with applicable Laws in connection with the sale or other disposition
of any Collateral or other security for any Guarantied Obligation, including
without limitation, any failure of Lender to conduct a commercially reasonable
sale or other disposition of any Collateral or other security for any Guarantied
Obligation, (g) any act or omission of Lender or others that directly or
indirectly results in or aids the discharge or release of Borrower or the
Guarantied Obligations or any security or guaranty therefor by operation of law
or otherwise, (h) any Law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation, (i) any failure of Lender to file or
enforce a claim in any bankruptcy or other proceeding with respect to any
Person, (j) the election by Lender, in any bankruptcy proceeding of any Person,
of the application or non-application of Section 1111(b)(2) of the United States
Bankruptcy Code, (k) any extension of credit or the grant of any Lien under
Section 364 of the United States Bankruptcy Code, (l) any use of cash collateral
under Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any Person, (n) the avoidance of any Lien in favor of
Lender for any reason, (o) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against any Person, including any discharge of, or bar or stay
---------
against collecting, all or any of the Guarantied Obligations (or any interest
thereon) in or as a result of any such proceeding, (p) to the extent permitted,
the benefits of any form of one-action rule, or (q) any action taken by Lender
that is authorized by this Section or any other provision of any Loan Document.
Guarantor expressly waives all setoffs and counterclaims and all presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Guarantied
Obligations, and all notices of acceptance of this Guaranty or of the existence,
creation or incurrence of new or additional Guarantied Obligations.
8. Condition of Borrower and Borrower's Subsidiaries. Guarantor
-------------------------------------------------
represents and warrants to Lender that Guarantor has established adequate means
of obtaining from Borrower and Borrower's Subsidiaries, on a continuing basis,
financial and other information pertaining to the businesses, operations and
condition (financial and otherwise) of Borrower and Borrower's Subsidiaries and
their Properties, and Guarantor now is and hereafter will be completely familiar
with the businesses, operations and condition (financial and otherwise) of
Borrower and Borrower's Subsidiaries and their Properties. Guarantor hereby
expressly waives and relinquishes any duty on the part of Lender (should any
such duty exist) to disclose to Guarantor any matter, fact or thing related to
the businesses, operations or condition (financial or otherwise) of Borrower or
Borrower's Subsidiaries or their Properties, whether now known or hereafter
known by Lender during the life of this Guaranty. With respect to any of the
Guarantied Obligations, Lender need not inquire into the
-5-
<PAGE>
powers of Borrower or any Subsidiaries thereof or the officers or employees
acting or purporting to act on their behalf, and all Guarantied Obligations made
or created in good faith reliance upon the professed exercise of such powers
shall be secured hereby.
9. Liens on Real Property. In the event that all or any part of the
----------------------
Guarantied Obligations at any time are secured by any one or more deeds of trust
or mortgages or other instruments creating or granting Liens on any interests in
real Property, Guarantor authorizes Lender, upon the occurrence of and during
the continuance of any Event of Default, at its sole option, without notice or
demand and without affecting any Guarantied Obligations of Guarantor, the
enforceability of this Guaranty, or the validity or enforceability of any Liens
of Lender on any Collateral, to foreclose any or all of such deeds of trust or
mortgages or other instruments by judicial or nonjudicial sale. Guarantor
expressly waives any defenses to the enforcement of this Guaranty or any rights
of Lender created or granted hereby or to the recovery by Lender against
Borrower or any other Person liable therefor of any deficiency after a judicial
or nonjudicial foreclosure or sale because all or any part of the Guarantied
Obligations is secured by real Property. This means, among other things: (1)
Lender may collect from any Guarantor without first foreclosing on any real or
personal Property collateral pledged by Borrower. (2) If the Lender forecloses
on any real Property collateral pledged by Borrower: (A) The amount of the
Guarantied Obligations may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price. (B) The Lender may collect from any Guarantor even if the
Lender, by foreclosing on the real Property collateral, has destroyed any right
any Guarantor may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses any Guarantor may have because all
or any part of the Guarantied Obligations is secured by real Property. Guarantor
expressly waives any defenses or benefits that may be derived from California
Code of Civil Procedure (S)(S) 580a, 580b, 580d or 726, or comparable provisions
of the Laws of any other jurisdiction, including, without limitation, NRS
Section 40.430 and judicial decisions relating thereto, and NRS Sections 40.451,
40.455, 40.457 and 40.459 and all other suretyship defenses it otherwise might
or would have under California Law or other applicable Law. Guarantor expressly
waives any right to receive notice of any judicial or nonjudicial foreclosure or
sale of any real Property or interest therein subject to any such deeds of trust
or mortgages or other instruments and any Guarantor's or any other Person's
failure to receive any such notice shall not impair or affect Guarantor's
Obligations or the enforceability of this Guaranty or any rights of Lender
created or granted.
10. Waiver of Rights of Subrogation. Notwithstanding anything to the
-------------------------------
contrary elsewhere contained herein or in any other Loan Document to which
Guarantor is a Party, unless and until all Obligations have been paid and
performed in full, Guarantor hereby expressly waives with respect to Borrower
and its successors and assigns (including any surety) and any other Person which
---------
is directly or indirectly a creditor of Borrower or any surety for Borrower, any
and all rights at Law or in equity to subrogation, to reimbursement, to
exoneration, to contribution, to setoff or to any other rights that could accrue
to a surety
-6-
<PAGE>
against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, or to a holder or transferee
against a maker, and which Guarantor may have or hereafter acquire against
Borrower or any other such Person in connection with or as a result of
Guarantor's execution, delivery and/or performance of this Guaranty or any other
Loan Document to which Guarantor is a party. Guarantor agrees that it shall not
have or assert any such rights against Borrower or its successors and assigns or
any other Person (including any surety) which is directly or indirectly a
---------
creditor of Borrower or any surety for Borrower, either directly or as an
attempted setoff to any action commenced against Guarantor by Borrower (as
borrower or in any other capacity), Lender or any other such Person unless and
until all Obligations have been paid and performed in full. Guarantor hereby
acknowledges and agrees that this waiver is intended to benefit Borrower and
Lender and shall not limit or otherwise affect Guarantor's liability hereunder,
under any other Loan Document to which Guarantor is a party, or the
enforceability hereof or thereof.
11. Understandings With Respect to Waivers and Consents. Guarantor
---------------------------------------------------
warrants and agrees that each of the waivers and consents set forth herein are
made with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Guarantor otherwise
may have against Borrower, Lender or others, or against any Collateral, and
that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or Law. Guarantor acknowledges
that it has either consulted with legal counsel regarding the effect of this
Guaranty and the waivers and consents set forth herein, or has made an informed
decision not to do so. If this Guaranty or any of the waivers or consents
herein are determined to be unenforceable under or in violation of applicable
Law, this Guaranty and such waivers and consents shall be effective to the
maximum extent permitted by Law.
12. Representations and Warranties. Guarantor hereby makes each and
------------------------------
every representation and warranty applicable to Guarantor set forth in Article 4
---------
of the Loan Agreement as if set forth in full herein.
13. Costs and Expenses. Guarantor agrees to pay to Lender all costs
------------------
and expenses (including, without limitation, reasonable attorneys' fees and
---------
disbursements) incurred by Lender in the enforcement or attempted enforcement of
this Guaranty, whether or not an action is filed in connection therewith, and in
connection with any waiver or amendment of any term or provision hereof. All
advances, charges, costs and expenses, including reasonable attorneys' fees and
---------
disbursements (including the reasonably allocated cost of legal counsel employed
by Lender), incurred or paid by Lender in exercising any right, privilege, power
or remedy conferred by this Guaranty, or in the enforcement or attempted
enforcement thereof, shall be subject hereto and shall become a part of the
Guarantied Obligations and shall be paid to Lender by Guarantor, immediately
upon demand, together with interest thereon at the rate(s) provided for under
the Loan Agreement.
-7-
<PAGE>
14. Liability. Notwithstanding anything to the contrary elsewhere
---------
contained herein or in any Loan Document to which Guarantor is a Party, the
aggregate liability of Guarantor hereunder for payment and performance of the
Guarantied Obligations shall not exceed an amount which, in the aggregate, is
$1.00 less than that amount which if so paid or performed would constitute or
result in a "fraudulent transfer", "fraudulent conveyance", or terms of similar
import, under applicable state or federal Law, including without limitation,
Section 548 of the United States Bankruptcy Code. The liability of Guarantor
hereunder is independent of any other guaranties at any time in effect with
respect to all or any part of the Guarantied Obligations, and Guarantor's
liability hereunder may be enforced regardless of the existence of any such
guaranties. Any termination by or release of any guarantor in whole or in part
shall not affect the continuing liability of Guarantor hereunder, and no notice
of any such termination or release shall be required. The execution hereof by
Guarantor is not founded upon an expectation or understanding that there will be
any other guarantor of the Guarantied Obligations.
15. WAIVER OF JURY TRIAL. GUARANTOR AND LENDER EXPRESSLY WAIVE THEIR
--------------------
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, THE LOAN
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. GUARANTOR AND LENDER AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY, THE LOAN AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
GUARANTY, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
-8-
<PAGE>
16. THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REFERENCE TO THE CONFLICT OF LAWS OR CHOICE OF LAW PRINCIPLES THEREOF.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty by its duly
authorized officer as of the date first written above.
"Guarantor"
COAST RESORTS, INC.,
a Nevada corporation
By:___________________________
Gage Parrish, Vice President
and Chief Financial Officer
Address:
4500 West Tropicana Road
Las Vegas, Nevada 89103
702/365-7002 direct
702/365-7111 general
702/365-7566 FAX
<PAGE>
TRADEMARK SECURITY INTEREST ASSIGNMENT
--------------------------------------
This TRADEMARK SECURITY INTEREST ASSIGNMENT (the "Assignment") dated
as of March 18, 1999 is made by Coast Hotels and Casinos, Inc., a Nevada
corporation ("Borrower") and Coast Resorts, Inc., a Nevada corporation
("Guarantor"), together with each other Person who may become a party hereto
pursuant to Section 9 of this Assignment (each a "Grantor" and collectively,
"Grantors"), jointly and severally, in favor of Bank of America National Trust
and Savings Association, as the Administrative Agent under the Loan Agreement
referred to below for the ratable benefit of each of the Lenders which are
parties to the Loan Agreement from time to time, as Secured Party, with
reference to the following facts:
RECITALS
--------
A. Pursuant to the Loan Agreement (the "Loan Agreement") of even
date herewith among Borrower, the Lenders referred to therein, and the
Administrative Agent, the Lenders are extending a reducing revolving line of
credit to Borrower (as at any time amended, the "Loan Agreement").
B. Guarantor has issued a Guaranty of even date herewith of the
Obligations of Borrower under the Loan Agreement (as at any time amended,
renewed, replaced, extended or supplanted, the "Guaranty").
C. It is a condition to the credit facilities under the Loan
Agreement that Borrower and Guarantor enter into this Assignment, and Borrower
has covenanted to cause any Subsidiary hereafter formed or acquired by Borrower
or Guarantor to enter into a joinder hereto.
AGREEMENT
NOW, THEREFORE, in order to induce the Lenders to extend the
aforementioned credit facilities to Borrower, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Borrower and Guarantor, as initial Grantors hereunder, and each of the
subsequent Grantors which hereafter become party hereto, hereby jointly and
severally represent, warrant, covenant and agree as follows:
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<PAGE>
1. Definitions. This Assignment is the Trademark Assignment
-----------
referred to in the Loan Agreement. Terms defined in the Loan Agreement and not
otherwise defined in this Assignment shall have the meanings defined for those
terms in the Loan Agreement. As used in this Assignment, the following terms
shall have the meanings respectively set forth after each:
"Assignment" means this Trademark Security Interest Assignment, and
----------
any extensions, modifications, renewals, restatements, supplements or amendments
hereof, including, without limitation, any documents or agreements by which
---------
additional Grantors become party hereto.
"Collateral" means and includes all of the following: (a) all of
----------
Grantors' now-existing, or hereafter acquired, right, title, and interest in and
to all of Grantors' trademarks, trade names, trade styles, and service marks;
all prints and labels on which said trademarks, trade names, trade styles, and
service marks appear, have appeared, or will appear, and all designs and general
intangibles of a like nature; all applications, registrations, and recordings
relating to the foregoing in the United States Patent and Trademark Office
("USPTO") or in any similar office or agency of the United States, any State
thereof, or any political subdivision thereof, and all reissues, extensions, and
renewals thereof, including those trademarks, trade names, trade styles, service
marks, terms, designs, and applications described in Schedule 1 hereto (the
----------
"Trademarks"); (b) the goodwill of the business symbolized by each of the
Trademarks, including, without limitation, all customer lists and other records
relating to the distribution of products or services bearing the Trademarks; (c)
all licenses and sublicenses of trademarks, trade names, trade styles and
service marks, to the extent that there exists no prohibition as a matter of law
on the transfer thereof for security as contemplated by this Assignment, and (d)
any and all proceeds of any of the foregoing, including any claims by Grantors
against third parties for past, present and future infringement of the
Trademarks or any licenses with respect thereto, provided that the term
--------
"Collateral", as used in this Assignment, shall not include gaming licenses or
- ----------- ---
liquor licenses which are not transferable without the consent of Governmental
Authorities.
"Secured Obligations" means (a) in the case of Borrower, any and all
-------------------
present and future Obligations of any type or nature of Borrower to the
Administrative Agent, the Lenders, and any one or more of them, arising under or
relating to the Loan Documents or any one or more of them, and (b) in the case
of Guarantor and each other Grantor, the obligations of that Grantor under any
guaranty which that Grantor has executed in favor of Secured Party with respect
to the obligations of Borrower to Secured Party, in each case whether due or to
become due, matured or unmatured, liquidated or unliquidated, or contingent or
-2-
<PAGE>
noncontingent, including Obligations of performance as well as Obligations of
---------
payment, and including interest that accrues after the commencement of any
---------
bankruptcy or insolvency proceeding by or against any Grantor.
"Secured Party" means the Administrative Agent who shall receive and
-------------
hold the assignments made hereunder for the ratable benefit of each of the
Lenders which are parties to the Loan Agreement from time to time. Subject to
the terms and conditions of the Loan Agreement, any right, remedy, privilege, or
power of Secured Party shall be exercised by the Administrative Agent.
2. Assignment. For valuable consideration, Grantors and each of
----------
them hereby jointly and severally grant and assign to Secured Party a security
interest, to secure the prompt and indefeasible payment and performance of the
Secured Obligations, and each of them, in and to all of the presently existing
and hereafter acquired Collateral. This Assignment is a continuing and
irrevocable agreement and all the rights, powers, privileges and remedies
hereunder shall apply to any and all Secured Obligations, including those
arising under successive transactions which shall either continue the Secured
Obligations, increase or decrease them and notwithstanding the bankruptcy of any
Grantor or any other event or proceeding affecting any Grantor.
3. Representations, Warranties and Covenants. Grantors, and each of
-----------------------------------------
them, represent, warrant and agree that:
(a) All of the existing Collateral is valid and subsisting and in
full force and effect, and Grantors own the sole, full, and clear title
thereto, and the right and power to grant the security interests granted
hereunder (subject to any inconsistent rights of the Trustee under the 13%
Indenture). Grantors will, at their expense, perform all acts and execute
all documents necessary to maintain the existence of the Collateral as
valid, subsisting, and registered trademarks, including, without
limitation, the filing of any renewal affidavits and applications. The
Collateral is not subject to any Liens, claims, mortgages, assignments or
licenses of any nature whatsoever, whether recorded or unrecorded, except
------
as permitted by the Loan Agreement.
(b) As of the date hereof, none of Grantors or their Subsidiaries
has any Trademarks registered, or subject to pending applications, in the
USPTO, or any similar office or agency in the United States, other than
those described in Schedule 1.
----------
(c) No Grantor nor any Subsidiary of any Grantor shall file any
-3-
<PAGE>
application for the registration of a trademark with the USPTO or any
similar office or agency in the United States, or State therein, unless
such Grantor or Subsidiary has informed Secured Party of such action in
advance or informs Secured Party promptly thereafter. Upon request of
Secured Party, Grantors shall execute and deliver to Secured Party any and
all agreements, instruments, documents, and such other papers as may be
reasonably requested by Secured Party to evidence the grant and assignment
of a security interest to Secured Party of such trademark. Each Grantor
authorizes Secured Party to modify this Assignment by amending Schedule 1
----------
to include any new trademark or service mark, and any trademark or service
mark renewal of any Grantor applied for and obtained hereafter.
(d) No Grantor nor any Subsidiary of any Grantor has abandoned
any of the Trademarks, and no Grantor nor any Subsidiary of any Grantor
will do any act, or omit to do any act, whereby the Trademarks may become
abandoned, canceled, invalidated, unenforceable, avoided, or avoidable.
Each Grantor shall notify Secured Party promptly if it knows, or has reason
to know, of any reason why any application, registration, or recording may
become abandoned, canceled, invalidated, or unenforceable.
(e) Grantors will render any assistance, as Secured Party may
reasonably determine is necessary, to Secured Party in any proceeding
before the USPTO, any federal or state court, or any similar office or
agency in the United States, or any State therein, to protect Secured
Party's security interest in the Trademarks.
(f) Grantors assume all responsibility and liability arising from
the use of the Trademarks, and each Grantor hereby indemnifies and holds
the Administrative Agent and each of the Lenders harmless from and against
any claim, suit, loss, damage, or expense (including reasonable attorneys'
fees) arising out of any alleged defect in any product manufactured,
promoted, or sold by any Grantor (or any Affiliate or Subsidiary thereof)
in connection with any Trademark or out of the manufacture, promotion,
labeling, sale, or advertisement of any such product by any Grantor or any
Affiliate or Subsidiary thereof.
(g) Grantors shall promptly notify Secured Party in writing of
any adverse determination in any proceeding in the USPTO or domestic
Governmental Agency, court or body, regarding any Grantor's ownership of
any of the Trademarks. In the event of any material infringement of any of
the Trademarks by a third party, Grantors shall promptly notify Secured
Party of such infringement and shall diligently pursue damages or an
injunction for such infringement.
-4-
<PAGE>
(h) Each Grantor shall, at its sole expense, do, make, execute
and deliver all such additional and further acts, things, assurances, and
instruments, in each case in form and substance reasonably satisfactory to
Secured Party, relating to the creation, validity, or perfection of the
security interests provided for in this Assignment under 35 U.S.C. Section
261, 15 U.S.C. Section 1051 et seq., the Uniform Commercial Code or other
-- ---
Law of the United States, the State of California, or of any other States
as Secured Party may from time to time reasonably request, and shall take
all such other action as the Secured Party may reasonably require to more
completely vest in and assure to Secured Party its security interest in any
of the Collateral, and each Grantor hereby irrevocably authorizes Secured
Party or its designee, at such Grantor's expense, to execute such
documents, and file such financing statements with respect thereto with or
without such Grantor's signature, as Secured Party may reasonably deem
appropriate. In the event that any recording or refiling (or the filing of
any statement of continuation or assignment of any financing statement) or
any other action, is required at any time to protect and preserve such
security interest, Grantors shall, at their sole cost and expense, cause
the same to be done or taken at such time and in such manner as may be
necessary and as may be reasonably requested by Secured Party. Each
Grantor further authorizes Secured Party to have this or any other similar
security agreement recorded or filed with the Commissioner of Patents and
Trademarks or other appropriate federal, state or government office.
(i) Secured Party is hereby irrevocably appointed by each Grantor
as its lawful attorney and agent, with full power of substitution to
execute and deliver on behalf of and in the name of any or all Grantors,
such financing statements and other documents and agreements, and to take
such other action as Secured Party may deem necessary for the purpose of
perfecting, protecting or effecting the security interests granted herein
and effected hereby, and any mortgages or Liens necessary or desirable to
implement or effectuate the same, under any applicable Law, and Secured
Party is hereby authorized to file on behalf of and in the name of any or
all Grantors, at Grantors' sole expense, such financing statements,
documents and agreements in any appropriate governmental office.
(j) Secured Party may, in its sole discretion, pay any amount, or
do any act which Grantors fail to pay or do as reasonably required
hereunder to preserve, defend, protect, maintain, record, amend, or enforce
the Secured Obligations, the Collateral, or the security interest granted
hereunder, including, but not limited to, all filing or recording fees,
court costs, collection charges, and reasonable attorneys' fees. Grantors
will be liable to Secured Party for any such payment, and any amount so
-5-
<PAGE>
paid shall be an expense reimbursable by Borrower under Section 11.3 of the
Loan Agreement (or, in the proper case, by each other Grantor under the
expense provisions of its Guaranty).
4. Events of Default. Any "Event of Default" as defined in the Loan
-----------------
Agreement shall constitute an Event of Default hereunder.
5. Rights and Remedies. Upon the occurrence and during the
-------------------
continuance of any such Event of Default, in addition to all other rights and
remedies of Secured Party, whether provided under Law, the Loan Agreement or
otherwise, Secured Party may enforce its security interest hereunder which may
be exercised without notice to, or consent by, any Grantor, except as such
------
notice or consent is expressly provided for hereunder. Upon such enforcement:
(a) Secured Party may use any of the Trademarks for the sale of
goods, completion of work in process, or rendering of services in
connection with enforcing any security interest granted to Secured Party by
Grantors or any Subsidiary of any Grantor.
(b) Secured Party may grant such license or licenses relating to
the Collateral for such term or terms, on such conditions and in such
manner, as Secured Party shall, in its sole discretion, deem appropriate.
Such license or licenses may be general, special, or otherwise, and may be
granted on an exclusive or nonexclusive basis throughout all or part of the
United States of America and its territories and possessions.
(c) Secured Party may assign, sell, or otherwise dispose of the
Collateral, or any part thereof, either with or without special conditions
or stipulations, except that Secured Party agrees to provide Grantors with
------
ten (10) days' prior written notice of any proposed disposition of the
Collateral. Each Grantor hereby irrevocably appoints Borrower as its agent
for the purpose of receiving notice of sale hereunder, and agrees that such
Grantor conclusively shall be deemed to have received notice of sale when
notice of sale has been given to Borrower. Each Grantor expressly waives
any right to receive notice of any public or private sale of any Collateral
or other security for the Secured Obligations except as expressly provided
------
in this Section 5(c). Secured Party shall have the power to buy the
Collateral, or any part thereof, and Secured Party shall also have the
power to execute assurances and perform all other acts which Secured Party
may, in Secured Party's sole discretion, deem appropriate or proper to
complete such assignment, sale, or disposition. In any such event,
Grantors shall be liable for any deficiency.
-6-
<PAGE>
(d) In addition to the foregoing, in order to implement the
assignment, sale or other disposition of any of the Collateral pursuant to
Section 5(c) hereof, Secured Party may, at any time, execute and deliver,
on behalf of Grantors, and each of them, pursuant to the authority granted
in powers of attorney, one or more instruments of assignment of the
Trademarks (or any application, registration, or recording relating
thereto), in form suitable for filing, recording, or registration. Grantors
agree to pay Secured Party, on demand, all costs incurred in any such
transfer of the Collateral, including, but not limited to any taxes, fees,
and reasonable attorneys' fees.
(e) Secured Party may first apply the proceeds actually received
from any such use, license, assignment, sale, or other disposition of
Collateral first to the reasonable costs and expenses thereof, including,
without limitation, reasonable attorneys' fees and all legal, travel, and
other expenses which may be incurred by Secured Party. Thereafter, Secured
Party may apply any remaining proceeds to such of the Secured Obligations
as provided in the Loan Agreement. Grantors shall remain liable to Secured
Party for any expenses or Secured Obligations remaining unpaid after the
application of such proceeds, and Grantors will pay Secured Party, on
demand, any such unpaid amount, together with interest at the rate(s) set
forth in the Loan Agreement.
(f) Upon request of Secured Party, Grantors shall supply to
Secured Party, or Secured Party's designee, Grantors' knowledge and
expertise relating to the manufacture and sale of the products and services
bearing the Trademarks and Grantors' customer lists and other records
relating to the Trademarks and the distribution hereof.
Nothing contained herein shall be construed as requiring Secured Party
to take any such action at any time. All of Secured Party's rights and
remedies, whether provided under Law, the Loan Agreement, this Assignment, or
otherwise shall be cumulative, and none is exclusive of any right or remedy
otherwise provided herein or in any of the other Loan Documents, at law or in
equity. Such rights and remedies may be enforced alternatively, successively,
or concurrently.
Secured Party or Designee will keep such confidential information,
lists or records provided hereunder in confidence in accordance with Section
11.4 of the Loan Agreement.
-7-
<PAGE>
6. Waivers.
-------
(a) Each Grantor hereby waives any and all rights that it may
have to a judicial hearing, if any, in advance of the enforcement of any of
Secured Party's rights hereunder, including, without limitation, its rights
following any Event of Default and during the continuance thereof to take
immediate possession of the Collateral and exercise its rights with respect
thereto.
(b) Secured Party shall not be required to marshal any present or
future security for (including, but not limited to, this Assignment and the
Collateral subject to a security interest hereunder), or guaranties of, the
Secured Obligations or any of them, or to resort to such security or
guaranties in any particular order. Each Grantor hereby agrees that it
will not invoke any Law relating to the marshaling of collateral which
might cause delay in or impede the enforcement of Secured Party's rights
under this Assignment or any other instrument evidencing any of the Secured
Obligations or by which any of such Secured Obligations is secured or
guaranteed, and each Grantor hereby irrevocably waives the benefits of all
such Laws.
(c) Except for notices specifically provided for herein, each
Grantor hereby expressly waives demand, notice, protest, notice of
acceptance of this Assignment, notice of loans made, credit extended,
collateral received or delivered or other action taken in reliance hereon
and all other demands and notices of any description. With respect both to
Secured Obligations and any collateral therefor, each Grantor assents to
any extension or postponement of the time of payment or any other
indulgence, to any substitution, of any Person primarily or secondarily
liable, to the acceptance of partial payment thereon and the settlement,
compromising or adjusting of any thereof, all in such manner and at such
time or times as Secured Party may deem advisable. Secured Party shall
have no duty as to the protection of the Collateral or any income thereon,
nor as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto except as otherwise required
by Law. Secured Party may exercise its rights with respect to the
Collateral without resorting or regard to other collateral or sources of
reimbursement for liability. Secured Party shall not be deemed to have
waived any of its rights upon or under the Loan Agreement or the Collateral
unless such waiver be in writing and signed by the Secured Party. The
exercise of the rights under this Agreement are not intended by the parties
to constitute an "action" within the meaning of Sections 580a, 580d, or 726
of the California Code of Civil Procedure. No delay or omission on the
part of the Secured Party in exercising any right shall operate as a waiver
of any right on any future occasion. All rights and remedies of the
Secured Party under the Loan
-8-
<PAGE>
Agreement or on the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly
or concurrently.
7. Costs and Expenses. Grantors will pay any and all charges,
------------------
costs and taxes incurred in implementing or subsequently amending this
Assignment, including, without limitation, recording and filing fees, appraisal
fees, stamp taxes, and reasonable fees and disbursements of Secured Party's
counsel incurred by Secured Party, and the allocated cost of in-house counsel to
Secured Party, in connection with this Assignment, and in the enforcement of
this Assignment and in the enforcement or foreclosure of any Liens, security
interests or other rights of the Secured Party under this Assignment, or under
any other documentation heretofore, now, or hereafter given to Secured Party in
furtherance of the transactions contemplated hereby.
8. Continuing Effect. This Assignment shall remain in full force
-----------------
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any
Grantor's assets.
9. Joinder. Any other Person may become a Grantor hereunder and
-------
become bound by the terms and conditions of this Assignment by executing and
delivering to Administrative Agent an Instrument of Joinder substantially in the
form attached hereto as Exhibit A, accompanied by such documentation as
---------
Administrative Agent may require to establish the due organization, valid
existence and good standing of such Person, its qualification to engage in
business in each material jurisdiction in which it is required to be so
qualified, its authority to execute, deliver and perform this Assignment, and
the identity, authority and capacity of each Responsible Official thereof
authorized to act on its behalf.
10. Release of Grantors. This Assignment and all Secured Obligations
-------------------
of Grantors hereunder shall be released when all Secured Obligations have been
paid in full in cash or otherwise performed in full and when no portion of the
Commitments remain outstanding. Upon such release of Grantors' Secured
Obligations hereunder, Secured Party shall return and reassign any Collateral to
Grantors, or to the Person or Persons legally entitled thereto, and shall
endorse, execute, deliver, record and file all instruments and documents, and do
all other acts and things, reasonably required for the return of the Collateral
to Grantors, or to the Person or Persons legally entitled thereto, and to
evidence or document the release of Secured Party's interests arising under this
Assignment, all as reasonably requested by, and at the reasonable expense of,
Grantors.
-9-
<PAGE>
11. Additional Powers and Authorization. Secured Party shall be
-----------------------------------
entitled to the benefits accruing to it as Administrative Agent under the Loan
Assignment and the other Loan Documents. Notwithstanding anything contained
herein to the contrary, Secured Party may employ agents, trustees, or attorneys-
in-fact and may vest any of them with any Property (including, without
limitation, any Collateral assigned hereunder), title, right or power deemed
necessary for the purposes of such appointment.
12. WAIVER OF JURY TRIAL. EACH GRANTOR AND SECURED PARTY EXPRESSLY
--------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS ASSIGNMENT, THE
LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. EACH GRANTOR AND SECURED PARTY AGREE THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY ARE WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS ASSIGNMENT, THE LOAN AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS ASSIGNMENT, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS. ANY PARTY
HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA
AND THE LAWS OF THE STATE OF CALIFORNIA.
14. Miscellaneous.
-------------
-10-
<PAGE>
(a) Grantors and Secured Party may from time to time agree in
writing to the release of certain of the Collateral from the security
interest created hereby.
(b) Any notice, request, demand or other communication required
or permitted under this Assignment shall be in writing and shall be deemed
to be properly given if done in accordance with Section 11.6 of the Loan
Agreement.
(c) Except as otherwise set forth in the Loan Agreement, the
provisions of this Assignment may not be modified, amended, restated or
supplemented, whether or not the modification, amendment, restatement or
supplement is supported by new consideration, except by a written
------
instrument duly executed and delivered by Secured Party and Grantors.
(d) Except as otherwise set forth in the Loan Agreement or this
Assignment, any waiver of the terms and conditions of this Assignment, or
any Event of Default and its consequences hereunder or thereunder, and any
consent or approval required or permitted by this Assignment to be given,
may be made or given with, but only with, the written consent of Secured
Party on such terms and conditions as specified in the written instrument
granting such waiver, consent or approval.
(e) Any failure or delay by Secured Party to require strict
performance by Grantors of any of the provisions, warranties, terms, and
conditions contained herein, or in any other agreement, document, or
instrument, shall not affect Secured Party's right to demand strict
compliance and performance therewith, and any waiver of any default shall
not waive or affect any other default, whether prior or subsequent thereto,
and whether of the same or of a different type. None of the warranties,
conditions, provisions, and terms contained herein, or in any other
agreement, document, or instrument, shall be deemed to have been waived by
any act or knowledge of Secured Party, its agents, officers, or employees,
but only by an instrument in writing, signed by an officer of Secured Party
and directed to Grantors, specifying such waiver.
(f) If any term or provision of this Assignment conflicts with
any term or provision of the Loan Agreement, the term or provision of the
Loan Agreement shall control.
-11-
<PAGE>
(g) If any provision hereof shall be deemed to be invalid by any
court, such invalidity shall not affect the remainder of this Assignment.
(h) This Assignment supersedes all prior oral and written
assignments and agreements between the parties hereto on the subject matter
hereof.
(i) This Assignment shall be binding upon, and for the benefit
of, the parties hereto and their respective legal representatives,
successors, and assigns.
(j) This Assignment may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of Borrower and Guarantor have executed this
Assignment by its duly authorized officer as of the date first written above.
COAST HOTELS AND CASINOS, INC.,
a Nevada corporation
By:_______________________________
Title: ___________________________
COAST RESORTS, INC.,
a Nevada corporation
By:_______________________________
Title: ___________________________
-12-
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On March ___, 1999, before me, _______________________, Notary Public,
personally appeared ___________________________
[_] personally known to me or [_] proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On March___, 1999, before me, _______________________, Notary Public, personally
appeared ___________________________
[_] personally known to me or [_] proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________
-13-
<PAGE>
SCHEDULE 1
----------
Existing and Pending Trademarks
-------------------------------
<TABLE>
<CAPTION>
Registration Registration
Mark Class Number Date Owner
- ---- ----- ------------ -------- ---------
<S> <C> <C> <C> <C>
Gone Country 41 2,123,611 12/23/97 Guarantor
Super Sequential 41 2,163,477 06/08/98 Borrower
Party Poker 41 2,127,100 01/06/98 Borrower
Cajun Quarters 41 2,163,476 06/09/98 Borrower
Paycheck Party Machine 41 2,116,281 11/25/97 Borrower
Crawfish Quarters 41 2,127,099 01/06/98 Borrower
</TABLE>
Schedule 1
<PAGE>
EXHIBIT A
TO
TRADEMARK SECURITY INTEREST ASSIGNMENT
INSTRUMENT OF JOINDER
---------------------
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of
_________________, _____, by ______________________________, a
___________________________ ("Joining Party"), and delivered to Bank of America
National Trust and Savings Association, as Administrative Agent, pursuant to the
Trademark Security Interest Assignment (the "Assignment") dated as of March 18,
1999 made by Coast Hotels and Casinos, Inc. and Coast Resorts, Inc. in favor of
the Administrative Agent and the Lenders (the "Assignment"). Terms used but not
defined in this Joinder shall have the meanings defined for those terms in the
Assignment.
RECITALS
--------
(A) The Assignment was made by the Grantors in favor of the
Administrative Agent for the benefit of the Lenders that are parties to that
certain Loan Agreement dated as of March 18, 1999 by and among Coast Hotels and
Casinos, Inc., a Nevada corporation ("Borrower"), the Lenders which are parties
thereto, and Bank of America National Trust and Savings Association, as the
Administrative Agent for the Lenders.
(B) Joining Party has become a Subsidiary of Borrower, and as such is
required pursuant to the Loan Agreement to become a Grantor.
(C) Joining Party expects to realize direct and indirect benefits as a
result of the availability of the credit facilities under the Loan Agreement to
Borrower.
NOW THEREFORE, Joining Party agrees as follows:
AGREEMENT
---------
(1) By this Joinder, Joining Party becomes a "Grantor" under and
pursuant to Section 9 of the Assignment. Joining Party agrees that, upon its
execution hereof, it will become a Grantor under the Assignment with respect to
all Obligations of Borrower heretofore or hereafter incurred under the Loan
Documents, and will be bound by all terms, conditions, and duties applicable to
a Grantor under the Assignment.
<PAGE>
(2) The effective date of this Joinder is _________, _____.
"Joining Party"
______________________________,
a _____________________________
By:____________________________
Title:_________________________
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:__________________________
Title:_______________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 38,616
<SECURITIES> 0
<RECEIVABLES> 5,054
<ALLOWANCES> 842
<INVENTORY> 5,481
<CURRENT-ASSETS> 61,817
<PP&E> 455,953
<DEPRECIATION> 118,249
<TOTAL-ASSETS> 408,173
<CURRENT-LIABILITIES> 55,296
<BONDS> 234,766
0
0
<COMMON> 1
<OTHER-SE> 97,156
<TOTAL-LIABILITY-AND-EQUITY> 408,173
<SALES> 0
<TOTAL-REVENUES> 362,531
<CGS> 0
<TOTAL-COSTS> 309,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,441
<INCOME-PRETAX> 31,628
<INCOME-TAX> 10,382
<INCOME-CONTINUING> 21,246
<DISCONTINUED> 0
<EXTRAORDINARY> (27,007)
<CHANGES> 0
<NET-INCOME> (5,761)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
