UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
____________________
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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 No. 01-6697
MIRAGE RESORTS, INCORPORATED
(Exact name of Registrant as specified in its charter)
____________________
Nevada 88-0058016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 693-7111
____________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ---------------------------------------- -----------------------
Common Stock ($.004 par value per share) New York Stock Exchange
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 the 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 aggregate market value of the Registrant's Common Stock held by
non-affiliates (all persons other than executive officers or
directors) of the Registrant on March 12, 1999 (based on the closing
sale price per share on the New York Stock Exchange Composite Tape on
that date) was $3,404,036,564.
The Registrant's Common Stock outstanding at March 12, 1999 was
181,277,553 shares.
Portions of the Registrant's definitive Proxy Statement for its June
9, 1999 Annual Meeting of Stockholders (which has not been filed as of
the date of this filing) are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
OUR OPERATING PROPERTIES
Mirage Resorts, Incorporated (the "Company" or the "Registrant,"
which may also be referred to as "we," "us" or "our") was incorporated
in Nevada in 1949 as the successor to a partnership that began
business in 1946. Through our wholly owned subsidiaries, we own and
operate the following hotel-casinos and resorts:
- - BELLAGIO - an elegant European-style luxury resort located on an
approximately 90-acre site with 1,450 feet of frontage at the
center of the Las Vegas Strip, which opened on October 15, 1998.
The resort overlooks an eight-acre lake inspired by Lake Como
in Northern Italy. Each day, more than 1,000 fountains in the lake
come alive at regular intervals in a choreographed ballet of water,
music and lights. Bellagio features a wide variety of casual and
gourmet restaurants in both indoor and outdoor settings (including
the world-famous Le Cirque, Olives and Aqua restaurants), upscale
retail boutiques (including those leased to Armani, Chanel, Gucci,
Hermes, Prada and Tiffany & Co.) and extensive meeting, convention
and banquet space. Bellagio's specially designed theater offers
luxurious seating overlooking a stage that rises and falls in
sections into what we believe to be one of the world's largest
enclosed bodies of water. The theater is home to the spectacular
new show "O" produced and performed by the talented Cirque du
Soleil organization. The surroundings of Bellagio are lushly
landscaped with classical gardens and European fountains and pools.
Inside, a botanical conservatory is filled with vibrant colors
and pleasing scents that change with the seasons. Adjoining the
conservatory is the Bellagio Gallery of Fine Art, featuring
original masterpieces by van Gogh, Monet, Manet, Renoir and
Rembrandt, among others.
- - THE MIRAGE - a luxurious, tropically themed destination resort
located on approximately 100 acres with 2,200 feet of frontage
shared with Treasure Island near the center of the Las Vegas Strip.
The exterior of the resort is landscaped with palm trees,
abundant foliage and more than four acres of lagoons and other
water features centered around a 54-foot volcano and waterfall.
Each evening, the volcano erupts at regular intervals, sending
blasts of steam and water 40 feet into the air, with flames that
spectacularly illuminate the front of the resort. Inside the
front entrance is an atrium with a tropical garden and additional
water features capped by a 100-foot-high glass dome. The atrium
has an advanced environmental control system and creative lighting
and other special effects designed to replicate the sights, sounds
and fragrances of the South Seas. Located at the rear of the
hotel, adjacent to the swimming pool area, is a dolphin habitat
with eight Atlantic bottlenose dolphins and The Secret Garden of
Siegfried & Roy, an attraction that allows guests to view the
beautiful exotic animals of Siegfried & Roy, the world-famous
illusionists who star in a spectacular show at The Mirage.
<PAGE>
- - TREASURE ISLAND AT THE MIRAGE ("TREASURE ISLAND") - a pirate-
themed hotel-casino resort located next to The Mirage. Treasure
Island and The Mirage are connected by a monorail. The front of
Treasure Island, facing the Las Vegas Strip, is an elaborate pirate
village where full-scale replicas of a pirate ship and a British
frigate regularly engage in a pyrotechnic and special effects sea
battle, culminating with the sinking of the frigate. The showroom
at Treasure Island features Mystere, a unique choreographic mix of
magic, special effects and feats of human prowess produced and
performed by Cirque du Soleil.
- - BEAU RIVAGE - a luxurious new beachfront resort located on a 36-
acre site with 1,400 feet of frontage where Interstate 110 meets
the Gulf Coast in Biloxi, Mississippi. Beau Rivage opened on March
16, 1999. The graceful driveway leading to Beau Rivage is lined
with intricate gardens and stately oak trees. Large magnolia trees
fill the resort's skylit atrium lobby. Thirteen distinctive
restaurants offer a variety of dining experiences, from a cafe
nestled in the atrium gardens to a steak and seafood restaurant
surrounded by tropical fish and coral reefs. Adjoining its lavish
health spa is a lushly landscaped swimming pool, cafe and special
events pavilion overlooking the Gulf of Mexico. Beau Rivage also
offers a state-of-the-art convention center, a shopping esplanade,
a 1,550-seat theater that will feature Alegria, another spectacular
show produced and performed by Cirque du Soleil, and a brew pub
with live entertainment nightly. Adjoining the hotel is a deluxe
marina capable of accommodating yachts of up to 125 feet in length.
We are also considering the development of a world-class golf
course on approximately 508 acres of land we own in the Biloxi
area.
- - THE GOLDEN NUGGET - the largest, in terms of number of
guestrooms (according to the Las Vegas Convention and Visitors
Authority) and, we believe, the most luxurious hotel-casino in
downtown Las Vegas. The Golden Nugget, together with its parking
facilities, occupies approximately seven and one-half acres and is
located approximately six miles north of Bellagio and five miles
north of The Mirage and Treasure Island. It has received the Mobil
Travel Guide's Four Star Award and the AAA Four Diamond Award for
15 and 22 consecutive years, respectively. The Golden Nugget has
also benefited from the "Fremont Street Experience," a $70 million
entertainment attraction developed by a coalition of several major
downtown Las Vegas hotel-casinos (including the Golden Nugget) in
conjunction with the City of Las Vegas. This attraction converted
Fremont Street into a four-block-long pedestrian mall, topped with
a 90-foot by 1,400-foot special effects canopy. Within the
canopy are 2.1 million computer-controlled, four-color lights and
a 540,000-watt sound system.
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- - THE GOLDEN NUGGET-LAUGHLIN - located on approximately 13 acres
with 600 feet of Colorado River frontage near the center of the
tourist strip in Laughlin, Nevada, 90 miles south of Las Vegas.
The Golden Nugget-Laughlin features a 32,000-square foot casino
offering 13 table games and approximately 1,195 slot machines, 300
hotel rooms (including four suites), three restaurants, three
bars, an entertainment lounge, a deli, an ice cream parlor and two
gift and retail shops. Other facilities at the Golden Nugget-
Laughlin include a swimming pool, a parking garage with space for
approximately 1,585 vehicles and approximately four and one-half
acres of surface parking for recreational vehicles. We also own
and operate a 78-room motel in Bullhead City, Arizona, across the
Colorado River from the Golden Nugget-Laughlin.
- - HOLIDAY INN - REGISTERED TRADEMARK - CASINO BOARDWALK (the
"Boardwalk") - located between Bellagio and Monte Carlo on the Las
Vegas Strip. This facility includes 654 hotel rooms and 32,000
square feet of casino space offering 650 slot machines, 20 table
games and a race and sports book. Other amenities at the Boardwalk
include a coffee shop, a buffet, a snack bar, an entertain-
ment lounge, two bars, a gift shop, two outdoor swimming pools
and 1,125 garage and surface parking spaces. See the section
titled "Future Expansion" in this Form 10-K for information
concerning our plans for a potential new hotel-casino resort to be
constructed on the Boardwalk site.
- - MONTE CARLO RESORT & CASINO ("MONTE CARLO") - located on
approximately 46 acres with 600 feet of frontage on the Las Vegas
Strip, approximately one-half mile south of Bellagio. We own 50%
of this resort in a joint venture with Circus Circus Enterprises,
Inc. ("Circus"), which manages the resort. Monte Carlo has a
palatial style reminiscent of the Belle Epoque, the French
Victorian architecture of the late 19th century. The resort has
amenities such as a brew pub featuring live entertainment, a health
spa, a beauty salon, a 1,200-seat theater featuring the world-
renowned magician Lance Burton, a large pool area and lighted
tennis courts. Monte Carlo is connected to Bellagio by a monorail.
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<TABLE>
<CAPTION>
The following table provides certain information, as of March 16,
1999, regarding our major hotel-casino resorts.
Bellagio The Mirage Treasure Island Beau Rivage Golden Nugget Monte Carlo (a)
--------------- ------------ --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Opening date...................... Oct. 1998 Nov. 1989 Oct. 1993 Mar. 1999 Aug. 1946 June 1996
Total building square footage..... 4,289,000 3,117,000 2,377,000 2,222,000 1,465,000 2,520,000
Casino
Square footage (including
corridors).................... 155,000 107,200 83,800 80,000 38,000 90,000
Number of gaming tables......... 139 124 83 86 56 95
Number of slots................. 2,660 2,200 1,910 1,990 1,300 2,090
Hotel
Number of guestrooms (including
suites and villas)............ 3,005 3,044 2,891 1,780 1,907 3,002
Square footage of interior
meeting space................. 99,100 73,000 16,000 30,000 21,000 25,000
Restaurants
Number of outlets.............. 16 13 10 13 6 8
Number of seats................ 2,778 2,190 1,748 1,564 1,006 2,200
Retail
Square footage................. 85,700 35,000 17,540 25,500 4,350 28,100
Showroom
Number of seats................ 1,795 1,503 1,525 1,550 386 1,200
</TABLE>
- ---------------
(a) Our Company owns 50% of Monte Carlo.
FUTURE EXPANSION
ATLANTIC CITY
On January 8, 1998, the City of Atlantic City deeded to our
Company approximately 180 acres (120 acres of which are developable)
in the Marina area of Atlantic City. In exchange, our Company
agreed to develop a hotel-casino on the site and perform certain
other obligations. We also entered into an agreement with two New
Jersey State agencies for the construction and joint funding of road
improvements necessary to improve access to the Marina area. As called
for by the agreement, in October 1997, we funded our $110 million
portion and one of the State agencies funded its $125 million
portion of the $330 million estimated total cost of the road
improvements. Each party deposited its funds into escrow accounts
and the funds are restricted for construction of the road improvement
project. The other State agency is providing the remaining $95
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million estimated cost of the project, of which approximately $88
million had been spent as of March 15, 1999. There is a fixed-price
design/build contract for the road improvement project. Groundbreaking
on the project took place on November 4, 1998, and construction is
scheduled for completion in May 2001.
We are in the design phase of our planned hotel-casino on the
Marina site and have not yet developed a budget or construction
schedule for the project. As part of the agreement with the City,
we are required to remediate environmental contamination at the Marina
site, which had been a municipal landfill until 1975. We began
remediation work in November 1998 and it is expected to take approxi-
mately one year to complete at a cost of approximately $37.5
million. We must finish much of the remediation before we can begin
construction of our new resort.
In July 1998, we entered into an amended and restated 50/50 joint
venture agreement with Boyd Gaming Corporation ("Boyd") for the
development of another hotel-casino on a 25-acre portion of the Marina
site. The joint venture intends to develop a $750 million enter-
tainment resort with approximately 1,500 hotel rooms to be connected
to our planned hotel-casino. We will design and develop the master
plan for the Marina site and Boyd will oversee the design and
construction of the joint venture resort, as well as operate it upon
completion. Under the agreement, we will contribute the land and $60
million in cash and Boyd will contribute $150 million in cash. The
joint venture will attempt to obtain acceptable financing that will be
non-recourse to both our Company and Boyd for the remaining
development cost of the project. If the joint venture obtains the
necessary permits and financing, we anticipate that construction of
the joint venture resort could begin late this year.
We and the joint venture must apply for and receive numerous
governmental permits and satisfy other conditions before construction
of either of the hotel-casinos can begin. The joint venture must also
arrange significant project financing that is non-recourse to our
Company and Boyd. Additionally, a current Atlantic City hotel-casino
operator and others have filed various lawsuits challenging the
validity of our agreement with the City and seeking to stop the con-
struction of the road improvements that is now underway. These law-
suits have delayed and may continue to delay or prevent construction
of the planned hotel-casino resorts. As a result of these factors,
we cannot be certain that the hotel-casinos planned for the Marina
site will be developed or of the timing or cost of construction.
LAS VEGAS
We acquired the Boardwalk and some related properties on June 30,
1998. Combined with land we own adjacent to the Boardwalk, the
acquisition provides us with an approximately 55-acre site for future
development with over 1,200 feet of frontage on the Las Vegas Strip
between Bellagio and Monte Carlo. We are in the very early design
phase for a potential new hotel-casino resort we expect to develop on
the site. The design, timing and cost of any future development,
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however, are still highly uncertain. The timing of construction of
our planned resort will depend upon several factors. These factors
include the market's absorption of Bellagio and the other major new
hotel-casino resorts on the Las Vegas Strip and competition from
gaming outside of Nevada. See the section titled "Competition" in this
Form 10-K.
OTHER
We regularly evaluate possible expansion and acquisition
opportunities in both the domestic and international markets. These
opportunities may include the ownership, management and operation of
gaming and other entertainment facilities in states other than Nevada
or outside of the United States. We may undertake these opportunities
either alone or with joint venture partners. Development and
operation of any gaming facility in a new jurisdiction are subject to
many contingencies. Several of these contingencies are outside of our
control and may include the passage of appropriate gaming legislation,
the issuance of necessary permits, licenses and approvals, the
availability of appropriate financing and the satisfaction of other
conditions. We cannot be sure that we will decide or be able to
proceed with any of these acquisition or expansion opportunities.
MARKETING
All of our hotel-casinos operate 24 hours each day, every day of
the year. We do not consider our business to be particularly seasonal.
We believe that the largest portion of our Nevada customers live in
Southern California, although other geographic areas are also
important.
The level of gaming activity at our casinos is the single largest
factor in determining our revenues and operating income. We also
receive a large amount of revenues from room, food and beverage,
entertainment and retail operations.
The principal segments of the Nevada and Mississippi gaming markets
are tour and travel, leisure travel, high-level wagerers and
conventions (including small meetings and corporate incentive
programs). Both Bellagio and The Mirage appeal to the upper end of
each market segment, balancing their business by using the convention
and tour and travel segments to fill the mid-week and off-peak
periods. Our marketing strategy for Treasure Island and the Golden
Nugget is aimed at attracting middle- to upper-middle-income wagerers,
largely from the leisure travel and, to a lesser extent, the tour and
travel segments. Since we believe that the number of walk-in customers
also affects the success of all of our hotel-casinos, we design our
facilities to maximize their attraction to guests of other hotels.
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The Golden Nugget-Laughlin appeals primarily to middle-income
customers. Many of its customers are senior citizens who are attracted
by room, food and beverage and entertainment prices that are lower
than those offered by the major Las Vegas hotel-casinos. A large
percentage of the Golden Nugget-Laughlin's casino revenues comes from
slot machine play.
We own and operate an exclusive world-class golf course known as
"Shadow Creek," located approximately five miles north of the Golden
Nugget and approximately 10 miles north of our Las Vegas Strip hotel-
casinos. Our major Las Vegas hotel-casinos offer luxury suite
packages that include golf privileges at Shadow Creek. In connection
with our marketing activities, we also invite our high-end casino
customers to play Shadow Creek on a complimentary basis. Shadow Creek
is located on approximately 240 acres of an 850-acre site that we own
in North Las Vegas.
Beau Rivage opened in Biloxi, Mississippi on March 16, 1999, and
we believe it is the most luxurious hotel-casino on the Mississippi
Gulf Coast. We intend to market Beau Rivage to the most affluent
customers in each market segment, particularly those who live in major
cities in the South. The Gulf Coast currently has only a limited
number of scheduled airline flights. We recently signed an agreement
for a regional airline to provide daily scheduled jet service at
reasonable prices between the Gulf Coast and several major cities.
We advertise on radio, television and billboards and in newspapers
and magazines in selected cities throughout the United States, as well
as on the Internet and by direct mail. We also advertise through our
regional marketing offices located in major United States and foreign
cities.
CREDIT
Credit play represents a large portion of the table games volume at
Bellagio and The Mirage. Our other facilities do not emphasize credit
play to the same extent as Bellagio and The Mirage, although we offer
credit at those casinos as well.
We maintain strict controls over the issuance of credit and
aggressively pursue collection of our customer debts. These
collection efforts are similar to those used by most large
corporations, including the mailing of statements and delinquency
notices, personal and other contacts, the use of outside collection
agencies and civil litigation. Nevada and Mississippi gaming debts
evidenced by written credit instruments are enforceable under the laws
of Nevada and Mississippi. All other states are required to enforce
a judgment on a gaming debt entered in Nevada or Mississippi
pursuant to the Full Faith and Credit Clause of the United States
Constitution. Gaming debts are not legally enforceable in some
foreign countries, but the United States assets of foreign debtors may
be reached to satisfy judgments entered in the United States. A large
portion of our Company's accounts receivable is owed by major casino
customers from the Far East. The collectibility of customer debts is
affected by a number of factors, including changes in currency
exchange rates and economic conditions in the customers' home
countries.
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SUPERVISION OF GAMING ACTIVITIES
In connection with the supervision of gaming activities at our
casinos, we maintain stringent controls on the recording of all
receipts and disbursements. These audit and cash controls include:
- - Locked cash boxes on the casino floor;
- - Employees who are independent of casino operations to perform the
daily cash and coin counts;
- - Constant observation and supervision of the gaming area;
- - Observation and recording of gaming and other areas by closed-
circuit television;
- - Constant computer monitoring of our slot machines;
- - Computer tabulation of receipts and disbursements for each of our
table games; and
- - Timely analysis of deviations from expected performance.
COMPETITION
LAS VEGAS
Our Las Vegas hotel-casinos compete with a large number of other
hotel-casinos in the Las Vegas area. Currently there are
approximately 29 major hotel-casinos located on or near the Las
Vegas Strip, 11 major hotel-casinos located in the downtown area
(about five miles from the center of the Strip) and several major
facilities located elsewhere in the Las Vegas area. As of March 15,
1999, there were approximately 109,000 guestrooms in Las Vegas,
compared to 102,100 at March 15, 1998. There are currently four
major new hotel-casinos under construction in Las Vegas. Three of
these are scheduled to open in 1999 and the fourth in 2000 and they
will add a total of approximately 9,100 guestrooms to the market.
Other major hotel-casinos and expansion projects at existing Las
Vegas hotel-casinos have also been proposed. We are unable to
determine how the increased competition will affect our future
operating results.
LAUGHLIN, NEVADA
The Golden Nugget-Laughlin competes with nine other casinos in
Laughlin, eight of which offer hotel accommodations, as well as with
hotel-casinos in Las Vegas, Jean and Primm, Nevada. In recent years,
the Laughlin market has been adversely affected by the expansion of
casino gaming in Las Vegas and on Indian reservations, particularly
in Southern California and Arizona.
BILOXI, MISSISSIPPI
Beau Rivage competes with 11 other casinos in the Mississippi Gulf
Coast market, eight of which offer hotel accommodations. Several
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competitors have announced plans to expand their existing Gulf Coast
facilities or to develop major new casino-based resorts in the market.
The Gulf Coast casinos also compete with a large number of riverboat
casinos on the Mississippi River, the closest of which are located in
New Orleans and Baton Rouge, Louisiana. In addition, a competitor
is constructing a major land-based casino in New Orleans that is
expected to open in the fourth quarter of 1999. Gulf Coast casinos
also compete in the regional market with a land-based Indian casino
in central Mississippi. Beau Rivage expects to compete with casinos
in the Bahamas for the south Florida market. Since Beau Rivage only
opened on March 16, 1999, it is too early for us to assess its
competitive position or the impact of the increased competition on its
future operating results.
OTHER
Our Company's facilities also compete for gaming customers with
hotel-casino operations located in other areas of Nevada, Atlantic
City, the Bahamas and other parts of the world, and for vacationers
with non-gaming tourist destinations such as Hawaii and Florida. Our
hotel-casinos compete to a lesser extent with state-sponsored
lotteries, off-track wagering, card parlors, riverboat and Indian
gaming facilities and other forms of legalized gaming in the United
States, as well as with shipboard gaming. In recent years, certain
states have legalized, and several other states have considered
legalizing, casino gaming. We do not believe that legalization of
casino gaming in those jurisdictions would have a material adverse
impact on our operations. However, we do believe that the legal-
ization of large-scale land-based casino gaming in or near certain
major metropolitan areas, particularly in California, could have a
material adverse effect on the Las Vegas market. The California
electorate approved Proposition 5 in November 1998. Proposition 5, if
implemented, would give all California Indian tribes the right to
operate an unlimited number of certain kinds of gaming machines and
other forms of casino wagering on California reservations. Legal
challenges to Proposition 5 are pending in the California Supreme
Court which have delayed and may further delay or prevent its
implementation. If implemented, Proposition 5 may negatively affect
Nevada gaming markets. We are unable, however, to assess the
magnitude of the impact on our Company.
HOW WE COMPETE
Our Company's major properties compete on the basis of:
- - Recruiting, training and retaining well-qualified and motivated
employees who provide superior and friendly customer service;
- - Offering high-quality guestrooms and dining, entertainment and
retail options;
- - Providing unique, "must-see" entertainment attractions;
- - Our marketing and promotional programs; and
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- - The superior locations and sites of our properties.
The principal negative factors relating to our competitive position
are:
- - Our limited geographic diversification (some of our competitors
operate in more gaming markets);
- - There are a number of gaming facilities that are located closer to
where our customers live than our resorts;
- - Our guestroom, dining and entertainment prices are often higher
than those of most of our competitors in each market, although
we believe that the quality of our facilities and services is also
higher; and
- - Our hotel-casinos compete to some extent with each other for
customers. Bellagio and The Mirage, in particular, compete for
some of the same high-end customers.
EMPLOYEES AND LABOR RELATIONS
As of March 1, 1999, we had approximately 25,720 full-time and
4,130 part-time employees. At that date, we had collective
bargaining contracts with unions covering approximately 11,215 of our
Las Vegas employees, expiring in May 2002. We consider our employee
relations to be excellent.
REGULATION AND LICENSING
Our Company is licensed by gaming authorities in both Nevada and
Mississippi and intends to apply for licensing in New Jersey.
NEVADA
The ownership and operation of casino gaming facilities in Nevada
are subject to the Nevada Gaming Control Act and the regulations
promulgated under that Act (collectively, the "Nevada Act") and
various local ordinances and regulations. Our Nevada gaming
operations are subject to the licensing and regulatory control of:
- - The Nevada Gaming Commission (the "Nevada Commission");
- - The Nevada State Gaming Control Board (the "Nevada Board");
- - The City of Las Vegas; and
- - The Clark County Liquor and Gaming Licensing Board (the "Clark
County Board").
In this Form 10-K, we collectively refer to the Nevada Commission,
the Nevada Board, the City of Las Vegas and the Clark County Board as
the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada
Gaming Authorities are based upon declarations of public policy which
are concerned with, among other things:
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- - The prevention of unsavory or unsuitable persons from having a
direct or indirect involvement with gaming at any time or in any
capacity;
- - The establishment and maintenance of responsible accounting
practices and procedures;
- - The maintenance of effective controls over the financial
practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of
assets and revenues, providing reliable record keeping and
requiring the filing of periodic reports with the Nevada Gaming
Authorities;
- - The prevention of cheating and fraudulent practices; and
- - Providing a source of state and local revenues through taxation and
licensing fees.
Change in these laws, regulations and procedures could have an
adverse effect on our gaming operations.
Our direct and indirect subsidiaries that conduct gaming operations
are required to be licensed by the Nevada Gaming Authorities. The
gaming licenses require the periodic payment of fees and taxes and are
not transferable. These subsidiaries are as follows:
- - THE MIRAGE CASINO-HOTEL ("MCH") has been registered as an
intermediary company and has been found suitable to own the stock
of Treasure Island Corp. ("TI Corp."). MCH has also been licensed
to conduct nonrestricted gaming operations at The Mirage.
- - TI Corp. has been licensed to conduct nonrestricted gaming
operations at Treasure Island.
- - GNLV, CORP. ("GNLV") has been registered as an intermediary
company and has been found suitable to own the stock of Golden
Nugget Manufacturing Corp. ("GNMC"), its subsidiary which is
licensed as a manufacturer and distributor of gaming devices. GNLV
has also been licensed to conduct nonrestricted gaming operations
at the Golden Nugget.
- - GNL, CORP. ("GNL") has been licensed to conduct nonrestricted
gaming operations at the Golden Nugget-Laughlin.
- - Bellagio has been registered as an intermediary company and has
been found suitable to own the stock of MRGS Corp. ("MRGS"), which
has been licensed as a 50% general partner of Victoria Partners.
Bellagio has also been licensed to conduct nonrestricted gaming
operations at Bellagio.
- - Boardwalk Casino, Inc. ("BCI") has been licensed to conduct
nonrestricted gaming operations at the Boardwalk.
The Company is registered by the Nevada Commission as a publicly
traded corporation (a "Registered Corporation"). The Company has also
been found suitable to own the stock of MCH, GNLV, Bellagio, GNL and
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BCI, each of which, together with TI Corp., MRGS and GNMC, is a
corporate licensee (individually, a "Gaming Subsidiary" and
collectively, the "Gaming Subsidiaries") under the Nevada Act.
Victoria Partners has been licensed to conduct nonrestricted gaming
operations at Monte Carlo and certain subsidiaries of Circus have been
registered or licensed for their ownership of Victoria Partners.
As a Registered Corporation, we are required periodically to submit
detailed financial and operating reports to the Nevada Commission and
furnish any other information that the Nevada Commission may require.
No person may become a stockholder of, or receive any percentage of
profits from, our Gaming Subsidiaries without first obtaining licenses
and approvals from the Nevada Gaming Authorities. We and our Gaming
Subsidiaries have obtained from the Nevada Gaming Authorities the
various registrations, findings of suitability, approvals, permits and
licenses required in order to engage in gaming activities in Nevada.
All gaming devices that are manufactured, sold or distributed for
use or play in Nevada, or for distribution outside of Nevada, must be
manufactured by licensed manufacturers and distributed or sold by
licensed distributors. All gaming devices manufactured for use or
play in Nevada must be approved by the Nevada Commission before
distribution or exposure for play. The approval process for gaming
devices includes rigorous testing by the Nevada Board, a field trial
and a determination as to whether the gaming device meets strict
technical standards that are set forth in the regulations of the
Nevada Commission. Associated equipment must be administratively
approved by the Chairman of the Nevada Board before it is distributed
for use in Nevada.
The Nevada Gaming Authorities may investigate any individual who
has a material relationship to, or material involvement with, the
Company or any of our Gaming Subsidiaries in order to determine
whether the individual is suitable or should be licensed as a
business associate of a gaming licensee. Officers, directors and
certain key employees of our Gaming Subsidiaries must file
applications with the Nevada Gaming Authorities and may be required
to be licensed or found suitable by the Nevada Gaming Authorities.
Officers, directors and key employees of the Company who are actively
and directly involved in gaming activities of our Gaming Subsidiaries
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 that they deem reasonable. A finding
of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suit-
ability 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 unsuitable for licensing or unsuitable to continue
having a relationship with the Company or our Gaming Subsidiaries, the
companies involved would have to sever all relationships with that
person. In addition, the Nevada Commission may require us or our
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Gaming Subsidiaries to terminate the employment of any person who
refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to
judicial review in Nevada.
The Company and our Gaming Subsidiaries 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 entered into by our Gaming Subsidiaries
must be reported to or approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by a Gaming
Subsidiary, the licenses it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, our Gaming
Subsidiaries 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 Bellagio, The Mirage, Treasure
Island, the Golden Nugget, the Golden Nugget-Laughlin, the Boardwalk
or Monte Carlo and, under certain circumstances, earnings generated
during the supervisor's appointment (except for the reasonable rental
value of the premises) could be forfeited to the State of Nevada.
Limitation, conditioning or suspension of the gaming license of a
Gaming Subsidiary or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect
our gaming operations.
Any beneficial holder of the voting securities of Mirage Resorts,
Incorporated, regardless of the number of shares owned, may be
required to file an application, be investigated and have his or her
suitability as a beneficial holder of the voting securities
determined if the Nevada Commission has reason to believe that the
ownership would 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
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 a written notice requiring this
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 the finding of suit-
ability requirement if the 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 it acquired and holds the voting securities in the ordinary
course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority
of the members of the board of directors of the Registered Cor-
poration, any change in the corporate charter, bylaws, management,
13
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policies or operations of the Registered Corporation or any of
its gaming affiliates or any other action which the Nevada Commission
finds to be inconsistent with holding the Registered Corporation's
voting securities for investment purposes only. Activities that are
not deemed to be inconsistent with holding voting securities for
investment purposes only include:
- - Voting on all matters voted on by stockholders;
- - 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
- - Other activities that the Nevada Commission may determine to be
consistent with such investment intent.
The City of Las Vegas and the Clark County Board have the authority
to approve all persons owning or controlling the stock of any
corporation controlling a gaming licensee. If the beneficial holder
of voting securities which must be found suitable is a corporation,
partnership or trust, it must submit detailed business and financial
information, including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do so
by the Nevada Commission or the Chairman of the Nevada Board may be
found unsuitable. The same restrictions apply to a record owner if the
record owner, after request, fails to identify the beneficial owner.
Any stockholder found unsuitable who holds, directly or indirectly,
any beneficial ownership of the voting securities beyond such period
of time as may be prescribed by the Nevada Commission may be guilty of
a criminal offense. We are subject to disciplinary action if, after we
receive notice that a person is unsuitable to be a stockholder or to
have any other relationship with us or our Gaming Subsidiaries, we:
- - Pay the person any dividend or interest on our voting securities;
- - Allow the person to exercise, directly or indirectly, any voting
right conferred through securities held by the person;
- - Pay remuneration in any form to the person for services rendered
or otherwise; or
- - Fail to pursue all lawful efforts to require the person to
relinquish his voting securities including, if necessary, the
immediate purchase of the voting securities for cash at fair market
value.
The Nevada Commission may, in its discretion, require the holder of
any debt security of a Registered Corporation to file applications, be
investigated and be found suitable to own the debt security if it has
reason to believe that the ownership would be inconsistent with the
declared policies of the State of Nevada. If the Nevada Commission
determines that a person is unsuitable to own a debt security, then
pursuant to the Nevada Act, the Registered Corporation can be
13
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sanctioned, including the loss of its approvals, if without the prior
approval of the Nevada Commission, it:
- - Pays to the unsuitable person any dividend, interest or any
distribution whatsoever;
- - Recognizes any voting right by the unsuitable person in
connection with those securities;
- - Pays the unsuitable person remuneration in any form; or
- - Makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar
transaction.
We are required to maintain a current stock ledger in Nevada that
may be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or nominee, the record holder
may be required to disclose the identity of the beneficial owner to
the Nevada Gaming Authorities. A failure to make that disclosure may
be grounds for finding the record holder unsuitable. We are 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. To date, the Nevada Commission has not
imposed this requirement on us.
We may not make a public offering of our securities without the
prior approval of the Nevada Commission if the securities or proceeds
from their sale are intended to be used to construct, acquire or
finance gaming facilities in Nevada or to retire or extend obligations
incurred for those purposes. On May 22, 1997, the Nevada Commission
granted us prior approval to make public offerings for a period of two
years, subject to certain conditions (the "Shelf Approval"). The
Shelf Approval was amended on June 23, 1998 and November 19, 1998.
However, the Shelf Approval may be rescinded for good cause without
prior notice upon the issuance of an interlocutory stop order by
the Chairman of the Nevada Board. The Shelf Approval also applies to
any affiliated company wholly owned by us (an "Affiliate") that is a
publicly traded corporation or would become a publicly traded
corporation pursuant to a public offering. The Shelf Approval also
includes approval for the Gaming Subsidiaries to guarantee any
security issued by, or to hypothecate their assets to secure the
payment or performance of any obligations issued by, us or an
Affiliate in a public offering under the Shelf Approval. The Shelf
Approval does not constitute a finding, recommendation or approval by
the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities
offered. Any representation to the contrary is unlawful. We have
filed an application for renewal of the Shelf Approval, which we
expect will be considered by the Nevada Board and the Nevada
Commission in May 1999.
Changes in control of the Company through merger, consolidation,
stock or asset acquisitions, management or consulting agreements or
any act or conduct by a person by which he or she obtains control may
15
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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 the
Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having
a material relationship or involvement with the entity proposing to
acquire control to be investigated and licensed as part of the
approval process relating to the transaction.
The Nevada Legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting securities
and corporate defensive tactics affecting Nevada corporate 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:
- - Assure the financial stability of corporate gaming licensees and
their affiliates;
- - Preserve the beneficial aspects of conducting business in the
corporate form; and
- - Promote a neutral environment for the orderly governance of
corporate affairs.
Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional
repurchases of voting securities above the current market price and
before a corporate acquisition opposed by management can be completed.
The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Registered Corporation's board of
directors in response to a tender offer made directly to the
Registered Corporation's stockholders for the purpose 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 Clark County and the City of Las Vegas, in which our
Gaming Subsidiaries' respective operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable monthly, quarterly or annually and are based upon:
- - A percentage of the gross revenues received;
16
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- - The number of gaming devices operated; or
- - The number of table games operated.
Casino operations also pay a casino entertainment tax where
entertainment is furnished in connection with the serving or selling
of food or refreshments or the selling of merchandise. Nevada
licensees that hold a manufacturer's or distributor's license,
such as GNMC, also pay certain fees 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 those
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 by the
Nevada Board of its participation in foreign gaming. The revolving
fund is subject to increase or decrease at the discretion of the
Nevada Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act. Licensees
are also subject to disciplinary action by the Nevada Commission if
they knowingly:
- - Violate any laws of the foreign jurisdiction pertaining to the
foreign gaming operation;
- - Fail to conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming
operations;
- - Engage in activities or enter into associations that are harmful
to the State of Nevada or its ability to collect gaming taxes and
fees; or
- - Employ, contract with or associate with a person in the foreign
operation who has been denied a license or finding of suitability
in Nevada on the ground of personal unsuitability.
The sale of alcoholic beverages at our hotel-casinos on the Las
Vegas Strip and at the Golden Nugget-Laughlin is subject to licensing,
control and regulation by the Clark County Board. The sale of
alcoholic beverages at the Golden Nugget in downtown Las Vegas is
subject to licensing, control and regulation by the City of Las Vegas.
All licenses are revocable and are not transferable. The agencies
involved have full power to limit, condition, suspend or revoke any
liquor license, and any disciplinary action of that type could (and
revocation would) have a material adverse effect on the operations of
the affected Gaming Subsidiary.
MISSISSIPPI
The ownership and operation of casino gaming facilities in
Mississippi are subject to the Mississippi Gaming Control Act and the
regulations promulgated under that Act (collectively, the "Mississippi
Act"). Our Mississippi gaming operations are subject to the licensing
and regulatory control of the Mississippi Gaming Commission (the
"Mississippi Commission").
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The laws, regulations and supervisory procedures of the Mississippi
Commission are based upon declarations of public policy which are
concerned with, among other things:
- - Keeping gaming free of criminal and corruptive elements; and
- - Maintaining public confidence and trust in gaming by means of
strict regulation of all persons, locations, practices,
associations and activity related to the operation of licensed
gaming establishments and the manufacture or distribution of
gambling devices and equipment.
Changes in these laws, regulations and procedures could have an
adverse effect on our Mississippi gaming operations.
Beau Rivage Resorts, Inc. ("Beau Rivage Resorts"), our indirect
subsidiary that owns and operates Beau Rivage, is required to be
licensed by the Mississippi Commission. The gaming license, which
must be renewed every two years, requires the periodic payment of fees
and taxes and is not transferable. GNLV is registered as an
intermediary company and has been found suitable to own the stock of
Beau Rivage Resorts. The Company is registered by the Mississippi
Commission as a publicly traded corporation (a "Registered
Corporation") and has been found suitable to own the stock of GNLV
under the Mississippi Act.
As a Registered Corporation, we are required periodically to submit
detailed financial and operating reports to the Mississippi Commission
and furnish any other information that the Mississippi Commission may
require. No person may become a stockholder of, or receive any
percentage of profits from, Beau Rivage Resorts without first
obtaining approval from the Mississippi Commission. The Company, GNLV
and Beau Rivage Resorts have obtained from the Mississippi Commission
the various registrations, findings of suitability and licenses
required to engage in gaming activities in Mississippi.
All gaming devices that are manufactured, sold or distributed for
use or play in Mississippi, or for distribution outside of
Mississippi, must be manufactured by licensed manufacturers and
distributed or sold by licensed distributors. Beau Rivage
Distribution Corp. ("BRDC"), a subsidiary of Beau Rivage Resorts, is
licensed as a distributor of gaming devices. All gaming devices
manufactured for use or play in Mississippi must be approved by the
Mississippi Commission before distribution or exposure for play. The
approval process for gaming devices includes rigorous testing by the
staff of the Mississippi Commission, a field trial and a determination
as to whether the gaming device meets strict technical standards that
are set forth in the regulations of the Mississippi Commission.
Associated equipment must be administratively approved by the
Executive Director of the Mississippi Commission before it is
distributed for use in Mississippi.
The Mississippi Commission may investigate any individual who has a
material relationship to, or material involvement with, the Company,
GNLV, Beau Rivage Resorts or BRDC in order to determine whether the
individual is suitable or should be licensed as a business associate
18
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of a gaming licensee. Officers, directors and certain key employees
of Beau Rivage Resorts and BRDC must file applications with the
Mississippi Commission and may be required to be licensed or found
suitable. Officers, directors and key employees of GNLV and the
Company who are actively and directly involved in gaming activities of
Beau Rivage Resorts or BRDC may be required to be licensed or found
suitable by the Mississippi Commission. The Mississippi Commission
may deny an application for licensing for any cause which it deems
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 approval positions must be reported to the Mississippi
Commission, and in addition to its authority to deny an application
for a finding of suitability or licensure, the Mississippi Commission
has jurisdiction to disapprove a change in a corporate position.
If the Mississippi Commission were to find an officer, director or
key employee unsuitable for licensing or unsuitable to continue having
a relationship with the Company, GNLV, Beau Rivage Resorts or BRDC,
the companies involved would have to sever all relationships with the
person. In addition, the Mississippi Commission may require the
Company, GNLV, Beau Rivage Resorts or BRDC 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 Mississippi.
The Company, GNLV, Beau Rivage Resorts and BRDC are required to
submit detailed financial and operating reports to the Mississippi
Commission. All material loans, sales of securities and similar
financing transactions entered into by Beau Rivage Resorts or BRDC
must be reported to or approved by the Mississippi Commission.
If it were determined that the Mississippi Act was violated by Beau
Rivage Resorts or BRDC, the license it holds could be limited,
conditioned, suspended or revoked, subject to compliance with certain
statutory and regulatory procedures. In addition, the Company, GNLV,
Beau Rivage Resorts, BRDC and the persons involved could be subject to
substantial fines for each separate violation of the Mississippi Act
at the discretion of the Mississippi Commission. Limitation,
conditioning or suspension of the gaming license of Beau Rivage
Resorts could (and revocation of the gaming license would) materially
adversely affect our Mississippi gaming operations.
Any beneficial holder of our voting securities, regardless of the
number of shares owned, may be required to file an application, be
investigated and have his or her suitability as a beneficial holder of
our voting securities determined if the Mississippi Commission has
reason to believe that the ownership may be inconsistent with the
declared policies of the State of Mississippi. The applicant must pay
all costs of investigation incurred by the Mississippi Commission in
conducting any investigation.
19
<PAGE>
The Mississippi Act requires any person who acquires more than 5%
of a Registered Corporation's voting securities to report the
acquisition to the Mississippi Commission. The Mississippi Act
requires that beneficial owners of more than 10% of a Registered
Corporation's voting securities apply to the Mississippi Commission
for a finding of suitability within 30 days after the Executive
Director of the Mississippi Commission requests the filing. With
the exception of certain institutional investors, the Mississippi
Commission has generally exercised its discretion to require a finding
of suitability of any beneficial owner of more than 5% of a Registered
Corporation's voting securities. The Mississippi Commission has
adopted a policy that permits certain institutional investors to own
beneficially up to 10% of a Registered Corporation's voting
securities without a finding of suitability. If a beneficial owner
which must be found suitable is a corporation, partnership or trust,
it must submit detailed business and financial information, including
a list of beneficial owners.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do so
by the Mississippi Commission or the Executive Director of the
Mississippi Commission may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after
request, fails to identify the beneficial owner. Any stockholder
found unsuitable who holds, directly or indirectly, any beneficial
ownership of the voting securities beyond the period of time that may
be prescribed by the Mississippi Commission may be guilty of a
criminal offense.
The Mississippi Commission may, in its discretion, require the
holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own the debt
security if it determines that this requirement is in the public
interest.
We are required to maintain a current stock ledger in Mississippi
that may be examined by the Mississippi Commission at any time. If
any securities are held in trust by an agent or nominee, the record
holder may be required to disclose the identity of the beneficial
owner to the Mississippi Commission. A failure to make the disclosure
may be grounds for finding the record holder unsuitable. We are also
required to render maximum assistance in determining the identity of
the beneficial owner. The Mississippi Commission has the power to
require our stock certificates to bear a legend indicating that the
securities are subject to the Mississippi Act; however, the
Mississippi Commission has in the past routinely waived this
requirement.
We may not make a public offering of our securities without the
prior approval of the Mississippi Commission if the securities or
proceeds from their sale are intended to be used to construct, acquire
or finance gaming facilities in Mississippi or to retire or extend
obligations incurred for those purposes. On January 21, 1999, the
Mississippi Commission granted us prior approval to make public
20
<PAGE>
offerings for a period of two years, subject to certain conditions
(the "Mississippi Shelf Approval"). However, the Mississippi Shelf
Approval may be rescinded for good cause without prior notice upon the
issuance of a stop order by the Executive Director of the Mississippi
Commission. The Mississippi Shelf Approval does not constitute a
finding, recommendation or approval by the Mississippi Commission as
to the accuracy or adequacy of the prospectus or the investment merits
of the securities offered. Any representation to the contrary is
unlawful.
Changes in control of the Company through merger, consolidation,
stock or asset acquisitions, management or consulting agreements or
any act or conduct by a person by which he or she obtains control may
not occur without the prior approval of the Mississippi Commission.
Entities seeking to acquire control of a Registered Corporation must
satisfy the Mississippi Commission with respect to a variety of
stringent standards prior to assuming control of the Registered
Corporation. The Mississippi Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire
control to be investigated and licensed as part of the approval
process relating to the transaction.
The Mississippi Legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting securities
and corporate defensive tactics affecting Mississippi corporate gaming
licensees, and Registered Corporations that are affiliated with those
operations, may be injurious to stable and productive corporate
gaming. The Mississippi Commission has established a regulatory
scheme to ameliorate the potentially adverse effects of these business
practices upon Mississippi's gaming industry and to further
Mississippi's policy to:
- - Assure the financial stability of corporate gaming licensees and
their affiliates;
- - Preserve the beneficial aspects of conducting business in the
corporate form; and
- - Promote a neutral environment for the orderly governance of
corporate affairs.
Approvals are, in certain circumstances, required from the
Mississippi Commission before the Registered Corporation can make
exceptional repurchases of voting securities above the current market
price and before a corporate acquisition opposed by management can be
completed. The Mississippi Act also requires prior approval of a plan
of recapitalization proposed by the Registered Corporation's board of
directors in response to a tender offer made directly to the
Registered Corporation's stockholders for the purpose of acquiring
control of the Registered Corporation.
21
<PAGE>
License fees and taxes, computed in various ways depending on the
type of gaming or activity involved, are payable to the State of
Mississippi, and to the City of Biloxi, where Beau Rivage Resorts'
operations are conducted. Depending upon the particular fee or tax
involved, these fees and taxes are payable monthly, quarterly or
annually and are based upon:
- - A percentage of the gross revenues received;
- - The number of gaming devices operated; or
- - The number of table games operated.
BRDC, as a licensed distributor, also pays certain fees to the
State of Mississippi.
Any person who is licensed, required to be licensed, registered,
required to be registered or is under common control with those
persons (collectively, "Licensees"), and who proposes to become
involved in a gaming venture outside of Mississippi, is required to
receive the approval of the Mississippi Commission with respect to
foreign gaming activities. Licensees are also subject to disciplinary
action by the Mississippi 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 Mississippi
gaming operations;
- - Engage in activities that are harmful to the State of Mississippi
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 Mississippi on the ground of
personal unsuitability.
The sale of alcoholic beverages at Beau Rivage is subject to
licensing, control and regulation by the Mississippi State Tax
Commission. All licenses are revocable and are not transferable. The
Mississippi State Tax Commission has full power to limit, condition,
suspend or revoke any liquor license, and any disciplinary action of
that type could (and revocation would) have a material adverse effect
on the operations of Beau Rivage Resorts. Beau Rivage Resorts has
received approval from the United States Department of the Treasury to
operate the brew pub at Beau Rivage.
22
<PAGE>
FACTORS THAT MAY AFFECT OUR FUTURE RESULTS
(Cautionary Statements Under the Private Securities Litigation Reform
Act of 1995)
This Form 10-K and our 1998 Annual Report to Shareholders contain
some forward-looking statements. Forward-looking statements give our
current expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to
historical or current facts. They contain words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe," "may,"
"could," "might" and other words or phrases of similar meaning in
connection with any discussion of future operating or financial
performance. In particular, these include statements relating to
future actions, new projects, future performance, the outcome of
contingencies such as legal proceedings and future financial results.
From time to time, we also provide oral or written forward-looking
statements in our Forms 10-Q and 8-K, press releases and other
materials we release to the public.
Any or all of our forward-looking statements in this Form 10-K, in
our 1998 Annual Report to Shareholders and in any other public
statements we make may turn out to be wrong. They can be affected by
inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in this Form 10-K - for
example, government regulation and the competitive environment - will
be important in determining our future results. Consequently, no
forward-looking statement can be guaranteed. Our actual future
results may differ materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise. You are advised, however, to consult any further
disclosures we make on related subjects in our Form 10-K, 10-Q and 8-K
reports to the Securities and Exchange Commission. Also note that we
provide the following cautionary discussion of risks, uncertainties
and possible inaccurate assumptions relevant to our business. These
are factors that we think could cause our actual results to differ
materially from expected and historical results. Other factors beyond
those listed here could also adversely affect us. This discussion is
provided as permitted by the Private Securities Litigation Reform Act
of 1995.
- - As described under "Competition," we operate in a very
competitive environment, particularly in Las Vegas. The growth in
guestroom inventory in Las Vegas, which will increase sharply in
1999, and the spread of legalized gaming in other states and
countries, could negatively affect our operating results.
- - As discussed under "Regulation and Licensing," our casinos are
highly regulated by governmental authorities in Nevada and
Mississippi. We will also be subject to regulation, which may or
may not be similar to that in Nevada and Mississippi, by the
authorities in New Jersey and any other jurisdiction where we may
23
<PAGE>
conduct gaming activities in the future. Changes in applicable laws
or regulations could have a significant effect on our operations.
As a result of federal legislation passed in 1996, the National
Gambling Impact Study Commission has been conducting a two-year
study of the gaming industry in the United States and is expected
to report its findings and recommendations to Congress this June.
Although there has been no indication that the Commission will make
such recommendation, it is possible that the report may result in
additional regulation and taxation of the gaming industry. In
March 1999, a proposed referendum was submitted to the Mississippi
Secretary of State which would repeal legalized gaming in
Mississippi and impose a two-year period for all gaming operations
to terminate. In order for the referendum to be included on the
November 2000 ballot, it must be approved by the Secretary of State
and the signatures of approximately 98,000 registered voters must
be gathered and certified by October 6, 1999. Two similar proposed
referenda failed to meet the deadline for the November 1999 ballot.
If this or any similar referendum is ultimately adopted, it could
have a material adverse effect on our Company.
- - Our business is affected by changes in local, national and
international general economic and market conditions in the
locations where we operate and where our customers live. Bellagio
and The Mirage are particularly affected by the economic situation
in the Far East and all of our Nevada properties are affected by
economic conditions in California.
- - A large portion of our customers travel by air. As a result, the
cost and availability of air service can affect our business.
Additionally, there is one principal interstate highway between Las
Vegas and Southern California, where a large number of our
customers reside. Capacity constraints of that highway or any other
traffic disruptions may affect the number of customers who visit
our facilities.
- - Our plans for future construction can be affected by a number of
factors, including time delays in obtaining necessary governmental
permits and approvals and legal challenges. We may make changes in
project scope, budgets and schedules for competitive, aesthetic or
other reasons, and these changes may also result from circumstances
beyond our control. These circumstances include weather inter-
ference, shortages of materials and labor, work stoppages, labor
disputes, unforeseen engineering, environmental or geological
problems and unanticipated cost increases. Any of these circum-
stances could give rise to delays or cost overruns.
- - The gaming industry represents a significant source of tax
revenues, particularly to the State of Nevada and its counties and
cities. From time to time, various state and federal legislators
and officials have proposed changes in tax law, or in the
administration of the law, affecting the gaming industry. 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 its administration. These changes,
if adopted, could have a material negative effect on our operating
results.
24
<PAGE>
- - Our debt has increased significantly in the past three years,
primarily due to the construction of Bellagio and Beau Rivage. The
interest rate on a large portion of our long-term debt is subject
to fluctuation based on changes in short-term interest rates and
the ratings which national rating agencies assign to our out-
standing debt securities. Our interest expense could increase as a
result of these factors.
- - Claims have been brought against us and our subsidiaries in
various legal proceedings, and additional legal and tax claims
arise from time to time. It is possible that our cash flows and
results of operations could be affected by the resolution of these
claims. We believe that the ultimate disposition of current
matters will not have a material impact on our financial condition
or results of operations. Please see the further discussion
under "Legal Proceedings" in Item 3 of this Form 10-K.
- - There is intense competition to attract and retain management and
key employees in the gaming industry. Our inability to recruit or
retain personnel could adversely affect our business.
- - As described under "Year 2000 Readiness Disclosure" in Item 7 of
this Form 10-K, we are working to address the Year 2000 issue. If
we should fail to identify or correct problems in our critical
systems, or if we are affected by disruptions in airline service
or other disruptions affecting our resorts or customers, our
operations could be impacted.
You should also be aware that while we from time to time communi-
cate with securities analysts, we do not disclose to them any
material non-public information, internal forecasts or other
confidential business information. Therefore, you should not assume
that we agree with any statement or report issued by any analyst,
irrespective of the content of the statement or report. To the
extent that reports issued by securities analysts contain
projections, forecasts or opinions, those reports are not our
responsibility.
ITEM 2. PROPERTIES
Bellagio occupies an approximately 90-acre site. We own the
entire site except for one acre which we lease under a ground lease
that expires (giving effect to our options to renew) in 2073.
The Mirage and Treasure Island share an approximately 100-acre site
which we own.
The Boardwalk occupies an approximately nine-acre site which we
own. We also own approximately 45 acres of property adjacent to the
Boardwalk.
Beau Rivage occupies approximately 36 acres (including 10 acres of
tidelands) in Biloxi, Mississippi. We own the land and we lease the
tidelands from the State of Mississippi under a lease that expires
(giving effect to our options to renew) in 2049. We also own approx-
imately 508 acres in the Biloxi area for the potential development
of a world-class golf course.
25
<PAGE>
The Golden Nugget occupies approximately seven and one-half acres.
We own the buildings and approximately 90% of the land. We lease the
remaining land under three ground leases that expire (giving effect to
our options to renew) on dates from 2025 to 2046.
The Golden Nugget-Laughlin, including approximately two acres where
the motel in Bullhead City, Arizona is located, occupies approximately
15 1/2 acres. We own all of the property.
Monte Carlo occupies approximately 46 acres owned by Victoria
Partners (the joint venture that owns and operates Monte Carlo). At
March 1, 1999, Monte Carlo was subject to mortgages approximating
$90.5 million.
We own approximately 850 acres of land in North Las Vegas,
including 240 acres occupied by Shadow Creek.
We own approximately 200 acres in Atlantic City consisting
principally of three different parcels in casino-zoned areas. We
are currently designing a major new hotel-casino resort complex
on the largest of these parcels as described under "Future Expansion -
Atlantic City" in Item 1 of this Form 10-K.
We also own or lease various other improved and unimproved property
in Las Vegas and other locations in the United States and some
foreign countries.
ITEM 3. LEGAL PROCEEDINGS
On April 26, 1994, an individual filed a complaint in a class
action lawsuit in the United States District Court for the Middle
District of Florida against 41 manufacturers, distributors and casino
operators of video poker and electronic slot machines, including the
Company. On May 10, 1994, another plaintiff filed a complaint in a
class action lawsuit alleging substantially the same claims in the
same court against 48 defendants, including the Company. On September
26, 1995, another plaintiff filed a complaint in a class action
lawsuit alleging substantially the same claims in the United States
District Court for the District of Nevada against 45 defendants,
including the Company. The court consolidated the three cases in the
United States District Court for the District of Nevada. The con-
solidated complaint claims that we and the other defendants have
engaged in a course of fraudulent and misleading conduct intended
to induce people to play video poker and electronic slot machines by
collectively misrepresenting how the gaming machines operate, as well
as the chances of winning. The complaint alleges violations of the
Racketeer Influenced and Corrupt Organizations Act, as well as claims
of common law fraud, unjust enrichment and negligent misrepresenta-
tion, and asks for unspecified compensatory and punitive damages. In
December 1997, the court granted in part and denied in part the
defendants' motions to dismiss the complaint for failure to state a
claim and ordered the plaintiffs to file an amended complaint, which
was filed in January 1998. The defendants filed an answer to the
amended complaint in February 1998. We believe that the claims
against us are without merit and intend to continue to defend the
case vigorously.
26
<PAGE>
In December 1997, the trustee of the bankruptcy estate of Ken
Mizuno ("Mizuno") filed a complaint against us in the United States
Bankruptcy Court for the Central District of California, which was
amended in February 1998. The amended complaint claims that Mizuno, a
Japanese national, repaid various debts to our casinos prior to the
commencement of Mizuno's bankruptcy case in June 1992 for which
Mizuno was not legally liable and which were not legally collectible
under Japanese law. The amended complaint alleges that these repay-
ments constituted fraudulent transfers under federal and state law and
seeks to require us to pay the value of the transfers, totaling at
least $61,418,250, plus interest, to the bankruptcy trustee. In
August 1998, the Bankruptcy Court granted our motion to dismiss the
complaint based on the statute of limitations. The plaintiff
appealed to the United States District Court for the Central District
of California, which reversed the dismissal in January 1999. We have
appealed the District Court's ruling. The case has been transferred
to the United States District Court for the District of Nevada. We
intend to continue to defend the case vigorously.
We and our subsidiaries are also defendants in various other
lawsuits, most of which relate to routine matters incidental to our
business. We do not believe that the outcome of this other pending
litigation, considered in the aggregate, will have a material adverse
effect on our Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of our security holders
during the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is traded on the New York Stock Exchange and the
Pacific Exchange under the symbol "MIR." The following table sets
forth, for the calendar quarters indicated, the high and low sale
prices of our common stock on the New York Stock Exchange Composite
Tape.
<TABLE>
<CAPTION>
1998 1997
--------------------- -----------------
HIGH LOW HIGH LOW
--------- --------- ------- -------
<S> <C> <C> <C> <C>
First quarter................ $26 3/4 $20 13/16 $25 7/8 $21 1/8
Second quarter............... 25 1/8 20 25 7/8 19 7/8
Third quarter................ 22 1/4 13 3/4 30 3/8 23 3/4
Fourth quarter............... 18 15/16 13 3/16 30 1/8 20 1/2
</TABLE>
27
<PAGE>
There were approximately 13,000 record holders of our common stock
as of March 12, 1999. We paid no dividends in 1998 or 1997 and do not
expect to do so in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------
1998 (a) 1997 1996 (b) 1995 1994
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS (c)
Gross revenues................................ $1,676.9 $1,546.0 $1,496.3 $1,453.7 $1,370.9
Promotional allowances........................ (153.2) (127.4) (128.8) (123.0) (116.7)
Net revenues.................................. 1,523.7 1,418.6 1,367.5 1,330.7 1,254.2
Preopening expense............................ 88.3 - - - -
Operating income.............................. 152.1 326.0 312.7 284.1 237.8
Income before extraordinary item (d).......... 85.2 209.8 206.0 169.9 124.7
Net income.................................... 81.7 207.6 206.0 163.2 114.3
Income per share before extraordinary item (d)
Basic....................................... $ 0.47 $ 1.17 $ 1.13 $ 0.93 $ 0.69
Diluted..................................... $ 0.45 $ 1.09 $ 1.05 $ 0.88 $ 0.66
Net income per share
Basic....................................... $ 0.45 $ 1.16 $ 1.13 $ 0.89 $ 0.63
Diluted..................................... $ 0.43 $ 1.08 $ 1.05 $ 0.85 $ 0.60
OTHER DATA
Interest expense, net of
amounts capitalized......................... $ 32.7 $ 7.7 $ 6.8 $ 23.2 $ 44.2
Net cash provided by operating
activities.................................. 287.2 292.8 331.9 327.0 286.8
Capital expenditures.......................... 1,160.3 1,058.9 407.3 183.0 71.9
YEAR-END STATUS
Construction in progress...................... $ 539.5 $1,261.1 $ 355.9 $ 84.5 $ 25.3
Total assets.................................. 4,530.2 3,347.4 2,143.5 1,791.7 1,641.4
Long-term debt, net of current maturities..... 2,378.5 1,396.7 468.1 248.5 359.6
Stockholders' equity (e)...................... 1,601.8 1,512.5 1,290.9 1,209.3 1,030.9
Shares outstanding............................ 180.1 179.4 178.3 183.3 182.0
- ---------------
(a) Bellagio opened on October 15, 1998.
(b) Monte Carlo opened on June 21, 1996.
(c) The Boardwalk is being accounted for as an incidental operation. Under this method,
its operating results are excluded from our consolidated operating results, and its
net income is recorded as a reduction in the carrying value of the land.
(d) Before extraordinary losses on early retirements of debt.
(e) We paid no dividends during the five-year period ended December 31, 1998.
</TABLE>
28
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OUR OPERATING RESULTS
Our 1998 revenues after promotional allowances grew by $105.2
million, or 7%, over 1997, primarily reflecting the October 15
opening of Bellagio. Our casino revenues increased by $37.5
million, or 5%, and our non-casino revenues were up $70.1 million, or
12%.
During its 77 days of operation in 1998, Bellagio achieved net
revenues of $220.7 million and operating profit before preopening
expense of $34.1 million. Bellagio's depreciation expense for this
period was $18.9 million. These strong initial results were
achieved despite high staffing levels and other inefficiencies
historically associated with the opening periods of new facilities.
We expensed all $88.3 million of Bellagio's previously capitalized
preopening costs in the 1998 fourth quarter. These costs include
the costs associated with hiring and training some 9,300 employees,
operating the reservation and marketing offices and various other
costs incurred prior to opening this $1.6 billion resort. After tax,
the charge for Bellagio's preopening costs reduced our 1998 earnings
by approximately $0.30 per share.
Our international business declined during 1998 due to the economic
difficulties that have been experienced by certain Asian countries.
The devaluation of certain Asian currencies and subsequent declines
in certain Asian stock and real estate markets that occurred
primarily in the second half of 1997 began affecting the baccarat
component of our revenues in the first quarter of 1998. Including
Bellagio's partial-year contribution, our table games revenues
declined by 2% compared with 1997. Excluding Bellagio's contribution,
our table games revenues declined by 22%. Luck was also a factor;
our Company-wide table games win percentage in 1998 was 19.4%,
compared with 21.5% in 1997 and 19.3% in 1996.
Apart from the decline in table games revenues, the other
components of our casino revenues generally equaled or exceeded
historical levels. Same-store slot revenues (i.e., excluding
Bellagio) achieved a 2% increase over 1997. Slot revenues,
including Bellagio, grew by $40.2 million, or 12%.
Our same-store net non-casino revenues in 1998 were down by 4%
compared with 1997, which we attribute primarily to additional
competitive pressures in the Las Vegas market. At year-end 1998,
there were approximately 106,000 hotel and motel rooms in Las
Vegas, compared with 86,000 at December 31, 1995. This increase
has resulted in a slight decline in city-wide occupancy and room
rates as the new capacity is being absorbed. Our occupancy and
average daily room rates have generally outperformed the Las Vegas
averages. Combined standard room occupancy at our Las Vegas hotels
was 97.6% in 1998, 98.0% in 1997 and 98.8% in 1996. Our combined
average daily standard room rate was approximately $93 in both 1998
and 1997 and $92 in 1996. Excluding Bellagio, our total room
occupancy in 1998 remained at approximately 98%, and our average
daily standard room rate declined to $89.
29
<PAGE>
Three major new hotel-casinos will open on the Strip in 1999,
adding a total of approximately 9,600 guestrooms to the market. The
first of these new resorts, which has 3,700 guestrooms, opened in
early March at the southernmost end of the Strip. The second new
resort, with 3,000 guestrooms, is being constructed directly across
the Strip from The Mirage and Treasure Island and is scheduled
to open in April. The last of these three new resorts will offer
2,900 guestrooms and is scheduled to open in early September across
the Strip from Bellagio.
There were three similar waves of capacity additions in Las Vegas
during the past 10 years. The Mirage opened in 1989 and Excalibur
opened in 1990 and stimulated sufficient incremental demand such
that city-wide guestroom occupancies remained stable irrespective
of the additional hotel rooms at the two new resorts. In late
1993, Treasure Island, Luxor and the MGM Grand opened within a few
months of each other and the new resorts stimulated enough new
demand to cause an increase in city-wide occupancy, despite the
increase in guestroom inventory. However, during 1996 and 1997,
Monte Carlo, New York-New York and the Stratosphere opened, along
with several additions at existing hotel-casinos, and city-wide
guestroom occupancy declined. The new attractions in the third
wave apparently failed to create sufficient incremental demand to
absorb the considerable number of additional new hotel rooms.
Bellagio opened in October 1998 and increased the number of
guestrooms in Las Vegas by approximately 3%. According to the Las
Vegas Convention and Visitors Authority, the number of Las Vegas
visitors increased over the same months in 1997 by 1.7% in
November, 6.7% in December and 7.4% in January. City-wide
occupancy in December and January also rose over the same months in
the prior year. Occupancy statistics are not yet available for
February. The impact of the three new resorts opening on the Las
Vegas Strip during 1999 is still uncertain. Each of the resorts
features new attractions and amenities that should add to the
visitor appeal of Las Vegas, but each also has a large number of
guestrooms and gaming capacity.
We are continuing to develop and implement strategies for the
evolving situation in Las Vegas. Some of these strategies include
introducing new restaurants and entertainment attractions, refur-
bishing our guestrooms and introducing new advertising and marketing
programs. Our greatest strengths in these circumstances are the
excellent condition and design of our resorts, their locations at
the center of activity in their respective markets and the friendli-
ness and professionalism of our employees.
Our 50% share of Monte Carlo's net income contributed $27.2 million
to our pre-tax earnings during 1998, versus $29.6 million in 1997.
Monte Carlo achieved gross operating revenues of $267.4 million in
1998, a 2% increase over the $262.8 million reported in 1997.
Promotional and other operating expenses at the resort also
increased, resulting in an $8.8 million decline in its 1998
operating income. Prior to the 1998 second quarter, the joint
venture was using Monte Carlo's operating cash flow primarily to
reduce its outstanding debt. At December 31, 1998, the joint
30
<PAGE>
venture's outstanding debt totaled $91.2 million, versus $111.9
million and $185.4 million at year-end 1997 and 1996, respectively.
As a result, interest cost was substantially lower in 1998,
partially offsetting the decline in operating income. During the
1998 second quarter, the joint venture achieved a favorable pricing
tier under its bank credit agreement and began distributing Monte
Carlo's available cash to the partners. If these cash
distributions continue, the joint venture's debt should remain at
approximately $90 million.
Monte Carlo opened on June 21, 1996, and contributed $9.3 million
($14.9 million before preopening expense) to our pre-tax earnings
during that partial year of operation.
Same-store operating costs and expenses at our hotel-casinos
declined by $15.6 million, or 1%, in 1998. This decline generally
follows the decline in same-store operating revenues, offset
partially by the costs of additional staffing efforts necessary to
prepare for the opening of Bellagio and Beau Rivage. The opening
of these spectacular new resorts increased our staffing levels from
17,000 to almost 30,000 employees. Many of these new positions
were filled through promotion or transfer of employees from our
other resorts. In order to ensure a smooth transition, we hired
replacement employees prior to the departure of transferring
employees. These additional staffing efforts resulted in
considerably higher payroll and training costs in 1998.
Our net revenues in 1997 grew by $51.0 million, or 4%, over 1996.
Casino revenues increased by 4%, principally due to a 14% increase
in baccarat play at The Mirage combined with a significantly higher
win percentage. This offset slight declines in slot revenues and
activity at table games other than baccarat, which we attribute to
the increase in competition. During 1997, we also benefited from
an additional $20.3 million earnings contribution from Monte Carlo,
reflecting the resort's first full year of operation.
During 1997, Siegfried & Roy at The Mirage and Mystere at Treasure
Island achieved a combined average ticket price that was
approximately 7% higher than in 1996. As a result, net
entertainment revenues in 1997 grew by $3.4 million, or 4%, over
1996. Our other non-casino revenues in 1997 were down by a
combined 1%, resulting in a slight decline in total net non-casino
revenues.
Construction disruptions impacted our earnings throughout most of
1997. At Treasure Island, a luxurious new hotel lobby was
completed in early August, a new retail outlet opened in September
and a new Italian restaurant opened in December. We also completed
the refurbishment of 1,382 standard guestrooms at the Golden Nugget
in downtown Las Vegas, resulting in approximately 3% fewer
available room nights at the facility during 1997 than in 1996. This
reduction in available room inventory combined with the lower
occupancy level, as partially offset by the slightly higher average
room rate, resulted in a 2% decline in our Company-wide net room
revenues in 1997 versus 1996.
31
<PAGE>
In response to the new hotels in the Las Vegas market and in
preparation for the opening of Bellagio, we heightened our
marketing and promotional efforts during 1997 and 1998. The costs
associated with these additional efforts caused an 8% increase in
casino costs and expenses during 1997 and a small decline in the
operating margin at our wholly owned facilities. The provision for
losses on receivables in 1997 increased by $4.7 million over 1996.
This increase primarily reflects the growth in table games revenues
and in particular the level of table games credit play.
OTHER FACTORS AFFECTING OUR EARNINGS
We are currently refurbishing all of the standard guestrooms at
Treasure Island at a total cost of approximately $60 million. The
project is scheduled to be completed in early October and will
result in approximately 7% fewer available room nights at the
property during 1999. General and administrative expense in the
fourth quarter of 1998 includes a $2.1 million abandonment charge
associated with this project. We recorded a similar charge of $2.7
million in 1997 associated with the construction of a new gourmet
restaurant at The Mirage and a new employee parking garage that was
completed in March 1998. Construction of the new hotel lobby,
retail outlet and restaurant completed at Treasure Island during
1997 began in late 1996. The construction had little impact on its
operating results in 1996, but general and administrative expense
in that year includes a $5.4 million abandonment charge related to
these projects.
After declining by 8% in 1997, corporate expense increased
significantly during 1998. This increase reflects certain expenses
related to the potential legalization of gaming in new
jurisdictions, the growth in the size of our Company and expanded
activities in pursuit of entertainment attractions for our resorts.
The decline in 1997 is principally due to a gain from the sale of
one of our corporate aircraft.
Reflecting our growing investment in the Bellagio and Beau Rivage
projects, our debt levels and the associated interest cost and
amount of interest capitalized have risen significantly over the
past two years. The impact was less significant in 1996, as we
were able to fund much of the early stages of construction from
operating cash flow. With Bellagio and Beau Rivage now open, a
much smaller portion of our interest cost is being capitalized,
resulting in a much higher charge for interest expense.
The category "Other, including interest income" in 1998 reflects a
full year of earnings on an escrow account we established in
October 1997 to fund our portion of the cost of certain road
improvements in the Marina area of Atlantic City, New Jersey.
Additionally, in the third quarter of 1997, we purchased certain of
Boardwalk's previously issued debt securities as part of the
acquisition. As a result, we recorded interest earned on the
securities until Boardwalk became our wholly owned subsidiary in
June 1998. This category in 1996 includes a pre-tax gain of $8.0
million associated with the sale of our 50% equity interest in a
small casino located near Iguazu Falls, Argentina for $12.5 million
in cash.
32
<PAGE>
We recorded debt-related extraordinary charges in both 1998 and
1997. The $3.5 million ($0.02 per share) charge recorded in 1998
is associated with the March redemption of all $100 million
principal amount of our 9 1/4% notes. It was economically
advantageous for us to repay the notes with less expensive funds
borrowed under our bank credit facility and commercial paper
program, even after considering the prepayment penalty that
accounted for most of the extraordinary charge. In 1997, we
incurred a similar $2.2 million charge ($0.01 per share) in
connection with amending and increasing the size of our bank credit
facility. We incurred no extraordinary charges in 1996.
Our effective income tax rate of approximately 37% during 1998
exceeded the 35% statutory rate mainly due to the non-deductibility
of certain expenses related to the potential legalization of gaming
in new jurisdictions mentioned previously. Our effective income
tax rate approximated the statutory rate during both 1997 and 1996.
OUR CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY
The capital required for the recent and ongoing significant
expansion of our Company is being provided by net operating cash
flow, revolving bank credit facility and commercial paper
borrowings and the issuance of long-term unsecured debt.
During 1998, our resorts contributed net operating cash flow (as
shown in our Consolidated Statements of Cash Flows) of $287.2
million, versus $292.8 in 1997 and $331.9 in 1996. The small
decline in our net operating cash flow in 1998 generally reflects
the decline in our operating income, offset in part by cash
distributions from Monte Carlo of $20.9 million. As discussed
earlier, prior to 1998 the Monte Carlo joint venture was using its
operating cash flow to reduce its outstanding debt. As a result,
although Monte Carlo contributed an additional $20.3 million to our
earnings in 1997 versus 1996, the amount is not included in our
operating cash flow. Our operating cash flow in 1997 was also
impacted by a substantial increase in trade receivables occurring
mainly near year-end. The revenues associated with the receivables
are included in our 1997 operating income. Due to the normal
timing of collections, however, a large portion of the receivables
remained outstanding at the end of 1997.
Our capital expenditures in 1998 totaled $1.2 billion, compared
with $1.1 billion in 1997 and $407.3 million in 1996. Capital
expenditures during all three years primarily represent amounts
invested in Bellagio and Beau Rivage. Bellagio opened on October
15, 1998 at a total cost, including land, capitalized interest and
preopening costs, of approximately $1.6 billion. Beau Rivage
opened on March 16, 1999 at a total cost of approximately $685
million. At December 31, 1998, we had incurred approximately $522
million of this amount.
33
<PAGE>
Beau Rivage was previously scheduled to open on February 1, 1999.
However, Hurricane Georges battered the Mississippi Gulf Coast in
early October 1998 and delayed its opening. We were fully insured
for the hurricane damage and the resulting repair costs are not
included in the total project cost disclosed above. We have been
reimbursed for much of the repair costs and expect to receive the
remaining amount in 1999. We are also insured for the estimated
lost profits caused by the delayed opening.
The total Bellagio project cost does not include the cost of fine
art we acquired for display and resale in the Bellagio Gallery of
Fine Art. Our total capital expenditures included $44.4 million in
1998, $150.4 million in 1997 and $39.9 million in 1996 associated
with artwork acquisitions. During 1998, we received cash proceeds
of $43.6 million from the sale of various works of fine art. This
includes the sale of four artworks to our Chairman for a total
sales price of $25.6 million, which was the amount we paid for the
artworks in the fourth quarter of 1997.
Capital expenditures during 1998 also include a total of
approximately $118.8 million we spent to acquire land on the Las
Vegas Strip. This acquisition, together with the $27.6 million we
incurred to acquire land on the Strip in 1997 and the $112.0
million we spent to acquire the Boardwalk, completes the assemblage
of an approximately 23-acre site at a total cost of $258.4
million. Combined with other land we purchased in 1993, we now own
approximately 55 acres for future development with over 1,200 feet
of frontage on the Strip between Bellagio and Monte Carlo. We are
in the very early design phase for a potential new hotel-casino
resort we expect to develop on the site. The design, timing and
cost of the new resort are still highly uncertain and will depend
on several factors. Among these factors is the market's absorption
of Bellagio and the other new resorts on the Las Vegas Strip.
In April 1998, we received net cash proceeds of approximately $23.5
million from the sale of 16 acres of land to the owner of the
upscale retail mall located adjacent to Treasure Island and The
Mirage. We previously used the land for off-site parking for
employees of both hotel-casinos. To facilitate the land sale, we
completed the construction in March 1998 of a new 1,800-space
employee parking garage directly behind The Mirage and Treasure
Island at a total cost of approximately $12.4 million. The
purchaser of the land intends to use it to significantly expand the
size of the mall. If completed, the mall expansion should prove
beneficial to both The Mirage and Treasure Island. We also sold
corporate aircraft in both 1998 and 1997 and received cash proceeds
of $20.9 million and $22.8 million, respectively.
34
<PAGE>
We are currently planning our Company's further expansion in
Atlantic City, New Jersey. In January 1998, the City of Atlantic
City deeded to us approximately 180 acres in the Marina area of
Atlantic City. Some of the property is undevelopable wetlands,
leaving us approximately 120 acres suitable for development. In
exchange for the property, we agreed to construct a hotel-casino on
the site and perform certain other obligations. We also entered
into an agreement with two New Jersey State agencies for the
construction and joint funding of road improvements necessary to
improve access to the Marina area. As called for by the agreement,
in October 1997, we deposited our $110 million portion and one of
the State agencies deposited its $125 million portion of the
estimated $330 million total cost of the road improvements. The
funds were deposited into separate escrow accounts and are
restricted for construction of the road improvement project. The
other State agency is providing the remaining $95 million cost of
the road improvements, of which approximately $88 million had been
spent as of March 15, 1999. Groundbreaking on the road improvement
project took place on November 4, 1998, and construction is scheduled
for completion in May 2001. The road improvements are being
constructed under a fixed-price design/build contract.
We are in the design phase of our planned hotel casino on the
Marina site and a budget and construction schedule for the project
have not yet been developed. The Marina site was used as a
municipal landfill until 1975. As part of our agreement with the
City, we agreed to remediate the site. We began remediation work
in November 1998 and expect it to take approximately one year to
complete. We anticipate the total cost to remediate the site will
be approximately $37.5 million. We had spent approximately $2.2
million of this amount at December 31, 1998. Much of the
remediation work must be completed before we can begin construction
of our new resort.
We have a joint venture agreement with Boyd for the development of
another hotel-casino on a 25-acre portion of the Marina site. The
joint venture intends to develop a $750 million entertainment
resort with approximately 1,500 hotel rooms that will be connected
to our planned wholly owned hotel-casino. We will design and
develop the master plan for the Marina site and Boyd will oversee
the design and construction of the joint venture resort. Boyd will
also operate the joint venture resort upon completion. Under the
agreement, we will contribute the 25 acres of land and $60 million
in cash to the joint venture. Boyd will contribute $150 million in
cash. The joint venture will attempt to obtain acceptable
financing for the remaining development cost of the project that
will be non-recourse to both our Company and Boyd. If the joint
venture obtains the necessary permits and financing, construction
of the joint venture resort could begin by late 1999.
35
<PAGE>
Both our Company and the joint venture must apply for and receive
numerous governmental permits and satisfy other conditions before
construction of either hotel-casino can begin. In addition, a
current Atlantic City hotel-casino operator and others have filed
various lawsuits challenging the validity of our agreement with the
City and seeking to stop the construction of the road improvements
that is now underway. As a result of these factors, we cannot be
certain of the ultimate development or timing of construction of
the hotel-casinos planned for the Marina site.
We completed the purchase of Boardwalk on June 30, 1998. As
mentioned previously, the purchase required total cash outlays of
approximately $112.0 million. We spent approximately $51.9 of this
amount in 1997, primarily to acquire certain of Boardwalk's
previously issued debt securities.
In February 1998, we received $394.7 million from the issuance of
$200 million principal amount of 6 5/8% notes due in 2005 and an
equal principal amount of 6 3/4% notes due in 2008. These notes are
the only notes issued to date under a "shelf" registration
statement we filed with the Securities and Exchange Commission in
October 1997 covering a total of up to $750 million of debt or
equity securities or any combination of these securities.
In August 1997, we received $296.1 million from the issuance of
$200 million principal amount of 6 3/4% notes due in 2007 and $100
million principal amount of 7 1/4% debentures due in 2017. We
received $247.4 million in October 1996 from the issuance of $250
million principal amount of 7 1/4% notes due in 2006.
In March 1998, we used bank credit facility and commercial paper
borrowings to repay the $133 million principal amount of our zero
coupon notes upon maturity and to retire early all $100 million
principal amount of our 9 1/4% notes.
During 1996, we repurchased 6.7 million shares of our common stock
at a total cost of $144.2 million. These are substantially all the
shares that we have repurchased to date under our existing 10
million-share repurchase program. Repurchase of the almost 3.3
million shares remaining under the program will depend on many
factors, including market conditions, other available investments
and our financial position.
We believe our existing cash balances, operating cash flow and
available borrowing capacity will provide us with sufficient
resources to meet our existing debt obligations and foreseeable
capital expenditure requirements.
36
<PAGE>
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 and commercial paper program.
The following table provides information about our long-term debt
at March 1, 1999.
<TABLE>
<CAPTION>
Maturity Face Carrying Estimated
Date Amount Value Fair Value
---------- -------- -------- -----------
(Dollars in millions)
<S> <C> <C> <C> <C>
LIBOR-based bank credit facility borrowings, at a
weighted average interest rate of approximately Various to
5.56%................................................... May 1999 $1,390.0 $1,390.0 $1,390.0
Commercial paper notes, at a weighted
average effective interest rate of Various to
approximately 5.20%..................................... April 1999 142.0 140.8 140.8
6 5/8% notes............................................. Feb. 2005 200.0 199.1 192.7
7 1/4% notes............................................. Oct. 2006 250.0 249.7 246.7
6 3/4% notes............................................. Aug. 2007 200.0 199.2 189.1
6 3/4% notes............................................. Feb. 2008 200.0 199.0 190.5
7 1/4% debentures........................................ Aug. 2017 100.0 99.7 93.5
Other notes, at a weighted average Various to
interest rate of approximately 8.8%..................... Aug. 2010 2.0 2.0 2.0
-------- -------- --------
$2,484.0 $2,479.5 $2,445.3
======== ======== ========
</TABLE>
There are no principal payments due on our debt securities prior to
their maturity.
At March 16, 1998, the face amount, carrying value and estimated
fair value of our long-term debt was approximately $1.6 billion. At
that date, our fixed-rate debt consisted of the notes and debentures
listed above, and our bank credit facility borrowings totaled $280.0
million at a weighted average interest rate of approximately 5.82%.
No borrowings were outstanding under our commercial paper program.
37
<PAGE>
In March 1997, the availability under our bank credit facility was
increased from $1 billion to $1.75 billion and the maturity date
was extended from May 1999 to March 2002. Borrowings under the
bank credit facility are unsecured and bear interest, at our
option, at the prime rate or at a specified premium over the one-,
two-, three- or six-month London Interbank Offered Rate, a rate
that fluctuates daily. The premium is based on the credit rating
of our 7 1/4% notes due October 2006 and our Leverage Ratio (as
defined). The premium is currently 0.45% per annum.
Alternatively, we may request interest rate bids from the
participating banks. Outstanding commercial paper borrowings count
against the availability under our bank credit facility.
Borrowings under our bank credit facility and commercial paper
program are classified as long-term debt because we intend to
replace these borrowings as they come due and to have these
borrowings outstanding for longer than one year. However, the
amount of our outstanding borrowings is expected to fluctuate and
may be reduced from time to time. At March 1, 1999, we had
combined availability under our bank credit facility and commercial
paper program of $218.0 million.
RECENTLY ISSUED ACCOUNTING STATEMENT
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement
of Position No. 98-5 - Reporting on the Costs of Start-Up Activities
("SOP 98-5"). The provisions of SOP 98-5 are effective for fiscal
years beginning after December 15, 1998 and require that, although
the interest cost related to new projects shall continue to be
capitalized, the other costs associated with start-up activities
(including the costs of hiring and training employees, operating
marketing and reservation offices and various other costs incurred
prior to opening) must be expensed as incurred. We previously
capitalized these preopening costs and amortized them over the 60-day
period following opening of the related facility.
Although we disagree with the logic of SOP 98-5, we had no choice
but to adopt its provisions effective January 1, 1999 and expensed
all capitalized preopening costs relating to Beau Rivage and our
Atlantic City projects. These costs, totaling $30.6 million (net
of applicable income tax benefit of $16.4 million), will be
reflected as a cumulative effect of change in accounting principle
in our 1999 first quarter financial statements.
YEAR 2000 READINESS DISCLOSURE
BACKGROUND
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.
38
<PAGE>
RISK FACTORS
We are in many ways engaged in a low-technology business. Our
casino employees, for example, do not require computers to deal black-
jack or spin a roulette wheel. Likewise, our chefs do not require
computers to prepare a meal and our housekeepers do not require
computers to clean and prepare a guestroom. Slot machines are a type
of computer, but there is no date embodied in their basic operation
of choosing a random sequence and determining the appropriate payout.
Nevertheless, we do use computers extensively to assist our
employees in providing good service to our guests and to assist us
in monitoring our operations. The front desks at our hotels, for
example, are highly computerized in order to expedite the check-in
and check-out of guests. Similarly, we use computers in the back-
of-the-house to facilitate purchasing and maintain inventory
records. Our shows and free entertainment attractions also use
computers extensively. In our casinos, computers are used to
monitor gaming activity and maintain customer records, such as
credit availability and points earned by members of our slot clubs.
Computers on occasion fail, irrespective of the Year 2000 issue.
For this reason, where appropriate, we maintain paper and magnetic
tape back-ups and our employees are trained in the use of manual
procedures. When the front desk computer fails, for example, our
employees continue to check guests in and out using manual methods.
Many of these incidents occur each year and generally these
failures are unnoticed by our guests.
This is not to imply that there is no risk to us from the Year 2000
issue. The risks could be substantial. Most of our guestrooms,
for example, are easily accessed only by elevator, and most
elevators incorporate some computer technology. Likewise, our
heating, ventilation, life safety and air conditioning systems are
highly computerized and, of course, critical to our operations.
While some attractions, such as the Bellagio Gallery of Fine Art
and The Secret Garden of Siegfried & Roy, would be relatively
unaffected by failure of computer technology, other attractions,
such as the O, Siegfried & Roy and Mystere shows, could not
function without computers. We are also exposed to the risk that
one or more of our vendors or suppliers could experience Year 2000
problems that may impact their ability to provide us with goods and
services. With respect to the suppliers of many of our goods, we
generally have alternative suppliers. However, the disruption of
certain services, in particular utilities and financial services,
could, depending upon the extent of the disruption, have a material
adverse impact on our operations.
External effects of the Year 2000 issue, such as disruptions in
airline service or other domestic or international economic
disruptions affecting our customers, could also adversely affect
our business. Most of our customers travel in excess of 100 miles
to reach our resorts and many of them travel by air. If there is a
breakdown of the Federal Aviation Administration's ("FAA") air
traffic control system, or if fear of a breakdown discourages
customers from traveling, it could impact our operations. Of
39
<PAGE>
course, we anticipate that the arrival of the new millennium will
result in a great deal of celebration and activity in our hotel-
casinos. A minor breakdown or fear of a breakdown in air travel
immediately following the New Year's Eve holiday could also result
in extended stays by patrons at our facilities. We are not in a
position to determine the readiness of the FAA and the airlines
with respect to the Year 2000 issue or the impact that this would
have on our business.
STRATEGY
We have an extensive Year 2000 compliance program and have
substantially completed an inventory of our various systems that
may be sensitive to the Year 2000 issue. We are prioritizing the
importance of these systems to our operations and have formed teams
and assigned responsibilities to ensure Year 2000 compliance of all
critical systems. Where important to our business and inquiry
seems reasonable, we are also contacting third parties to ascertain
their Year 2000 readiness. We are developing alternatives, if
available, for those third parties where we perceive there could be
a problem.
We have begun testing our systems, but do not yet know precisely
how many of the systems are Year 2000 compliant. Our goal is to
have all internally developed systems Year 2000 compliant by August
1999 and all vendor-supplied systems compliant by year-end 1999.
We have not developed a comprehensive contingency plan. As
previously mentioned, however, a number of our critical hotel and
casino systems are currently backed up by manual procedures that we
use during times of system malfunctions. We will continue to
assess the need for a comprehensive contingency plan as we continue
to implement our corrective action plan.
COSTS
It is difficult to calculate the cost of ensuring that our systems
are Year 2000 compliant, in part because there are many different
solutions to various Year 2000 situations. In the case of our
elevators, for example, we have requested that the third parties
with whom we contract for our elevator maintenance inspect each
elevator system, as part of its normal maintenance, for any Year
2000 issues. As another example, we have contracted with a third-
party consultant to make our proprietary casino tracking system
Year 2000 compliant. At the same time, however, and under the same
contract, the consultant is also incorporating several other
enhancements to the system.
During the period from 1997 through 1999, we have installed and
will be installing new slot accounting, hotel management and
financial accounting systems. Two of these new systems are Year
2000 compliant and the third is expected to be compliant after an
upgrade to be supplied by the vendor at no charge. Each of these
new systems has numerous enhancements over our prior systems. The
total cost of installing these new systems is approximately $20
million, of which we had incurred approximately $10 million
40
<PAGE>
through March 1, 1999. We believe that only a small portion of
this cost relates directly to the Year 2000 issue. We also believe
that we would have installed these systems within this time frame
irrespective of the Year 2000 issue. Other than the cost of these
new systems, the cost of addressing the Year 2000 issue has not
been and is not expected to be material to our financial condition
or results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We incorporate by reference the information appearing under "Market
Risk" in Item 7 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and Notes to Consolidated
Financial Statements, referred to in Item 14(a)(1) of this Form 10-K,
are included at pages 54 to 74 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We incorporate by reference the information appearing under
"Directors and Executive Officers" in our definitive Proxy Statement
for our June 9, 1999 Annual Meeting of Stockholders, which we expect
to file with the Securities and Exchange Commission in April 1999
(the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
We incorporate by reference the information appearing under
"Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
We incorporate by reference the information appearing under "Stock
Ownership of Major Stockholders and Management" in the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We incorporate by reference the information appearing under
"Compensation Committee Interlocks and Insider Participation" in the
Proxy Statement.
41
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1). FINANCIAL STATEMENTS.
Included in Part II of this Report:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1998 and 1997
Years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a)(2). FINANCIAL STATEMENT SCHEDULES.
Included in Part IV of this Report:
Years ended December 31, 1998, 1997 and 1996
Schedule II - Valuation and Qualifying Accounts
We have omitted schedules other than the one listed above because
they are not required or are not applicable, or the required informa-
tion is shown in the financial statements or notes to the financial
statements.
(a)(3). EXHIBITS.
2.1 Agreement and Plan of Merger, dated December 22,
1997, among the Company, Mirage Acquisition Sub,
Inc. and BCI (without schedules). Incorporated
by reference to Exhibit 2 to the Schedule 13D,
dated December 29, 1997, filed by the Company
with respect to BCI (the "Schedule 13D").
2.2 Agreement, dated December 22, 1997, among the
Company, Diversified Opportunities Group Ltd.,
Jacobs Entertainment Nevada, Inc. and Jeffrey
P. Jacobs. Incorporated by reference to Exhibit
5 to the Schedule 13D.
2.3 Agreement, dated December 22, 1997, between the
Company and Avis P. Jansen, individually, as
executrix ("Executrix") of the Estate of Norbert
W. Jansen and as trustee ("Trustee") for the
Jansen Family Trust under an Agreement dated
July 14, 1993 (the "Jansen Agreement") (without
exhibits). Incorporated by reference to Exhibit
3 to the Schedule 13D.
2.4 Agreement of Purchase and Sale and Joint Escrow
Instructions, dated as of December 22, 1997,
between Restaurant Ventures of Nevada, Inc.
and Avis Jansen, as Trustee (without exhibits).
Incorporated by reference to Exhibit 4 to the
Schedule 13D.
42
<PAGE>
3.1 Restated Articles of Incorporation of the
Company. Incorporated by reference to Exhibit
3(i) to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1993.
3.2 Amended and Restated Certificate of Division of
Shares into Smaller Denominations Pursuant to
N.R.S. Section 78.207 of the Company, filed
October 14, 1993. Incorporated by reference to
Exhibit 2.2 to Amendment No. 3 to the Company's
Registration Statement on Form 8-A dated October
19, 1993.
3.3 Certificate of Division of Shares into Smaller
Denominations Pursuant to N.R.S. Section 78.207
of the Company, filed June 5, 1996. Incorporated
by reference to Exhibit 1 to Amendment No. 4 to
the Company's Registration Statement on Form 8-A
dated June 18, 1996.
3.4 Amended and Restated Bylaws of the Company
("Bylaws"). Incorporated by reference to Exhibit
99 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1994.
3.5 Amendment to Bylaws, dated February 17, 1999.
4.1 Indenture, dated as of October 15, 1996, between
the Company and Firstar Bank of Minnesota, N.A.,
as trustee (the "1996 Shelf Indenture").
Incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 (the
"September 1996 Form 10-Q").
4.2 Supplemental Indenture, dated as of October 15,
1996, to the 1996 Shelf Indenture, with respect
to the Company's 7.25% Senior Notes Due October
15, 2006. Incorporated by reference to Exhibit
4.2 to the September 1996 Form 10-Q.
4.3 Indenture, dated as of August 1, 1997, between
the Company and First Security Bank, National
Association, as trustee (the "1997 Shelf
Indenture"). Incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30,
1997 (the "June 1997 Form 10-Q").
4.4 Supplemental Indenture, dated as of August 1,
1997, to the 1997 Shelf Indenture, with respect
to the Company's 6.75% Notes Due August 1,
2007 and 7.25% Debentures Due August 1, 2017.
Incorporated by reference to Exhibit 4.2 to the
June 1997 Form 10-Q.
43
<PAGE>
4.5 Indenture, dated as of February 4, 1998, between
the Company and PNC Bank, National Association,
as trustee (the "1998 Shelf Indenture").
Incorporated by reference to Exhibit 4(e) to
the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 (the
"1997 Form 10-K").
4.6 Supplemental Indenture, dated as of February 4,
1998 to the 1998 Shelf Indenture, with respect
to the Company's 6.625% Notes Due February 1,
2005 and 6.75% Notes Due February 1, 2008.
Incorporated by reference to Exhibit 4(f) to
the 1997 Form 10-K.
10.1* Forms of Incentive Stock Option Agreement and
Non-Qualified Stock Option Agreement. Incorpor-
ated by reference to Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989.
10.2* 1983 Stock Option and Stock Appreciation Rights
Plan, as amended. Incorporated by reference
to Exhibit 4.3 to the Registration Statement
filed by the Company on Form S-8 under the
Securities Act of 1933 (No. 33-16037) (the
"Form S-8").
10.3* 1984 Stock Option and Stock Appreciation Rights
Plan, as amended. Incorporated by reference to
Exhibit 4.2 to the Form S-8.
10.4* 1986 Stock Option and Stock Appreciation Rights
Plan, as amended. Incorporated by reference to
Exhibit 4.1 to the Form S-8.
10.5* 1992 Stock Option and Stock Appreciation Rights
Plan. Incorporated by reference to Exhibit
10(n) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31,
1991.
10.6* 1993 Stock Option and Stock Appreciation Rights
Plan. Incorporated by reference to Exhibit 10(m)
to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (the
"1992 Form 10-K").
10.7* Amended and Restated 1992 Non-Employee Director
Stock Option Plan. Incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June
30, 1996.
44
<PAGE>
10.8 Easement, dated December 28, 1990, from MH, INC.
in favor of Stephen A. Wynn. Incorporated by
reference to Exhibit 10(ll) to Amendment No. 1
to the Registration Statement filed by GNS
FINANCE CORP. and MCH on Form S-1 under the
Securities Act of 1933 (No. 33-38496).
10.9* Employment Agreement, dated as of August 18,
1992, between the Company and Frank Visconti.
Incorporated by reference to Exhibit 19.4 to the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1992.
10.10* Employment Agreement, dated December 16, 1992,
between the Company and Stephen A. Wynn.
Incorporated by reference to Exhibit 10(zz) to
the 1992 Form 10-K.
10.11 Lease, dated September 4, 1962, and Agreement,
dated March 25, 1975, between the Trustees
of the Fraternal Order of Eagles, Las Vegas
Aerie 1213, and the Company. Incorporated by
reference to Exhibit 10(c) to the Registration
Statement filed by GNLV FINANCE CORP. and GNLV
on Form S-1 under the Securities Act of 1933
(No. 33-5694) (the "GNLV Form S-1").
10.12 Lease Agreement, dated July 1, 1973, and Amend-
ment to Lease, dated February 27, 1979, between
First National Bank of Nevada, Trustee under
Private Trust No. 87, and the Company.
Incorporated by reference to Exhibit 10(d) to
the GNLV Form S-1.
10.13 Lease, dated April 30, 1976, between Elizabeth
Properties Trust, Elizabeth Zahn, Trustee,
and the Company. Incorporated by reference to
Exhibit 10(e) to the GNLV Form S-1.
10.14 Joint Venture Agreement of Victoria Partners,
dated as of December 9, 1994, among MRGS, Gold
Strike L.V. and the Company (without exhibit)
(the "Joint Venture Agreement"). Incorporated
by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated December 9,
1994 (the "December 1994 Form 8-K").
45
<PAGE>
10.15 Reducing Revolving Loan Agreement, dated as of
December 21, 1994, among Victoria Partners,
each Bank party thereto, The Long-Term Credit
Bank of Japan, Ltd., Los Angeles Agency and
Societe Generale, as Co-Agents, and Bank of
America National Trust and Savings Association,
as Administrative Agent (without schedules or
exhibits) (the "Victoria Partners Loan Agree-
ment"). Incorporated by reference to Exhibit
99.2 to Amendment No. 1 to the December 1994
Form 8-K on Form 8-K/A.
10.16 Amendment No. 1 to the Victoria Partners Loan
Agreement, dated as of January 31, 1995.
Incorporated by reference to Exhibit 10(uu) to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
10.17* 1995 Stock Option and Stock Appreciation Rights
Plan. Incorporated by reference to Exhibit A to
the Company's definitive Proxy Statement filed
on April 18, 1995 under cover of Schedule 14A.
10.18 Amendment No. 1 to the Joint Venture Agreement,
dated as of April 17, 1995. Incorporated by
reference to Exhibit 10(c) to the Company's
Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1995 (the "March 1995
Form 10-Q").
10.19 Amended and Restated Lease, dated as of April
26, 1995, between MKB Company and Beau Rivage
(without exhibits). Incorporated by reference
to Exhibit 10(e) to the March 1995 Form 10-Q.
10.20 Amendment No. 2 to the Victoria Partners Loan
Agreement, dated as of June 30, 1995 (without
exhibit). Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1995
(the "June 1995 Form 10-Q").
10.21 Amendment No. 3 to the Victoria Partners Loan
Agreement, dated as of July 28, 1995. Incorpor-
ated by reference to Exhibit 10.3 to the June
1995 Form 10-Q.
10.22 Amendment No. 2 to the Joint Venture Agreement,
dated as of September 25, 1995. Incorporated by
reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1995.
46
<PAGE>
10.23 Amendment No. 4 to the Victoria Partners Loan
Agreement, dated as of October 16, 1995.
Incorporated by reference to Exhibit 10(a) to
the Quarterly Report on Form 10-Q of Circus
(Commission File No. 01-8570) for the fiscal
quarter ended October 31, 1995.
10.24* Executive Medical Reimbursement Plan. Incorpor-
ated by reference to Exhibit 10(hhh) to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 (the "1995
Form 10-K").
10.25 Amendment No. 3 to the Joint Venture Agreement,
dated as of February 28, 1996. Incorporated
by reference to Exhibit 10(nnn) to the 1995 Form
10-K.
10.26 An Agreement Between the City of Atlantic City
and Mirage Resorts, Incorporated for the
Development of the Huron North Redevelopment
Area, dated May 3, 1996 (without exhibits).
Incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1996 (the
"March 1996 Form 10-Q").
10.27 Completion Guaranty by the Company in favor of
the City of Atlantic City, dated as of May
3, 1996. Incorporated by reference to Exhibit
10.2 to the March 1996 Form 10-Q.
10.28 Amendment No. 4 to the Joint Venture Agreement,
dated as of May 29, 1996. Incorporated by
reference to Exhibit 10(b) to the Quarterly
Report on Form 10-Q of Circus for the fiscal
quarter ended April 30, 1996.
10.29 Amendment No. 5 to the Victoria Partners Loan
Agreement, dated as of August 1, 1996.
Incorporated by reference to Exhibit 10(a) to
the Quarterly Report on Form 10-Q of Circus for
the fiscal quarter ended July 31, 1996.
10.30 Road Development Agreement, dated as of January
10, 1997, among the Company, the State of New
Jersey (the "State") and South Jersey Transpor-
tation Authority ("SJTA") (without schedules or
exhibits), and Assignment and Assumption
Agreement, dated as of January 10, 1997,
between the Company and Atlandia Design and
Furnishings Inc. ("Atlandia"). Incorporated by
reference to Exhibit 99 to the Company's
Current Report on Form 8-K dated January 10,
1997.
47
<PAGE>
10.31* Non-Qualified Deferred Compensation Plan, dated
as of February 1, 1997. Incorporated by
reference to Exhibit 10(ccc) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "1996 Form 10-K").
10.32* Directors' Deferred Fee Plan, dated as of
February 1, 1997. Incorporated by reference to
Exhibit 10(ddd) to the 1996 Form 10-K.
10.33* First Amendment to Non-Qualified Deferred
Compensation Plan, dated February 28, 1997.
Incorporated by reference to Exhibit 10(eee) to
the 1996 Form 10-K.
10.34* First Amendment to Directors' Deferred Fee Plan,
dated February 28, 1997. Incorporated by refer-
ence to Exhibit 10(fff) to the 1996 Form 10-K.
10.35 Amended and Restated Loan Agreement, dated as of
March 7, 1997, among the Company, the Banks
named therein, BancAmerica Securities, Inc.,
CIBC Wood Gundy Securities Corp., J.P. Morgan
Securities Inc. and Societe Generale, as Co-
Arrangers, Bankers Trust Company, The Bank of
New York, The Bank of Nova Scotia,
Commerzbank Aktiengesellschaft, Credit Lyonnais,
The Long-Term Credit Bank of Japan, Ltd.,
Los Angeles Agency, PNC Bank, National
Association and Westdeutsche Landesbank
Girozentrale, as Co-Agents, Bank of America
National Trust and Savings Association, as
Administrative Agent, and Morgan Guaranty Trust
Company of New York, as Documentation Agent
(without schedules or exhibits) (the "Amended
and Restated Loan Agreement"). Incorporated by
reference to Exhibit 10(ggg) to the 1996 Form
10-K.
10.36 Amendment No. 6 to the Victoria Partners Loan
Agreement, dated as of April 2, 1997. Incorpor-
ated by reference to Exhibit 10(ccc) to the
Annual Report on Form 10-K of Circus for the
fiscal year ended January 31, 1997.
10.37 Issuing and Paying Agency Agreement, dated July
24, 1997, between the Company and First Trust
of New York, National Association (without
exhibit). Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September
30, 1997 (the "September 1997 Form 10-Q").
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<PAGE>
10.38 Form of Series A Commercial Paper Note of the
Company. Incorporated by reference to Exhibit
10.2 to the September 1997 Form 10-Q.
10.39 Commercial Paper Dealer Agreement, dated July
24, 1997, between the Company and BancAmerica
Securities, Inc. (without exhibits). Incorpor-
ated by reference to Exhibit 10.3 to the
September 1997 Form 10-Q.
10.40 Commercial Paper Dealer Agreement, dated July
24, 1997, between the Company and Credit Suisse
First Boston Corporation (without exhibits).
Incorporated by reference to Exhibit 10.4 to
the September 1997 Form 10-Q.
10.41 Commercial Paper Dealer Agreement, dated July
24, 1997, between the Company and Morgan Stanley
& Co. Incorporated (without exhibits).
Incorporated by reference to Exhibit 10.5 to the
September 1997 Form 10-Q.
10.42 Commercial Paper Dealer Agreement, dated July
24, 1997, between the Company and Goldman,
Sachs & Co. (without exhibits). Incorporated by
reference to Exhibit 10.6 to the September 1997
Form 10-Q.
10.43 First Amendment to Road Development Agreement,
dated as of July 31, 1997, among the State,
SJTA and Atlandia. Incorporated by reference
to Exhibit 10.7 to the September 1997 Form 10-Q.
10.44* Letter agreement, dated September 16, 1997,
between the Company and Frank Visconti.
Incorporated by reference to Exhibit 10.8 to
the September 1997 Form 10-Q.
10.45 Amendment No. 1 to Amended and Restated Loan
Agreement, dated as of September 19, 1997.
Incorporated by reference to Exhibit 10.9 to the
September 1997 Form 10-Q.
10.46 Second Amendment to Road Development Agreement,
dated as of October 10, 1997, among the State,
SJTA and Atlandia (without schedules or
exhibits). Incorporated by reference to Exhibit
10.10 to the September 1997 Form 10-Q.
49
<PAGE>
10.47 Letter agreement, dated March 12, 1998, between
Bellagio and Stephen A. Wynn (with exhibit).
Incorporated by reference to Exhibit 10(ccc) to
the 1997 Form 10-K.
10.48 Design/Build Contract, dated September 8, 1997,
between Atlandia and Yonkers Contracting
Company, Inc./Granite Construction Company, a
Joint Venture (with appendices). Incorporated
by reference to Exhibit 10.13 to the September
1997 Form 10-Q.
10.49 Escrow Fund Agreement, dated as of October 10,
1997, among CoreStates Bank, N.A., as Escrow
Agent, Atlandia, the State and SJTA (without
schedules). Incorporated by reference to Exhibit
10.14 to the September 1997 Form 10-Q.
10.50 Bond Purchase Agreement, dated October 10, 1997,
between the Company and SJTA (without exhibit).
Incorporated by reference to Exhibit 10.15 to
the September 1997 Form 10-Q.
10.51 Donation Agreement, dated as of October 10,
1997, between the Casino Reinvestment Develop-
ment Authority and MAC, CORP. (without
exhibits). Incorporated by reference to Exhibit
10.16 to the September 1997 Form 10-Q.
10.52 Agreement, dated as of July 3, 1996, between
Beau Rivage Construction (a Division of Beau
Rivage Resorts, Inc.) and W.G. Yates & Sons
Construction Co. (without schedules).
Incorporated by reference to Exhibit 10(jjj) to
the 1997 Form 10-K.
10.53* Employment Agreement, dated as of July 16, 1997,
between the Company and Daniel R. Lee (with
exhibits). Incorporated by reference to Exhibit
10(kkk) to the 1997 Form 10-K.
10.54 First Amendment to Jansen Agreement, dated as of
January 30, 1998, between the Company and Avis
P. Jansen, individually, as Executrix and as
Trustee. Incorporated by reference to Exhibit
10(mmm) to the 1997 Form 10-K.
10.55 An Amendment to the May 3, 1996 Agreement
Between the City of Atlantic City and Mirage
Resorts, Incorporated for the Development of the
Huron North Redevelopment Area, dated January 8,
1998 (without exhibits). Incorporated by
reference to Exhibit 10(nnn) to the 1997 Form
10-K.
50
<PAGE>
10.56 Letter agreement, dated January 14, 1998,
between Bellagio and Stephen A. Wynn (with
exhibits). Incorporated by reference to Exhibit
10(ooo) to the 1997 Form 10-K.
10.57* Second Amendment to Non-Qualified Deferred
Compensation Plan, dated as of February 1,
1998. Incorporated by reference to Exhibit
10(ppp) to the 1997 Form 10-K.
10.58* Second Amendment to Directors' Deferred Fee
Plan, dated as of February 1, 1998. Incorpor-
ated by reference to Exhibit 10(qqq) to the 1997
Form 10-K.
10.59* 1998 Stock Option and Stock Appreciation Rights
Plan. Incorporated by reference to Exhibit
10(rrr) to the 1997 Form 10-K.
10.60 Second Amendment to Jansen Agreement, dated as
of March 13, 1998, between the Company and Avis
P. Jansen, individually, as Executrix and as
Trustee. Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31,
1998 (the "March 1998 Form 10-Q").
10.61 Amendment No. 7 to Victoria Partners Loan
Agreement, dated as of January 12, 1998
(without schedule). Incorporated by reference
to Exhibit 10.2 to the March 1998 Form 10-Q.
10.62 Letter agreement, dated April 21, 1998, between
Bellagio and Stephen A. Wynn. Incorporated by
reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998 (the "June 1998 Form
10-Q").
10.63 Amendment No. 2 to Amended and Restated Loan
Agreement, dated as of June 19, 1998.
Incorporated by reference to Exhibit 10.2 to
the June 1998 Form 10-Q.
10.64 Agreement Between Owner and Construction Manager
for Construction Management Services, dated as
of November 1, 1997, between Tishman Construc-
tion Corporation of New Jersey and MAC, CORP.
Construction. Incorporated by reference to
Exhibit 10.3 to the June 1998 Form 10-Q.
51
<PAGE>
10.65 Amended and Restated Joint Venture Agreement of
Stardust A.C., dated as of July 14, 1998,
between MAC, CORP. and Boyd Atlantic City,
Inc. Incorporated by reference to Exhibit
10.55 to the Quarterly Report on Form 10-Q of
Boyd (Commission File No. 01-12168) for the
fiscal quarter ended June 30, 1998.
10.66 Letter agreement, dated July 31, 1998, between
Bellagio and Stephen A. Wynn. Incorporated by
reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1998 (the "September
1998 Form 10-Q").
10.67 Letter agreement, dated August 17, 1998, between
Bellagio and Stephen A. Wynn. Incorporated by
reference to Exhibit 10.2 to the September 1998
Form 10-Q.
10.68 Letter agreement, dated September 1, 1998,
between Bellagio and Stephen A. Wynn. Incorpor-
ated by reference to Exhibit 10.3 to the
September 1998 Form 10-Q.
10.69 Purchase and Sale Agreement (with Option), dated
as of August 12, 1998, between The April Cook
Companies and RZ Corporation (without exhibits)
(the "Purchase and Sale Agreement"). Incorpor-
ated by reference to Exhibit 10.4 to the
September 1998 Form 10-Q.
10.70 First Amendment to Purchase and Sale Agreement,
dated as of August 24, 1998 (without
exhibit). Incorporated by reference to Exhibit
10.5 to the September 1998 Form 10-Q.
10.71 Second Amendment to Purchase and Sale Agreement,
dated as of August 30, 1998 (without exhibit).
Incorporated by reference to Exhibit 10.6 to the
September 1998 Form 10-Q.
10.72 Letter agreement, dated December 31, 1998,
between Bellagio and Stephen A. Wynn (with
exhibit).
10.73 Letter agreement, dated January 7, 1999, between
Bellagio and Stephen A. Wynn.
10.74* 1999 Cash Bonus Plan.
10.75 Amendment No. 3 to Amended and Restated Loan
Agreement, dated as of December 17, 1998.
52
<PAGE>
10.76 Amended and Restated Third Amendment to Road
Development Agreement, dated as of February 1,
1999, among the State, SJTA and AC Holding Corp.
10.77 A Second Amendment to the May 3, 1996 Agreement
Between the City of Atlantic City and Mirage
Resorts, Incorporated for the Development of
the Huron North Redevelopment Area, dated
December 15, 1998.
10.78* Third Amendment to Non-Qualified Deferred Comp-
ensation Plan, dated as of February 15, 1999.
10.79* Third Amendment to Directors' Deferred Fee Plan,
dated as of February 15, 1999.
10.80 A Third Amendment to the May 3, 1996 Agreement
Between the City of Atlantic City and Mirage
Resorts, Incorporated for the Development of the
Huron North Redevelopment Area, dated January
13, 1999 (without exhibits).
10.81 First Amendment to Amended and Restated Joint
Venture Agreement, dated as of September 10,
1998, between MAC, CORP. and Boyd Atlantic
City, Inc.
21 List of subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
- ---------------
*Constitutes a management contract or compensatory plan or arrangement.
(b). REPORTS ON FORM 8-K.
We filed no reports on Form 8-K during the three-month
period ended December 31, 1998.
53
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Directors and Stockholders
of Mirage Resorts, Incorporated
We have audited the accompanying consolidated balance sheets of
Mirage Resorts, Incorporated (a Nevada corporation) and subsidiaries
(the "Company") as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash flows
for the years ended December 31, 1998, 1997 and 1996. These
consolidated financial statements and the schedule referred to below
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Mirage Resorts, Incorporated and subsidiaries as of December 31,
1998 and 1997, and the consolidated results of their operations and
their cash flows for the years ended December 31, 1998, 1997 and 1996
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The financial statement
schedule of Valuation and Qualifying Accounts for the years ended
December 31, 1998, 1997 and 1996 is presented for purposes of
complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. This schedule
has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 22, 1999
54
<PAGE>
<TABLE>
<CAPTION>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
AT DECEMBER 31
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.................................. $ 74,814 $ 99,337
Trade receivables, net of allowance for doubtful
accounts of $40,480 and $42,477.......................... 118,125 101,635
Other receivables.......................................... 41,111 22,203
Inventories................................................ 74,195 29,179
Preopening costs........................................... 24,718 14,603
Deferred income taxes...................................... 23,180 16,047
Prepaid expenses and other................................. 42,334 17,918
---------- ----------
Total current assets.............................. 398,477 300,922
Property and equipment, net................................. 3,290,189 1,455,125
Construction in progress.................................... 539,530 1,261,084
Other assets, net........................................... 302,006 330,219
---------- ----------
$4,530,202 $3,347,350
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable..................................... $ 129,592 $ 93,052
Construction payables...................................... 42,859 58,941
Accrued payroll............................................ 55,200 46,800
Accrued interest........................................... 39,842 17,809
Other accrued expenses..................................... 60,633 39,858
Current maturities of long-term debt....................... 404 927
---------- ----------
Total current liabilities......................... 328,530 257,387
Long-term debt, net of current maturities................... 2,378,507 1,396,728
Other liabilities, including deferred income taxes of
$207,063 and $167,415.. ................................. 221,328 180,751
---------- ----------
Total liabilities................................. 2,928,365 1,834,866
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $0.004: authorized 1,125,000,000
shares; issued 235,147,650 shares; outstanding
180,119,931 and 179,421,822 shares....................... 940 940
Additional paid-in capital................................. 738,665 734,547
Retained earnings.......................................... 1,145,497 1,063,793
Treasury stock, at cost: 55,027,719 and
55,725,828 shares........................................ (283,265) (286,796)
---------- ----------
Total stockholders' equity........................ 1,601,837 1,512,484
---------- ----------
$4,530,202 $3,347,350
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31
-----------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Casino............................................... $ 821,964 $ 784,512 $ 752,914
Rooms................................................ 329,873 297,885 303,566
Food and beverage.................................... 257,373 218,974 224,430
Entertainment........................................ 106,803 97,924 94,361
Retail............................................... 76,313 65,703 66,187
Other................................................ 57,391 51,450 45,626
Equity in earnings of Monte Carlo.................... 27,179 29,601 9,273
---------- ---------- ----------
1,676,896 1,546,049 1,496,357
Less - promotional allowances........................ (153,167) (127,498) (128,813)
---------- ---------- ----------
1,523,729 1,418,551 1,367,544
---------- ---------- ----------
COSTS AND EXPENSES
Casino............................................... 453,691 414,482 384,301
Rooms................................................ 105,459 88,705 88,602
Food and beverage.................................... 177,696 143,069 142,549
Entertainment........................................ 88,739 77,377 75,507
Retail............................................... 53,437 44,068 43,238
Other................................................ 30,984 26,487 24,911
Provision for losses on receivables.................. 27,677 19,213 14,480
General and administrative........................... 191,377 161,960 163,045
Depreciation and amortization........................ 105,298 87,956 86,661
Preopening expense................................... 88,313 - -
Corporate expense.................................... 48,953 29,193 31,580
---------- ---------- ----------
1,371,624 1,092,510 1,054,874
---------- ---------- ----------
OPERATING INCOME....................................... 152,105 326,041 312,670
---------- ---------- ----------
OTHER INCOME AND (EXPENSE)
Interest cost........................................ (130,598) (70,350) (31,106)
Interest capitalized................................. 97,870 62,673 24,281
Other, including interest income..................... 15,801 6,715 12,563
---------- ---------- ----------
(16,927) (962) 5,738
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM...... 135,178 325,079 318,408
Provision for income taxes........................... (49,953) (115,276) (112,363)
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM....................... 85,225 209,803 206,045
Extraordinary item - loss on early retirements of
debt, net of applicable income tax benefit......... (3,521) (2,225) -
---------- ---------- ----------
NET INCOME............................................. $ 81,704 $ 207,578 $ 206,045
========== ========== ==========
INCOME PER SHARE OF COMMON STOCK
Income before extraordinary item
Basic.............................................. $ 0.47 $ 1.17 $ 1.13
Diluted............................................ 0.45 1.09 1.05
Net income
Basic.............................................. $ 0.45 $ 1.16 $ 1.13
Diluted............................................ 0.43 1.08 1.05
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
COMMON STOCK
--------------------- ADDITIONAL
SHARES PAR PAID-IN RETAINED TREASURY
OUTSTANDING VALUE CAPITAL EARNINGS STOCK TOTAL
----------- ----- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1996...... 183,341,494 $ 940 $710,816 $ 650,170 $(152,583) $1,209,343
Exercise of common
stock options.............. 1,677,550 - 3,418 - 5,297 8,715
Tax benefit from stock
option exercises........... - - 10,137 - - 10,137
Repurchases of common
stock...................... (6,683,129) - - - (144,226) (144,226)
Other........................ - - 869 - - 869
Net income................... - - - 206,045 - 206,045
----------- ----- -------- ---------- --------- ----------
BALANCES, DECEMBER 31, 1996.... 178,335,915 940 725,240 856,215 (291,512) 1,290,883
Exercise of common
stock options.............. 1,136,888 - 369 - 5,842 6,211
Tax benefit from stock
option exercises........... - - 6,580 - - 6,580
Repurchases of common
stock...................... (50,981) - - - (1,126) (1,126)
Other........................ - - 2,358 - - 2,358
Net income................... - - - 207,578 - 207,578
----------- ----- -------- ---------- --------- ----------
BALANCES, DECEMBER 31, 1997.... 179,421,822 940 734,547 1,063,793 (286,796) 1,512,484
Exercise of common
stock options.............. 701,500 - 629 - 3,605 4,234
Tax benefit from stock
option exercises........... - - 3,258 - - 3,258
Repurchases of common
stock...................... (3,391) - - - (74) (74)
Other........................ - - 231 - - 231
Net income................... - - - 81,704 - 81,704
----------- ----- -------- ---------- --------- ----------
BALANCES, DECEMBER 31, 1998.... 180,119,931 $ 940 $738,665 $1,145,497 $(283,265) $1,601,837
=========== ===== ======== ========== ========= ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31
--------------------------------------
1998 1997 1996
----------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................................. $ 81,704 $ 207,578 $ 206,045
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for losses on receivables..................................... 27,677 19,213 14,480
Depreciation and amortization of property and equipment,
including amounts reported as corporate expense....................... 119,855 97,533 93,319
Preopening expense...................................................... 88,313 - -
Earnings in excess of distributions from Monte Carlo.................... (6,279) (29,601) (9,273)
Amortization of debt discount and issuance costs........................ 4,472 14,778 14,514
Loss on early retirements of debt....................................... 5,418 3,422 -
Deferred income taxes................................................... 4,851 15,076 30,230
Other adjustments....................................................... (2,442) 1,313 (8,266)
Changes in working capital, excluding the effect of the Boardwalk
acquisition and other non-operating activities
Increase in trade receivables........................................ (43,330) (50,652) (7,817)
Increase in inventories.............................................. (45,016) (1,625) (1,953)
(Increase) decrease in other current assets.......................... (31,680) 4,729 (16,064)
Increase in trade accounts payable and accrued expenses.............. 83,637 10,996 16,665
----------- ----------- ---------
Net cash provided by operating activities...................... 287,180 292,760 331,880
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Preopening costs............................................................ (102,306) (22,220) (8,665)
Capital expenditures........................................................ (1,160,348) (1,058,900) (407,276)
Net increase in construction deposits....................................... (19,375) (111,665) (5,970)
Increase (decrease) in construction payables................................ (16,082) 27,452 27,511
Proceeds from sales of property and equipment............................... 99,077 30,825 5,121
Boardwalk acquisition costs, net of cash acquired........................... (55,562) (51,917) -
Joint venture and other investments......................................... (14,510) (2,490) (23,976)
Proceeds from sale of joint venture interest and other investments.......... - - 30,627
Other investing activities.................................................. (18,623) (6,309) (741)
----------- ----------- ---------
Net cash used for investing activities......................... (1,287,729) (1,195,224) (383,369)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in bank credit facility and commercial
paper borrowings.......................................................... 817,205 612,795 (41,882)
Issuance of long-term debt.................................................. 394,728 296,052 247,387
Retirement of long-term debt................................................ (237,110) - -
Repurchases of common stock................................................. (74) (1,126) (144,226)
Exercise of common stock options, including related income
tax benefit............................................................... 7,492 12,791 18,852
Other financing activities.................................................. (6,215) (619) 5,240
----------- ----------- ---------
Net cash provided by financing activities...................... 976,026 919,893 85,371
----------- ----------- ---------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year............................................ (24,523) 17,429 33,882
Balance, beginning of year.................................................. 99,337 81,908 48,026
------------ ----------- ---------
Balance, end of year........................................................ $ 74,814 $ 99,337 $ 81,908
============ =========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for
Interest, net of amounts capitalized...................................... $ 6,223 $ - $ -
Income taxes, net of refunds.............................................. 41,000 72,000 93,000
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
58
<PAGE>
MIRAGE RESORTS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. Mirage Resorts, Incorporated (the
"Company"), a Nevada corporation, through wholly owned subsidiaries,
owns and operates some of the world's most successful casino-based
entertainment resorts. These resorts include Bellagio (which opened
on October 15, 1998), The Mirage and Treasure Island, all located on
the Las Vegas Strip. The Company also owns the Golden Nugget,
located in downtown Las Vegas, and Golden Nugget-Laughlin, located
along the Colorado River in Laughlin, Nevada. The Company's newest
resort, Beau Rivage, opened on March 16, 1999. Beau Rivage is a
luxurious 1,780-guestroom beachfront resort located on an
approximately 36-acre site where Interstate 110 meet the Gulf Coast in
Biloxi, Mississippi.
The Company is also a 50% partner in a joint venture that owns
and operates the Monte Carlo Resort & Casino on the Las Vegas Strip
("Monte Carlo"). Additionally, as discussed in Note 2, on June 30,
1998, the Company acquired the Holiday Inn - Registered Trademark -
Casino Boardwalk on the Las Vegas Strip.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany balances and transactions have been
eliminated. Investments in 50% or less owned entities over which the
Company has the ability to exercise significant influence, including
joint ventures such as Monte Carlo, are accounted for using the equity
method.
CASINO REVENUES AND PROMOTIONAL ALLOWANCES. The Company recognizes
as casino revenues the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues include the
estimated retail value of rooms, food and beverage and other goods and
services provided to customers on a complimentary basis as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Rooms......................... $ 65,399 $ 55,153 $ 55,125
Food and beverage............. 79,629 64,575 66,424
Other......................... 8,139 7,770 7,264
-------- -------- --------
$153,167 $127,498 $128,813
======== ======== ========
</TABLE>
59
<PAGE>
After being included in gross revenues, such amounts are then
deducted as promotional allowances. The estimated costs of providing
these promotional allowances, totaling $112.9 million in 1998, $90.2
million in 1997 and $88.3 million in 1996, have been classified
primarily as casino costs and expenses.
CASH AND CASH EQUIVALENTS. The Company classifies as cash
equivalents all highly liquid debt instruments with a maturity of
three months or less when purchased. Cash equivalents are carried at
cost, which approximates fair value.
CONCENTRATIONS OF CREDIT RISK. Financial instruments that
potentially subject the Company to concentrations of credit risk
consist principally of short-term investments and receivables.
The Company's short-term investments typically consist of U.S.
Government-backed repurchase agreements with maturities of 30 days or
less. Such investments are made with financial institutions having a
high credit quality and the Company limits the amount of its credit
exposure to any one financial institution. Due to the short-term
nature of the instruments, the Company does not take possession of the
securities, which are instead held in a custodial account.
The Company extends credit to some casino patrons, but only
following background checks and investigations of creditworthiness.
At December 31, 1998, a substantial portion of the receivables was due
from foreign customers. Business or economic conditions or other
significant events in the countries in which such customers reside
could affect the collectibility of these receivables.
The Company maintains an allowance for doubtful accounts to reduce
its receivables to their carrying amount, which approximates fair
value. Management believes that as of December 31, 1998, no
significant concentrations of credit risk existed for which an
allowance had not already been determined and recorded.
INVENTORIES. Inventories are stated at the lower of cost or market
value. Cost is determined by the first-in, first-out and specific
identification methods.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the assets
using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes.
The costs of significant improvements are capitalized. Costs of
normal repairs are charged to expense as incurred. The cost and
accumulated depreciation of property and equipment retired or
otherwise disposed of are eliminated from the respective accounts and
any resulting gain or loss is included in income.
60
<PAGE>
CAPITALIZED INTEREST. Interest cost associated with major
construction projects is capitalized. When no debt is incurred
specifically for a project, interest is capitalized on amounts
expended on the project using the weighted-average cost of the
Company's outstanding borrowings. The amount of interest capitalized
in any accounting period cannot exceed the Company's total interest
cost in such period. Capitalization of interest ceases when the
project is substantially complete.
PREOPENING EXPENSE. Preopening expense primarily represents direct
personnel and other costs incurred prior to the opening of a new
hotel-casino. In April 1998, the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5 - REPORTING ON THE COSTS OF
START-UP ACTIVITIES ("SOP 98-5"). The provisions of SOP 98-5 are
effective for fiscal years beginning after December 15, 1998 and
require that the costs associated with start-up activities
(including preopening costs of casinos) be expensed as incurred. The
Company previously capitalized preopening costs and amortized such
costs over the 60-day period following opening of the related
facility. As a result, all $88.3 million of Bellagio's preopening
costs were fully amortized to expense in the 1998 fourth quarter.
As required, the Company adopted the provisions of SOP 98-5
effective January 1, 1999 and expensed all capitalized preopening
costs relating to its Beau Rivage and Atlantic City projects. Such
costs, totaling $30.6 million (net of applicable income tax benefit
of $16.4 million), will be reflected as a cumulative effect of change
in accounting principle in the Company's 1999 first quarter financial
statements.
DEBT DISCOUNT AND ISSUANCE COSTS. Debt discount and issuance costs
are capitalized and amortized to expense based on the terms of the
related debt agreements using the effective interest method.
CORPORATE EXPENSE. Corporate expense represents unallocated payroll
costs, professional fees, costs associated with operating and
maintaining the Company's aircraft and various other expenses not
directly related to operating the Company's hotel-casinos. Corporate
expense also includes the costs associated with the Company's
evaluation and pursuit of new gaming opportunities. Such costs are
expensed as incurred until construction of a project has become
relatively certain.
61
<PAGE>
INCOME PER SHARE OF COMMON STOCK. The weighted-average number of
common and common equivalent shares used in the calculation of basic
and diluted earnings per share consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Weighted-average common shares outstanding
(used in the computation of basic earnings
per share)..................................... 179,679,123 178,816,348 182,988,904
Potential dilution from the assumed exercise
of common stock options......................... 11,285,181 13,719,527 13,694,408
----------- ----------- -----------
Weighted average common and common equivalent
shares (used in the computation of diluted
earnings per share)............................. 190,964,304 192,535,875 196,683,312
=========== =========== ===========
</TABLE>
Stock options having an exercise price greater than the average
market price of the underlying common stock during the period are
excluded from the computation of diluted earnings per share. As
a result, a weighted average of approximately 7,260,000 stock options
was excluded from the computation during 1998. The number of stock
options excluded from the computations for 1997 and 1996 was not
material.
62
<PAGE>
RECLASSIFICATIONS. Certain amounts in the 1997 and 1996
consolidated financial statements have been reclassified to conform to
the 1998 presentation. These reclassifications had no effect on the
Company's net income.
USE OF ESTIMATES. The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles.
Those principles require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from such
estimates.
NOTE 2 - ACQUISITION OF BOARDWALK CASINO, INC.
On June 30, 1998, the Company, through a wholly owned subsidiary,
completed the acquisition of Boardwalk Casino, Inc. ("Boardwalk") and
certain related assets for a total price of approximately $112.0
million in cash. Approximately $51.9 million of this amount was
expended in 1997. Boardwalk owns and operates the Holiday Inn -
Registered Trademark - Casino Boardwalk located on the Las Vegas
Strip. The facility includes 654 hotel rooms and 32,000 square feet
of casino space.
The Boardwalk acquisition was accounted for pursuant to the pur-
chase method, with approximately $145.9 million allocated to the
assets acquired and approximately $33.9 million to the liabilities
assumed (including $4.1 million of accounts payable and accrued
liabilities and $27.7 million of deferred income taxes) based
upon their respective estimated fair values.
Combined with adjacent land owned by the Company, the Boardwalk
acquisition provides an approximately 55-acre site for future
development with over 1,200 feet of frontage on the Las Vegas Strip
between Bellagio and Monte Carlo. The Company is in the very early
design phase for a potential new hotel-casino resort expected to be
developed on the site. The design, timing and cost of any such
future development, however, are still highly uncertain. Boardwalk
is being accounted for as an incidental operation. Under this method,
Boardwalk's operations are excluded from the Company's consolidated
operating results and its net income is recorded as a reduction in the
carrying value of the land.
63
<PAGE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Land.................................... $ 607,318 $ 330,015
Land improvements....................... 183,635 125,523
Buildings............................... 1,954,400 946,464
Furniture, fixtures and equipment....... 1,277,868 686,686
---------- ----------
4,023,221 2,088,688
Less accumulated depreciation........... (733,032) (633,563)
---------- ----------
$3,290,189 $1,455,125
========== ==========
</TABLE>
NOTE 4 - OTHER ASSETS, NET
Other assets, net consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Construction deposits................... $ 105,228 $ 114,963
Joint venture and other investments..... 101,613 145,355
Other, net.............................. 95,165 69,901
---------- ----------
$ 302,006 $ 330,219
========== ==========
</TABLE>
64
<PAGE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Zero coupon first mortgage notes (effective interest rate
of 11%), net of unamortized discount of $2.9 million,
matured March 1998.................................................. $ - $ 130,074
9 1/4% senior subordinated notes, redeemed March 1998................. - 100,000
Revolving bank credit facility, at a weighted average interest
rate of 5.75% and 6.22%............................................. 1,430,000 365,000
Commercial paper notes, at a weighted average effective interest
rate of 6.03%....................................................... - 247,795
6 5/8% notes, due February 2005, net of unamortized original
issue discount of $947.............................................. 199,053 -
7 1/4% notes, due October 2006, net of unamortized
original issue discount of $274 and $299............................ 249,726 249,701
6 3/4% notes, due August 2007, net of unamortized original
issue discount of $811 and $879..................................... 199,189 199,121
6 3/4% notes, due February 2008, net of unamortized original
issue discount of $991.............................................. 199,009 -
7 1/4% debentures, due August 2017, net of unamortized original
issue discount of $295 and $302..................................... 99,705 99,698
Other notes........................................................... 2,229 6,266
---------- ----------
2,378,911 1,397,655
Less current maturities............................................... (404) (927)
---------- ----------
$2,378,507 $1,396,728
========== ==========
</TABLE>
On March 15, 1998, the Company repaid at maturity the entire $133.0
million principal amount of the zero coupon first mortgage notes. The
notes are classified as long-term debt at December 31, 1997 because
the Company used its revolving bank credit facility and commercial
paper borrowings (classified as long-term debt as discussed below) to
fund the repayment.
The Company also used its bank credit facility and commercial paper
borrowings on March 15, 1998 to redeem all $100.0 million principal
amount of the 9 1/4% senior subordinated notes. The notes were
scheduled to mature in March 2003 and were redeemed at 104.11% of the
principal amount. The call premium and write-off of the unamortized
debt issuance costs resulted in an extraordinary loss of $3.5
million ($0.02 per share basic and diluted), net of applicable
income tax benefit of $1.9 million.
65
<PAGE>
On March 7, 1997, the Company's $1 billion revolving bank credit
facility maturing in May 1999 was amended to increase the total
availability to $1.75 billion and extend the maturity to March 2002
(as so amended, the "Bank Facility"). Borrowings under the Bank
Facility are unsecured and bear interest, at the Company's option,
at the prime rate or at a specified premium over the one-, two-,
three- or six-month London Interbank Offered Rate ("LIBOR"). The
premium is based on the credit rating of the Company's 7 1/4%
notes due October 2006 and the Company's Leverage Ratio (as defined).
The premium is currently 0.45% per annum. Alternatively, the Company
may request interest rate bids from the participating banks. The
Company incurs an annual commitment fee on the unused portion of the
Bank Facility, which is also based on the rating of the 7 1/4% notes.
The commitment fee is currently 0.125% per annum.
The loan agreement governing the Bank Facility contains a covenant
that the Company will not permit its Leverage Ratio to exceed a
specified amount. The loan agreement also provides that, with certain
limited exceptions, the Company and its subsidiaries will not further
encumber their assets or dispose of their Core Assets (as defined).
In many respects, the amended Bank Facility is tantamount to a new
facility. As a result, the Company wrote off the unamortized up-front
costs and fees associated with the original $1 billion facility,
resulting in an extraordinary charge in 1997 of $2.2 million ($0.01
per share basic and diluted), net of applicable income tax benefit
of $1.2 million.
The Company has a commercial paper program that provides for the
issuance, on a revolving basis, of up to $500 million outstanding
principal amount of uncollateralized short-term notes. The Company is
required to maintain credit availability under the Bank Facility equal
to the outstanding principal amount of commercial paper borrowings.
Bank Facility borrowings and commercial paper notes are classified
as long-term debt because management intends to replace such
borrowings as they come due and to have such borrowings outstanding
for a period greater than one year. However, the amount of
outstanding borrowings is expected to fluctuate and may be reduced
from time to time.
The 6 5/8% notes and the 6 3/4% notes due February 2008 were issued
by the Company in February 1998. The notes were issued pursuant to a
"shelf" registration statement filed with the Securities and
Exchange Commission in October 1997 covering a total of up to $750
million of debt or equity securities or any combination thereof. At
December 31, 1998, $350 million of additional securities could be
issued under the "shelf" registration statement.
The 7 1/4% notes were issued by the Company in October 1996. The
Company issued the 6 3/4% notes due August 2007 and the 7 1/4%
debentures in August 1997.
66
<PAGE>
All of the outstanding notes and debentures issued by the Company
are redeemable, in whole or in part, at the option of the Company at
any time at a redemption price equal to the greater of:
- 100% of the principal amount, or
- The sum of the present values of the remaining scheduled interest
and principal payments discounted to the date of redemption on a
semiannual basis at the Adjusted Treasury Rate (as defined),
plus, in either case, accrued interest to the redemption date.
At December 31, 1998, maturities of the Company's long-term debt
during the next five years totaled $1.4 billion. This amount
principally represents amounts borrowed under the Bank Facility,
which matures in March 2002.
The estimated fair value of the Company's long-term debt at
December 31, 1998 and 1997 approximated its carrying value.
NOTE 6 - INCOME TAXES
The provision for income taxes for financial reporting purposes
consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Income from continuing operations.......... $49,953 $115,276 $112,363
Tax benefit from extraordinary losses
on early retirements of debt............. (1,897) (1,198) -
------- -------- --------
$48,056 $114,078 $112,363
======= ======== ========
</TABLE>
67
<PAGE>
The provision for income taxes attributable to income from
continuing operations consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
CURRENT
Federal.................................. $45,051 $ 90,185 $ 82,165
State.................................... 51 15 38
------- -------- --------
45,102 90,200 82,203
DEFERRED
Federal................................... 4,851 25,076 30,160
------- -------- --------
$49,953 $115,276 $112,363
======= ======== ========
</TABLE>
The provision for income taxes attributable to income from
continuing operations differs from the amount computed at the 35%
federal income tax statutory rate as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1998 1997 1996
------- -------- --------
<S> <C> <C> <C>
Amount at statutory rate................... $47,312 $113,778 $111,443
Nondeductible contributions................ 3,033 76 461
Other...................................... (392) 1,422 459
------- -------- --------
$49,953 $115,276 $112,363
======= ======== ========
</TABLE>
The Internal Revenue Service has completed examinations of the
Company's federal income tax returns for the years 1991 and 1992 and
an examination of the years 1993 and 1994 is currently in process. A
number of adjustments have been proposed but no settlement has been
reached. In the opinion of management, any tax liability arising from
these examinations will not have a material adverse effect on the
Company's financial position or results of operations.
68
<PAGE>
The components of the deferred tax liability consisted of the
following:
<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------
1998 1997
-------- --------
<S> <C> <C>
DEFERRED TAX LIABILITIES
Temporary differences related to property and equipment....... $220,143 $161,129
Other temporary differences................................... 22,374 19,754
-------- --------
Gross deferred tax liabilities........................... 242,517 180,883
-------- --------
DEFERRED TAX ASSETS
Preopening costs.............................................. 25,142 1,147
Temporary differences related to receivables.................. 17,625 13,612
Other temporary differences................................... 15,867 14,756
-------- --------
Gross deferred tax assets................................ 58,634 29,515
-------- --------
Net deferred tax liabilities............................. $183,883 $151,368
======== ========
</TABLE>
NOTE 7 - EMPLOYEE BENEFIT PLANS
Employees of the Company who are members of various unions are
covered by union-sponsored, collectively bargained, multi-employer
health and welfare and defined benefit pension plans. The Company
recorded an expense of $33.9 million in 1998, $29.8 million in 1997
and $26.5 million in 1996 under such plans. The plans' sponsors have
not provided sufficent information to permit the Company to determine
its share of unfunded vested benefits, if any.
The Company has a retirement savings plan under Section 401(k) of
the Internal Revenue Code covering its non-union employees. The plan
allows employees to defer, within prescribed limits, up to 15% of
their income on a pre-tax basis through contributions to the plan.
The Company matches, within prescribed limits, 50% of eligible
employees' contributions up to 4% of their individual earnings. The
Company recorded charges for matching contributions of $4.8 million
in 1998, $4.3 million in 1997 and $4.0 million in 1996.
The Company also has deferred compensation and retirement
arrangements with certain of its executives and directors. Benefits
payable under the arrangements represent unfunded and unsecured
liabilities of the Company. The Company recorded expense of $0.7
million in 1998, $0.9 million in 1997 and $1.6 million in 1996 for
these arrangements. The liability for the arrangements at December 31,
1998 and 1997 was $12.9 million and $11.7 million, respectively.
69
<PAGE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
LEASES. The Company leases real estate and various equipment under
operating lease arrangements. Certain real estate leases provide for
escalation of rent based upon a specified price index. Future minimum
payments for lease commitments in effect at December 31, 1998 total
$48.4 million. Of this amount, $17.5 million is payable during the
five-year period subsequent to December 31, 1998. Aggregate rent
cost was $14.4 million in 1998, $5.6 million in 1997 and $4.2
million in 1996.
ENTERTAINMENT SERVICES. The Company has entered into long-term
agreements for entertainment productions appearing in the showrooms at
its major hotel-casinos. Under the agreements, the producers of the
shows generally receive a percentage of show and related revenues
and/or a percentage of show profits. Producers of certain of the pro-
ductions also receive a specified payment per show. The producers are
responsible for paying the talent and most other costs of presenting
the shows. Generally, the Company may terminate the agreements without
material financial obligation under certain conditions, including
failure of the respective show to achieve specified financial results.
LITIGATION. The Company is a party to various legal proceedings,
most of which relate to routine matters incidental to its business.
Management does not believe that the outcome of such proceedings will
have a material adverse effect on the Company's financial position or
results of operations.
NOTE 9 - STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Company has various fixed stock option plans under which
options are granted to employees and directors of the Company.
Options granted under the plans typically have an exercise price equal
to the market price of the Company's common stock on the date of grant
and a term of 10 years. Certain of the plans also permit the
grant of stock appreciation rights ("SARs"). At December 31, 1998, no
SARs had been granted under the plans.
70
<PAGE>
<TABLE>
<CAPTION>
Summarized information for the stock option plans is as follows:
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------
1998 1997 1996
-------------------------- ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
---------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year............................. 36,578,562 $ 10.66 34,842,950 $ 9.47 35,490,500 $ 8.99
Granted............................... 19,895,255 15.91 2,872,500 23.00 1,130,000 18.73
Exercised............................. (701,500) 6.04 (1,136,888) 5.46 (1,677,550) 5.19
Terminated............................ (18,325,111) 18.65 - (100,000) 16.31
----------- ---------- ----------
Outstanding at end
of year............................. 37,447,206 9.62 36,578,562 10.66 34,842,950 9.47
=========== ========== ==========
Options exercisable (i.e., vested)
at end of year...................... 21,002,682 $ 6.97 19,218,730 $ 6.44 18,564,450 $ 5.98
Options and SARs available
for grant at end of year............ 4,224,524 794,668 3,667,168
</TABLE>
In December 1998, a total of 18,235,111 outstanding stock options
with a weighted-average exercise price of $18.66 were terminated in
exchange for the grant of 15,592,144 stock options with an exercise
price of $14.38, the closing sale price of the Company's common stock
on the date of the exchange. The options granted in the exchange were
intended to have the same theoretical value to each option holder as
the terminated options, determined using a variation of the Black-
Scholes option pricing model. Other than the exercise price, the
options granted in the exchange have the same terms as the terminated
options, including the respective vesting dates and remaining
contractual lives.
The offer to exchange was made to all option holders whose
options had an exercise price higher than $14.38. The exchange
offer was designed to have little or no economic impact on the
Company, but to encourage the retention of key personnel, particularly
in light of the new hotel-casinos opening in Las Vegas during 1999.
71
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes information about stock options
outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------- -----------------------------
WEIGHTED-
AVERAGE
RANGE OF REMAINING WEIGHTED- WEIGHTED-
EXERCISE NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.60 to $ 5.98.... 11,674,562 3.0 years $ 4.74 9,662,062 $ 4.79
6.55 to 13.63.... 9,964,000 4.3 7.74 9,319,000 7.62
14.38.............. 15,592,144 7.5 14.38 1,965,620 14.38
14.69 to 20.50.... 216,500 7.6 16.40 56,000 15.90
---------- ----------
37,447,206 5.2 9.62 21,002,682 6.97
========== ==========
</TABLE>
In 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123 - Accounting for Stock-Based
Compensation ("SFAS 123"). SFAS 123 provides, among other things,
that companies may elect to account for employee stock options using a
fair value-based method or continue to apply the intrinsic value-based
method prescribed by Accounting Principal Board Opinion No. 25 ("APB
25").
Under the fair value-based method prescribed by SFAS 123, all
employee stock option grants are considered compensatory.
Compensation cost is measured at the date of grant based on the
estimated fair value of the options determined using an option pricing
model. The model takes into account the stock price at the grant
date, the exercise price, the expected life of the option, the
volatility of the stock, expected dividends on the stock and the risk-
free interest rate over the expected life of the option. Under APB
25, generally only stock options having intrinsic value at the date of
grant are considered compensatory. Intrinsic value represents the
excess of the market price of the stock at the grant date over the
exercise price of the options. Under both methods, compensation cost
is charged to earnings over the period that the options become
exercisable.
As permitted by SFAS 123, the Company accounts for employee stock
options using the intrinsic value-based method. Accordingly, no
material compensation cost has been recognized.
72
<PAGE>
The following table discloses the Company's pro forma net income
and net income per share assuming compensation cost for employee stock
options had been determined using the fair value-based method
prescribed by SFAS 123. The table also discloses the weighted-average
assumptions used in estimating the fair value of each option grant on
the date of grant using a variation of the Black-Scholes option
pricing model, and the estimated weighted-average fair value of the
options granted. The model assumes no expected future dividend pay-
ments on the Company's common stock. The calculations under SFAS 123
implicitly assume that the price of the underlying stock will
appreciate from the price at the time that the options were granted.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM
As reported.......................................... $ 85,225 $ 209,803 $ 206,045
Pro forma............................................ 67,730 197,290 196,428
NET INCOME
As reported.......................................... $ 81,704 $ 207,578 $ 206,045
Pro forma............................................ 64,209 195,065 196,428
INCOME PER SHARE BEFORE EXTRAORDINARY ITEM
Basic
As reported........................................ $ 0.47 $ 1.17 $ 1.13
Pro forma.......................................... 0.38 1.10 1.07
Diluted
As reported........................................ $ 0.45 $ 1.09 $ 1.05
Pro forma.......................................... 0.36 1.04 1.00
NET INCOME PER SHARE
Basic
As reported........................................ $ 0.45 $ 1.16 $ 1.13
Pro forma.......................................... 0.36 1.09 1.07
Diluted
As reported........................................ $ 0.43 $ 1.08 $ 1.05
Pro forma.......................................... 0.35 1.03 1.00
WEIGHTED-AVERAGE ASSUMPTIONS
Expected stock price volatility...................... 35.00% 35.14% 35.90%
Risk-free interest rate.............................. 4.72% 6.49% 5.92%
Expected option life................................. 5.8 years 6.2 years 5.1 years
Estimated fair value of options granted.............. $ 6.69 $ 11.05 $ 8.65
WEIGHTED-AVERAGE VESTING PERIOD OF OPTIONS GRANTED..... 4.9 years 5.3 years 3.8 years
</TABLE>
The accounting method prescribed by SFAS 123 is not applicable to
options granted prior to January 1, 1995. Had the method been applied
to options granted in earlier years, compensation cost reflected in
the pro forma amounts shown above would have been higher to the extent
the vesting periods for such options extended into 1996 or beyond.
73
<PAGE>
NOTE 10 - CAPITAL STOCK
In July 1994, the Company's Board of Directors approved a program
to repurchase up to 10,000,000 shares of the Company's common stock
from time to time in the open market. At December 31, 1998, 6,737,900
shares had been repurchased pursuant to this program. The timing and
amount of future share repurchases, if any, will depend on various
factors, including market conditions, available alternative
investments and the Company's financial position.
The Company's Articles of Incorporation authorize 5,000,000 shares
of preferred stock, none of which has been issued.
NOTE 11 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1998
Gross revenues..................................... $377,932 $354,157 $372,174 $572,633 $1,676,896
Promotional allowances............................. (35,328) (31,222) (34,031) (52,586) (153,167)
Net revenues....................................... 342,604 322,935 338,143 520,047 1,523,729
Preopening expense................................. - - - (88,313) (88,313)
Operating income (loss)............................ 65,908 52,564 48,225 (14,592) 152,105
Other income (expense), net........................ (485) 430 641 (17,513) (16,927)
Income (loss) before extraordinary item............ 41,600 33,619 30,104 (20,098) 85,225
Extraordinary loss on early retirement of debt..... (3,521) - - - (3,521)
Net income (loss).................................. 38,079 33,619 30,104 (20,098) 81,704
Income (loss) per share before extraordinary item
Basic............................................ $ 0.23 $ 0.19 $ 0.17 $ (0.11) $ 0.47
Diluted.......................................... 0.22 0.18 0.16 (0.11) 0.45
Net income (loss) per share
Basic............................................ $ 0.21 $ 0.19 $ 0.17 $ (0.11) $ 0.45
Diluted.......................................... 0.20 0.18 0.16 (0.11) 0.43
1997
Gross revenues..................................... $394,399 $373,757 $400,631 $377,262 $1,546,049
Promotional allowances............................. (32,360) (29,396) (31,478) (34,264) (127,498)
Net revenues....................................... 362,039 344,361 369,153 342,998 1,418,551
Operating income................................... 90,737 76,837 87,453 71,014 326,041
Other income (expense), net........................ (3,017) (1,179) (2,380) 5,614 (962)
Income before extraordinary item................... 56,689 48,901 54,899 49,314 209,803
Extraordinary loss on early retirement of debt..... (2,225) - - - (2,225)
Net income......................................... 54,464 48,901 54,899 49,314 207,578
Income per share before extraordinary item
Basic............................................ $ 0.32 $ 0.27 $ 0.31 $ 0.28 $ 1.17
Diluted.......................................... 0.30 0.25 0.28 0.26 1.09
Net income per share
Basic............................................ $ 0.31 $ 0.27 $ 0.31 $ 0.28 $ 1.16
Diluted.......................................... 0.28 0.25 0.28 0.26 1.08
</TABLE>
74
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MIRAGE RESORTS, INCORPORATED
By: STEPHEN A. WYNN
--------------------------
Stephen A. Wynn, Chairman
of the Board, President and
Chief Executive Officer
Dated: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
STEPHEN A. WYNN Chairman of the Board, President March 29, 1999
- ------------------- and Chief Executive Officer
Stephen A. Wynn (Principal Executive Officer)
DANIEL R. LEE Senior Vice President - Finance and March 29, 1999
- ------------------- Development, Chief Financial Officer
Daniel R. Lee and Treasurer (Principal Financial
and Accounting Officer)
ELAINE P. WYNN Director March 29, 1999
- -------------------
Elaine P. Wynn
GEORGE J. MASON Director March 29, 1999
- -------------------
George J. Mason
MELVIN B. WOLZINGER Director March 29, 1999
- -------------------
Melvin B. Wolzinger
RONALD M. POPEIL Director March 29, 1999
- -------------------
Ronald M. Popeil
DANIEL B. WAYSON Director March 29, 1999
- -------------------
Daniel B. Wayson
RICHARD D. BRONSON Director March 29, 1999
- -------------------
Richard D. Bronson
75
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
MIRAGE RESORTS, INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ADDITIONS
---------------------------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER DEDUCTIONS AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS(a) (b) OF YEAR
- ----------- ----------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Year Ended December 31, 1998.......... $42,477 $27,677 $1,904 $31,578 $40,480
Year Ended December 31, 1997.......... $38,674 $19,213 $ 711 $16,121 $42,477
Year Ended December 31, 1996.......... $47,161 $14,480 $1,447 $24,414 $38,674
- ---------------
(a) Recoveries of accounts previously charged off.
(b) Accounts charged off.
</TABLE>
S-1
MIRAGE RESORTS, INCORPORATED
AMENDMENT TO BYLAWS
February 17, 1999
RESOLVED: That Section 6(A)(b) of the Bylaws of this Corporation is
hereby amended by deleting the second sentence thereof and replacing
it with the following sentence:
"To be timely, a stockholder's notice shall be received by
the secretary at the principal executive office of the
corporation not less than 120 calendar days prior to the
day and month corresponding to the day and month on which
the corporation's proxy statement was first released to
stockholders in connection with the previous year's annual
meeting of stockholders; provided, however, that in the
event that the date of the annual meeting is more than 30
days before or more than 60 days after the day and month
corresponding to the day and month of the previous year's
annual meeting, notice by the stockholder to be timely must
be so received not later than the close of business on the
later of 120 calendar days prior to such annual meeting or
10 calendar days following the date on which public
announcement of the date of such annual meeting is first
made by the corporation."; and
RESOLVED FURTHER: That Section 6(B) of the Bylaws of this Corporation
is hereby amended by deleting the third sentence thereof and replacing
it with the following sentence:
"In the event that the corporation calls a special meeting
of stockholders for the purpose of electing one or more
directors to the board of directors, any such stockholder
may nominate a person or persons (as the case may be) for
election to such position(s) as specified in the corpor-
ation's notice of meeting, if the stockholder's notice
required by paragraph (A)(b) of this bylaw shall be
received by the secretary at the principal executive office
of the corporation not later than the close of business on
the later of 120 calendar days prior to such special
meeting or 10 calendar days following the date on which
public announcement is first made by the corporation of the
date of such special meeting and of the nominee(s) proposed
by the board of directors to be elected at such meeting."
EXHIBIT 3.5
Robert H. Baldwin
President
B E L L A G I O
December 31, 1998
Mr. Stephen A. Wynn
Chairman of the Board and
Chief Executive Officer
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Re: Rental of Fine Art
Dear Steve:
This letter sets forth the agreement between Bellagio and you
effective this date with respect to the rental of the works of fine
art identified on Exhibit A hereto (individually, a "Work" and collec-
tively, the "Works"), and supersedes and amends in their entirety the
letter agreements between Bellagio and you dated January 14, 1998,
March 12, 1998, April 21, 1998, July 31, 1998 and September 1, 1998.
1. You hereby rent each of the Works to Bellagio for exhibition
in any hotel-casino operated by Bellagio or any other wholly owned
subsidiary of Mirage Resorts, Incorporated. The Works shall be main-
tained on public display and shall be available for educational
purposes in one or more of such hotel-casinos in conformity with the
requirements of NRS 361.068(k) and NRS 374 and any regulations validly
promulgated thereunder.
2. Bellagio shall pay you monthly rent for each of the Works in
the respective amounts set forth on Exhibit A. The rent for each
month, commencing January 1999, shall be payable in advance not later
than the fifth calendar day of such month. In the event that the
rental with respect to one or more Works is in effect for less than a
full calendar month, the rent for such month shall be prorated based
on the actual number of days during which the rental was in effect and
a month consisting of 30 days. Any such reduction shall be credited
against Bellagio's next monthly rent payment.
3. Bellagio and you shall each have the option to terminate the
rental as to one or more of the Works on 30 days' notice to the other
party. Bellagio and you may also mutually agree to include additional
works of fine art in this rental agreement, in which event the parties
shall execute an amendment to Exhibit A setting forth the additional
works of fine art and the monthly rent for such works.
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700
EXHIBIT 10.72
<PAGE>
Mr. Stephen A. Wynn
Mirage Resorts, Incorporated
December 31, 1998
Page Two
4. Bellagio shall be responsible for insuring and maintaining
the security of the Works subject to this rental, and for any Nevada
sales, use or personal property taxes applicable to this rental.
Please sign below to confirm your agreement to the foregoing. My
signature below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO
ROBERT H. BALDWIN
By:
-------------------------------------
ROBERT H. BALDWIN
President and Chief Executive Officer
I hereby agree to the foregoing.
STEPHEN A. WYNN
-------------------------------------
STEPHEN A. WYNN
cc: Bruce A. Levin
Peter C. Walsh
James E. Pettis
George J. Panek
2
Robert H. Baldwin
President
B E L L A G I O
January 7, 1999
Mr. Stephen A. Wynn
Chairman of the Board, President
and Chief Executive Officer
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Dear Steve:
This confirms the agreement this date between Bellagio and you with
respect to the work of fine art entitled "Nature Morte, Nape Rose,
Vase d'anemones, citrons et ananas" by Henri Matisse (1925, oil on
canvas, 32-3/8 x 39-3/4 inches) (the "Work"), which you purchased from
Bellagio on January 14, 1998 at a purchase price of $4,562,812.45.
You hereby sell the Work to Bellagio and Bellagio hereby purchases the
Work from you for $4,562,812.45.
Please sign below to confirm your agreement to the foregoing. My
signature below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO
ROBERT H. BALDWIN
By:
----------------------------
ROBERT H. BALDWIN
President and Chief
Executive Officer
I hereby agree to the foregoing.
STEPHEN A. WYNN
----------------------------
STEPHEN A. WYNN
cc: Bruce A. Levin
Peter C. Walsh
James E. Pettis
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700
EXHIBIT 10.73
MIRAGE RESORTS, INCORPORATED
1999 CASH BONUS PLAN
1. Adoption, Name and Effective Date. Mirage Resorts, Incorpor-
ated, a Nevada corporation (the "Company"), hereby adopts the Mirage
Resorts, Incorporated 1999 Cash Bonus Plan (the "Plan") effective as
of February 17, 1999, and first applying with respect to the fiscal
year ending December 31, 1999, subject to stockholder approval at the
1999 Annual Meeting of Stockholders as described below.
2. Purpose. The purpose of the Plan is to provide additional
compensation as an incentive to executive officers to attain certain
specified performance objectives of the Company and to ensure the
continued availability of their full-time or part-time services to the
Company and its subsidiary and affiliated corporations. The Plan is
also intended to qualify as a "performance-based" plan as described in
Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended
(including proposed, temporary and final regulations promulgated
thereunder from time to time, the "Code"), and thereby secure the full
deductibility for federal income tax purposes of bonus compensation
paid to persons who are "executive officers" of the Company, or who
are "covered employees" of the Company or its subsidiary or affiliated
corporations under Section 162(m)(3) of the Code.
3. Administrative Committee. The Plan will be administered by a
committee (the "Committee") of the Company's Board of Directors (the
"Board"), consisting entirely of two or more persons who are "outside
directors" within the meaning of Section 162(m) of the Code. The
Committee is hereby vested with full powers of administration, subject
only to the provisions set forth herein.
The Committee shall hold its meetings at such times and places as
it may determine, shall keep minutes of its meetings and shall adopt,
amend or revoke such rules and procedures as it deems proper for the
administration of this Plan; provided, however, that it shall take
action only upon the agreement of a majority of the whole Committee.
Any action that the Committee takes through a written instrument
signed by a majority of its members shall be effective as though it
had been taken at a meeting duly called and held. The Committee shall
report all actions taken by it to the Board.
The Committee shall have the full and final discretion and
authority, subject to the provisions of the Plan, to grant awards
pursuant to the Plan, to construe and interpret the Plan and to make
all other determinations and take all other actions which it deems
necessary or appropriate for the proper administration of the Plan.
All such interpretations, actions and determinations shall be con-
clusively binding for all purposes and upon all persons.
EXHIBIT 10.74
<PAGE>
4. Eligibility. For each fiscal year of the Company, the par-
ticipants entitled to share in the benefits of the Plan are persons
who are "executive officers" of the Company, as such term is defined
in Rule 3b-7 under the Securities Exchange Act of 1934, as amended (or
any successor rule or regulation), or who are "covered employees" of
the Company or its subsidiary or affiliated corporations under Section
162(m)(3) of the Code (collectively, "executives" or "participants").
An executive whose employment or service relationship with the Company
is terminated for any reason prior to the end of any fiscal year of
the Company will not be entitled to participate in the Plan or receive
any benefits with respect to any later fiscal year, unless he or she
again becomes eligible to participate in the Plan under the first
sentence of this Section 4.
5. Determination of Awards; Limitations on Amounts of Awards.
5.1 Limitations on Amount of Awards. The maximum aggregate
amount of bonuses to be awarded for each fiscal year of the Company
under the Plan shall be 5% of the excess of the Company's EBDIT for
such fiscal year over an amount (the "Floor Amount"), which shall
be $450,000,000 for the fiscal year ending December 31, 1999, and
for each later fiscal year unless the Committee, in its discretion,
sets a different amount before the beginning of a later fiscal year
or within the first 90 days of a later fiscal year, in which case
such amount shall be the Floor Amount for such later fiscal year
and shall remain the Floor Amount for following fiscal years unless
and until the Committee, in its discretion, sets a different amount
before the beginning of a later fiscal year or within the first 90
days of a later fiscal year. As used in the Plan, the term "EBDIT"
means (a) operating income, plus (b) depreciation, amortization and
all other non-cash expenses, plus (c) preopening and related promo-
tional expenses, in each case determined on a consolidated basis in
accordance with generally accepted accounting principles. The
maximum award under the Plan for each fiscal year of the Company to
any participant shall not exceed the lesser of (i) 50% of such
participant's annual base salary in effect on the first day of such
fiscal year, or, if such participant becomes eligible to partici-
pate in this Plan during such fiscal year, 50% of such partici-
pant's annual base salary in effect on the date such participant
becomes eligible (the "Applicable Salary"),or (ii) $1,500,000.
5.2 Determination of Amount of Individual Awards. For each
fiscal year of the Company, each participant shall receive an award
equal to the maximum aggregate amount of bonuses determined under
Section 5.1, multiplied by a fraction, the numerator of which shall
be the Applicable Salary of such participant, and the denominator
of which shall be the aggregate amount of the Applicable Salaries
of all participants. The Committee shall not have the discretion
to increase, but shall have the discretion to decrease, any award
2
<PAGE>
determined in accordance with the Plan. The reduction in any par-
ticipant's award for any fiscal year as a result of the Committee's
exercise of such discretion shall not increase the amount of an
award to any other participant (through reallocation of unutilized
awards or otherwise) with respect to such fiscal year.
6. Award Periods; Payment of Awards.
6.1 Award Periods. All awards shall be made on the basis of
the fiscal year of the Company.
6.2 Committee Certifications. As a condition precedent to
the payment of any award, the Committee shall certify, as soon as
practicable following the end of the fiscal year of the Company,
that the objective performance goal for the award has been satis-
fied and that the amount of the award is no greater than that
dictated by the computation set forth in Section 5.2, and within
the limitations set forth in the last sentence of Section 5.1. The
Committee shall make such determination by means of a written
resolution of the Committee that is maintained in the minute book
of the Company.
6.3 Payment of Awards. Awards under the Plan will be paid
in cash reasonably promptly following the conclusion of each fiscal
year of the Company and the certification of the Committee as set
forth in Section 6.2. All awards under the Plan will be subject to
withholding for applicable employment and income taxes.
6.4 Termination of Employment. An award that would other-
wise be payable to a participant who is not employed by the Company
on the last day of a fiscal year shall be prorated based on active
service during the fiscal year, or not paid, as follows:
Termination due to disability - prorated
Retirement in accordance with the Company's policies - prorated
Death - prorated
Voluntary or involuntary termination other than as specified above
- - no payment
7. Nonassignment. The interest of any participant in the Plan
is not assignable either by voluntary or involuntary assignment or
operation of law (except that, in the event of death, earned and
unpaid amounts shall be payable to the legal successor of a partici-
pant).
8. Indemnification. No employee, member of the Committee or
director of the Company will have any liability for any decision or
action if made or done in good faith, nor for any error or miscalcula-
tion unless such error or miscalculation is the result of his or her
3
<PAGE>
fraud or deliberate disregard of any provisions of the Plan. The
Company will indemnify each director, member of the Committee and any
employee acting in good faith pursuant to this Plan against any loss
or expense arising therefrom.
9. Amendment, Suspension or Termination. The Board may from time
to time amend, suspend or terminate, in whole or in part, any or all
the provisions of this Plan; provided, however, that no such action
shall adversely affect the right of any participant with respect to
any award of which he or she may have become entitled to payment here-
under prior to the effective date of such amendment, suspension or
termination. In particular, but without limitation, the Board shall
have the authority to amend or modify the Plan from time to time in
order to reflect amendments to or regulations promulgated under
Section 162(m) of the Code. Notwithstanding the foregoing, in the
event that any amendment or other modification of or to the Plan
expands the class of persons eligible to participate as set forth in
Section 4, raises the limits set forth in the last sentence of Section
5.1 or requires stockholder approval in order to continue the compli-
ance of the Plan as a "performance-based" plan under Section 162(m) of
the Code, such amendment or modification shall be contingent on the
receipt of stockholder approval.
10. Limitations; Participation in Other Plans. This Plan is not
to be construed as constituting a contract of employment or for
services. Nothing contained herein will affect or impair the Company's
right to terminate the employment or other contract for services of a
participant hereunder, or entitle a participant to receive any par-
ticular level of compensation. The Company's obligation hereunder to
make awards merely constitutes the unsecured promise of the Company to
make such awards from its general assets, and no participant hereunder
will have any interest in, or a lien or prior claim upon, any property
of the Company. Nothing herein nor the participation by any partici-
pant shall limit the ability of such participant to participate in any
other compensatory plan or arrangement of the Company, or to receive a
bonus from the Company other than under this Plan.
11. Governing Law. The terms of this Plan will be governed by
and construed in accordance with the laws of the State of Nevada,
without regard to principles of conflict of laws.
12. Term. This Plan shall continue in place until the fifth
anniversary of the effective date, unless earlier terminated by the
Board as provided in Section 9. No awards shall be paid under the
Plan unless and until the material terms (within the meaning of
Section 162(m)(4)(C) of the Code) of the Plan are disclosed to the
Company's stockholders and are approved by the stockholders by a
majority of votes cast in person or by proxy.
4
AMENDMENT NO. 3 TO AMENDED AND RESTATED LOAN AGREEMENT
This Amendment No. 3 (the "Amendment") to Amended and Restated Loan
Agreement dated as of December 17, 1998 is entered into with reference
to the Amended and Restated Loan Agreement dated as of March 7, 1997
(as heretofore amended by an Amendment No. 1 dated as of September 19,
1997, and an Amendment No. 2 dated as of June 19, 1998, the "Loan
Agreement") among Mirage Resorts, Incorporated, a Nevada corporation
("Borrower"), the Banks, Co-Arrangers, Co-Agents and Documentation
Agent referred to therein, and Bank of America National Trust and
Savings Association, as Administrative Agent. Capitalized terms used
herein are used with the meanings set forth for those terms in the
Loan Agreement. Borrower and the Administrative Agent (acting with
the consent of the Requisite Banks) agree as follows:
1. Amendment to Leverage Ratio. Section 6.6 of the Loan Agree-
ment is hereby amended to read in full as follows:
"6.6 Leverage Ratio. Permit the Leverage Ratio, as of the
last day of any Fiscal Quarter described below, to be greater
than the ratio set forth opposite that Fiscal Quarter:
Fiscal Quarter Ratio
-----------------------------------------------------
Fiscal Quarters ending during the
period from Closing Date through
and including December 31, 1997 4.00 to 1.00
Fiscal Quarters ending March 31,
1998 and June 30, 1998 5.00 to 1.00
Fiscal Quarters ending September
30, 1998 and December 31, 1998 5.85 to 1.00
Fiscal Quarter ending March 31, 1999 5.00 to 1.00
Later Fiscal Quarters 4.00 to 1.00."
2. Supplemental Leverage Fee. In consideration of the execution
of this Amendment, Borrower hereby agrees that (a) if the Leverage
Ratio exceeds 5.00 to 1.00 as of the last day of any of the three
calendar month periods ending December 31, 1998, January 31, 1999 or
February 28, 1999, or (b) if the Leverage Ratio exceeds 4.00 to 1.00
as of the last day of any of the three calendar month periods ending
EXHIBIT 10.75
<PAGE>
March 31, 1999, April 30, 1999 or May 31, 1999, then Borrower shall
pay a supplemental leverage fee to the Banks in an amount equal to the
average daily principal amount of the Obligations during the calendar
month ending on each such date times 10 basis points divided by 12.
The supplemental leverage fee required by this Section shall be
payable on the last day of the calendar month immediately following
each month in which the Leverage Ratio exceeds the levels described in
this Section and shall be paid to the Administrative Agent for the
account of the Banks in accordance with their respective Pro Rata
Shares.
3. Calculation of Leverage Ratio for Supplemental Leverage Fee;
Reporting. It is agreed that the Leverage Ratio as of the last day of
January, February, April and May, 1999, shall be calculated for the
three calendar month period ending on each such date, as if each such
period were a Fiscal Quarter of Borrower. The calculation of the
Leverage Ratio as of these dates shall be solely for the purpose of
determining the applicability of the fee described in Section 2 of
this Amendment, and the failure of Borrower to achieve a particular
Leverage Ratio as of such dates shall not constitute a covenant
violation under the Loan Agreement. Borrower hereby agrees to deliver,
as promptly as reasonably practicable and in any event by the end of
the calendar month immediately following each such date, a calculation
of the Leverage Ratio as of such dates in detail reasonably satis-
factory to the Administrative Agent.
4. Condition Precedent. The effectiveness of this Amendment
shall be conditioned upon the receipt by the Administrative Agent of
written consents hereto executed by the Requisite Banks.
5. Representations and Warranties. Borrower represents and
warrants to the Administrative Agent and the Banks that, as of the
date of this Amendment, no Default or Event of Default has occurred
and remains continuing.
6. Confirmation. In all other respects, the terms of the Loan
Agreement and the other Loan Documents are hereby confirmed.
2
<PAGE>
IN WITNESS WHEREOF, Borrower and the Administrative Agent have
executed this Amendment as of the date first written above by their
duly authorized representatives.
MIRAGE RESORTS, INCORPORATED
By: DANIEL R. LEE
-----------------------------------------
Daniel R. Lee, Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By: JANICE HAMMOND
-----------------------------------------
Janice Hammond, Vice President
3
<PAGE>
CONSENT OF BANK
This Consent of Bank is delivered by the undersigned Bank with
reference to the Amended and Restated Loan Agreement dated as of March
7, 1997 (as heretofore amended by an Amendment No. 1 dated as of
September 19, 1997, and an Amendment No. 2 dated as of June 19, 1998,
the "Loan Agreement") among Mirage Resorts, Incorporated, a Nevada
corporation ("Borrower"), the Banks, Co-Arrangers, Co-Agents and Docu-
mentation Agent referred to therein, and Bank of America National
Trust and Savings Association, as Administrative Agent. Capitalized
terms used herein are used with the meanings set forth for those terms
in the Loan Agreement.
The undersigned hereby consents to the execution and delivery of
the proposed Amendment No. 3 to the Loan Agreement by the Administra-
tive Agent, substantially in the form of the draft presented to the
undersigned.
- ----------------------------------------
[Name of Bank]
By:
---------------------------------
Title:
---------------------------------
4
EXECUTION COPY
AMENDED AND RESTATED THIRD AMENDMENT
MADE AS OF THE 1ST DAY OF FEBRUARY, 1999
TO
ROAD DEVELOPMENT AGREEMENT
MADE AS OF THE 10TH DAY OF JANUARY, 1997
BY AND AMONG
STATE OF NEW JERSEY
AND
SOUTH JERSEY TRANSPORTATION AUTHORITY
AND
AC HOLDING CORP.
EXHIBIT 10.76
<PAGE>
AMENDED and RESTATED THIRD AMENDMENT TO ROAD DEVELOPMENT AGREEMENT
("Restated Third Amendment") made as of this lst day of February,
1999, by and among the STATE OF NEW JERSEY, acting through the Depart-
ment of Transportation, 1035 Parkway Avenue, CN 600, Trenton, New
Jersey 08625-0600 (the "State"), the SOUTH JERSEY TRANSPORTATION
AUTHORITY, a public body having an office at Farley Service Plaza,
P.O. Box 351, Hammonton, New Jersey 08037 ("SJTA") and AC HOLDING
CORP., a Nevada corporation, having an office and place of business at
3260 South Industrial Road, Las Vegas, Nevada 89109 ("Developer").
W I T N E S S E T H:
WHEREAS, as of January 10, 1997 the State, SJTA and Mirage Resorts,
Incorporated ("MRI"), as "Developer", executed and delivered a Road
Development Agreement which agreement (the "Original Agreement") was,
by a first amendment thereto made as of July 31, 1997, a Second
Amendment thereto made as of October 10, 1997 and a Third Amendment
thereto (the "Third Amendment") made as of the 30th day of October,
1998 thereafter amended (said Original Agreement, as so amended, the
"Agreement"); and WHEREAS, concurrently with the execution and
delivery of the Original Agreement, pursuant to Section 13.1 thereof,
MRI assigned all of its right, title and interest in and to the
1
<PAGE>
Original Agreement to Atlandia Design and Furnishings Inc.
("Atlandia"), which assumed the obligations of the assignor there-
under; and
WHEREAS, as of December 1, 1998, pursuant to Section 13.1 of the
Agreement, Atlandia assigned all of its right, title and interest in
and to the Agreement to Developer, which assumed the obligations of
assignor thereunder, and
WHEREAS, the State, SJTA and Developer have determined that it is
necessary and, pursuant to the provisions of N.J.S.A. 27:1A-5, 27:7-21
and 27:25A-23 that it is in the public interest, to amend further the
Agreement and restate the Third Amendment as hereinafter provided.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Definitions.
1.1 All terms, the initial letters of which are capitalized and
not otherwise defined in this Restated Third Amendment, shall have the
respective meanings ascribed to them in the Agreement.
2. Amendment of Article 12 (Termination).
2.1 Article 12 (Termination) is hereby amended as follows:
2.1.1 By deleting subparagraphs 12.1.7.2 and 12.2.6.2;
and
2.1.2 By adding new paragraphs 12.1.10 and 12.2.8 to read
as follows:
"If, on October 31, 1999, Developer is not in receipt
of all Casino Project Permits necessary to commence construction of
the Casino Project."
2
<PAGE>
3. Miscellaneous
3.1 This Restated Third Amendment may not be modified, except by
an instrument in writing signed by the State, SJTA and the Developer,
and shall be binding on the parties, their successors and assigns, but
shall not enure to the benefit of any other Person.
3.2 This Restated Third Amendment may be executed in any number
of counterparts, by manual or by facsimile signature, all of which
counterparts together shall constitute a single instrument.
3.3 This Restated Third Amendment shall supersede in all respects
the Third Amendment.
3.4 Except as amended by this Restated Third Amendment, all of
the terms, covenants and conditions of the Agreement shall continue in
full force and effect.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Restated
Third Amendment to be executed as of the date first set forth above by
their duly authorized representatives.
STATE OF NEW JERSEY
BY: DEPARTMENT OF TRANSPORTATION
LAURIE B. GUTSHAW
By:
-------------------------------------
Laurie B. Gutshaw
Acting Deputy Commissioner
SOUTH JERSEY TRANSPORTATION AUTHORITY
JAMES A. CRAWFORD
By:
-------------------------------------
James A. Crawford
Executive Director
AC HOLDING CORP.
KENNETH R. WYNN
By:
-------------------------------------
Kenneth R. Wynn
Secretary
THIS DOCUMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM ON THIS
9TH DAY OF FEBRUARY, 1999
PETER VERNIERO
ATTORNEY GENERAL OF NEW JERSEY
SUSAN R. ROOP
By:
--------------------------
Assistant Attorney General
4
A SECOND AMENDMENT TO THE MAY 3, 1996 AGREEMENT
BETWEEN THE CITY OF ATLANTIC CITY AND
MIRAGE RESORTS, INCORPORATED FOR THE
DEVELOPMENT OF THE HURON NORTH REDEVELOPMENT AREA
1. INITIAL RECITALS.
THIS SECOND AMENDMENT (this "Second Amendment") KNOWN AS "A
SECOND AMENDMENT TO THE MAY 3, 1996 AGREEMENT BETWEEN THE CITY OF
ATLANTIC CITY AND MIRAGE RESORTS, INCORPORATED FOR THE DEVELOPMENT OF
THE HURON NORTH REDEVELOPMENT AREA" IS MADE THIS 15 DAY OF December,
1998 by and between the City of Atlantic City (the "City") and MAC,
CORP. (the "Redeveloper"), in consideration of the provisions set
forth hereinafter and the mutual promises contained therein.
WHEREAS, pursuant to Ordinance No. 14 of 1996 adopted by the
City Council of the City of Atlantic City (the "City Council"), the
City entered into a certain agreement known as "An Agreement Between
the City of Atlantic City and Mirage Resorts, Incorporated for the
Development of the Huron North Redevelopment Area" (the "Agreement"),
which Agreement was executed on May 3, 1996; and
WHEREAS, the Redeveloper is the successor by assignment, in
accordance with Section 5.6 of the Agreement, to the rights of Mirage
Resorts, Incorporated in and to the Agreement; and
WHEREAS, pursuant to Ordinance No. 75 of 1997 adopted by the
City Council, the City entered into a certain agreement known as "An
Amendment to the May 3, 1996 Agreement Between the City of Atlantic
City and Mirage Resorts, Incorporated for the Development of the Huron
North Redevelopment Area" (the "First Amendment"), which First Amend-
ment was executed on January 8, 1998; and
WHEREAS, Section 10.5.3 of the Agreement provides that any
amendment to the Agreement must be in writing and specifically recite
that it is being entered into by and between the City and the
Redeveloper with the specific intention to modify the terms of the
Agreement; and
EXHIBIT 10.77
<PAGE>
WHEREAS, there exists various public purpose projects within
the City that are in need of immediate funding; and
WHEREAS, pursuant to Section 4.3.1.1 of the Agreement, the
Redeveloper and the City have agreed that the Redeveloper may be
obligated to make certain payments of monies (the "Funds") to the City
under certain circumstances set forth therein; and
WHEREAS, pursuant to Section 4.3.1.2 of the Agreement, the
parties have agreed that the City shall apply the Funds for the
benefit of the residents of the City for approved projects (the
"Approved Projects") as more specifically set forth therein; and
WHEREAS, pursuant to Section 4.3.1.2 of the Agreement, the
City and the Redeveloper have agreed that the City and the Redeveloper
shall form a committee (the "Committee") consisting of one member
appointed by the Mayor, one member appointed by the President of the
City Council, and one member appointed by the Redeveloper and that the
responsibility of the Committee will be to make a final determination
as to how and on what projects the Funds will be expended; and
WHEREAS, the Redeveloper and the City have agreed that
Section 4.3.1.l of the Agreement provides that the Redeveloper is not
obligated to pay the Funds, if any, to the City unless and until the
Redeveloper receives credit from the State of New Jersey against its
sales tax obligation for funds expended to conduct reimbursable
environmental remediation activities at the Site (as defined in the
Agreement); and
WHEREAS, the Redeveloper and the City acknowledge that the
Redeveloper may not receive credit from the State of New Jersey
against its sale tax obligation for a substantial period of time; and
WHEREAS, it would be in the best interest of the City to
permit the Redeveloper to pay the City at this time a portion of the
Funds the Redeveloper may owe to the City in order that the City may
apply such funds for the Approved Projects; and
WHEREAS, the public interest of the City will be served by
funding the Approved Projects at this time; and
2
<PAGE>
WHEREAS, in Bryant vs. City of Atlantic City, 309 N.J. Super.
596 (App. Div. 1998), the Appellate Division modified (the "Modified
Judgment") the Judgment (as defined in the First Amendment) to provide
that Section 5.5 of the Agreement is void and severed from the
Agreement; and
WHEREAS, in light of the foregoing recitals, the City and the
Redeveloper are desirous of entering into this Second Amendment to
amend various sections of the Agreement; and
WHEREAS, the City and the Redeveloper acknowledge that the
mutual promises contained in this Second Amendment are good and
valuable consideration for the binding execution of this Second
Amendment;
IT IS ON THE DATE STATED ABOVE AGREED BY AND BETWEEN THE CITY AND THE
REDEVELOPER AS FOLLOWS:
2. INCORPORATION OF RECITALS
2.0 Incorporation of Recitals. The recitals set forth in
Section 1 of this Second Amendment are hereby incorporated
by reference and are considered part of this Second
Amendment.
3. DEFINITIIONS
3.0 Governing Definitions. The defined words, phrases and
terms in the Agreement and the First Amendment shall have
their same respective meaning in this Second Amendment unless
the context clearly indicates otherwise.
4. ENVIRONMENTAL ISSUES
4.0 Sharing Formula. The Agreement is hereby amended to add
the following provision:
"4.3.1.1 Sharing Formula.
(4) Notwithstanding anything to the contrary in Section
4.3.1.1(1) of the Agreement, the City and the Rede-
veloper agree that the Redeveloper shall be permitted
to make advance payments of the Funds, if any, that may
ultimately be owed by the Redeveloper to the City and
that the City shall (i) credit the amount of such Funds
against any monetary obligation of the Redeveloper
under Section 4.3.1.1 of the Agreement and (ii) expend
the Funds solely for the purposes established in
Section 4.3.1.2."
3
<PAGE>
5. DEVELOPMENT OF THE PROJECT
5.0 Subsequent Conveyance by Redeveloper. Pursuant to the
Modified Judgment, Section 5.5 of the Agreement is void and severed
from the Agreement.
6. MISCELLANEOUS
6.0 Ratification of All Other Terms and Conditions of the
Agreement and the First Amendment. Except to the extent inconsistent
with the terms and conditions of this Second Amendment, all remaining
terms and conditions of the Agreement and the First Amendment are
hereby ratified and confirmed and are agreed to be in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Second Amendment
effective as of the date appearing on the first page hereof.
ATTEST CITY OF ATLANTIC CITY
[Illegible] JAMES WHELAN
By: By:
-------------------------- -------------------------------
Mayor
-------------------------------
Title
Approved as to form:
DANIEL A. COREY
-------------------------------
DANIEL A. COREY, City Solicitor
ATTEST: MAC, CORP.
SUSAN M. WALKER BRUCE A. LEVIN
By: By:
-------------------------- -------------------------------
VP/Asst. Secretary
-------------------------------
Title
4
Third Amendment to Mirage Resorts, Incorporated
Non-Qualified Deferred Compensation Plan
WHEREAS, Mirage Resorts, Incorporated maintains a Non-Qualified
Deferred Compensation Plan effective as of February 1, 1997, as
amended by a First Amendment thereto effective as of February 20, 1997
and a Second Amendment thereto effective as of February 1, 1998 (as so
amended, the "Deferred Compensation Plan"); and
WHEREAS, the Board of Directors desires to amend further the terms of
the Deferred Compensation Plan in certain respects as permitted by
Section 8.4 of the Deferred Compensation Plan, without affecting in
any manner the investment of amounts in Participants' 1997 or 1998
Plan Year Subaccounts; and
WHEREAS, due to the delay resulting from implementation of the changes
reflected herein, to date no Participant has elected or has been given
the opportunity to elect to participate in the Deferred Compensation
Plan for the 1999 Plan Year;
NOW, THEREFORE, it is declared as follows:
1. Amended Definitions. The following definitions in Section 1
of the Deferred Compensation Plan are amended to read as follows:
"Election Date" shall mean (i) with respect to the first
Plan Year, except as provided in clause (ii) of this
definition, February 21, 1997; (ii) with respect to the first
Plan Year, March 31, 1997, but only for Eligible Employees
who did not elect to defer compensation on or before February
21, 1997; (iii) with respect to the 1998 Plan Year, February
20, 1998; (iv) with respect to the 1999 Plan Year, February
28, 1999; and (v) with respect to each subsequent Plan Year,
December 1 of the immediately preceding Plan Year.
"Plan Year" shall mean, with respect a Participant, that
period beginning on the first day of the Participant's first
pay period that begins on or after January 1, and ending on
the last day of the Participant's pay period that ends on or
includes the following December 31; provided, however, that
(i) the first Plan Year shall be a short year beginning on
the first day of the Participant's first pay period that
begins on or after February 21, 1997 (if such employee
elected on or before such date), or that begins after March
31, 1997 (if such employee did not elect to defer compensa-
tion on or before February 21, 1997, but did so elect on or
before March 31,1997), and in each case ending on the last
day of the Participant's pay period that ends on or includes
EXHIBIT 10.78
<PAGE>
December 31, 1997, (ii) the 1998 Plan Year shall be a short
year beginning on the first day of the Participant's first
pay period that begins after February 20, 1998, and ending on
the last day of the Participant's pay period that ends on or
includes December 31, 1998 and (iii) the 1999 Plan Year shall
be a short year beginning on the first day of the Partici-
pant's first pay period that begins after February 28, 1999,
and ending on the last day of the Participant's pay period
that ends on or includes December 31, 1999.
2. Amendment to Section 4.2. Section 4.2 of the Deferred
Compensation Plan is amended to read in its entirety as follows:
4.2 Percentage to be Deferred. For the initial Plan Year,
an Eligible Employee may elect to defer any percentage of
Salary not exceeding 25 percent and any percentage of Bonus
not exceeding 15 percent. For the 1998 Plan Year and the
1999 Plan Year, an Eligible Employee may elect to defer any
percentage of Salary not exceeding 20 percent and any
percentage of Bonus not exceeding 15 percent. For each
subsequent Plan Year, an Eligible Employee may elect to defer
any percentage of Salary not exceeding 15 percent and any
percentage of Bonus not exceeding 15 percent. The percentage
designated by the Participant shall apply to each payment of
Salary and Bonus subject to the election.
3. Other Capitalized Terms. Except as otherwise expressly
provided, all capitalized terms used herein shall have the meaning
assigned to such terms in the Deferred Compensation Plan.
4. Confirmation. In all other respects, the terms of the
Deferred Compensation Plan are hereby confirmed and shall remain in
full force and effect.
IN WITNESS WHEREOF, Mirage Resorts, Incorporated has caused this
document to be executed by its duly authorized officer effective as of
February 15, 1999.
MIRAGE RESORTS, INCORPORATED
JAMES E. PETTIS
----------------------------
By: James E. Pettis
Title: Vice President -
Risk Management
2
Third Amendment to Mirage Resorts, Incorporated
Directors' Deferred Fee Plan
WHEREAS, Mirage Resorts, Incorporated maintains a Directors' Deferred
Fee Plan effective as of February 1, 1997, as amended by a First
Amendment thereto effective as of February 28, 1997 and a Second
Amendment thereto effective as of February 1, 1998 (as so amended, the
"Deferred Fee Plan"); and
WHEREAS, the Board of Directors desires to amend further the terms of
the Deferred Fee Plan in certain respects as permitted by Section 8.4
of the Deferred Fee Plan, without affecting in any manner the invest-
ment of amounts in Participants' 1997 or 1998 Plan Year Subaccounts;
and
WHEREAS, due to the delay resulting from implementation of the changes
reflected herein, to date no Participant has elected or has been given
the opportunity to elect to participate in the Deferred Fee Plan for
the 1999 Plan Year;
NOW, THEREFORE, it is declared as follows:
1. Amended Definitions. The following definitions in Section 1
of the Deferred Fee Plan are amended to read as follows:
"Election Date" shall mean (i) with respect to the first
Plan Year, except as provided in clause (ii) of this
definition, February 21, 1997; (ii) with respect to the
first Plan Year, March 31, 1997, but only for Directors who
did not elect to defer fees on or before February 21, 1997;
(iii) with respect to the 1998 Plan Year, February 20,
1998; (iv) with respect to the 1999 Plan Year, February 28,
1999; and (v) with respect to each subsequent Plan Year,
December 1 of the immediately preceding Plan Year.
"Plan Year" shall mean a calendar year; provided, however,
that (i) the first Plan Year shall be a short year
beginning, with respect to each Director, on March 1, 1997
(if such Director elected to defer fees on or before February
21, 1997), or on April 1, 1997 (if such Director did not
elect to defer fees on or before February 21, 1997, but did
so elect on or before March 31, 1997), and in each case
ending on December 31, 1997, (ii) the 1998 Plan Year shall be
a short year beginning on March 1, 1998 and ending on
December 31, 1998 and (iii) the 1999 Plan Year shall be a
short year beginning on March 1, 1999 and ending on December
31, 1999.
EXHIBIT 10.79
<PAGE>
2. Amendment to Section 4.2. Section 4.2 of the Deferred Fee
Plan is amended to read in its entirety as follows:
4.2 Percentage to be Deferred. For the initial Plan Year, a
Director may elect to defer any percentage of Compensation
not exceeding 25 percent. For the 1998 Plan Year and the 1999
Plan Year, a Director may elect to defer any percentage of
Compensation not exceeding 20 percent. For each subsequent
Plan Year, a Director may elect to defer any percentage of
Compensation not exceeding 15 percent.
3. Other Capitalized Terms. Except as otherwise expressly
provided, all capitalized terms used herein shall have the meaning
assigned to such terms in the Deferred Fee Plan.
4. Confirmation. In all other respects, the terms of the
Deferred Fee Plan are hereby confirmed and shall remain in full force
and effect.
IN WITNESS WHEREOF, Mirage Resorts, Incorporated has caused this
document to be executed by its duly authorized officer effective as of
February 15, 1999.
MIRAGE RESORTS, INCORPORATED
JAMES E. PETTIS
----------------------------
By: James E. Pettis
Title: Vice President -
Risk Management
2
A THIRD AMENDMENT TO THE MAY 3, 1996 AGREEMENT
BETWEEN THE CITY OF ATLANTIC CITY AND
MIRAGE RESORTS, INCORPORATED FOR THE
DEVELOPMENT OF THE HURON NORTH REDEVELOPMENT AREA
1. INITIAL RECITALS.
THIS THIRD AMENDMENT (this "Third Amendment") KNOWN AS "A
THIRD AMENDMENT TO THE MAY 3, 1996 AGREEMENT BETWEEN THE CITY OF
ATLANTIC CITY AND MIRAGE RESORTS, INCORPORATED FOR THE DEVELOPMENT OF
THE HURON NORTH REDEVELOPMENT AREA" IS MADE THIS 13th DAY OF
January, 1999 by and between the City of Atlantic City (the "City")
and MAC, CORP. (the Redeveloper"), in consideration of the provisions
set forth hereinafter and the mutual promises contained therein.
WHEREAS, pursuant to Ordinance No. 14 of 1996 adopted by the
City Council of the City of Atlantic City (the "City Council"), the
City entered into a certain agreement known as "An Agreement Between
the City of Atlantic City and Mirage Resorts, Incorporated for the
Development of the Huron North Redevelopment Area" (the "Agreement"),
which Agreement was executed on May 3, 1996; and
WHEREAS, the Redeveloper is the successor by assignment, in
accordance with Section 5.6 of the Agreement, to the rights of Mirage
Resorts, Incorporated in and to the Agreement; and
WHEREAS, pursuant to Ordinance No. 75 of 1997 adopted by the
City Council, the City entered into a certain agreement known as "An
Amendment to the May 3, 1996 Agreement between the City of Atlantic
City and Mirage Resorts, Incorporated for the Development of the Huron
North Redevelopment Area" (the "First Amendment"), which First Amend-
ment was executed on January 8, 1998; and
WHEREAS, pursuant to Ordinance No. 61 of 1998 adopted by the
City Council, the City entered into a certain agreement known as "A
Second Amendment to the May 3, 1996 Agreement Between the City of
Atlantic City and Mirage Resorts, Incorporated for the Development of
the Huron North Redevelopment Area" (the "Second Amendment") and;
WHEREAS, Section 10.5.3 of the Agreement provides that any
amendment to the Agreement must be in writing and specifically recite
that it is being entered into by and between the City and the
EXHIBIT 10.80
<PAGE>
Redeveloper with the specific intention to modify the terms of the
Agreement; and
WHEREAS, pursuant to the First Amendment, the City conveyed
the Project Parcels (as defined in the Agreement) to the Redeveloper
by deed (the "Deed") dated January 8, 1998; and
WHEREAS, Marina Associates, a New Jersey General Partnership,
d/b/a Harrah's ("Harrah's"), whose sole partners are indirect wholly
owned subsidiaries of Harrah's Entertainment, Inc., is the owner of
Lot 10 in Block H-18 on the Tax Map of the City ("Lot 10") which is
adjacent to the Project Parcels and located within the Huron North
Redevelopment Area; and
WHEREAS, Lot 10 is used by Harrah's as a valet surface
parking lot (the "Harrah's Valet Lot"); and
WHEREAS, Section 6.1 of the Redevelopment Plan for the Huron
North Redevelopment Area (the "Redevelopment Plan") adopted by the
City Council provides that the City does not contemplate the public
acquisition of private parcels; however, the Redevelopment Plan
recognizes that such private parcels may be desirable from a develop-
ment standpoint. The Redevelopment Plan further provides that the
acquisition of, or development rights to, such parcels, if at all, are
to be the sole responsibility of the redeveloper, at its own
initiative and expense; and
WHEREAS, the Redevelopment Plan was amended by City Council
pursuant to Ordinance No. 60 of 1998 (the "Amendment to Redevelopment
Plan"); and
WHEREAS, the Redeveloper has determined that a portion of Lot
10 will be of assistance in the completion of the Project (as defined
in the Agreement); and
WHEREAS, Harrah's is currently leasing a portion (the
"Harrah's Intercept Lot") of the Project Parcels from the Redeveloper
consisting of 1,287 surface parking spaces; and
WHEREAS, the Harrah's Intercept Lot is used by Harrah's as an
employee parking lot; and
WHEREAS, Harrah's will be required to vacate the Harrah's
Intercept Lot in connection with the development of the Project
Parcels; and
2
<PAGE>
WHEREAS, the Redeveloper and Harrah's have entered into a
certain agreement known as an "Exchange & Development Agreement" (the
"Exchange Agreement"), which Exchange Agreement was executed July 13,
1998 and is contemplated to be amended in a manner consistent with
this Third Amendment; and
WHEREAS, pursuant to the Exchange Agreement, as amended, the
Redeveloper, subject to the approval of the City by Ordinance
approving this Third Amendment, has agreed to convey a portion of the
Project Parcels shown as the "Mirage Land" on Exhibit A attached
hereto and made a part hereof (the "Mirage Land") to Harrah's in
exchange for a portion of Lot 10 shown as the "Harrah's Land"; and
WHEREAS, Harrah's desires to acquire the Mirage Land and, in
connection with the portion of Lot 10 to be retained by Harrah's (as
shown on Exhibit A hereto the "Harrah's Remainder Land") to develop
the Mirage Land and Harrah's Remainder Land as a surface parking
facility (the "Harrah's Project") to replace the Harrah's Intercept
Lot and Harrah's Valet Lot, understanding that such initial use shall
not in any manner restrict the future use of the Mirage Land and the
Harrah's Remainder Land so long as such lands are developed in accor-
dance with the Redevelopment Plan as it may be amended from time-to-
time; and
WHEREAS, at a hearing held on September 16, 1998, the City
Planning Board granted preliminary and final site plan approval for
the Harrah's Project; and
WHEREAS, Harrah's has made application for other approvals
in order to develop the Harrah's Project; and
WHEREAS, pursuant to Section 4.1.1 of the Redevelopment Plan,
surface parking is a permitted use in the Resort Zone (as defined in
the Redevelopment Plan) in which the Mirage Land and the Harrah's
Remainder Land are located; and
WHEREAS, with respect to the Mirage Land and the Harrah's
Remainder Land, the public policy goals set forth in Section 3.4 of
the Redevelopment Plan would be satisfied upon the completion of
construction of the Harrah's Project; and
WHEREAS, Section 4.2.4 of the Redevelopment Plan provides
that while it is the intent of the Redevelopment Plan to develop all
parcels jointly under a comprehensive program for the entire Project
3
<PAGE>
Area (as defined in the Redevelopment Plan), the City reserves the
right to enter into a redeveloper's agreement for any combination of
said parcels, or to subdivide said parcels into smaller development
tracts should a particular proposal merit such action; and
WHEREAS, pursuant to the Exchange Agreement, the Redeveloper
has requested that the Agreement be amended so as to provide that the
Mirage Land and the Harrah's Remainder Land be considered a separate
development tract pursuant to Section 4.2.4 of the Redevelopment Plan
and that on the effective date of the City Ordinance approving and
adopting this Third Amendment, the City shall execute and deliver to
the Redeveloper an agreement (the "Deed Modification") in the form
attached as Exhibit "B" hereto; and
WHEREAS, to further maximize the development potential of the
Huron North Redevelopment Area, the Redeveloper, subject to the
approval by the City Council of the Ordinance approving this Third
Amendment, has agreed to convey a portion of the Project Parcels shown
as "Tract A" on Exhibit A (the "Joint Venture Property") to a Joint
Venture (the "Joint Venture") formed and established by the
Redeveloper and Boyd Atlantic City, Inc. and known as Marina District
Development Company (f/k/a/ Stardust A.C.) for the purpose of, among
other things, developing and operating thereon a facility consisting
of a hotel-casino and related restaurant, entertainment, retail and
other amenities; and
WHEREAS, pursuant to N.J.S.A. 40A:12A-7, the City Council, by
Resolution No. 680 of 1998, directed the City Planning Board to
prepare a report containing the recommendation of the City Planning
Board concerning, among other things, issues involving the said
proposed conveyances to Harrah's and to the Joint Venture; and
WHEREAS, pursuant to the said direction of City Council, the
City Planning Board, by Resolution Nos. 23A-98 and 22-98
(collectively, the "Planning Board Resolutions"), determined that the
said proposed conveyances are in conformance and consistent with the
Redevelopment Plan for the Huron North Redevelopment Area; and
WHEREAS, City Council has duly considered the Planning Board
Resolutions; and
4
<PAGE>
WHEREAS, pursuant to Section 5.3 of the First Amendment, the
Redeveloper has requested that the Agreement be amended to provide
that the City consent to the said conveyances of the Mirage Land and
the Joint Venture Property; and
WHEREAS, the State of New Jersey Casino Control Commission
(the "CCC") has, (1) in the case of Harrah's, granted a gaming
license, (2) in the case of the Mirage Resorts, Incorporated, the
holder of 100% of the stock of the Redeveloper, issued Statements of
Compliance determining, among other things, that Mirage Resorts,
Incorporated was suitable to be a holding company of a casino licensee
and (3) in the case of Boyd Atlantic City, Inc., issued Statements of
Compliance determining, among other things, that Boyd Atlantic City,
Inc. has satisfied various eligibility criteria in connection with its
application for a casino license; and
WHEREAS, on the strength of the aforesaid actions by the CCC,
the City Council hereby determines that Harrah's and the Joint Venture
are responsible and financially capable developers; and
WHEREAS, in light of the foregoing recitals, the City and the
Redeveloper are desirous of entering into this Third Amendment to
amend varous sections of the Agreement; and
WHEREAS, the City and the Redeveloper acknowledge that the
mutual promises contained in this Third Amendment are good and
valuable consideration for the binding execution of this Third
Amendment;
IT IS ON THE DATE STATED ABOVE AGREED BY AND BETWEEN THE CITY
AND THE REDEVELOPER AS FOLLOWS:
2. INCORPORATION OF RECITALS
2.0 Incorporation of Recitals. The recitals set forth in
Section 2 of this Third Amendment are hereby incorporated by
reference and are considered part of this Third Amendment.
3. DEFINITIONS
3.0 Governing Definitions. The defined words, phrases and
terms in the Agreement, the First Amendment and the Second
Amendment shall have their same respective meanings in this
Third Amendment unless the context clearly indicates
otherwise.
5
<PAGE>
4. PROJECT IDENTIFICATION
4.0 The Harrah's Project. The Agreement is hereby amended
to add the following provision:
"3.1.1 The Harrah's Project.
Notwithstanding the terms of Section 3.1 of the Agreement,
pursuant to Section 4.2.4 of the Redevelopment Plan, as
amended by the Amendment to the Redevelopment Plan and as may
be further amended from time-to-time, the Harrah's Project on
the Mirage Land shall be considered a separate development
tract within the Project Parcels for the development of the
Harrah's Project. Redeveloper has caused Harrah's to agree
to, at the Closing (as defined in Paragraph 4(a) of the
Exchange Agreement, as amended), deliver to the City Harrah's
agreement (the "Harrah's Agreement"), the form of which is
attached hereto and made a part hereof as Exhibit C. Upon
the City's receipt of the Harrah's Agreement which has been
executed by Harrah's, the City shall promptly execute and
deliver same to Harrah's and Redeveloper. Redeveloper shall
not have any liability to the City and the City shall not
have the right to declare Redeveloper in Default of the
Agreement in the event Harrah's fails to comply with any of
its obligations set forth in the Harrah's Agreement. The use
of the Mirage Land the Harrah's Remainder Land for the
Harrah's Project shall not in any manner restrict the future
use of the Mirage Land and the Harrah's Remainder Land so
long as such lands are developed in accordance with the Re-
development Plan and as may be further amended from time-to-
time. The City agrees to provide any reasonable assistance,
without cost or expense to the City other than payroll and
internal administrative costs, which may be required of it to
enable Harrah's to properly apply for and obtain such permits
or approvals in a timely fashion, including making appli-
cations in the name of the City when reasonably advantageous
or otherwise required to do so.
3.1.2 Restriction of Harrah's Land.
Upon delivery of a deed by Harrah's to Redeveloper or its
nominee conveying title to the Harrah's Land, Redeveloper
acknowledges and agrees that the Harrah's Land shall be bound
by the provisions of Sections 5.3.1.3(2) and (3) of the
Agreement, in a manner similar to the Project Parcels.
6
<PAGE>
3.1.3 Release of Mirage Land.
The Harrah's Project and the Mirage Land shall be released
from the Agreement and Section 3.0 of the Deed Modification
upon Substantial Completion (as defined in the Harrah's
Agreement) of the Harrah's Project and upon satisfaction of
other conditions set forth in the Deed Modification attached
hereto as Exhibit B.
3.1.4 No Effect Upon Mirage Land.
No default by Redeveloper in the performance of any provision
of the Agreement or any other agreement with the City and no
termination of any such agreement, for any reason whatsoever,
shall in any manner affect the City's rights or obligations
with respect to the Harrah's Project or the Mirage Land.
3.1.5 Termination of Exchange Agreement.
In the event, for any reason, the Exchange Agreement is ter-
minated prior to the conveyances of the Mirage Land to
Harrah's (or its nominee) and the Harrah's Land to the Rede-
veloper (or its nominee), then in such event, upon such
termination, this Section 4.0 of the Third Amendment shall be
void and severed from the Agreement."
5. THE DEED MODIFICATION
5.0 The Deed Modification. The Agreement is hereby amended
to add the following provisions:
"5.1.2.2. The Deed Modification.
The City agrees that concurrently upon the execution of this
Third Amendment, it will execute and deliver to the Redevel-
oper for recording the Deed Modification, the form of which
is attached hereto and made a part hereof as Exhibit B.
5.1.2.3. The Project Parcels.
Upon the release of the Mirage Land from the terms and
conditions of Section 3.0 of the Deed Modification pursuant
to the terms of the Deed Modification, if such release occurs
prior to the completion of construction of the Project, the
term "Project Parcels" shall henceforth mean the Project
Parcels (1) excluding the Mirage Land and (2) including the
7
<PAGE>
Harrah's Land, as more particularly described by the metes
and bounds legal description attached hereto and made a part
hereof as Exhibit D."
5.1 Consent to Conveyances. The Agreement is hereby amended
to add the following provision:
"5.3.1 Consent to Conveyances. The City hereby approves of
the Redeveloper's conveyances of (i) the Mirage Land to
Harrah's and (ii) the Joint Venture Property to the Joint
Venture."
6. MISCELLANEOUS
6.0 Notices. Section 10.8 of the Agreement is hereby
amended to amend the address and fax number of the Redevel-
oper and to designate a new person that is to receive copies
of all notices to the Redeveloper, as follows:
"As to the Redeveloper:
"Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
ATTN: Bruce A. Levin, Vice President
Mailing Address:
P.O. Box 7700
Las Vegas, Nevada 89177-7700
ATTN: Bruce A. Levin, Vice President
With a copy to:
Lee A. Levine, Esquire
Levine, Staller, Sklar, Chan, Brodsky & Donnelly, P.A.
3030 Atlantic Avenue
Atlantic City, New Jersey 08401
Facsimile No.: (609) 345-2473
6.1 Ratification of All Other Terms and Conditions of the
Agreement and the First Amendment and the Second Amendment.
Except to the extent inconsistent with the terms and
conditions of this Third Amendment, all remaining terms and
conditions of the Agreement and the First Amendment and the
Second Amendment are hereby ratified and confirmed and are
agreed to be in full force and effect.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Third
Amendment effective as of the date appearing on the first
page hereof.
ATTEST CITY OF ATLANTIC CITY
By: ROSEMARY ADAMS By: JAMES WHELAN
-------------------------- ------------------------------
Assistant City Clerk Mayor
------------------------------
Title
Approved as to form:
DANIEL A. COREY
------------------------------
DANIEL A. COREY,
City Solicitor
ATTEST: MAC, CORP.
By: SUSAN M. WALKER By: BRUCE A. LEVIN
-------------------------- ------------------------------
Bruce A. Levin
Vice President and
Assistant Secretary
------------------------------
Title
9
FIRST AMENDMENT TO AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED JOINT VENTURE
AGREEMENT (the "First Amendment") is made as of the 10th day of
September, 1998, by and between MAC, CORP. ("MR Sub"), a New Jersey
corporation which is a wholly owned subsidiary of Mirage Resorts,
Incorporated, a Nevada corporation ("MRI"), and Boyd Atlantic City,
Inc. ("Boyd Sub"), a New Jersey corporation which is a wholly owned
subsidiary of Boyd Gaming Corporation, a Nevada corporation ("Boyd")
(MR Sub and Boyd Sub are hereinafter referred to individually as a
"Venturer" and collectively as the "Venturers"). MRI, Atlandia Design
and Furnishings, Inc., a New Jersey corporation ("Atlandia") and Boyd
are also parties to this First Amendment solely for the specific
purpose of consenting to the change in the name of the Joint Venture,
as hereinafter provided.
RECITALS:
A. The parties hereto previously entered into that certain
Amended and Restated Joint Venture Agreement of Stardust A.C.,
dated as of July 14, 1998 (the "Joint Venture Agreement"); and
B. The parties now wish to modify and amend the Joint Venture
Agreement to change the name of the Joint Venture, as more particu-
larly provided herein.
AGREEMENT:
1. Defined Terms. Unless otherwise defined herein, all
capitalized terms used in this First Amendment shall have the
meanings ascribed to such terms in the Joint Venture
Agreement.
2. Name of Joint Venture. Section 1.2 of the Joint Venture
Agreement is hereby amended to provide that the name of the
Joint Venture shall be Marina District Development Company,
and all business of the Joint Venture shall be conducted
solely in such name or in such other name or names as the
Venturers may mutually determine.
3. Intellectual Property. Section 8.2 of the Joint Venture
Agreement is hereby modified and amended to delete all refer-
ences to the use of the name "Stardust" by the Joint Venture
and to eliminate any requirement of Boyd to enter into a
license agreement with the Joint Venture for the use of the
"Stardust" name.
EXHIBIT 10.81
<PAGE>
4. Full Force and Effect. Except as hereby modified and
amended, all of the terms and provisions of the Joint Venture
Agreement shall remain in full force and effect.
5. Counterparts. This First Amendment may be executed in
any number of counterparts, each of which shall constitute an
original, but all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this First
Amendment as of the date first above written.
MAC, CORP., a New Jersey
corporation
By: BRUCE A. LEVIN
--------------------------
Its: Vice President/Assistant
Secretary
Boyd Atlantic City, Inc., a
New Jersey corporation
By: BRIAN A. LARSON
--------------------------
Its: Vice President
Mirage Resorts, Incorporated, a
Nevada corporation
By: BRUCE A. LEVIN
---------------------------
Its: Vice President/General
Counsel
Atlandia Design and Furnishings,
Inc., a New Jersey corporation
By: BRUCE A. LEVIN
---------------------------
Its: Secretary
Boyd Gaming Corporation, a Nevada
corporation
By: BRIAN A. LARSON
---------------------------
Its: Senior Vice President
2
EXHIBIT 21
SUBSIDIARIES OF MIRAGE RESORTS, INCORPORATED
--------------------------------------------
- - AC HOLDING CORP.
a Nevada corporation
- - AC HOLDING CORP. II
a Nevada corporation
- - THE APRIL COOK COMPANIES
a Nevada corporation
- - ATLANDIA DESIGN AND FURNISHINGS INC.
a New Jersey corporation
- - BEAU RIVAGE DISTRIBUTION CORP. (1)
a Mississippi corporation
- - BEAU RIVAGE RESORTS, INC. (2)
a Mississippi corporation
d.b.a. Beau Rivage
- - BELLAGIO
a Nevada corporation
- - BOARDWALK CASINO, INC.
a Nevada corporation
d.b.a. Holiday Inn - Registered Trademark - Casino Boardwalk
- - GNL, CORP.
a Nevada corporation
d.b.a. Golden Nugget-Laughlin
- - GNLV, CORP.
a Nevada corporation
d.b.a. Golden Nugget
- - GNS FINANCE CORP.
a Nevada corporation
- - GOLDEN NUGGET AVIATION CORP.
a Nevada corporation
- - GOLDEN NUGGET MANUFACTURING CORP. (2)
a Nevada corporation
- - LV CONCRETE CORP.
a Nevada corporation
- - MAC, CORP.
a New Jersey corporation
- - MH, INC. (3)
a Nevada corporation
d.b.a. Shadow Creek
- - THE MIRAGE CASINO-HOTEL
a Nevada corporation
d.b.a. The Mirage
- - MRGS CORP. (4)
a Nevada corporation
- - RESTAURANT VENTURES OF NEVADA, INC.
a Nevada corporation
- - TREASURE ISLAND CORP. (3)
a Nevada corporation
d.b.a. Treasure Island at The Mirage
- ---------------
(1) 100% of the voting securities are owned by Beau Rivage Resorts,
Inc.
(2) 100% of the voting securities are owned by GNLV, CORP.
(3) 100% of the voting securities are owned by THE MIRAGE CASINO-
HOTEL.
(4) 100% of the voting securities are owned by Bellagio.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated February 22, 1999,
included in this Form 10-K, into Mirage Resorts, Incorporated's
previously filed registration statements on Form S-8 (File No. 33-
16037), on Form S-8 (File No. 33-48394), on Form S-8 (File No. 33-
63804), on Form S-8 (File No. 33-60183), on Form S-8 (File No. 333-
59455) and on Form S-3 (File No. 333-39029).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 26, 1999
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31,
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