-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cy5vv5lWmYYFRm6Vo7ILRSNEH4cPyoigwJmcHylRccHb1HEo4iWivgKEjDMDZLfx 1/gcr2FjA8BXLDAyxanp3A== 0000907242-00-000007.txt : 20000331 0000907242-00-000007.hdr.sgml : 20000331 ACCESSION NUMBER: 0000907242-00-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH CASINO & RESORT INC CENTRAL INDEX KEY: 0000907242 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880300760 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-22088 FILM NUMBER: 584426 BUSINESS ADDRESS: STREET 1: 1175 W MOANA LANE STREET 2: STE 200 CITY: RENO STATE: NV ZIP: 89509 BUSINESS PHONE: 7758253355 MAIL ADDRESS: STREET 1: 1175 W MOANA LANE STREET 2: STE 200 CITY: RENO STATE: NV ZIP: 89509 10-K 1 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, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______ Commission File No. 0-22088 Monarch Casino & Resort, Inc. (Exact name of registrant as specified in its charter) ------------------------- NEVADA 88-0300760 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1175 W. MOANA LANE, SUITE 200 RENO, NEVADA 89509 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code: (775) 825-3355 ------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Name of each exchange Title of each class on which registered ------------------- ------------------- None None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $0.01 PAR VALUE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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. [ ] The aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 21, 2000, based on the closing price as reported on The Nasdaq Stock Market(SM) of $5.438 per share, was approximately $12,669,860. As of March 17, 2000, Registrant had outstanding 9,436,275 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for Registrant's 2000 Annual Meeting of Stockholders, which Proxy Statement shall be filed with the Commission not later than 120 days after the end of the fiscal year covered by this report, are incorporated by reference into Part III. STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K WHICH EXPRESS THE "BELIEF", "ANTICIPATION", "INTENTION", "EXPECTATION", OR "SCHEDULES" AS WELL AS OTHER STATEMENTS WHICH ARE NOT HISTORICAL FACT, AND STATEMENTS AS TO BUSINESS OPPORTUNITIES, MARKET CONDITIONS, COST ESTIMATIONS AND OPERATING PERFORMANCE INSOFAR AS THEY MAY APPLY PROSPECTIVELY, ARE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. -2- PART I ITEM 1. BUSINESS Monarch Casino & Resort, Inc., through its wholly-owned subsidiary Golden Road Motor Inn, Inc. ("Golden Road"), owns and operates the tropically-themed Atlantis Casino Resort, a hotel/casino facility in Reno, Nevada (the "Atlantis"). Unless otherwise indicated, "Monarch" or the "Company" refers to Monarch Casino & Resort, Inc. and its Golden Road subsidiary. Monarch was incorporated in 1993 under Nevada law for the purpose of acquiring all of the stock of Golden Road. The principal asset of Monarch is the stock of Golden Road, which holds substantially all of the assets of the Atlantis. The Company's principal executive offices are located at 1175 West Moana Lane, Suite 200, Reno, Nevada 89509, telephone (775) 825-3355. Until December 1999, Monarch Casino & Resort, Inc. owned two other subsidiaries, Dunes Marina Resort & Casino, Inc.("Dunes Marina"), and Sea World Processors, Inc. ("Sea World"). Dunes Marina and Sea World had been inactive for several years and had virtually no assets or liabilities. In December 1999, both corporations were dissolved. THE ATLANTIS CASINO RESORT Through Golden Road, the Company owns and operates the tropically-themed Atlantis, which is located approximately three miles south of downtown Reno in the generally more affluent southwest area of Reno. In the 1998 second quarter, the Company began construction of a major expansion of the Atlantis (the "Atlantis Expansion") that was substantially completed in the second quarter of 1999. The two primary components of the Atlantis Expansion were a new 27-story hotel tower with approximately 391 new hotel rooms and suites with an adjoining new low rise structure containing additional casino and public space (the "Hotel Tower Project"), and an enclosed overhead sky walk ("Sky Terrace") structure connecting the Atlantis with a 16 acre site across South Virginia Street from the Atlantis, which contains approximately 8,000 square feet of casino and public space. The Sky Terrace was officially opened to the public on March 18, 1999. The Atlantis now features approximately 51,000 square feet of casino space interspersed with waterfalls and water features, giant artificial palm trees, thatched-roof huts, and other tropical features; a hotel and a motor lodge; nine food outlets; a nightclub; an enclosed pool with waterfall features in addition to an outdoor pool; health club; retail outlets featuring traditional "gift shop" merchandise as well as clothing and other merchandise and a gift shop featuring items with the Atlantis logo; an 8,000 square-foot family entertainment center; and approximately 25,000 square feet of banquet, convention and meeting room space. The Atlantis is the closest hotel casino to the 370,000 square-foot Reno Sparks Convention Center (the "Convention Center"), and the only hotel casino located within easy walking distance of the Convention Center. -3- Casino. The Atlantis' casino features approximately 40 table games, including blackjack, craps, roulette, mini-baccarat, "Let it Ride(TM)", "Three Card Poker(TM)", "Fortune Pai Gow Poker(TM)", and "Royal Match(TM)"; approximately 1,500 slot and video poker machines; a race and sports book (which is operated by an independent third party pursuant to a lease arrangement with the Company); keno; and a poker room. During the year ended December 31, 1999, 76.0% of the Atlantis' casino revenue was from slot and video poker machines, 21.3% was from table games, and 2.7% was from keno and the poker room. The Atlantis offers what the Company believes to be higher-than-average payout rates on slot machines and has adopted liberal rules for its blackjack games which include using mostly single decks of cards at its tables and allowing the player to "double down" on the first two cards. The Company's present policy is to extend gaming credit only to a limited number of qualified customers. Lodging. The Atlantis features three contiguous high-rise hotel towers offering a total of 834 rooms and suites, and a low-rise motor lodge offering another 148 rooms, for a total guest room count of 976. The first of the three hotel towers was completed in April 1991 and contains 160 rooms and suites in 13 stories. The second hotel tower was completed in September 1994 and contains 283 rooms and suites in 19 stories. The third tower was completed in June 1999 and contains 385 rooms and suites in 27 stories. The top seven floors in the newest tower are larger than the standard guest rooms by nearly 20% and feature private elevator access, upscale accommodations, and a private concierge service. The Atlantis' hotel rooms feature fresh, colorful interior decorations and furnishings consistent with the Atlantis' tropical theme, as well as nine-foot ceilings (most standard hotel rooms feature eight-foot ceilings), which give the rooms an open and spacious feel. The newest hotel tower features a four story waterfall with an adjacent swimming pool in a climate controlled, five story glass enclosure, which shares an outdoor third floor pool deck with an outdoor swimming pool and whirlpool. The health club is located adjacent to the swimming areas. The hotel also features glass elevators rising the full 19 and 27 stories of the two taller hotel towers, providing panoramic views of the northern Reno valley, known as the Truckee Meadows and the Sierra Nevadas, which is a majestic mountain range separating Nevada from California. The two-story, 148-room motor lodge, which has been operated by the Company since 1973, is located on the back half of the Atlantis' 13-acre site. The motor lodge rooms, which are also decorated and furnished consistently with the Atlantis' tropical theme, contain less average square footage than the hotel rooms and have standard eight-foot ceilings. The Company believes the motor lodge rooms appeal to value conscious travelers who still want to enjoy the experience of and amenities associated with a stay at a first-class hotel casino resort. The Company renovated all of the motor lodge units in 1996. -4- The average occupancy rate at the Atlantis for fiscal years 1999, 1998, and 1997 was 86.8%, 88.0%, and 85.9%, respectively. Dining. The Atlantis features six restaurants, one snack bar, and two gourmet coffee bars, including the 640-seat Toucan Charlie's Buffet & Grill, which features a wide variety of standard hot food line selections, salads and seafood, and specialty substations featuring made to order items such as Mongolian Barbecue, fresh Southwest and Asian specialties, meats roasted in wood-fired rotisserie ovens, and two salad stations; the aquatic-themed 135- seat Atlantis Seafood Steakhouse gourmet restaurant; the new, upscale, intimate 230-seat MonteVigna Italian Ristorante, featuring a centrally located wine "cellar" and seasonal outdoor terrace; the 74-seat Oyster Bar restaurant in the new Sky Terrace, featuring seafood flown in daily and soups and bisques made to order; a 178-seat twenty-four hour coffee shop; a 104-seat cafe restaurant featuring pizzas from a wood-fired, brick oven; and a snack bar and soda fountain. There are two gourmet coffee bars, one located in the Sky Terrace, and the other located adjacent to the Xanadu Lounge next to the 27-story elevator lobby, both featuring fine specialty coffee drinks and pastries and desserts made fresh daily in the Atlantis bakery. The Sky Terrace. The Sky Terrace is a one-of-a-kind structure, with a diamond-shaped, blue glass body rising approximately 55 feet from street level and spanning 160 feet across South Virginia Street with no intermediate support pillars. The Sky Terrace connects the Atlantis with additional parking on a 16 acre site owned by the Company across South Virginia Street from the Atlantis. The structure is supported at each end by two 100 foot tall Grecian columns which erupt in flames at regular intervals. The tropically-themed interior of the Sky Terrace contains an oyster bar and a gourmet coffee and pastry bar with adjacent table seating, a video poker bar and numerous banks of slot machines, and a lounge area featuring oversized leather sofas and chairs. Capital expenditures at the Atlantis totaled approximately $46.1 million, $27.2 million, and $2.3 million in fiscal years 1999, 1998, and 1997, respectively. Capital expenditures during 1999 are a combination of construction costs and the cost of furnishing the completed Atlantis Expansion with fixtures and equipment. The capital expenditures for 1998 primarily reflect construction costs associated with the Atlantis Expansion and upkeep of existing facilities. The expenditures for 1997 were for ongoing refurbishment and enhancement to the Atlantis, including equipment replacements. Operations at the Atlantis are conducted 24 hours a day, every day of the year. The Atlantis' business is moderately seasonal in nature, with its highest revenues typically occurring in the summer months and lower amounts generally in the winter months. MARKETING The Company's revenues and operating income are largely dependent on the level of gaming activity at the Atlantis' casino; therefore, the Company's predominant marketing goal is to attract gaming customers to its casino. The Company's primary objective for its hotel, food and beverage outlets, and other amenities is to utilize those facilities to generate additional casino play, although as a secondary goal, the Company also seeks to maximize revenues from those areas. -5- The Company's marketing efforts are directed toward three broad consumer groups: Reno area residents, non-conventioneer visitors to the Reno area, and conventioneers. The Company believes that the Atlantis' location outside the downtown area and across the street from the Convention Center makes the property appealing to all three groups. Reno area residents. The Atlantis' proximity to rapidly growing, generally more affluent southwestern Reno residential areas provides a significant source of middle to upper-middle income gaming customers. The Company markets to Reno area residents ("Locals") on the basis of the Atlantis' location and accessibility, the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its food and beverage offerings, entertainment offerings, promotions, and gaming values. The Company believes that Locals as a group tend to prefer slot and video poker machines over table games, and tend to prefer video poker machines over reel- spinning (or electronically simulated reel-spinning) slot machines. Accordingly, the Atlantis provides a large, diverse selection of video poker machines. Moreover, the Company believes that Locals tend to seek out and frequent those casinos with higher-than-average payout rates on slot and video poker machines and liberal rules on table games. The Company believes that the Atlantis offers higher-than-average payout rates on slot machines, and has adopted liberal rules for its blackjack games which include using mostly single decks of cards at its tables and allowing players to "double down" on the first two cards. Non-conventioneer Visitors. Reno is a popular gaming and vacation destination which enjoys direct freeway access to nearly all major northern California population centers, and non-stop air service from most large cities in the western United States as well as many Midwest and southern population centers such as Chicago, Dallas, Minneapolis and St. Louis. The principal segments of Reno's non-conventioneer visitor market are leisure travelers, package tour and travel customers, and higher-level wagerers. The Company attempts to maximize its gaming revenues and hotel occupancy through a balanced marketing approach addressing each market segment. Leisure travelers are not affiliated with groups and make their reservations directly with hotels of their choice or through independent travel agents. The Company believes that this segment is largely comprised of individuals driving, and to a lesser extent, flying to Reno from a regional market, primarily California and to a lesser extent, the Pacific Northwest. The Company strives to attract the middle to upper-middle income strata of this segment through advertising and direct marketing in select markets. This segment represents a significant portion of the Atlantis' customers, especially those customers visiting on weekends. The package tour and travel segment consists of visitors who utilize travel "packages" produced by wholesale operators. The Company markets to this segment through relationships with select wholesalers, primarily to generate customer visits and supplement occupancy mid-week. The Company selectively markets to higher-level wagerers through direct sales. The Company utilizes complimentary rooms, food and beverage, special events and the extension of gaming credit to attract higher-level wagerers. -6- Conventioneers. Convention business, like package tour and travel, generates mid-week customer visits and supplements occupancy during low-demand periods. Conventioneers typically also pay higher average room rates than non- conventioneers. The Company seeks those convention and meeting groups which it believes will materially enhance the Atlantis' average occupancy rate and average daily room rates, as well as those the Company believes will be more likely to gamble. As the only hotel casino within easy walking distance of the Convention Center, the Company believes the Atlantis is uniquely positioned to capitalize on this segment. The Company believes that this market segment is presently underserved in the Reno area, and that the additional rooms and amenities added with the completed Atlantis Expansion enhances the Company's ability to realize the potential of this market segment. The Company markets to all customer segments, including conventioneers, on the basis of the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its rooms and food and beverage offerings, entertainment offerings, promotions, and gaming values. The Company has instituted a frequent player club, "Club Paradise," which allows the Atlantis' customers to earn rewards and special privileges based on the amount of their play, while at the same time allowing the Company to track the play of those customers utilizing a computerized player tracking system. The Company uses this information to determine appropriate levels of complimentary awards, and also in its direct marketing efforts. The Company believes that Club Paradise significantly enhances the Company's ability to build customer loyalty and generate repeat customer visits. COMPETITION Competition in the Reno area gaming market is intense. Based on information obtained from the December 31, 1999 Gaming Revenue Report published by the Nevada State Gaming Control Board and Company estimates, the Company believes that there are approximately 12 casinos in the Reno area which generate more than $12 million each in annual gaming revenues, approximately 7 of which are located in downtown Reno. The Company believes that the Atlantis' competition for Locals comes primarily from other large-scale casinos located outside of downtown Reno that offer amenities that appeal to middle to upper-middle income customers, and secondarily with those casinos located in downtown Reno which offer similar amenities. The Company competes for Locals primarily on the basis of the desirability of its location, the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its food and beverage offerings, entertainment offerings, promotions, and gaming values. The Company believes its proximity to residential areas in southwest and southeast Reno and its abundant surface parking afford it an advantage over the casinos located in downtown Reno in attracting Locals. The Company believes that the Atlantis' primary competition for non- conventioneer visitors comes from other large-scale casinos, including those located in downtown Reno and those located away from downtown Reno, that offer amenities that appeal to middle to upper-middle income customers. The Company competes for non-conventioneer visitors on the basis of the desirability of -7- its location, the quality and ambiance of the Atlantis facility, friendly efficient service, the quality and relative value of its rooms and food and beverage offerings, entertainment offerings, promotions, and gaming values. The Company believes that its location away from downtown Reno is appealing to many customers who prefer to avoid the more congested downtown Reno area; however, the Atlantis' location is a disadvantage in that it does not afford the Company the ability to generate walk-in traffic, which is a significant source of customers for some casinos located in downtown Reno. The Company believes that the Atlantis' primary competition for conventioneers comes from other large-scale hotel casinos in the Reno area that actively target the convention market segment, and secondarily from other cities on the U.S. west coast with large convention facilities and substantial hotel capacity, including Las Vegas. The Company competes for conventioneers based on the desirability of its location, the quality and ambiance of the Atlantis facility, meeting and banquet rooms designed to appeal to conventions and groups, friendly efficient service, and the quality and relative value of its rooms and food and beverage offerings. The Company believes that the Atlantis' proximity to the Convention Center affords it a distinct competitive advantage in attracting conventioneers. The Atlantis also competes for gaming customers with hotel casino operations located in other parts of Nevada, especially Las Vegas and Lake Tahoe, and with hotel casinos, Indian casinos, and riverboat casinos located elsewhere throughout the United States and the world. The Company believes that the Atlantis also competes to a lesser extent with state-sponsored lotteries, off-track wagering, card parlors, and other forms of legalized gaming, particularly in California and the Pacific Northwest. The recent constitutional amendment approved by California voters allowing the expansion of Indian casinos in California will have an impact on casino revenues in Nevada in general, and many analysts have predicted the impact will be more significant on the Reno-Lake Tahoe market. The extent of this impact is difficult to predict, but the Company believes that the impact on the Company will be mitigated to an extent due to the Atlantis' emphasis on Reno area residents as a significant base of its business. However, if other Reno area casinos suffer business losses due to increased pressure from California Indian casinos, they may intensify their marketing efforts to Reno area residents as well. However, the Company's numerous amenities such as a wide array of restaurants and other venues are a key factor in the Company's ability to attract Reno area residents which competitor facilities will not easily be able to match. Certain experienced Nevada gaming operators have annual agreements to manage expanded Indian casino facilities near Sacramento, one of Reno's key feeder markets. These facilities could provide an alternative to Reno area casinos, especially during certain winter periods when auto travel through the Sierra Nevada is hampered. The Company believes that the legalization of unlimited land-based casino gaming in or near any major metropolitan area in the Atlantis' key marketing areas, such as San Francisco or Sacramento, could have a material adverse effect on its business. -8- REGULATION AND LICENSING Nevada Gaming Regulation The ownership and operation of casino gaming facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local regulations. The Company's gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and the Reno City Council (the "Reno Board"). (The Nevada Commission, the Nevada State Gaming Control Board, and the Reno Board are collectively hereinafter referred to as the "Nevada Gaming Authorities.") The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) 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; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations. Golden Road, which operates the Atlantis, is required to be licensed by the Nevada Gaming Authorities. The gaming license requires the periodic payment of fees and taxes and is not transferable. The Company is registered by the Nevada Commission as a publicly traded corporation ("Registered Corporation") and as such, it is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, Golden Road without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company and Golden Road have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or Golden Road in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and key employees of Golden Road 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 Golden Road may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to -9- licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company or Golden Road, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company or Golden Road 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 Golden Road are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by Golden Road must be reported to, or approved by, the Nevada Commission. If it were determined that the Nevada Act was violated by Golden Road, the gaming licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, Golden Road, the Company, and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Company's gaming properties and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the Company's gaming properties) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company's gaming operations. Any beneficial holder of the Company's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Gaming Act requires any person who acquires more than 5% of the Company's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of the Company's voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of the Company's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such -10- institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company's corporate charter, bylaws, management, policies or operations of the Company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation. Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with such Company or Golden Road, the Company (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities 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 of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction. -11- The Company is required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require the Company's stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. The Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such 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. 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 whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation. Licensee fees and taxes computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and -12- taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling of food or refreshments. Nevada licensees that hold a license as an operator of a slot route, a manufacturer or a distributor also pay certain fees and taxes to the State of Nevada. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. A licensee is also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability. EMPLOYEES As of March 6, 2000, the Company had approximately 1,975 employees. None of the Company's employees are covered by collective bargaining agreements. The Company believes that its relationship with its employees is good. ITEM 2. PROPERTIES The Company's properties consist of: (a) The approximately 13 acre site in Reno, Nevada on which the Atlantis is situated, including the hotel towers, casino, restaurant facilities and surrounding parking. These 13 acres are, in part or in whole, held subject to trust deed encumbrances in favor of financial institutions totaling approximately $81.7 million as of March 8, 2000. (b) An approximately 16 acre site in Reno, Nevada adjacent to the Atlantis and now connected to the Atlantis by the Sky Terrace, approximately seven acres of which is paved and used for customer, employee and valet parking and the remainder of which is undeveloped. This site is suitable and available for future expansion of the Atlantis facilities, parking, or complimentary resort and/or entertainment amenities. The Company has not determined what the ultimate use of this site will be. These 16 acres are held subject to a trust deed encumbrance in the approximate amount of $80.0 million as of March 8, 2000, which amount is also secured by the 13 acre site. -13- ITEM 3. LEGAL PROCEEDINGS On April 26, 1994 and May 10, 1994, complaints in purported class action lawsuits (William Poulos v. Caesars World, Inc. et al., Case No. 94-478-Civ- Orl-22, and William H. Ahern v. Caesars World, Inc. et al., Case No. 94-532- Civ-Orl-22, respectively) were filed in the United States District Court for the Middle District of Florida (the "Florida Complaints") and were subsequently transferred to the United States District Court for the District of Nevada, Southern Division (the "Nevada District Court"). On September 26, 1995, a complaint in a purported class action lawsuit (Larry Schrier v. Caesars World, Inc. et al., Case No. 95-923-LDG (RJJ)) was filed in Nevada District Court (along with the Florida Complaints, the "Complaints"). The Complaints allege that manufacturers, distributors and casino operators of video poker and electronic slot machines, including the Company, have engaged in a course of conduct intended to induce persons to play such games based on a false belief concerning how the gaming machines operate, as well as the extent to which there is an opportunity to win on a given play. The Complaints charge Defendants with violations of the Racketeer Influenced and Corrupt Organizations Act, as well as claims of common law fraud, unjust enrichment and negligent misrepresentation, and seek damages in excess of $1 billion without any substantiation of that amount. The Nevada District Court consolidated the actions (and one other action styled William Poulos v. American Family Cruise Line, NV et al., Case No. CV -S-95-936-LDG (RLH), in which the Company is not a named defendant). The parties are currently awaiting a decision from the Nevada U.S. District Court on the issue of class certification. Management believes that the substantive allegations in the Complaints are without merit and intends vigorously to defend the allegations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's security holders during the fourth quarter of fiscal 1999. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) The Company's common stock trades on The Nasdaq Stock Market(SM) under the symbol MCRI. The following table sets forth the high and low sales prices of the Company's common stock, as reported by The Nasdaq Stock Market(SM), during the periods indicated. 1999 1998 -------------- -------------- High Low High Low ------ ------ ------ ------ First quarter.......... 8 1/3 5 1/4 7 3/4 4 3/4 Second quarter.......... 7 5 1/3 7 5 3/8 Third quarter........... 7 3/4 5 1/2 6 1/2 5 3/8 Fourth quarter.......... 7 1/4 5 1/2 6 4 3/4 (b) As of March 15, 2000, there were approximately 136 holders of record of the Company's common stock, and approximately 784 beneficial stockholders. -14- (c) The Company paid no dividends in 1999 or 1998. The Company presently intends to retain earnings to finance its operating activities and does not anticipate declaring cash dividends in the foreseeable future. The Company's bank loan agreement also contains provisions which limit Monarch's ability to pay dividends to its stockholders. See Item 8, "FINANCIAL STATEMENTS, Notes to Consolidated Financial Statements." ITEM 6. SELECTED FINANCIAL DATA
Years ended December 31, -------------------------------------------- (In thousands except per share amounts) 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------- OPERATING RESULTS Casino revenues $48,345 $40,717 $37,254 $31,836 $30,072 Other revenues 43,227 31,802 30,365 29,476 30,099 -------------------------------------------- Gross revenues 91,572 72,519 67,619 61,312 60,171 Promotional allowances (12,707) (10,009) (8,504) (7,676) (6,772) -------------------------------------------- Net revenues 78,866 62,511 59,115 53,636 53,399 Income from operations 3,982 9,039 9,159 6,049 6,351 Income (loss) before income tax and extraordinary item (945) 5,681 5,722 1,298 2,323 Income (loss) before extraordinary item (585) 3,760 3,710 830 1,564 Net income (loss) $ (585) $ 3,760 $ 3,526 $ 830 $ 1,564 ======= ======= ======= ======= ======= - ---------------------------------------------------------------------------------------- INCOME PER SHARE OF COMMON STOCK Income (loss) before extraordinary item Basic $ (0.06) $ 0.40 $ 0.39 $ 0.09 $ 0.16 Diluted $ (0.06) $ 0.40 $ 0.39 $ 0.09 $ 0.16 Net income (loss) Basic $ (0.06) $ 0.40 $ 0.37 $ 0.09 $ 0.16 Diluted $ (0.06) $ 0.40 $ 0.37 $ 0.09 $ 0.16 Weighted average number of common shares and potential common shares outstanding Basic 9,436 9,436 9,444 9,502 9,536 Diluted 9,436 9,502 9,479 9,502 9,536 - ---------------------------------------------------------------------------------------- OTHER DATA EBITDA $ 11,720 $13,475 $13,284 $10,191 $10,370 Depreciation and amortization $ 7,738 $ 4,436 $ 4,125 $ 4,142 $ 4,020 Interest expense $ 4,742 $ 2,403 $ 3,437 $ 3,627 $ 4,087 Capital expenditures $ 46,132 $27,206 $ 2,270 $ 2,838 $ 2,148 - ---------------------------------------------------------------------------------------- BALANCE SHEET DATA Total assets $132,310 $96,732 $67,828 $67,379 $69,269 Current maturities of long-term debt $ 7,334 $ 850 $ 2,244 $ 3,487 $ 3,993 Long-term debt, less current maturities $ 82,236 $52,310 $32,908 $37,602 $39,069 Stockholders' equity $ 25,869 $26,453 $22,694 $19,001 $18,435 -15- 1999 includes a $184 thousand loss on disposal of fixed assets. 1998 includes a non-cash disposal of fixed assets charge of $956 thousand, primarily from demolition relating to the start of the Atlantis Expansion. 1997 includes a $185 thousand non-cash extraordinary loss on early retirement of debt, net of applicable income tax benefit. 1996 includes non-cash fixed asset impairment charge of $1.3 million (before minority interests), relating to the write down of the Company's investment in Sea World. 1995 includes a $433 thousand provision for litigation expenses related to two unfavorable judgments rendered in unrelated cases, and a $459 thousand charge for asset impairment associated with changing the name of the Company's hotel casino to the Atlantis Casino Resort. "EBITDA" consists of income from operations plus depreciation and amortization. EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, or as an alternative to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. This item enables comparison of the Company's performance with the performance of other companies that report EBITDA, although some companies do not calculate this measure in the same manner and therefore, the measure as presented, may not be comparable to similarly titled measures presented by other companies. Includes amounts financed with debt or capitalized lease obligations. The Company paid no dividends during the five year period ended December 31, 1999.
-16- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STATEMENT ON FORWARD-LOOKING INFORMATION Certain information included herein contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as statements relating to anticipated expenses, capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to competitive industry conditions, expansion of Indian casinos in California, Reno-area tourism conditions, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), the regulation of the gaming industry (including actions affecting licensing), outcome of litigation, domestic or global economic conditions and changes in federal or state tax laws or the administration of such laws. RESULTS OF OPERATIONS 1999 Compared with 1998 For the year ended December 31, 1999, the Company had a loss of $0.6 million, or $0.06 per share, on net revenues of $78.9 million, compared to earnings of $3.8 million, or $0.40 per share, on net revenues of $62.5 million for the year ended December 31, 1998. The Company's income from operations totaled $4.0 million for 1999 compared to $9.0 million for 1998. The Company believes the Atlantis continued to benefit in 1999 from the rapid growth occurring in the residential and industrial communities south of the Atlantis in Reno, and from the increasing popularity of the Atlantis with visitors to the Reno area. The Company believes its results were detrimentally impacted in 1999 by disruptions and pre-opening costs associated with the Atlantis Expansion, which involved major construction activity on both sides of the Atlantis during the first and second quarters of the year and expansion related disruptions into the third quarter of the year. Casino revenues totaled $48.3 million in 1999, up 18.7% from $40.7 million in 1998, driven by increases in both slot and table game win. Revenue from slot and video poker machines ("slot machines") increased approximately 18.8% in 1999 compared to 1998 due to an almost 30% increase in the number of slot machines on average for the year. Table game win increased approximately 16.5% in 1999 compared to 1998 due to an increase in table game drop and an almost 8% increase in the number of table games on average for the year. Casino operating expenses were 44.8% of casino revenues in 1999, compared to 43.7% in 1998, primarily as a result of higher promotional allowance costs in 1999. Food and beverage revenues increased in 1999, up 38.6% to $25.2 million from $18.2 million in 1998. Food and beverage operating expenses increased, amounting to 64.1% of food and beverage revenues in 1999 compared to 54.2% in 1998. The increase is primarily due to a combination of increased food and payroll costs. -17- Hotel revenues totaled $14.8 million in 1999, an increase of 35.3% from $10.9 million in 1998, driven by a 36.3% increase in the Atlantis' average number of rooms occupied and a 1.6% increase in the Atlantis' average daily room rate ("ADR"). ADR was $55.16 in 1999, compared to $56.23 in 1998. The average occupancy rate at Atlantis was 86.8% in 1999 compared to 88.0% in 1998. Hotel operating expenses amounted to 33.0% of hotel revenues in 1999, compared to 32.6% in 1998, with the slight increase reflecting increased operating inefficiencies during the final period of construction in the first half of the year and the opening of new rooms. Other revenues increased approximately 20.3% in 1999 to $3.2 million from $2.7 million in 1998, primarily reflecting increased revenues from the Atlantis retail outlet. Other expenses were approximately 35.1% of other revenues in 1999, up from 17.9% in 1998, primarily due to opening a second gift shop. Selling, general and administrative ("SG&A") expenses totaled 29.6% of net revenues in 1999, compared to 27.7% in 1998, with the increase primarily reflecting higher personnel costs and higher marketing costs in 1999. This increase in part reflects additional marketing and administrative staff added for the 1999 opening of the Atlantis Expansion, as well as additional operating expenses associated with the Atlantis Expansion. Interest expense for 1999 totaled $4.7 million, up from $2.4 million in 1998, reflecting an increase in the Company's debt from the Atlantis expansion and the capitalization of certain interest costs in 1999. In 1999, the Company capitalized approximately $1.6 million in interest costs related to construction activities at the Atlantis compared to $0.4 million in 1998. The Company incurred a non-cash expense of $0.2 million in the fourth quarter of 1999 for the disposal of certain fixed assets and a non-cash expense of $1.0 million in 1998 in conjunction with the Atlantis Expansion, including certain exterior walls, door and windows that had to be removed to make way for the expanded facilities. 1998 Compared with 1997 For the year ended December 31, 1998, the Company earned $3.8 million, or $.40 per share, on net revenues of $62.5 million, compared to earnings of $3.5 million, or $.37 per share, on net revenues of $59.1 million for the year ended December 31, 1997. The Company's income from operations totaled $9.0 million for 1998 compared to $9.2 million for 1997. The Company believes the Atlantis continued to benefit in 1998 from the rapid growth occurring in the residential and industrial communities south of the Atlantis in Reno, and from the increasing popularity of the Atlantis with visitors to the Reno area. The Company also believes its results were positively impacted in 1998 by the American Bowling Congress tournament, which ran from March through June 1998 at the National Bowling Stadium in downtown Reno and which brought approximately 90,000 visitors to the Reno area. However, the Company also believes its results were detrimentally impacted in 1998 by unusually severe winter weather in the first quarter of the year and by disruptions associated with the Atlantis Expansion, which involved major construction activity on both sides of the Atlantis during the third and fourth quarters of the year. -18- Casino revenues totaled $40.7 million in 1998, up 9.3% from $37.3 million in 1997, driven by increases in both slot and table game win. Revenue from slot machines increased approximately 8% in 1998 compared to 1997 due to an increase in the average daily win per slot machine. Table game win increased approximately 16% in 1998 compared to 1997 due to an increase in table game drop and an improvement in table game hold. Casino operating expenses amounted to 43.7% of casino revenues in 1998, compared to 43.1% in 1997. Food and beverage revenues were up slightly in 1998, rising approximately 2% to $18.2 million from $17.8 million in 1997. Food and beverage operating expenses were basically unchanged, amounting to 54.2% of food and beverage revenues in 1998 compared to 54.3% in 1997. Hotel revenues totaled $10.9 million in 1998, up more than 7% from $10.2 million in 1997, driven by a 2.1 point improvement in the Atlantis' occupancy rate and a 5% increase in the Atlantis' ADR. ADR was $56.23 in 1998, compared to $53.50 in 1997. The average occupancy rate at Atlantis was 88.0% in 1998 compared to 85.9% in 1997. Hotel operating expenses amounted to 32.6 % of hotel revenues in 1998, compared to 36.4% in 1997, with the improvement reflecting increased operating efficiencies and a higher level of revenue from which to offset the relatively high level of fixed costs of the hotel operation. Other revenues increased approximately 15.5% in 1998 to $2.7 million from $2.3 million in 1997, primarily reflecting increased revenues from the Atlantis' retail outlet. Other expenses equaled 17.9% of other revenues in 1998, down slightly from 18.5% in 1997. SG&A expenses totaled 27.7% of net revenues in 1998, compared to 27.0% in 1997, with the increase primarily reflecting higher personnel costs and higher marketing costs in 1998. This increase in part reflects additional marketing and administrative staff added in preparation for the 1999 opening of the Atlantis Expansion, as well as additional operating expenses associated with the Atlantis Expansion. Interest expense for 1998 totaled $2.4 million, down from $3.4 million in 1997, reflecting lower average interest rates on the Company's debt and the capitalization of certain interest costs in 1998. In 1998, the Company capitalized approximately $0.4 million in interest costs related to construction activities at the Atlantis. During 1997, there was no capitalized interest. The Company incurred a non-cash expense of $1.0 million in the fourth quarter of 1998 for the disposal of certain fixed assets in conjunction with the Atlantis Expansion, including certain exterior walls, doors and windows that had to be removed to accommodate the expanded facilities. -19- OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS The recent constitutional amendment approved by California voters allowing the expansion of Indian casinos in California will have an impact on casino revenues in Nevada in general, and many analysts have predicted the impact will be more significant on the Reno-Lake Tahoe market. The extent of this impact is difficult to predict, but the Company believes that the impact on the Company will be mitigated to an extent due to the Atlantis' emphasis on Reno area residents as a significant base of its business. However, if other Reno area casinos suffer business losses due to increased pressure from California Indian casinos, they may intensify their marketing efforts to Reno area residents as well. However, the Company's numerous amenities such as a wide array of restaurants and other venues are a key factor in the Company's ability to attract Reno area residents which competitor facilities will not easily be able to match. The Company also believes that the legalization of unlimited land-based casino gaming in or near any major metropolitan area in the Atlantis' key marketing areas, such as San Francisco or Sacramento, could have a material adverse effect on its business. The gaming industry represents a significant source of tax revenues to the State of Nevada. A recent proposal in Nevada would increase the tax on gaming revenues from 6.25% to 11.25%. If enacted, this proposal would have a material impact on the Company's results of operations. LIQUIDITY AND CAPITAL RESOURCES The Company has historically funded its daily hotel and casino activities with net cash provided by operating activities. For the years 1999, 1998, and 1997, net cash provided by operating activities totaled $11.1 million, $8.7 million, and $9.5 million, respectively. During each of the three years, net cash provided by operating activities was sufficient to fund the day to day operating expenses of the Company. Net cash used in investing activities, which consisted of acquisitions of property and equipment and the completion of the Atlantis Expansion, totaled $38.3 million, $26.1 million, and $1.6 million in 1999, 1998,and 1997, respectively. Total capital expenditures, including amounts financed, were $46.1 million, $34.5 million, and $2.2 million in 1999, 1998, and 1997, respectively. Capital expenditures during 1999 and 1998 primarily reflect construction costs, fixtures, and equipment associated with the Atlantis Expansion, and the expenditures for 1997 were primarily directed toward ongoing refurbishment and enhancement of the Atlantis, including equipment replacement. The Company funded the majority of these costs with borrowings available under its $80 million construction credit facility and $4.5 million equipment credit facility (the principal terms of which are summarized in Note 4 in the Notes to Consolidated Financial Statements, see Item 8, "FINANCIAL STATEMENTS, Notes to Consolidated Financial Statements"), together with cash flow from operations. At December 31, 1999, the outstanding balance of the Credit Facilities was $80 million and $4 million, respectively. Net cash provided by financing activities totaled $28.6 million in 1999 and $16.9 million in 1998, as a result of the Company borrowing funds under its bank credit facilities to finance the construction of the Atlantis -20- expansion. Net cash used in financing activities in 1997 totaled $6.3 million, with the funds being used primarily to reduce long-term debt. The Company also used funds in 1997 to repurchase its common stock on the open market. The Company believes that its existing cash balances and cash flow from operations will provide the Company with sufficient resources to fund its operations, meet its debt repayment obligations, and fund its other capital expenditure requirements; however, the Company's operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond its control. The Company's credit facility restricts additional debt incurrence. If the Company is unable to generate sufficient cash flow, it could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional equity capital. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None. ITEM 8. FINANCIAL STATEMENTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF MONARCH CASINO & RESORT, INC.: We have audited the accompanying consolidated balance sheet of Monarch Casino & Resort, Inc., (a Nevada Corporation) and subsidiary as of December 31, 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Monarch Casino & Resort, Inc. and subsidiary as of December 31, 1999, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. /s/Arthur Andersen LLP Las Vegas, Nevada February 11, 2000 -21- ITEM 8A. FINANCIAL STATEMENTS REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS OF MONARCH CASINO & RESORT, INC. We have audited the accompanying consolidated balance sheet of Monarch Casino & Resort, Inc. as of December 31, 1998, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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 Monarch Casino & Resort, Inc. as of December 31, 1998, and the consolidated results of its operations and its consolidated cash flows for each of the two years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/Grant Thornton LLP Reno, Nevada January 29, 1999 -22- MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, ------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Revenues Casino................................ $ 48,344,843 $ 40,716,535 $ 37,254,033 Food and beverage..................... 25,189,207 18,169,375 17,841,009 Hotel................................. 14,807,903 10,948,283 10,199,911 Other................................. 3,230,489 2,685,012 2,323,885 ------------ ------------ ------------ Gross revenues..................... 91,572,442 72,519,205 67,618,838 Less promotional allowances........... (12,706,786) (10,008,673) (8,504,072) ------------ ------------ ------------ Net revenues....................... 78,865,656 62,510,532 59,114,766 ------------ ------------ ------------ Operating expenses Casino................................ 21,659,138 17,800,326 16,043,256 Food and beverage..................... 16,135,529 9,850,599 9,682,253 Hotel................................. 4,889,968 3,567,021 3,710,462 Other................................. 1,132,640 479,560 430,471 Selling, general and administrative... 23,328,208 17,337,640 15,964,188 Depreciation and amortization......... 7,738,029 4,436,249 4,125,408 ------------ ------------ ------------ Total operating expenses........... 74,883,512 53,471,395 49,956,038 ------------ ------------ ------------ Income from operations............. 3,982,144 9,039,137 9,158,728 ------------ ------------ ------------ Other income (expense) Interest expense, net................. (4,742,475) (2,402,562) (3,436,650) Disposal of fixed assets.............. (184,206) (955,836) - ------------ ------------ ------------ Total other........................ (4,926,681) (3,358,398) (3,436,650) ------------ ------------ ------------ Income (loss) before income taxes and extraordinary item...... (944,537) 5,680,739 5,722,078 Provision (benefit) for income taxes.... (359,672) 1,920,957 2,011,930 ------------ ------------ ------------ Income (loss) before extraordinary item.............................. (584,865) 3,759,782 3,710,148 Extraordinary item - loss on early retirement of debt, net of applicable income tax benefit of $95,057..................... - - (184,524) ------------ ------------ ------------ Net income (loss).................. $ (584,865) $ 3,759,782 $ 3,525,624 ============ ============ ============ INCOME PER SHARE OF COMMON STOCK Income (loss) before extraordinary item Basic.............................. $ (0.06) $ 0.40 $ 0.39 Diluted............................ $ (0.06) $ 0.40 $ 0.39 Net income (loss) Basic.............................. $ (0.06) $ 0.40 $ 0.37 Diluted............................ $ (0.06) $ 0.40 $ 0.37 Weighted average number of common shares and potential common shares outstanding Basic.............................. 9,436,275 9,436,275 9,444,333 Diluted............................ 9,436,275 9,502,327 9,479,359
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -23- MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, ---------------------------- 1999 1998 ------------ ------------ ASSETS Current assets Cash........................................ $ 6,367,507 $ 4,919,143 Receivables, net............................ 1,954,447 1,283,129 Related party receivables................... 83,205 22,315 Inventories................................. 1,456,602 747,364 Prepaid expenses............................ 1,600,249 1,917,429 Prepaid federal income tax.................. 443,870 449,226 Deferred income taxes....................... 1,174,626 432,874 ------------ ------------ Total current assets..................... 13,080,506 9,771,480 ------------ ------------ Property and equipment Land........................................ 10,339,530 10,339,530 Land improvements........................... 3,034,095 - Buildings................................... 78,432,078 35,335,973 Furniture and equipment..................... 49,392,494 24,667,318 Improvements................................ 4,462,520 4,969,881 ------------ ------------ 145,660,717 75,312,702 Less accumulated depreciation and amortization.............. (27,964,180) (22,125,039) ------------ ------------ 117,696,537 53,187,663 Construction in progress.................... - 32,669,282 ------------ ------------ Net property and equipment............... 117,696,537 85,856,945 Other assets, net............................. 877,382 1,103,535 ------------ ------------ $ 131,654,425 $ 96,731,960 ============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -24- MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, ---------------------------- 1999 1998 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt........ $ 7,333,921 $ 850,498 Accounts payable............................ 7,238,084 3,441,829 Accounts payable construction............... 942,264 7,275,617 Accrued expenses............................ 5,156,363 4,152,237 Federal income taxes payable................ 213,686 - ------------ ------------ Total current liabilities................ 20,884,318 15,720,181 Long-term debt, less current maturities....... 82,235,509 52,309,785 Deferred income taxes......................... 2,666,017 2,248,548 Commitments and contingencies Stockholders' equity Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued............. - - Common stock, $.01 par value, 30,000,000 shares authorized; 9,536,275 issued; 9,436,275 outstanding...................... 95,363 95,363 Additional paid-in capital.................. 17,241,788 17,241,788 Treasury stock.............................. (329,875) (329,875) Retained earnings........................... 8,861,305 9,446,170 ------------ ------------ Total stockholders' equity............... 25,868,581 26,453,446 ------------ ------------ $131,654,425 $ 96,731,960 ============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -25- MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock -------------------- Additional Retained Shares Paid-in Earnings Treasury Outstanding Amount Capital (Deficit) Stock Total ----------- -------- ------------ ----------- -------- ------------ Balance, January 1, 1997 9,453,275 $ 95,363 $ 17,008,779 $ 2,160,764 $(264,000) $ 19,000,906 Net income - - - 3,525,624 - 3,525,624 Treasury stock acquired, at cost (17,000) - - - (65,875) (65,875) Other - - 233,009 - - 233,009 ----------- -------- ------------ ----------- --------- ------------ Balance, December 31, 1997 9,436,275 95,363 17,241,788 5,686,388 (329,875) 22,693,664 Net income - - - 3,759,782 - 3,759,782 ----------- -------- ------------ ----------- --------- ------------ Balance, December 31, 1998 9,436,275 95,363 17,241,788 9,446,170 (329,875) 26,453,446 Net loss - - - (584,865) - (584,865) ----------- -------- ------------ ----------- --------- ------------ Balance, December 31, 1999 9,436,275 $ 95,363 $ 17,241,788 $ 8,861,305 $(329,875) $ 25,868,581 =========== ======== ============ =========== ========= ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -26- MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, ------------------------------------------ 1999 1998 1997 ------------ ------------ ------------ Cash flows from operating activities: Net income (loss)............................ $ (584,865) $ 3,759,782 $ 3,525,624 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization.............. 7,919,120 4,616,722 4,308,991 (Gain) loss on disposal of assets.......... 184,206 955,836 (4,589) Deferred income taxes...................... (324,283) 623,674 949,009 Increase in receivables, net............... (732,208) (393,205) (343,124) (Increase) decrease in inventories......... (709,238) 93,419 (210,664) (Increase) decrease in prepaid expenses.... 322,536 (856,913) (164,794) (Increase) decrease in other assets........ 41,599 (1,884) 304,854 Increase (decrease) in accounts payable.... 3,796,255 (669,628) 108,691 Increase in accrued expenses and federal income taxes payable........... 1,217,812 527,412 980,769 ------------ ------------ ------------ Net cash provided by operating activities..................... 11,130,934 8,655,215 9,454,767 ------------ ------------ ------------ Cash flows from investing activities: Proceeds from sale of assets................. 39,993 8,170 188,040 Acquisition of property and equipment........ (31,964,910) (26,145,674) (1,820,935) Payment on accounts payable construction..... (6,333,353) - - ------------ ------------ ------------ Net cash used in investing activities..... (38,258,270) (26,137,504) (1,632,895) ------------ ------------ ------------ Cash flows from financing activities: Proceeds from long-term borrowings........... 30,671,549 21,385,842 32,810,000 Principal payments on long-term debt......... (2,095,849) (4,437,430) (39,085,029) Acquisition of treasury stock................ - - (65,875) ------------ ------------ ------------ Net cash provided by (used in) financing activities............ 28,575,700 16,948,412 (6,340,904) ------------ ------------ ------------ Net increase (decrease) in cash........... 1,448,364 (533,877) 1,480,968 Cash at beginning of period.................... 4,919,143 5,453,020 3,972,052 ------------ ------------ ------------ Cash at end of period.......................... $ 6,367,507 $ 4,919,143 $ 5,453,020 ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest....................... $ 4,880,664 $ 1,850,321 $ 3,590,323 Capitalized interest......................... $ 1,550,916 $ 432,835 $ - Cash paid for income taxes................... $ - $ 1,987,479 $ 610,000 Supplemental schedule of non-cash investing and financing activities: The Company financed the purchase of property and equipment in the following amounts...... $ 7,833,446 $ 8,336,347 $ 336,926 Capitalized loan costs included in accounts payable......................... - - $ 1,185,000
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -27- MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993. Monarch's wholly-owned subsidiary, Golden Road Motor Inn, Inc. ("Golden Road"), operates the Atlantis Casino Resort (the "Atlantis"), a hotel/casino facility in Reno, Nevada. Unless stated otherwise, the "Company" refers to Monarch and its wholly-owned subsidiary Golden Road. Until December 1999, Monarch Casino & Resort, Inc. owned two other subsidiaries, Dunes Marina Resort & Casino, Inc.("Dunes Marina"), and Sea World Processors, Inc. ("Sea World"). Dunes Marina and Sea World had been inactive for several years and had virtually no assets or liabilities. In December 1999, both corporations were dissolved. The consolidated financial statements include the accounts of Monarch and Golden Road. Intercompany balances and transactions are eliminated. Use of Estimates In preparing these financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the year. Actual results could differ from those estimates. Reclassifications Certain amounts in the 1998 and 1997 consolidated financial statements have been reclassified to conform with the 1999 presentation. These reclassifications had no effect on the previously reported net income. Capitalized Interest The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. When no debt is specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company's average cost of borrowed money. Interest capitalization is ceased when the project is substantially complete. The amounts capitalized during the years ended December 31, 1999, 1998, and 1997 were $1,550,916, $432,835, and $0, respectively. Cash and Cash Equivalents The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. -28- Related Party Receivables Receivables from officers, employees, or affiliated companies are primarily for banquet related services, and are priced at the retail value of the goods or services provided. Inventories Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Since inception, property and equipment have been depreciated principally on a straight line basis over the estimated service lives as follows: Buildings..........30-40 years Furniture.......... 5-10 years Equipment.......... 5-20 years Improvements.......15-40 years Casino Revenues Casino revenues represent the net win from gaming activity, which is the difference between wins and losses. Additionally, net win is reduced by a provision for anticipated payouts on progressive jackpots. Promotional Allowances The retail value of hotel, food and beverage services provided to customers without charge is included in gross revenue and deducted as promotional allowances. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses as follows:
Years ended December 31, --------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Food and beverage....... $ 6,769,700 $ 5,644,800 $ 5,393,000 Hotel................... 1,424,700 930,600 360,900 Other................... 105,400 198,700 40,100 ----------- ----------- ----------- $ 8,299,800 $ 6,774,100 $ 5,794,000 =========== =========== ===========
Advertising Costs All advertising costs are expensed as incurred. Advertising expense was $3,314,101, $1,897,036, and $1,940,628 for 1999, 1998, and 1997, respectively. -29- Disposal of Fixed Assets In 1999, there was a loss on disposal of fixed assets of $184 thousand, primarily related to the disposal of obsolete assets. In 1998, there was a loss on disposal of fixed assets of $956 thousand, primarily from the demolition of assets relating to the start of the Atlantis Expansion. Income Taxes Income taxes are recorded in accordance with the liability method specified by Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes." Under the asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is recognized for the estimated taxes payable or refundable on taxes for the current year; (b) a deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of deferred taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence, are not expected to be realized. Pre-Opening Costs During April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-5 "Reporting of the Costs of Start-up Activities" effective for fiscal years beginning after December 15, 1998. The new standard requires that all companies expense costs of "start-up" activities as the costs are incurred. The term "start-up" includes pre-opening, pre- operating, and organization activities. Accordingly, the Company has no capitalized "start-up" costs as of December 31, 1999 and all "start-up" costs related to projects were expensed as incurred in 1999. The impact of the adoption of SOP 98-5 on the 1999 consolidated financial statements was not material. Earnings Per Share In 1997, the Company adopted the provisions of SFAS No. 128 "Earnings Per Share." SFAS No. 128 replaces previously reported earnings per share with "basic" earnings per share and "diluted" earnings per share. Basic earnings per share is computed by dividing reported net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the additional dilution for all potentially dilutive securities such as stock options. In accordance with SFAS No. 128, when an entity has a loss from continuing operations, no potential common shares shall be included in the computation of any diluted per share amount. As such, potential dilution has not been considered in the calculations for 1999. -30- The weighted-average number of common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows:
1999 1998 1997 ----------- ----------- ----------- Basic........................... 9,436,275 9,436,275 9,444,333 Diluted......................... 9,436,275 9,502,327 9,479,359
The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (Shares in thousands):
Years ended December 31, ------------------------------------------------------ 1999 1998 1997 ---------------- ---------------- ---------------- Per Share Per Share Per Share Shares Amount Shares Amount Shares Amount ------ --------- ------ --------- ------ --------- Income (loss) before extraordinary item Basic..................... 9,436 $(0.06) 9,436 $0.40 9,444 $0.39 Effect of dilutive stock options............ - - 66 - 35 - ------ --------- ------ --------- ------ --------- Diluted................... 9,436 $(0.06) 9,502 $0.40 9,479 $0.39 ====== ========= ====== ========= ====== ========= Net income (loss) Basic..................... 9,436 $(0.06) 9,436 $0.40 9,444 $0.37 Effect of dilutive stock options........... - - 66 - 35 - ------ --------- ------ --------- ------ --------- Diluted................... 9,436 $(0.06) 9,502 $0.40 9,479 $0.37 ====== ========= ====== ========= ====== =========
The following options were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares:
1999 1998 1997 ----------- ----------- ----------- Options to purchase shares of common stock (in thousands).... - 16 26 Exercise prices.................. - $5.88-$8.06 $4.88-$8.06 Expiration dates................. - 6/99-5/08 9/98-6/00
In accordance with SFAS No. 128, no options were included in the computation of diluted earnings per share in 1999 because the Company reported a loss and the effect of the options would be anti-dilutive. -31- Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107 "Disclosures About Fair Value of Financial Instruments." The estimated fair value of the Company's financial instruments have been determined by the Company, using available market information and valuation methodologies. However, considerable judgment is required to develop the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying amounts of cash, receivables, accounts payable and accrued expenses, and current installments of long-term debt approximate fair value because of the short-term nature of these instruments. The fair value of long-term debt is estimated based on the current borrowing rates offered to the Company for debt of the same remaining maturities. It is estimated that the carrying amounts of all of the Company's financial instruments approximate fair value at December 31, 1999. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. The Company believes it is not exposed to any significant credit risk on cash and accounts receivable. NOTE 2. ACCOUNTS RECEIVABLE Accounts receivable consist of the following:
December 31, ------------------------- 1999 1998 ----------- ----------- Casino....................... $ 1,663,128 $ 975,131 Hotel........................ 891,290 411,473 Other........................ 49,043 62,103 ----------- ----------- 2,603,461 1,448,707 Less allowance for doubtful accounts.......... (649,014) (165,578) ----------- ----------- $ 1,954,447 $ 1,283,129 =========== ===========
-32- NOTE 3. ACCRUED EXPENSES Accrued expenses consist of the following:
December 31, ------------------------- 1999 1998 ----------- ----------- NOTE 4. LONG-TERM DEBT Long-term debt consists of the following:
December 31, ---------------------------- 1999 1998 ------------- ------------- Amounts outstanding under bank reducing revolving credit facility, collateralized by substantially all property and equipment of Golden Road and guaranteed by Monarch and its three largest stockholders, with floating interest rates tied to a base rate approximately equal to the prime rate or LIBOR (at the Company's option) plus a margin which fluctuates according to the Company's ratio of funded debt to EBITDA. At December 31, 1999, the weighted average interest rate was approximately 9.16%. The loan matures in June 2004, with all unpaid interest and principal due and payable at that time.................... $ 80,000,000 $ 50,328,451 Note payable to bank, collateralized by real property and guaranteed by Monarch and its three largest stockholders, with floating interest rates equal to the three month LIBO rate plus a margin which fluctuates according to the Company's ratio of funded debt to EBITDA. At December 31, 1999, the interest rate was approximately 9.585%. Interest and scheduled principal payments are payable quarterly until June, 2004, with all unpaid interest and principal due and payable at that time........................................ 1,685,097 1,855,097 Amount outstanding under bank promissory note, unsecured and guaranteed by Monarch's three largest stockholders, with a variable initial interest rate of 9% and adjusted based on an independent index plus 0.5 percentage points over the index. Interest is paid monthly and the note matures on April 5, 2001...................................... 1,000,000 - -33- Amounts outstanding under bank credit facility, collateralized by furniture, fixtures and equipment and guaranteed in full by Monarch and in part by Monarch's three largest stockholders, with interest rates on advances fixed at a margin over five year U.S. Treasury notes. At December 31, 1999, the Company's weighted average interest rate was 7.44%. Each advance under the credit facility is repaid in 60 monthly installments of principal and interest....................................... 4,012,523 339,795 Slot purchase contracts, collateralized by equipment, maturing in 2001. Contracts are non-interest bearing...................................................... 2,852,956 515,736 Notes payable, collateralized by equipment, with principal and interest due monthly through 2001.............. 18,854 121,204 ------------ ------------ $ 89,569,430 $ 53,160,283 Less current maturities....................................... (7,333,921) (850,498) ------------ ------------ $ 82,235,509 $ 52,309,785 ============ ============
THE CREDIT FACILITY. The Company has an $80 million reducing revolving term loan credit facility (the "Credit Facility") with a consortium of banks. The Credit Facility is a direct obligation of Golden Road, and is guaranteed by Monarch. The Credit Facility is also guaranteed individually by John Farahi, Co-Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Monarch and Golden Road and General Manager of the Atlantis; Bahram (Bob) Farahi, Co-Chairman of the Board and President of Monarch and Golden Road; and Behrouz (Ben) Farahi, Co-Chairman of the Board, Chief Financial Officer, Secretary and Treasurer of Monarch and Golden Road. The Company will be able to utilize proceeds from the Credit Facility for working capital needs and general corporate purposes relating to the Atlantis and for ongoing capital expenditure requirements at the Atlantis. At the Company's option, borrowings under the Credit Facility can accrue interest at a rate designated by the agent bank as its base rate (the "Base Rate") or at the London Interbank Offered Rate ("LIBOR") for one, two, three or six month periods. The rate of interest paid by the Company will include a margin added to either the Base Rate or to LIBOR that is tied to the Company's ratio of funded debt to EBITDA (the "Leverage Ratio"). Depending on the Company's Leverage Ratio, this margin can vary between 0.00 percent and 2.00 percent above the Base Rate, and between 1.50 percent and 3.50 percent above LIBOR. At December 31, 1999, the applicable margin was the Base Rate plus 2.0%, and the applicable LIBOR margin was LIBOR plus 3.5%. The Base Rate at December 31, 1999 was 10.5%, and the LIBOR rates were for various time periods and ranged in interest rates from 9.14% to 9.21%. At December 31, 1999, the Company had no Base Rate loans outstanding and had three LIBOR loans outstanding totaling $80 million. The maturity date of the Credit Facility is June 30, 2004. Beginning July 1, 2000, the maximum principal available under the Credit Facility will reduce quarterly from $80 million by an aggregate of $40 million in increasing increments ranging from $1.5 million to $6 million per quarter. The Company may prepay borrowings under the Credit Facility without penalty (subject to certain charges applicable to the prepayment of LIBOR borrowings prior to the -34- end of the applicable interest period) so long as the amount repaid is at least $200 thousand and a multiple of $10 thousand. Amounts prepaid under the Credit Facility may be reborrowed so long as the total borrowings outstanding do not exceed the maximum principal available. The Company may also permanently reduce the maximum principal available under the Credit Facility at any time so long as the amount of such reduction is at least $500 thousand and a multiple of $50 thousand. The Credit Facility is secured by liens on substantially all of the real and personal property of Golden Road, as well as by the aforementioned parent and personal guarantees. The Credit Facility contains covenants customary and typical for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of the Company's assets (including provisions requiring that a minimum amount equal to two percent of the Company's gaming revenues each year must be expended on capital expenditures at the Atlantis), and covenants restricting the Company's ability to merge, transfer ownership of Golden Road, incur additional indebtedness, encumber assets, and make certain investments. The Credit Facility also contains covenants requiring the Company to maintain certain financial ratios, and provisions restricting transfers between Golden Road and Monarch and between Golden Road and other specified persons. The Credit Facility also contains provisions requiring the achievement of certain financial ratios before the Company can repurchase its common stock or pay or declare dividends. The Company paid various fees and other loan costs upon the closing of the Credit Facility that are being amortized over the term of the Credit Facility using the effective interest rate method. As of January 2000, the Company will be required to pay a fee equal to three eighths of one percent per annum on the average unused portion of the Credit Facility. Annual maturities of long-term debt as of December 31, 1999, are as follows:
Years ending December 31, ------------ 2000.......... $ 7,333,921 2001.......... 8,786,336 2002.......... 9,341,912 2003.......... 11,407,259 2004.......... 52,700,002 Thereafter - ------------ $ 89,569,430 ============
-35- NOTE 5. INCOME TAX Income tax provision (benefit) consists of the following:
Years ended December 31, --------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Current provision.(benefit)........... $ (655,843) $ 1,297,283 $ 1,062,921 Deferred provision.................... 296,171 623,674 949,009 ----------- ----------- ----------- $ (359,672) $ 1,920,957 $ 2,011,930 =========== =========== ===========
The difference between the Company's provision (benefit) for federal income taxes as presented in the accompanying Consolidated Statements of Operations, and the provision (benefit) for income taxes computed at the statutory rate is comprised of the items shown in the following table as a percentage of pre-tax earnings.
Years ended December 31, --------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Income tax at the statutory rate...... (34.0)% 34.0% 34.0% Non-deductible expenses............... 3.5% 1.7% 1.2% Tax credits........................... (7.6)% (1.2)% - Other, net............................ - (0.7)% - ----------- ----------- ----------- (38.1)% 33.8% 35.2% =========== =========== ===========
The components of the deferred income tax assets and liabilities at December 31, 1999 and 1998, as presented in the Consolidated Balance Sheets, are as follows: -36-
1999 1998 ----------- ----------- CURRENT ASSETS Compensation and benefits............ $ 188,804 $ 88,319 Bad debt reserves.................... 220,665 56,297 Accrued gaming liabilities........... 253,508 71,406 Accrued other liabilities............ 47,594 - Alternative minimum tax credit....... 392,055 216,852 Other tax credit..................... 72,000 - ----------- ----------- 1,174,626 432,874 NONCURRENT ASSETS Net operating loss carryforward...... 655,843 - ----------- ----------- Deferred income tax asset $ 1,830,469 $ 432,874 =========== =========== NONCURRENT LIABILITIES Impairment of assets................. $ (170,196) $ (70,195) Depreciation......................... (2,874,121) (1,900,810) Land basis........................... (277,543) (277,543) ----------- ----------- Deferred income tax liability $(3,321,860) $(2,248,548) =========== ===========
SFAS No. 109 requires recognition of the future tax benefit of deferred tax assets to the extent realization of such benefits is "more likely than not," otherwise a valuation allowance is applied. Based on the operating history of the Company, management determined that the assets meet the "more likely than not" criteria and therefore no valuation allowance has been recognized as of December 31, 1999. As of December 31, 1999, the Company had a net operating loss carryforward available for Federal income tax purposes of approximately $1,929,000, which expires in 2019. NOTE 6. BENEFIT PLANS Self Insurance - The Company is self-insured for health care claims for eligible active employees. Benefit plan administrators assist the Company in determining its liability for self-insured claims, and such claims are not discounted. The Company is also self-insured for workman's compensation. Both plans limit the Company's maximum liability under stop-loss agreements with insurance companies. The maximum liability for health care claims under the stop-loss agreement is $50,000 as of November 1, 1999, and was $40,000 prior to that date. The maximum liability for workman's compensation under the stop- loss agreement is $300,000. -37- Savings Plan - Effective November 1, 1995, the Company adopted a savings plan, which qualifies under Section 401(k) of the Internal Revenue Code. Under the plan, participating employees may defer up to 15% of their pre-tax compensation, but not more than statutory limits. The Company contributes twenty five cents for each dollar contributed by a participant, with a maximum contribution of 4% of a participant's compensation. The Company's matching contribution was approximately $21,770 in 1999, $19,300 in 1998, and $17,000 in 1997. Stock Option Plans - The Company maintains three stock option plans, consisting of the Directors' Stock Option Plan, the Executive Long-term Incentive Plan, and the Employee Stock Option Plan, which collectively provide for the granting of options to purchase up to 425,000 common shares. The exercise price of stock options granted under the plans is established by the respective plan committees, but the exercise price may not be less than the market price of the Company's common stock on the date the option is granted. Options expire five to ten years from the grant date. The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, but applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans. If the Company had elected to recognize compensation cost on the fair market value at the grant dates for awards under the stock option plans, consistent with the method prescribed by SFAS No. 123, net income and income per share would have been changed to the pro forma amounts indicated below:
Years ended December 31, --------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Income (loss) before extraordinary item As reported $ (584,865) $ 3,759,782 $ 3,710,148 Pro forma $ (803,022) $ 3,728,019 $ 3,515,191 Net income (loss) As reported $ (584,865) $ 3,759,782 $ 3,525,624 Pro forma $ (803,022) $ 3,728,019 $ 3,330,668 Basic earnings (loss) per share before extraordinary item As reported $ (0.06) $ 0.40 $ 0.39 Pro forma $ (0.09) $ 0.40 $ 0.37 Basic earnings (loss) per share As reported $ (0.06) $ 0.40 $ 0.37 Pro forma $ (0.09) $ 0.40 $ 0.35 Diluted earnings (loss) per share before extraordinary item As reported $ (0.06) $ 0.40 $ 0.39 Pro forma $ (0.09) $ 0.39 $ 0.37 Diluted earnings (loss) per share As reported $ (0.06) $ 0.40 $ 0.37 Pro forma $ (0.09) $ 0.39 $ 0.35
-38- The fair value of the Company's stock options was estimated as of the grant date using the Black-Scholes option pricing model with the following weighted average assumptions for 1999, 1998, and 1997: dividend yield of 0.0% for all periods; expected volatility of 128.0%, 60.0%, and 35.0%, respectively; a weighted average risk free interest rate of 5.0%, 4.9%, and 6.6%, respectively; and an expected holding period of three to seven years. Presented below is a summary of the status of the Company's stock options and the related transactions.
Weighted Average Shares Exercise Price -------- ---------------- Outstanding at December 31, 1996.... 31,700 $ 6.44 Granted............................ 233,700 3.21 Exercised.......................... - - Forfeited/expired.................. (2,500) (2.88) ------- ----- Outstanding at December 31, 1997.... 262,900 3.60 Granted............................ 14,600 5.98 Exercised.......................... - - Forfeited/expired.................. (25,300) (6.27) ------- ----- Outstanding at December 31, 1998.... 252,200 3.47 Granted............................ 4,800 5.50 Exercised.......................... - - Forfeited/expired.................. (60,100) (5.93) ------- ----- Outstanding at December 31, 1999.... 196,900 $ 3.04 ======= ===== Weighted average fair value of options granted during 1999......... $ 5.50 ======= 1998......... $ 2.18 ======= 1997......... $ 1.28 =======
Stock Options Stock Options Outstanding Exercisable ------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Range of Contractual Exercise Exercise Exercise Prices Shares Life Price Shares Price ---------------- ------- -------- --------- ------- -------- $2.25 to $3.50 132,400 4.00 $ 2.82 52,400 $ 2.31 $4.00 to $5.00 58,700 4.00 $ 5.13 52,400 $ 4.44 $5.75 to $8.13 5,800 4.00 $ 5.97 7,300 $ 5.90 ------- ------- Total 196,900 112,100 ======= =======
-39- NOTE 7. COMMITMENTS AND CONTINGENCIES The Company is a defendant in various pending legal proceedings. In the opinion of management, all pending claims in such litigation will not, in the aggregate, have a material adverse effect on the Company's financial position or results of operations. 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 This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 21, 2000. ITEM 11. EXECUTIVE COMPENSATION This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 21, 2000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 21, 2000. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is incorporated by reference to the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders on June 21, 2000. -40- 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: Consolidated Statements of Income for the years ended December 31, 1999, 1998, and 1997. Consolidated Balance Sheets at December 31, 1999 and 1998. Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997. Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997. Notes to Consolidated Financial Statements. 2. Schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the financial statements or notes thereto. (b) Reports on Form 8-K The Company filed a report on Form 8-K dated October 28, 1999 reporting a change in the Company's auditors. (c) Exhibits Number Exhibit Description ------ ------------------- 3.01 Articles of Incorporation of Monarch Casino & Resort, Inc., filed June 11, 1993 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.01. 3.02 Bylaws of Monarch Casino & Resort, Inc., adopted June 14, 1993 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.02. 3.03 Articles of Incorporation of Golden Road Motor Inn, Inc. filed March 6, 1973; Certificate Amending Articles of Incorporation of Golden Road Motor Inn, Inc. filed August 29, 1973; and Certificate of Amendment of Articles of Incorporation filed April 5, 1984 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.03. -41- 3.04 Bylaws of Golden Road Motor Inn, Inc., adopted March 9, 1973 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.04. 4.01 Specimen Common Stock Certificate for the Common Stock of Monarch Casino & Resort, Inc. is incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33- 64556), Part II, Item 16, Exhibit 4.01. 4.02 Amended and Restated Monarch Casino & Resort, Inc. 1993 Directors' Stock Option Plan is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-022088) for the fiscal year ended December 31,1998, Item 14(c), Exhibit 4.02. 4.03 Amended and Restated Monarch Casino & Resort, Inc. 1993 Executive Long Term Incentive Plan is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1997, Item 14(c), Exhibit 4.03. 4.04 Amended and Restated Monarch Casino & Resort, Inc. 1993 Employee Stock Option Plan is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1997, Item 14(c), Exhibit 4.04. 10.01 Construction and Reducing Revolving Credit Agreement, dated as of December 29, 1997, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders and Swingline Lender is incorporated herein by reference to the Company's Form 8-K report (SEC File 0-22088) dated January 14, 1998, Exhibit 10.01. 10.02 First Amendment to Construction and Reducing Revolving Credit Agreement, dated as of January 9, 1998, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders, Swingline Lender and L/C Issuer is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1997, Item 14(c), Exhibit 10.02. 10.03 Second Amendment to Construction and Reducing Revolving Credit Agreement, dated as of June 12, 1998, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders, Swingline Lender and L/C Issuer is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.01. -42- 10.04 Term Loan Agreement, entered as of the 23rd day of July, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank National Association as Term Lender is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for fiscal quarter ended September 30, 1998, Item 6(a), Exhibit 10.01. 10.05 Schedule to Master Loan Agreement, dated as of December 16, 1998; Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1998, Item 14(c), Exhibit 10.05. 10.06 Agreement dated April 20, 1998, between Golden Road Motor Inn, Inc. and Krump Construction, Inc. is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for the fiscal quarter ended March 31, 1998, Item 6(a), Exhibit 10.01. 10.07 Agreement dated June 12, 1998, between Golden Road Motor Inn, Inc. and Perini Building Company, Inc. is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.02. 10.08 Lease, by and between Sierra Development Company, dba Club Cal- Neva, Tenant, and Golden Road Motor Inn, Inc., dba Clarion Hotel and Casino, Landlord, dated June 10, 1991 is incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 10.03. 10.09 Agreement for Purchase of Real Property between Marcelle M. Caramella, a widow, individually and Marcelle Margaret Caramella, as trustee of the Trust created under the Last Will and Testament of Ernest John Caramella, deceased, Ben A. Caramella and Cecile D. Caramella, as trustees of the Caramella Family Trust Agreement dated December 1, 1989, Marcelle Margaret Caramella, Erma V. Pezzi, Trustee of the Erma V. Pezzi Trust Agreement dated November 21, 1991, Golden Road Motor Inn, Inc. and Farahi Investment Company, dated June 1, 1993 is incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 10.04. 10.10 Agreement between Monarch Casino & Resort, Inc. and Peter Wilday dated May 13, 1994; First Amendment to Agreement between Monarch Casino & Resort, Inc. and Peter Wilday dated June 8, 1994; and Second Amendment to Agreement between Monarch Casino & Resort, Inc. and Peter Wilday dated March 23, 1995 are incorporated herein by reference from the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1994, Item 14(a)(3), Exhibit 10.20. -43- 10.11 Nonstandardized 401(k) Plan Adoption Agreement between Monarch Casino & Resort, Inc. and Smith Barney Shearson dated November 7, 1995 is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1995, Item 14(a)(3), Exhibit 10.21. 10.12 Recordkeeping Service Agreement between Monarch Casino & Resort, Inc. and Travelers Recordkeeping dated June 29, 1995 is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1995, Item 14(a)(3), Exhibit 10.22. 10.13 Trademark Agreement between Golden Road Motor Inn, Inc. and Atlantis Lodge, Inc., dated February 3, 1996 is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1995, Item 14(a)(3), Exhibit 10.23. 10.14 Business Loan Agreement between Golden Road Motor Inn, Inc. and Colonial Bank, dated November 17, 1999; Promissory Note by Golden Road Motor Inn, Inc. in favor of Colonial Bank, dated November 17, 1999; Commercial Guaranty issued by John Farahi in favor of Colonial Bank, dated November 17, 1999; Commercial Guaranty issued by Bahram Farahi in favor of Colonial Bank, dated November 17, 1999; and Commercial Guaranty issued by Ben Farahi, dated November 17, 1999. 10.15 Schedule to Master Loan Agreement, dated as of April 1, 1999; Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 10.16 Schedule to Master Loan Agreement, dated as of April 19, 1999; Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 10.17 Schedule to Master Loan Agreement, dated as of May 5, 1999; Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 10.18 Schedule to Master Loan Agreement, dated as of May 24, 1999; Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. -44- 10.19 Schedule to Master Loan Agreement, dated as of June 23, 1999; Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 21.01 Amended and Restated List of Subsidiaries of Monarch Casino & Resort, Inc. 27.01 Financial Data Schedule -45- 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. MONARCH CASINO & RESORT, INC. (Registrant) Date: March 20, 2000 By: /s/ BEN FARAHI ------------------------------------ Ben Farahi, Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer(Principal Financial Officer and Duly Authorized Officer)
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 ------------------ ----------------------------------- ---- /S/ JOHN FARAHI Co-Chairman of the Board of Directors, March 20, 2000 ------------------ Chief Executive Officer (Principal John Farahi Executive Officer) and Director /S/ BOB FARAHI Co-Chairman of the Board of Directors, March 20, 2000 ------------------ President, and Director Bob Farahi /S/ BEN FARAHI Co-Chairman of the Board of Directors, March 20, 2000 ------------------ Secretary, Treasurer, Chief Financial Ben Farahi Officer (Principal Financial Officer and Principal Accounting Officer) and Director /S/ CRAIG. F. SULLIVAN Director March 20, 2000 ------------------ Craig F. Sullivan /S/ RONALD R. ZIDECK Director March 20, 2000 ------------------ Ronald R. Zideck
-46- EXHIBIT INDEX
Exhibit Page Number Description Number - ----------- ------------------------------------------------------------------ -------- 3.01 Articles of Incorporation of Monarch Casino & Resort, Inc., filed June 11, 1993 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.01. 3.02 Bylaws of Monarch Casino & Resort, Inc., adopted June 14, 1993 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.02. 3.03 Articles of Incorporation of Golden Road Motor Inn, Inc. filed March 6, 1973; Certificate Amending Articles of Incorporation of Golden Road Motor Inn, Inc. filed August 29, 1973; and Certificate of Amendment of Articles of Incorporation filed April 5, 1984 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.03. 3.04 Bylaws of Golden Road Motor Inn, Inc., adopted March 9, 1973 are incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 3.04. 4.01 Specimen Common Stock Certificate for the Common Stock of Monarch Casino & Resort, Inc. is incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33- 64556), Part II, Item 16, Exhibit 4.01. 4.02 Amended and Restated Monarch Casino & Resort, Inc. 1993 Directors' Stock Option Plan is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-022088) for the fiscal year ended December 31,1998, Item 14(c), Exhibit 4.02. 4.03 Amended and Restated Monarch Casino & Resort, Inc. 1993 Executive Long Term Incentive Plan is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1997, Item 14(c), Exhibit 4.03. 4.04 Amended and Restated Monarch Casino & Resort, Inc. 1993 Employee Stock Option Plan is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1997, Item 14(c), Exhibit 4.04. 10.01 Construction and Reducing Revolving Credit Agreement, dated as of December 29, 1997, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders and Swingline Lender is incorporated herein by reference to the Company's Form 8-K report (SEC File 0-22088) dated January 14, 1998, Exhibit 10.01. 10.02 First Amendment to Construction and Reducing Revolving Credit Agreement, dated as of January 9, 1998, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders, Swingline Lender and L/C Issuer is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1997, Item 14(c), Exhibit 10.02. -47- 10.03 Second Amendment to Construction and Reducing Revolving Credit Agreement, dated as of June 12, 1998, among Golden Road Motor Inn, Inc. as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi, and Behrouz Farahi as guarantors, the Lenders as defined therein, and Wells Fargo Bank as administrative and collateral Agent for the Lenders, Swingline Lender and L/C Issuer is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.01. 10.04 Term Loan Agreement, entered into as of the 23rd day of July, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank National Association as Term Lender is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for the fiscal quarter ended September 30, 1998, Item 6(a), Exhibit 10.01. 10.05 Schedule to Master Loan Agreement, dated as of December 16, 1998; Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1998, Item 14(c), Exhibit 10.05. 10.06 Agreement dated April 20, 1998, between Golden Road Motor Inn, Inc. and Krump Construction, Inc. is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for the fiscal quarter ended March 31, 1998, Item 6(a), Exhibit 10.01. 10.07 Agreement dated June 12, 1998, between Golden Road Motor Inn, Inc. and Perini Building Company, Inc. is incorporated herein by reference to the Company's Form 10-Q report (SEC File 0-22088) for the fiscal quarter ended June 30, 1998, Item 6(a), Exhibit 10.02. 10.08 Lease, by and between Sierra Development Company, dba Club Cal- Neva, Tenant, and Golden Road Motor Inn, Inc., dba Clarion Hotel and Casino, Landlord, dated June 10, 1991 is incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 10.03. 10.09 Agreement for Purchase of Real Property between Marcelle M. Caramella, a widow, individually and Marcelle Margaret Caramella, as trustee of the Trust created under the Last Will and Testament of Ernest John Caramella, deceased, Ben A. Caramella and Cecile D. Caramella, as trustees of the Caramella Family Trust Agreement dated December 1, 1989, Marcelle Margaret Caramella, Erma V. Pezzi, Trustee of the Erma V. Pezzi Trust Agreement dated November 21, 1991, Golden Road Motor Inn, Inc. and Farahi Investment Company, dated June 1, 1993 is incorporated herein by reference from the Company's Form S-1 registration statement (SEC File 33-64556), Part II, Item 16, Exhibit 10.04. 10.10 Agreement between Monarch Casino & Resort, Inc. and Peter Wilday dated May 13, 1994; First Amendment to Agreement between Monarch Casino & Resort, Inc. and Peter Wilday dated June 8, 1994; and Second Amendment to Agreement between Monarch Casino & Resort, Inc. and Peter Wilday dated March 23, 1995 are incorporated herein by reference from the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1994, Item 14(a)(3), Exhibit 10.20. 10.11 Nonstandardized 401(k) Plan Adoption Agreement between Monarch Casino & Resort, Inc. and Smith Barney Shearson dated November 7, 1995 is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1995, Item 14(a)(3), Exhibit 10.21. -48- 10.12 Recordkeeping Service Agreement between Monarch Casino & Resort, Inc. and Travelers Recordkeeping dated June 29, 1995 is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1995, Item 14(a)(3), Exhibit 10.22. 10.13 Trademark Agreement between Golden Road Motor Inn, Inc. and Atlantis Lodge, Inc., dated February 3, 1996 is incorporated herein by reference to the Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended December 31, 1995, Item 14(a)(3), Exhibit 10.23. 10.14 Business Loan Agreement between Golden Road Motor Inn, Inc. and ......... 50 Colonial Bank, dated November 17, 1999; Promissory Note by Golden Road Motor Inn, Inc. in favor of Colonial Bank, dated November 17, 1999; Commercial Guaranty issued by John Farahi in favor of Colonial Bank, dated November 17, 1999; Commercial Guaranty issued by Bahram Farahi in favor of Colonial Bank, dated November 17, 1999; and Commercial Guaranty issued by Ben Farahi, dated November 17, 1999. 10.15 Schedule to Master Loan Agreement, dated as of April 1, 1999; ........... 94 Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 10.16 Schedule to Master Loan Agreement, dated as of April 19, 1999; ..........113 Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 10.17 Schedule to Master Loan Agreement, dated as of May 5, 1999; ............132 Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 10.18 Schedule to Master Loan Agreement, dated as of May 24, 1999; ...........151 Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 10.19 Schedule to Master Loan Agreement, dated as of June 23, 1999; ..........170 Master Loan Agreement, dated as of October 3, 1998; and Guaranties, dated as of September 9, 1998, by and among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino & Resort, Inc., John Farahi, Bahram Farahi and Behrouz Farahi as guarantors, and U.S. Bank Leasing and Financial as Lender. 21.01 Amended and Restated List of Subsidiaries of Monarch Casino & ..........189 Resort, Inc. 27.01 Financial Data Schedule
-49- EX-10 2 PROMISSORY NOTE Principal $1,000,000: Loan Date 11-17-1999: Maturity 04-05-2001: Loan No. 982000806: Call 50: Collateral 010: Account --: Officer TMN: Initials -- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Borrower: GOLDEN ROAD MOTOR INN, INC. Lender: COLONIAL BANK dba: ATLANTIS CASINO RESORT P.O. Box 7498 1175 West Moana Lane Reno, NV 89510 Reno, NV 89509 Principal Amount: $1,000,000.00 Initial Rate: 9.000% Date of Note: November 17, 1999 PROMISE TO PAY. GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT ("Borrower") promises to pay to COLONIAL BANK ("Lender"), or order, in lawful money of the United States of America, the principal amount of One Million & 00/100 Dollars ($1,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. The interest rate will not increase above 18.000%. PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 5, 2001. In addition, Borrower will pay regular monthly payments of accrued unpaid interest beginning December 17, 1999, and all subsequent interest payments are due on the same day of each month after that. The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the Colonial Bank Base Rate (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to the Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. The Index currently is 8.500% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 0.500 percentage points over the Index, adjusted if necessary for the minimum and maximum rate limitations described below, resulting in an initial rate of 9.000% per annum. Notwithstanding any other provision of this Note, the variable interest rate or rates provided for in this Note will be subject to the following minimum and maximum rates. NOTICE: Under no circumstances will the interest rate on this Note be less than 5.000% per annum or more than (except for any higher default rate shown below) the lesser of 18.000% per annum or the maximum rate allowed by applicable law. -50- PROMISSORY NOTE 11-17-1999 (Continued) Page 2 Loan No 982000806 PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum interest charge of $50.00. Other than Borrower's obligation to pay any minimum interest charge, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, they will reduce the principal balance due. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 10.000% of the unpaid portion of the regularly scheduled payment or $150.00, whichever is less. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c) Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the Related Documents. (d) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect either now or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts with Lender. (g) Any guarantor dies or any of the other events described in this default section occurs with respect to any guarantor of this Note. (h) A material adverse change occurs in Borrower's financial conditions, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. Upon default, including failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Note to 5.500 percentage points over the Index. The interest rate will not exceed the maximum rate permitted by applicable law. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will also pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. -51- PROMISSORY NOTE 11-17-1999 (Continued) Page 3 Loan No 982000806 This Note has been delivered to Lender and accepted by Lender in the State of Nevada. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Washoe County, the State of Nevada (Initial Here /s/ BF /s/ BF). This Note shall be governed by and construed in accordance with the laws of the State of Nevada. RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account),including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such accounts. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested only in writing by Borrower or by an authorized person. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized to request advances under the line of credit until Lender receives from Borrower at Lender's address shown above written notice of revocation of their authority: JOHN FARAHI, CHIEF EXECUTIVE OFFICER; and BEN FARAHI, CHIEF FINANCIAL OFFICER. Borrower agrees to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; or (d) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender. CERTIFICATION OF FINANCIAL STATEMENTS. An exhibit, titled "CERTIFICATION OF FINANCIAL STATEMENTS," is attached to this Note and by this references is made a part of this Note just as if all the provisions, terms and conditions of the Exhibit had been fully set forth in this Note. AGREEMENT TO PROVIDE FINANCIAL INFORMATION. An exhibit, titled "AGREEMENT TO PROVIDE FINANCIAL INFORMATION," is attached to this Note and by this reference is made a part of this Note just as if all the provisions, terms and conditions of the Exhibit had been fully set forth in this Note. GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive -52- PROMISSORY NOTE 11-17-1999 (Continued) Page 4 Loan No 982000806 presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: GOLDEN ROAD MOTOR INN, INC, dba ATLANTIS CASINO RESORT By: /s/ Bahram Farahi By: /s/ Ben Farahi ------------------------------- ------------------------------------- BAHRAM FARAHI, PRESIDENT BEN FARAHI, CHIEF FINANCIAL OFFICER -53- Date: November 17, 1999 ADDENDUM TO LOAN DOCUMENTS DATED November 17, 1999 covering the loan to Golden Road Motor Inn, Inc, from Colonial Bank of Nevada. The following modifications supercede the document language listed in the loan documents under loan number 982000806 date November 17, 1999. 1. Signers on the Loan Documents will be Bahram (Bob) Farahi and Ben Farahi. 2. Business Loan Agreement: Under the section Events of Default, the death or incompetence of a guarantor will not be considered and event of default. Under the section, Negative Covenants, prior consent is not required to seek additional debt or liens, or be affected by any language under Continuity of Operations and the section pertaining to Loans, Acquisitions and Guaranties. This credit extension is considered unsecured, therefore any reference to collateral or related issues concerning collateral in the agreements is void. Should for any reason this loan be out participated to another lender, the borrower will be placed on advance notice and the participating lender will be no less than an acceptable commercial banking institution. Please acknowledge these changes accordingly: /s/ Bob Farahi Date: 11/17/99 ----------------------- ---------- /s/ Ben Farahi 11/18/99 ----------------------- ---------- By: /s/ Tom Newman - ------------------ Tom Newman Vice President -54- BUSINESS LOAN AGREEMENT Principal $1,000,000: Loan Date 11-17-1999: Maturity 04-05-2001: Loan No. 982000806: Call 50: Collateral 010: Account --: Officer TMN: Initials -- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Borrower: GOLDEN ROAD MOTOR INN, INC. Lender: COLONIAL BANK dba: ATLANTIS CASINO RESORT P.O. Box 7498 1175 West Moana Lane Reno, NV 89510 Reno, NV 89509 THIS BUSINESS LOAN AGREEMENT between GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT ("Borrower") and COLONIAL BANK ("Lender") is made and executed on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans and other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. All such loans and financial accommodations, together with all future loans and financial accommodations from Lender to Borrower, are referred to in this Agreement individually as the "Loan" and collectively as the "Loans." Borrower understands and agrees that: (a) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements, as set forth in this Agreement; (b) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgement and discretion; and (c) all such Loans shall be and shall remain subject to the following terms and conditions of this Agreement. TERM. This Agreement shall be effective as of November 17, 1999, and shall continue thereafter until all Indebtedness of Borrower to Lender has been performed in full and the parities terminate this Agreement in writing. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. Agreement. The word "Agreement" means this Business Loan Agreement, as this business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time. Borrower. The word "Borrower" means GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT. The "Borrower" also includes, as applicable, all subsidiaries and affiliates of Borrower as provided below in the paragraph titled "Subsidiaries and Affiliates." CERCLA. The word "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. Collateral. The word "Collateral" means and includes without limitation all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or -55- 11-17-1999 BUSINESS LOAN AGREEMENT Page 2 Loan No 982000806 (Continued) indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. ERISA. The word "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Event of Default. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "EVENTS OF DEFAULT." Grantor. The word "Grantor" means and includes without limitation each and all of the persons or entities granting a Security Interest in any Collateral for the Indebtedness, including without limitation all Borrowers granting such a Security Interest. Guarantor. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with any Indebtedness. Indebtedness. The word "Indebtedness" means and includes without limitation all Loans, together with all other obligations, debts and liabilities of Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower, or any one or more of them; whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others; whether Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwise unenforceable. Lender. The word "Lender" means COLONIAL BANK, its successors and assigns. Loan. The word "Loan" or "Loans" means and includes without limitation any and all commercial loans and financial accommodations from Lender to Borrower, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. Note. The word "Note" means and includes without limitation Borrower's promissory note or notes, if any, evidencing Borrower's Loan obligations in favor of Lender, as well as any substitute, replacement or refinancing note or notes therefor. Permitted Liens. The words "Permitted Liens" mean: (a) liens and security interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes, assessments, or similar charges either not yet due or -56- 11-17-1999 BUSINESS LOAN AGREEMENT Page 3 Loan No 982000806 (Continued) being contested in good faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (d) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure Indebtedness outstanding on the date of the Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (f) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. Related Documents. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. Security Interest. The words "Security Interest" mean and include without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of 1986 as now or hereafter amended. CONDITIONS PRECENDENT TO EACH ADVANCE. Lender's obligation to make the initial Loan Advance and each subsequent Loan Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all the conditions set forth in this Agreement and in the Related Documents. Loan Documents. Borrower shall provide to Lender in form satisfactory to lender the following documents for the Loan: (a) the Note, (b) Security Agreements granting to Lender security interests in the Collateral, (c) Financing Statements perfecting Lender's Security Interests; (d) evidence of insurance as required below; and (e) any other documents required under this Agreement or by Lender or its counsel, including without limitation any guaranties described below. Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and -57- 11-17-1999 BUSINESS LOAN AGREEMENT Page 4 Loan No 982000806 (Continued) the Related Documents, and such other authorizations and other documents and instruments as Lender or its counsel, in their sole discretion, may require. Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document. Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct. No Event of Default. There shall not exist at the time of any advance a condition which would constitute an Event of Default under this Agreement. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of Loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: Organization. Borrower is a corporation which is duly organized, validly existing, and in good standing under the laws of the State of Nevada and is validly existing and in good standing in all states in which Borrower is doing business. Borrower has the full power and authority to own its properties and to transact the businesses in which it is presently engaged or presently proposes to engage. Borrower also is duly qualified as a foreign corporation and is in good standing in all states in which the failure to so qualify would have a material adverse effect on its businesses or financial condition. Authorization. The execution, delivery, and performance of this Agreement and all Related Documents by Borrower, to the extent to be executed, delivered or performed by Borrower, have been duly authorized by all necessary action by Borrower; do not require the consent or approval of any other person, regulatory authority or governmental body; and do not conflict with, result in a violation of, or constitute a default under (a) any provision of its articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (b) any law, governmental regulation, court degree, or order applicable to Borrower. Financial Information. Each financial statement of Borrower supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Legal Effect. This Agreement constitutes, and any instrument or agreement required hereunder to be given by Borrower when delivered will -58- 11-17-1999 BUSINESS LOAN AGREEMENT Page 5 Loan No 982000806 (Continued) constitute, legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interest, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used, or filed a financing statement under, any other name for at least the last five (5) years. Hazardous Substances. The terms "hazardous waste," "hazardous substance," "disposal," "release," and "threatened release," as used in this Agreement, shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (a) During the period of Borrower's ownership of the properties, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance by any person on, under, about or from any of the properties. (b) Borrower has no knowledge of, or reason to believe that there has been (i) any use, generation, manufacture, storage, treatment, disposal, release, or threatened release of any hazardous waste or substance on, under, about or from the properties by any prior owners or occupants of any of the properties, or (ii) any actual or threatened litigation or claims of any kind by any person relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the properties shall use, generate, manufacture, store, treat, dispose of, or release any hazardous waste or substance on, under, about or from any of the properties; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation those laws, regulations and ordinances described above. Borrower authorizes Lender and its agents to enter upon the properties to make such inspections and test as Lender may deem appropriate to determine compliance of the properties with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the properties for hazardous waste and hazardous substances. Borrower hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this -59- 11-17-1999 BUSINESS LOAN AGREEMENT Page 6 Loan No 982000806 (Continued) section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the properties. The provisions of this section of the Agreement, including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination or expiration of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the properties, whether by foreclosure or otherwise. Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. Taxes. To the best of Borrower's knowledge, all tax returns and reports of Borrower that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. Binding Effect. This Agreement, the Note, all Security Agreements directly or indirectly securing repayment of Borrower's Loan and Note and all of the Related Documents are binding upon Borrower as well as upon Borrower's successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. Commercial Purposes. Borrower intends to use the Loan proceeds solely for business or commercial related purposes. Employee Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, (iii) no steps have been taken to terminate any such plan, and (iv) there are no unfunded liabilities other than those previously disclosed to Lender in writing. Location of Borrower's Offices and Records. Borrower's place of business, or Borrower's Chief executive office, if Borrower has more than one place of business, is located at 1175 West Moana Lane, Reno, NV -60- 11-17-1999 BUSINESS LOAN AGREEMENT Page 7 Loan No 982000806 (Continued) 89509. Unless Borrower has designated otherwise in writing this location is also the office or offices where Borrower keeps its records concerning the Collateral. Information. All information heretofore or contemporaneously herewith furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrower to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. Survival of Representations and Warranties. Borrower understands and agrees that Lender, without independent investigation, is relying upon the above representations and warranties in extending Loan Advances to Borrower, Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will: Litigation. Promptly inform Lender in writing of (a) all material adverse changes in Borrower's financial condition, and (b) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. Financial Records. Maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. Financial Statements. Furnish Lender with, as soon as available, but in no event later than forty five (45) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, compiled by a certified public accountant satisfactory to Lender. All financial reports required to be provided under this Agreement shall be prepared in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. Additional Information. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower's financial condition and business operations as Lender may request from time to time. Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect -61- 11-17-1999 BUSINESS LOAN AGREEMENT Page 8 Loan No 982000806 (Continued) to Borrower's properties and operations, in form, amounts, coverages and with insurance companies reasonably acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such loss payable or other endorsements as Lender may require. Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties insured; (e) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (f) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on Lender's forms, and in the amounts and under the conditions spelled out in those guaranties. Guarantors Amounts ---------- ------- JOHN FARAHI Unlimited BAHRAM FARAHI Unlimited BEN FARAHI Unlimited Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. Loan Fees and Charges. In addition to all other agreed upon fees and charges, pay the following: $250.00 Document Preparation Fee. Loan Proceeds. Use all Loan Proceeds solely for the following specific purposes: Working Capital. Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of -62- 11-17-1999 BUSINESS LOAN AGREEMENT Page 9 Loan No 982000806 (Continued) Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriate governmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower's properties, income, or profits. Performance. Perform and comply with all terms, conditions, and provisions set forth in this Agreement and in the Related Documents in a timely manner, and promptly notify Lender if Borrower learns of the occurrence of any event which constitutes and Event of Default under this Agreement or under any of the Related Documents. Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operation, including without limitation, compliance with the Americans With Disabilities Act and with all minimum funding standards and other requirements of ERISA and other laws applicable to Borrower's employee benefit plans. Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense. Compliance Certificate. Unless waived in writing by Lender, provide Lender at least annually and at the time of each disbursement of Loan proceeds with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement. Environmental Compliance and Reports. Borrower shall comply in all respects with all environmental protection federal, state and local -63- 11-17-1999 BUSINESS LOAN AGREEMENT Page 10 Loan No 982000806 (Continued) laws, statutes, regulations and ordinances; not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources. Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: Indebtedness and Liens. (a) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets, or (c) sell with recourse any of Borrower's accounts, except to Lender. Continuity of Operations. (a) Engage in any business activities substantially different than those in which Borrower is presently engaged, (b) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change ownership, change its name, dissolve or transfer or sell Collateral out of the ordinary course of Business, (c) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure. Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or assets, (b) purchase, create or acquire any interest in any -64- 11-17-1999 BUSINESS LOAN AGREEMENT Page 11 Loan No 982000806 (Continued) other enterprise or entity, or (c) incur any obligation as surety or guarantor other than in the ordinary course of business. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (a) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender. OUT OF DEBT PERIOD. An out of debt period will be required for 90 days during the term of the loan. Loan will be considered in default if obligations with other lenders are in default. RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts. EVENTS OF DEFAULT. Each of the following shall constitute and Event of Default under this Agreement: Default of Indebtedness. Failure of Borrower to make any payment when due on the Loans. Other Defaults. Failure of Borrower or any Grantor to comply with or to perform when due any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents, or failure of Borrower to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower or any Grantor under -65- 11-17-1999 BUSINESS LOAN AGREEMENT Page 12 Loan No 982000806 (Continued) this Agreement or Related Documents is false or misleading in any material respect at the time made or furnished, or becomes false or misleading at any time thereafter. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any Security Agreement to create a valid and perfected Security Interest) at any time and for any reason. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower, any creditor of any Grantor against any collateral securing the Indebtedness, or by any governmental agency. This includes a garnishment, attachment, or levy on or of any of Borrower's deposit accounts with Lender. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except, where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of and Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. -66- 11-17-1999 BUSINESS LOAN AGREEMENT Page 13 Loan No 982000806 (Continued) MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Applicable Law. This Agreement has been delivered to Lender and accepted by Lender in the State of Nevada. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Washoe County, the State of Nevada (Initial Here /s/ BF /s/ BF). This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. Multiple Parties; Corporate Authority. All obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower shall mean each and every Borrower. This means that each of the persons signing below is responsible for all obligations in this Agreement. Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interest in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interest irrespective of any personal claims or defenses that Borrower may have against Lender. Costs and Expenses. Borrower agrees to pay upon demand all of Lender's expenses, including without limitation attorneys' fees, incurred in -67- 11-17-1999 BUSINESS LOAN AGREEMENT Page 14 Loan No 982000806 (Continued) connection with the preparation, execution, enforcement, modification and collection of this Agreement or in connection with the Loans made pursuant to this Agreement. Lender may pay someone else to help collect the Loans and to enforce this Agreement, and Borrower will pay that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collections services. Borrower also will pay any court costs, in addition to all other sums provided by law. Notices. All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimile (unless otherwise required by law), and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Borrower, notice to any Borrower will constitute notice to all Borrowers. For notice purposes, Borrower will keep Lender informed at all times of Borrower's current address(es). Severability. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used herein shall include all subsidiaries and affiliates of Borrower. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any subsidiary or affiliate of Borrower. Successors and Assigns. All covenants and agreements contained by or on behalf of Borrower shall bind its successors and assigns and shall inure to the benefit of Lender, its successors and assigns. Borrower shall not, however, have the right to assign its rights under this Agreement or any interest therein, without the prior written consent of Lender. Survival. All warranties, representations, and covenants made by Borrower in this Agreement or in any certificate or other instrument -68- 11-17-1999 BUSINESS LOAN AGREEMENT Page 15 Loan No 982000806 (Continued) delivered by Borrower to Lender under this Agreement shall be considered to have been relied upon by Lender an will survive the making of the Loan and delivery to Lender of the Related Documents, regardless of any investigation made by Lender or on Lender's behalf. Time Is of the Essence. Time is of the essence in the performance of this Agreement. Waiver. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any obligations of Borrower or of any Grantor as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent in subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the sole discretion of Lender. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF November 17, 1999. BORROWER: GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT By: /s/ BAHRAM FARAHI By: /s/ BEN FARAHI --------------------------- ------------------------------------- BAHRAM FARAHI, PRESIDENT BEN FARAHI, CHIEF FINANCIAL OFFICER LENDER: COLONIAL BANK By: /s/ TOM NEWMAN --------------------- Authorized Officer -69- COMMERCIAL GUARANTY Principal $1,000,000: Loan Date 11-17-1999: Maturity 04-05-2001: Loan No. 982000806: Call 50: Collateral 010: Account --: Officer TMN: Initials -- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Borrower: GOLDEN ROAD MOTOR INN, INC. Lender: COLONIAL BANK dba: ATLANTIS CASINO RESORT P.O. Box 7498 1175 West Moana Lane Reno, NV 89510 Reno, NV 89509 Guarantor: JOHN FARAHI 4095 Odile Court Reno, NV 89511 AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited. CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, JOHN FARAHI ("Guarantor") absolutely and unconditionally guarantees and promises to pay to COLONIAL BANK ("Lender") or its order, in legal tender of the United States of America, the Indebtedness (as that term is defined below) of GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT ("Borrower") to Lender on the terms and conditions set forth in this Guaranty. Under this Guaranty, the liability of Guarantor is unlimited and the obligations of Guarantor are continuing. DEFINITIONS. The following words shall have the following meanings when used in this Guaranty: Borrower. The word "Borrower" means GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT. Guarantor. The word "Guarantor" means JOHN FARAHI. Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for the benefit of Lender dated November 17, 1999. Indebtedness. The word "Indebtedness" is used in its most comprehensive sense and means and includes any and all of Borrower's liabilities, obligations, debts, and indebtedness to Lender, now existing or hereinafter incurred or created, including, without limitation, all loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease obligations, other obligations, and liabilities of Borrower, or any of them, and any present or future judgments against Borrower, or any of them; and whether any such Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined; whether Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery on the Indebtedness may be or may become barred or unenforceable against Borrower for any reason whatsoever; and whether the Indebtedness arises from transactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise. -70- 11-17-1999 COMMERCIAL GUARANTY Page 2 Loan No 982000806 (Continued) Lender. The word "Lender" means COLONIAL BANK, its successors and assigns. Related Documents. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force. Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of all Indebtedness. Accordingly, no payments made upon the Indebtedness will discharge or diminish the continuing liability of Guarantor in connection with any remaining portions of the Indebtedness or any of the Indebtedness which subsequently arises or is thereafter incurred or contracted. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all other obligations of Guarantor under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written notice of revocation must be mailed to Lender, by certified mail, at the address of Lender listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to advances or new Indebtedness created after actual receipt by Lender of Guarantor's written revocation. For this purpose and without limitation, the term "new Indebtedness" does not include Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. This Guaranty will continue to bind Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior to receipt of Guarantor's written notice of revocation, including any extensions, renewals, substitutions or modifications of the Indebtedness. All renewals, extensions, substitutions, and modifications of the Indebtedness granted after Guarantor's revocation, are contemplated under this Guaranty and, specifically will not be considered to be new Indebtedness. This Guaranty shall bind the estate of Guarantor as to Indebtedness created both before and after the death or incapacity of Guarantor, regardless of Lender's actual notice of Guarantor's death. Subject to the foregoing, Guarantor's executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation received by Lender from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. It is anticipated that fluctuations may occur in the aggregate -71- 11-17-1999 COMMERCIAL GUARANTY Page 3 Loan No 982000806 (Continued) amount of Indebtedness covered by this Guaranty, and it is specifically acknowledged and agreed by Guarantor that reductions in the amount of Indebtedness, even to zero dollars ($0.00), prior to written revocation of this Guaranty by Guarantor shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs, successors and assigns so long as any of the guaranteed Indebtedness remains unpaid and even though the Indebtedness guaranteed may from time to time be zero dollars ($0.00). GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor's liability under this Guaranty, from time to time: (a) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (b) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (c) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (d) to release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (e) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (f) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (g) to sell, transfer, assign, or grant participations in all or any part of the Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (a) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at Borrower's request and not at the request of Lender; (c) Guarantor has full power, right and authority to enter into this Guaranty; (d) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (e) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor's assets, or any interest therein; (f) upon Lender's request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present the financial condition of Guarantor as of the dates the financial information is provided; (g) no material adverse change has occurred in Guarantor's financial condition since the date of the most recent financial -72- 11-17-1999 COMMERCIAL GUARANTY Page 4 Loan No 982000806 (Continued) statements provided to Lender and no event has occurred which may materially adversely affect Guarantor's financial condition; (h) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (j) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower's financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor's risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower. GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (a) to continue lending money or to extend other credit to Borrower; (b) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (c) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (d) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (e) to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code; (f) to pursue any other remedy within Lender's power; or (g) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever. If now or hereafter (a) Borrower shall be or become insolvent, and (b) the Indebtedness shall not at all times until paid be fully secured by collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor of Lender and Borrower, and their respective successors, any claim or right to payment Guarantor may now have or hereafter have or acquire against Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or become a "creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal bankruptcy laws. Guarantor also waives any and all rights or defenses arising by reason of (a) any "one action" or "anti-deficiency" law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender's commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (b) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (c) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the -73- 11-17-1999 COMMERCIAL GUARANTY Page 5 Loan No 982000806 (Continued) cessation of Borrower's liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (e) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced there is outstanding Indebtedness of Borrower to Lender which is not barred by any applicable statute of limitations; or (f) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower's trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of enforcement of this Guaranty. Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both. GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor's full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff against the moneys, securities or other property of Guarantor given to Lender by law, Lender shall have, with respect to Guarantor's obligations to Lender under this Guaranty and to the extent permitted by law, a contractual security interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's right, title and interest in and to, all deposits, moneys, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor. No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender or by any neglect to exercise such right of setoff or to enforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lender. SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness of Borrower to Lender, whether now existing or hereafter created, shall be prior to any claim that Guarantor may now have or hereafter -74- 11-17-1999 COMMERCIAL GUARANTY Page 6 Loan No 982000806 (Continued) acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty: Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Applicable Law. This Guaranty has been delivered to Lender and accepted by Lender in the State of Nevada. If there is a lawsuit, Guarantor agrees upon Lender's request to submit to the jurisdiction of the courts of Washoe County, State of Nevada. (Initial Here ) This Guaranty shall be governed by and construed in accordance with the laws of the State of Nevada. Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of Lender's costs and expenses, including attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court. Notices. All notices required to be given by either party to the other under this Guaranty shall be in writing, may be sent by telefacsimile -75- 11-17-1999 COMMERCIAL GUARANTY Page 7 Loan No 982000806 (Continued) (unless otherwise required by law), and, except for revocation notices by Guarantor, shall be effective when actually delivered or when deposited with a nationally recognized overnight courier, or when deposited in the United States mail, first class postage prepaid, addressed to the party to whom the notice is to be given at the address shown above or to such other addresses as either party may designate to the other in writing. All revocation notices by Guarantor shall be in writing and shall be effective only upon delivery to Lender as provided above in the section titled "DURATION OF GUARANTY." If there is more than one Guarantor, notice to any Guarantor will constitute notice to all Guarantors. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor's current address. Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words "Borrower" and "Guarantor" respectively shall mean all and any one or more of them. The words "Guarantor," "Borrower," and "Lender" include the heirs, successors, assigns, and transferees of each of them. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty. If a court of competent jurisdiction finds any provision of this Guaranty to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances, and all provisions of this Guaranty in all other respects shall remain valid and enforceable. If any one or more of Borrower or Guarantor are corporations or partnerships, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, or agents acting or purporting to act on their behalf, and any Indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty. Waiver. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender's rights or of any of Guarantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. -76- 11-17-1999 COMMERCIAL GUARANTY Page 8 Loan No 982000806 (Continued) EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED NOVEMBER 17, 1999. GUARANTOR: /s/ JOHN FARAHI - -------------------------------- JOHN FARAHI -77- COMMERCIAL GUARANTY Principal $1,000,000: Loan Date 11-17-1999: Maturity 04-05-2001: Loan No. 982000806: Call 50: Collateral 010: Account --: Officer TMN: Initials -- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Borrower: GOLDEN ROAD MOTOR INN, INC. Lender: COLONIAL BANK dba: ATLANTIS CASINO RESORT P.O. Box 7498 1175 West Moana Lane Reno, NV 89510 Reno, NV 89509 Guarantor: BAHRAM FARAHI 2775 Lakeridge Shores Reno, NV 89509 AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited. CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, BAHRAM FARAHI ("Guarantor") absolutely and unconditionally guarantees and promises to pay to COLONIAL BANK ("Lender") or its order, in legal tender of the United States of America, the Indebtedness (as that term is defined below) of GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT ("Borrower") to Lender on the terms and conditions set forth in this Guaranty. Under this Guaranty, the liability of Guarantor is unlimited and the obligations of Guarantor are continuing. DEFINITIONS. The following words shall have the following meanings when used in this Guaranty: Borrower. The word "Borrower" means GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT. Guarantor. The word "Guarantor" means BAHRAM FARAHI. Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for the benefit of Lender dated November 17, 1999. Indebtedness. The word "Indebtedness" is used in its most comprehensive sense and means and includes any and all of Borrower's liabilities, obligations, debts, and indebtedness to Lender, now existing or hereinafter incurred or created, including, without limitation, all loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease obligations, other obligations, and liabilities of Borrower, or any of them, and any present or future judgments against Borrower, or any of them; and whether any such Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined; whether Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery on the Indebtedness may be or may become barred or unenforceable against Borrower for any reason whatsoever; and whether the Indebtedness arises from transactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise. -78- 11-17-1999 COMMERCIAL GUARANTY Page 2 Loan No 982000806 (Continued) Lender. The word "Lender" means COLONIAL BANK, its successors and assigns. Related Documents. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force. Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of all Indebtedness. Accordingly, no payments made upon the Indebtedness will discharge or diminish the continuing liability of Guarantor in connection with any remaining portions of the Indebtedness or any of the Indebtedness which subsequently arises or is thereafter incurred or contracted. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all other obligations of Guarantor under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written notice of revocation must be mailed to Lender, by certified mail, at the address of Lender listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to advances or new Indebtedness created after actual receipt by Lender of Guarantor's written revocation. For this purpose and without limitation, the term "new Indebtedness" does not include Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. This Guaranty will continue to bind Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior to receipt of Guarantor's written notice of revocation, including any extensions, renewals, substitutions or modifications of the Indebtedness. All renewals, extensions, substitutions, and modifications of the Indebtedness granted after Guarantor's revocation, are contemplated under this Guaranty and, specifically will not be considered to be new Indebtedness. This Guaranty shall bind the estate of Guarantor as to Indebtedness created both before and after the death or incapacity of Guarantor, regardless of Lender's actual notice of Guarantor's death. Subject to the foregoing, Guarantor's executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation received by Lender from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. It is anticipated that fluctuations may occur in the aggregate -79- 11-17-1999 COMMERCIAL GUARANTY Page 3 Loan No 982000806 (Continued) amount of Indebtedness covered by this Guaranty, and it is specifically acknowledged and agreed by Guarantor that reductions in the amount of Indebtedness, even to zero dollars ($0.00), prior to written revocation of this Guaranty by Guarantor shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs, successors and assigns so long as any of the guaranteed Indebtedness remains unpaid and even though the Indebtedness guaranteed may from time to time be zero dollars ($0.00). GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor's liability under this Guaranty, from time to time: (a) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (b) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (c) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (d) to release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (e) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (f) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (g) to sell, transfer, assign, or grant participations in all or any part of the Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (a) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at Borrower's request and not at the request of Lender; (c) Guarantor has full power, right and authority to enter into this Guaranty; (d) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (e) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor's assets, or any interest therein; (f) upon Lender's request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present the financial condition of Guarantor as of the dates the financial information is provided; (g) no material adverse change has occurred in Guarantor's financial condition since the date of the most recent financial -80- 11-17-1999 COMMERCIAL GUARANTY Page 4 Loan No 982000806 (Continued) statements provided to Lender and no event has occurred which may materially adversely affect Guarantor's financial condition; (h) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (j) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower's financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor's risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower. GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (a) to continue lending money or to extend other credit to Borrower; (b) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (c) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (d) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (e) to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code; (f) to pursue any other remedy within Lender's power; or (g) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever. If now or hereafter (a) Borrower shall be or become insolvent, and (b) the Indebtedness shall not at all times until paid be fully secured by collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor of Lender and Borrower, and their respective successors, any claim or right to payment Guarantor may now have or hereafter have or acquire against Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or become a "creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal bankruptcy laws. Guarantor also waives any and all rights or defenses arising by reason of (a) any "one action" or "anti-deficiency" law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender's commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (b) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (c) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the -81- 11-17-1999 COMMERCIAL GUARANTY Page 5 Loan No 982000806 (Continued) cessation of Borrower's liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (e) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced there is outstanding Indebtedness of Borrower to Lender which is not barred by any applicable statute of limitations; or (f) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower's trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of enforcement of this Guaranty. Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both. GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor's full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff against the moneys, securities or other property of Guarantor given to Lender by law, Lender shall have, with respect to Guarantor's obligations to Lender under this Guaranty and to the extent permitted by law, a contractual security interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's right, title and interest in and to, all deposits, moneys, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor. No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender or by any neglect to exercise such right of setoff or to enforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lender. SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness of Borrower to Lender, whether now existing or hereafter created, shall be prior to any claim that Guarantor may now have or hereafter -82- 11-17-1999 COMMERCIAL GUARANTY Page 6 Loan No 982000806 (Continued) acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty: Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Applicable Law. This Guaranty has been delivered to Lender and accepted by Lender in the State of Nevada. If there is a lawsuit, Guarantor agrees upon Lender's request to submit to the jurisdiction of the courts of Washoe County, State of Nevada. (Initial Here ) This Guaranty shall be governed by and construed in accordance with the laws of the State of Nevada. Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of Lender's costs and expenses, including attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court. Notices. All notices required to be given by either party to the other under this Guaranty shall be in writing, may be sent by telefacsimile -83- 11-17-1999 COMMERCIAL GUARANTY Page 7 Loan No 982000806 (Continued) (unless otherwise required by law), and, except for revocation notices by Guarantor, shall be effective when actually delivered or when deposited with a nationally recognized overnight courier, or when deposited in the United States mail, first class postage prepaid, addressed to the party to whom the notice is to be given at the address shown above or to such other addresses as either party may designate to the other in writing. All revocation notices by Guarantor shall be in writing and shall be effective only upon delivery to Lender as provided above in the section titled "DURATION OF GUARANTY." If there is more than one Guarantor, notice to any Guarantor will constitute notice to all Guarantors. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor's current address. Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words "Borrower" and "Guarantor" respectively shall mean all and any one or more of them. The words "Guarantor," "Borrower," and "Lender" include the heirs, successors, assigns, and transferees of each of them. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty. If a court of competent jurisdiction finds any provision of this Guaranty to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances, and all provisions of this Guaranty in all other respects shall remain valid and enforceable. If any one or more of Borrower or Guarantor are corporations or partnerships, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, or agents acting or purporting to act on their behalf, and any Indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty. Waiver. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender's rights or of any of Guarantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. -84- 11-17-1999 COMMERCIAL GUARANTY Page 8 Loan No 982000806 (Continued) EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED NOVEMBER 17, 1999. GUARANTOR: /s/ BAHRAM FARAHI - -------------------------------- BAHRAM FARAHI -85- COMMERCIAL GUARANTY Principal $1,000,000: Loan Date 11-17-1999: Maturity 04-05-2001: Loan No. 982000806: Call 50: Collateral 010: Account --: Officer TMN: Initials -- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Borrower: GOLDEN ROAD MOTOR INN, INC. Lender: COLONIAL BANK dba: ATLANTIS CASINO RESORT P.O. Box 7498 1175 West Moana Lane Reno, NV 89510 Reno, NV 89509 Guarantor: BEN FARAHI 2570 Spinnaker Reno, NV 89509 AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited. CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, BEN FARAHI ("Guarantor") absolutely and unconditionally guarantees and promises to pay to COLONIAL BANK ("Lender") or its order, in legal tender of the United States of America, the Indebtedness (as that term is defined below) of GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT ("Borrower") to Lender on the terms and conditions set forth in this Guaranty. Under this Guaranty, the liability of Guarantor is unlimited and the obligations of Guarantor are continuing. DEFINITIONS. The following words shall have the following meanings when used in this Guaranty: Borrower. The word "Borrower" means GOLDEN ROAD MOTOR INN, INC. dba ATLANTIS CASINO RESORT. Guarantor. The word "Guarantor" means BEN FARAHI. Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for the benefit of Lender dated November 17, 1999. Indebtedness. The word "Indebtedness" is used in its most comprehensive sense and means and includes any and all of Borrower's liabilities, obligations, debts, and indebtedness to Lender, now existing or hereinafter incurred or created, including, without limitation, all loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease obligations, other obligations, and liabilities of Borrower, or any of them, and any present or future judgments against Borrower, or any of them; and whether any such Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined; whether Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery on the Indebtedness may be or may become barred or unenforceable against Borrower for any reason whatsoever; and whether the Indebtedness arises from transactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise. -86- 11-17-1999 COMMERCIAL GUARANTY Page 2 Loan No 982000806 (Continued) Lender. The word "Lender" means COLONIAL BANK, its successors and assigns. Related Documents. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force. Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of all Indebtedness. Accordingly, no payments made upon the Indebtedness will discharge or diminish the continuing liability of Guarantor in connection with any remaining portions of the Indebtedness or any of the Indebtedness which subsequently arises or is thereafter incurred or contracted. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all other obligations of Guarantor under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written notice of revocation must be mailed to Lender, by certified mail, at the address of Lender listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to advances or new Indebtedness created after actual receipt by Lender of Guarantor's written revocation. For this purpose and without limitation, the term "new Indebtedness" does not include Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. This Guaranty will continue to bind Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior to receipt of Guarantor's written notice of revocation, including any extensions, renewals, substitutions or modifications of the Indebtedness. All renewals, extensions, substitutions, and modifications of the Indebtedness granted after Guarantor's revocation, are contemplated under this Guaranty and, specifically will not be considered to be new Indebtedness. This Guaranty shall bind the estate of Guarantor as to Indebtedness created both before and after the death or incapacity of Guarantor, regardless of Lender's actual notice of Guarantor's death. Subject to the foregoing, Guarantor's executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation received by Lender from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. It is anticipated that fluctuations may occur in the aggregate -87- 11-17-1999 COMMERCIAL GUARANTY Page 3 Loan No 982000806 (Continued) amount of Indebtedness covered by this Guaranty, and it is specifically acknowledged and agreed by Guarantor that reductions in the amount of Indebtedness, even to zero dollars ($0.00), prior to written revocation of this Guaranty by Guarantor shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor's heirs, successors and assigns so long as any of the guaranteed Indebtedness remains unpaid and even though the Indebtedness guaranteed may from time to time be zero dollars ($0.00). GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor's liability under this Guaranty, from time to time: (a) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (b) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (c) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (d) to release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (e) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (f) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (g) to sell, transfer, assign, or grant participations in all or any part of the Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (a) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at Borrower's request and not at the request of Lender; (c) Guarantor has full power, right and authority to enter into this Guaranty; (d) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (e) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor's assets, or any interest therein; (f) upon Lender's request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present the financial condition of Guarantor as of the dates the financial information is provided; (g) no material adverse change has occurred in Guarantor's financial condition since the date of the most recent financial -88- 11-17-1999 COMMERCIAL GUARANTY Page 4 Loan No 982000806 (Continued) statements provided to Lender and no event has occurred which may materially adversely affect Guarantor's financial condition; (h) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (j) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower's financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor's risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower. GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (a) to continue lending money or to extend other credit to Borrower; (b) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (c) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (d) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (e) to give notice of the terms, time, and place of any public or private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code; (f) to pursue any other remedy within Lender's power; or (g) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever. If now or hereafter (a) Borrower shall be or become insolvent, and (b) the Indebtedness shall not at all times until paid be fully secured by collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor of Lender and Borrower, and their respective successors, any claim or right to payment Guarantor may now have or hereafter have or acquire against Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or become a "creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal bankruptcy laws. Guarantor also waives any and all rights or defenses arising by reason of (a) any "one action" or "anti-deficiency" law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender's commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (b) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (c) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the -89- 11-17-1999 COMMERCIAL GUARANTY Page 5 Loan No 982000806 (Continued) cessation of Borrower's liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (e) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced there is outstanding Indebtedness of Borrower to Lender which is not barred by any applicable statute of limitations; or (f) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower's trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of enforcement of this Guaranty. Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both. GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor's full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff against the moneys, securities or other property of Guarantor given to Lender by law, Lender shall have, with respect to Guarantor's obligations to Lender under this Guaranty and to the extent permitted by law, a contractual security interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's right, title and interest in and to, all deposits, moneys, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor. No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender or by any neglect to exercise such right of setoff or to enforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lender. SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness of Borrower to Lender, whether now existing or hereafter created, shall be prior to any claim that Guarantor may now have or hereafter -90- 11-17-1999 COMMERCIAL GUARANTY Page 6 Loan No 982000806 (Continued) acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty: Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Applicable Law. This Guaranty has been delivered to Lender and accepted by Lender in the State of Nevada. If there is a lawsuit, Guarantor agrees upon Lender's request to submit to the jurisdiction of the courts of Washoe County, State of Nevada. (Initial Here ) This Guaranty shall be governed by and construed in accordance with the laws of the State of Nevada. Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of Lender's costs and expenses, including attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court. Notices. All notices required to be given by either party to the other under this Guaranty shall be in writing, may be sent by telefacsimile -91- 11-17-1999 COMMERCIAL GUARANTY Page 7 Loan No 982000806 (Continued) (unless otherwise required by law), and, except for revocation notices by Guarantor, shall be effective when actually delivered or when deposited with a nationally recognized overnight courier, or when deposited in the United States mail, first class postage prepaid, addressed to the party to whom the notice is to be given at the address shown above or to such other addresses as either party may designate to the other in writing. All revocation notices by Guarantor shall be in writing and shall be effective only upon delivery to Lender as provided above in the section titled "DURATION OF GUARANTY." If there is more than one Guarantor, notice to any Guarantor will constitute notice to all Guarantors. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor's current address. Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words "Borrower" and "Guarantor" respectively shall mean all and any one or more of them. The words "Guarantor," "Borrower," and "Lender" include the heirs, successors, assigns, and transferees of each of them. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty. If a court of competent jurisdiction finds any provision of this Guaranty to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances, and all provisions of this Guaranty in all other respects shall remain valid and enforceable. If any one or more of Borrower or Guarantor are corporations or partnerships, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, or agents acting or purporting to act on their behalf, and any Indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty. Waiver. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender's rights or of any of Guarantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. -92- 11-17-1999 COMMERCIAL GUARANTY Page 8 Loan No 982000806 (Continued) EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED NOVEMBER 17, 1999. GUARANTOR: /s/ BEN FARAHI - -------------------------------- BEN FARAHI -93- EX-21 3 LIST OF SUBSIDIARIES OF MONARCH CASINO & RESORT, INC. Golden Road Motor Inn, Inc. Ownership Percent: 100% dba Atlantis Casino Resort State of Incorporation: Nevada -189- EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS. 12-MOS DEC-31-1999 DEC-31-1999 6,367,507 0 2,603,461 649,014 1,456,602 13,080,506 145,660,717 27,964,180 131,654,425 20,884,318 82,235,509 0 0 95,363 25,773,218 131,654,425 0 78,865,656 0 43,817,275 7,738,029 0 4,742,475 (944,537) (359,672) (584,865) 0 0 0 (584,865) (0.06) (0.06)
EX-10 5 SCHEDULE TO MASTER LOAN AGREEMENT Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino 1175 W. Moana Lane, Suite 200 Reno, Nevada 89509 $631,250.00 Effective Date 4/1/99 Loan Transaction Number ------ 1. THIS SCHEDULE is made between Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino, as Debtor, and U.S. BANCORP LEASING & FINANCIAL (which, together with its successor and assigns, will be called the "Secured Party") pursuant to the Master Loan Agreement dated as of September 22, 1998 (the "Loan Agreement"), the terms of which (including the definitions) are incorporated herein. If any terms hereof are inconsistent with the terms of the Loan Agreement, the terms hereof shall prevail. 2. FOR VALUE RECEIVED, Debtor hereby promises to pay to the order of Secured Party the principal amount of Six Hundred Thirty-One Thousand Two Hundred Fifty and 00/100 Dollars ($631,250.00) with interest on any outstanding principal balance at the rate(s) specified herein from the Effective Date hereof until this Schedule shall have been paid in full in accordance with the following payment schedule: sixty (60) installments of $12,632.97 each, including the entire amount of interest accrued on this Schedule at the time of payment of each installment. The first payment shall be due on April 20, 1999 and a like payment shall be due on the same day of each succeeding month thereafter until the entire principal and interest have been paid. At the time of the final installment hereon, all unpaid principal and interest shall be due and owing. Each payment shall be applied first to accrued and unpaid interest, and the balance to the outstanding principal hereof. As a result, such final installment may be substantially more or substantially less than the installments specified herein. 3. The Debtor promises to pay interest on the principal balance outstanding at a rate of 7.43 percent per annum. 4. The Debtor may prepay this Schedule, in whole or in part, by paying simultaneously with an in addition to the prepayment, a premium for such prepayment privilege equal to the specified percent of the amount prepaid in accordance with the following schedule, one (1) to twelve (12) months: five (5.0)%, thirteen (13) to twenty-four (24) months: one (1.0)%. Notwithstanding the foregoing, payments made within 30 days of the date an installment is due which do not exceed the scheduled amount of such installment shall not be considered prepayments. 5. Each of Debtor, if more than one, and all other parties who at any time may be liable hereon in any capacity, hereby jointly and severally waive diligence, demand, presentment, presentment for payment, protest, notice of protest and notice of dishonor of this Schedule, and authorize the Secured Party, without notice, to grant extensions in the time of payment of and reductions in the rate of interest on any moneys owing on this Schedule. 6. The following property is hereby made Collateral for all purposes under the Loan Agreement: -94- Various items of Hotel fixtures, furniture, and equipment located at the Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino at 3800 S. Virginia St., Reno, Nevada 89502; Washoe County and including but not limited to, all property improvements, miscellaneous upgrades, non-salvageable material, slot machines, kitchen equipment, casino bars, buffet bars, furniture, room accessories and partitions, ice machines, and spas. Whether any of the foregoing is owned now or acquired later; all accessions, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to any of the foregoing; all proceeds relating to any of the foregoing (including insurance, general intangibles and accounts proceeds). 7. The Collateral hereunder shall be based at the following location(s): 3800 S. Virginia Street Reno, NV 89502 COUNTY: Washoe Year 2000. Debtor has reviewed and assessed or will review and assess its business operations and computer systems and applications to address the "year 2000 problem" (that is, that computer applications and equipment used by Debtor, directly or indirectly through third parties, may be unable to properly perform date-sensitive functions before, during and after January 1, 2000). Debtor reasonable believes that the year 2000 problem will not result in a material adverse change in Debtor's business condition (financial or otherwise), operations, properties or prospects or ability to repay Secured Party. Based upon the review, Debtor has developed or will develop and implement a plan to address the year 2000 problem, to remediate any material year 2000 problem, and to complete testing with respect thereto, as soon as practicable and in any event by June 30, 1999. Debtor will promptly deliver such information relating to this covenant as Secured Party requests from time to time. IN WITNESS WHEREOF, Debtor has executed this Schedule this 15th day of April, 1999. Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino By /s/Ben Farahi ------------- Title: An Authorized Officer -95- MASTER LOAN AGREEMENT 1.0 PARTIES, COLLATERAL AND OBLIGATIONS 1.1 This Agreement is dated as of September 22, 1998. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (hereinafter called "Debtor") with offices at 1175 W. Moana Lane, Suite 200, Reno, Nevada 89509 intending to be legally bound, hereby promises to pay to U.S. BANCORP LEASING & FINANCIAL, an Oregon corporation having offices at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177 (hereinafter called "Secured Party"), any amounts set forth on any Schedule to Master Loan Agreement hereunder (the "Schedule(s)", all the terms of which are incorporated herein) and grants a security interest in and assigns, transfers and sets over to and to the successors and assigns thereof, the property specified in any Schedule hereunder wherever located, and any and all proceeds thereof, insurance recoveries, and all replacements, additions, accessions, accessories and substitutions thereto or therefor (hereafter called the "Collateral"). The security interest granted hereby is to secure payment of any and all liabilities or obligations of Debtor to the Secured Party, matured or unmatured, direct or indirect, absolute or contingent, heretofore arising, now existing or hereafter arising, and whether under this Agreement or under any other writing between Debtor and Secured Party (all hereinafter called the "obligations" and/or the "liabilities"). 1.2 Joint and Several Liability; Payment Terms. In the event there is more than one Debtor, all obligations shall be considered as joint and several obligations of all Debtors regardless of the source of Collateral or the particular Debtor with which the obligation originated. Interest shall be calculated on the basis of a 360-day year. All payments on any Schedule hereunder shall be made in lawful money of the United States at the post office address of the Secured Party or at such other place as the Secured Party may designate to Debtor in writing from time to time. In no event shall any Schedule hereunder be enforced in any way which permits Secured Party to collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Secured Party shall refund such excess interest to Debtor. In such event, Debtor agrees that Secured Party shall not be subject to any penalties for contracting for or collecting interest in excess of the maximum lawful rate. 1.3 Late Charge. If any of the obligations remains overdue for more than ten (10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount equal to the lesser of (i) five percent (5.0%) of each such overdue amount; or (ii) the maximum percentage of any such overdue amount permitted by applicable law as a late charge. Debtor agrees that the amount of such late charge represents a reasonable estimate of the cost to Secured Party of processing a delinquent payment and that the acceptance of any late charge shall not constitute a waiver of default with respect to the overdue amount or prevent Secured Party from exercising any other available rights and remedies. 2.0 WARRANTIES AND COVENANTS OF DEBTOR Debtor hereby represents, warrants and covenants that: -96- 2.1 Business Organization Status and Authority. (i) Debtor is duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business in all states and countries in which such qualification is necessary; (ii) Debtor has the lawful power and authority to own its assets and to conduct the business in which it is engaged; and to execute and comply with the provisions of this Agreement and any related documents; (iii) the execution and delivery of this Agreement and any related documents have been duly authorized by all necessary action; (iv) no authorization, consent, approval, license or exemption of, or filing or registration with, any or all of the owners of Debtor or any governmental entity was, is or will be necessary to the valid execution, delivery, performance or full enforceability of this Agreement and any related documents. Except as specifically disclosed to Secured Party, Debtor utilizes no trade names in the conduct of its business and/or has not changed its name within the past five years. 2.2 Merger; Transfer of Assets. Debtor will not consolidate or merge with or into any other entity, liquidate or dissolve, distribute, sell, lease, transfer or dispose of all of its properties or assets or any substantial portion thereof other than in the ordinary course of its business, unless the Secured Party shall give its prior written consent, and the surviving, or successor entity or the transferee of such assets, as the case may be, shall assume, by a written instrument which is legal, valid and enforceable against such surviving or successor entity or transferee, all of the obligations of Debtor to Secured Party or any affiliate of Secured Party. 2.3 No Violation of Covenants or Laws. Debtor is not party to any agreement or subject to any restriction which materially and adversely affects its ability to perform its obligations under this Agreement and any related documents. The execution of and compliance with the terms of this Agreement and any related documents does not and will not (i) violate any provision of law, or (ii) conflict with or result in a breach of any order, injunction, or decree of any court or governmental authority or the formation documents of Debtor, or (iii) constitute or result in a default under any agreement, bond or indenture by which Debtor is bound or to which any of its property is subject, or (iv) result in the imposition of any lien or encumbrance upon any of Debtor's assets, except for any liens created hereunder or under any related documents. 2.4 Accurate Information. All financial information submitted to the Secured Party in regard to Debtor, was prepared in accordance with generally accepted accounting principles, consistently applied, and fairly and accurately depicts the financial position and results of operations of Debtor or such other person, as of the respective dates or for the respective periods, to which such information pertains. Debtor had good, valid and marketable title to all the properties and assets reflected as being owned by it on any balance sheets of Debtor submitted to Secured Party as of the dates thereof. 2.5 Judgments; Pending Legal Action. There are no judgments outstanding against Debtor, and there are no actions or proceedings pending or, to the best knowledge of Debtor, threatened against or affecting Debtor or any of its properties in any court or before any governmental entity which, if determined adversely to Debtor, would result in any material adverse change in the business, properties or assets, or in the condition, financial or -97- otherwise, of Debtor or would materially and adversely affect the ability of Debtor to satisfy its obligations under this Agreement and any related documents. 2.6 No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is not in breach of or in default under any loan agreement, indenture, bond, note or other evidence of indebtedness, or any other material agreement or any court order, injunction or decree or any lien, statute, rule or regulation. The operations of Debtor comply with all laws, ordinances and governmental rules and regulations applicable to them. Debtor has filed all Federal, state and municipal income tax returns which are required to be filed and has paid all taxes as shown on said returns and on all assessments billed to it to the extent that such taxes or assessments have become due. Debtor does not know of any other proposed tax assessment against it or of any basis for one. 2.7 Sale Prohibited. Debtor will not sell, dispose of or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Secured Party. 2.8 Location of Collateral. The Collateral will be kept at the location(s) shown on the Schedule(s) hereunder and Debtor will promptly notify Secured Party of any change in the location(s) of the Collateral. Debtor will not remove the Collateral from said location(s) without the prior written consent of Secured Party. 2.9 Collateral not a Fixture. Notwithstanding any presumption of applicable law, and irrespective of any manner of attachment, the Collateral shall not be deemed real property but shall retain its character as personal property. However, Debtor will at the option of Secured Party furnish the latter with a waiver or waivers in recordable form, signed by all persons having an ownership interest in the real estate, of any interest in the Collateral which is or might be deemed to be prior to Secured Party's interest. 2.10 Perfection of Security Interest. Except for (i) the security interest granted hereby and (ii) any other security interest previously disclosed by Debtor to Secured Party in writing, Debtor is the owner of the Collateral free from any adverse lien, security interest or encumbrance. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein. Except as previously disclosed in writing to Secured Party, no financing statement covering any Collateral or any proceeds thereof is on file in any public office. At the request of Secured Party, Debtor will execute, acknowledge and deliver to Secured Party in recordable or fileable form, any document or instrument required by Secured Party to further the purposes of this Agreement, or to perfect its interest in the Collateral or to maintain such perfected interest in full force and effect, including (without limitation) any fixture filings and financial statements and any amendments and continuation statements thereto pursuant to the Uniform Commercial Code, in form satisfactory to Secured Party, and will pay the cost of filing the same or filing or recording this Agreement in all public offices wherever filing or recording is deemed by Secured Party to be necessary or desirable. Debtor hereby agrees that this Agreement shall be and constitute a financing statement for purposes of the Uniform Commercial Code. -98- 2.11 Insurance. Unless otherwise agreed, Debtor will have and maintain insurance from financially sound carriers at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, collision, "mysterious disappearance" and other such risks as Secured Party may require, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to Secured Party; each insurance policy shall name Secured Party as loss payee and shall be payable to Secured Party and Debtor as their interest may appear; all policies of insurance shall provide for ten days' written minimum cancellation notice to Secured Party; Debtor shall furnish Secured Party with certificates or other evidence satisfactory to Secured Party of compliance with the foregoing insurance provisions. 2.12 Use of the Collateral. Debtor will use the Collateral for business purposes only and operate it by qualified personnel in accordance with applicable manufacturers' manuals. Debtor will keep the Collateral free from any adverse lien or encumbrance and in good working order, condition and repair and will not waste or destroy the Collateral or any part thereof; Debtor will keep the Collateral appropriately protected from the elements, and will furnish all required parts and servicing (including any contract service necessary to maintain the benefit of any warranty of the manufacturer); Debtor will not use the Collateral in violation of any statute, ordinance, regulation or order; and Secured Party may examine and inspect the Collateral and any and all books and records of Debtor during business hours at any time; such right of inspection shall include the right to copy Debtor's books and records and to converse with Debtor's officers, employees, agents, and independent accountants. 2.13 Taxes and Assessments. Debtor will pay promptly when due all taxes, assessments, levies, imposts, duties and charges, of any kind or nature, imposed upon the Collateral or for its use or operation or upon this Agreement or upon any instruments evidencing the obligations. 2.14 Financial Statements. Debtor shall furnish Secured Party within ninety (90) days after the close of each fiscal year of Debtor, its financial statements (including, without limitation, a balance sheet, a statement of income and surplus account and a statement of changes in financial position) for the immediately preceding fiscal year, setting forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by Secured Party. Such financial statements shall be prepared at least as a review by Debtor's independent certified accountants and, if prepared as an audit, shall be certified by such accountants. Debtor shall also furnish Secured Party with any other financial information deemed necessary by Secured Party. Each financial statement submitted by Debtor to Secured Party shall be accompanied by a certificate signed by the chief executive officer, the chief operating officer or the chief financial officer of Debtor, certifying that (i) such financial statement was prepared in accordance with the generally accepted accounting principles consistently applied and fairly and accurately presents the Debtor's financial condition and results of operations for the period to which it pertains, and (ii) no event of default has occurred under this Agreement during the period to which such financial statements pertains. -99- 3.0 EVENTS OF DEFAULT 3.1 the following shall be considered events of default: (i) failure on the part of Debtor to promptly perform in complete accordance with its representations, warranties and covenants made in this Agreement or in any other agreement with Secured Party, including, but not limited to, the payment of any liability, with interest, when due, or default by Debtor under the provisions of any other material agreement to which Debtor is party; (ii) the death of Debtor if an individual or the dissolution of Debtor if a business organization; (iii) more than one of the present officers of Debtor leave the business except for reason of the death or disability of an individual; (iv) the filing of any petition or complaint under the Federal Bankruptcy Code or other federal or state acts of similar nature, by or against Debtor; or an assignment for the benefit of creditors by Debtor; (v) an application for or the appointment of a Receiver, Trustee or Conservator, voluntary or involuntary, by or against Debtor or for any substantial assets of Debtor, (vi) insolvency of Debtor under either the Federal Bankruptcy Code or applicable principles of equity; (vii) entry of judgment, issuance of any garnishment or attachment, or filing of any lien, claim or government attachment against the Collateral or which, in Secured Party's sole discretion, might impair the Collateral; (viii) the determination by Secured Party that a material misrepresentation of fact has been made by Debtor in this Agreement or in any writing supplementary or ancillary hereto; (ix) a determination by Secured Party that Debtor has suffered a material adverse change in its financial condition from the date of this Agreement; or (x) bankruptcy, insolvency, termination, dissolution or default of any guarantor for Debtor. 4.0 REMEDIES 4.1 Upon the happening of any event of default which is not cured within ten (10) days, or at any time thereafter: (i) all liabilities of Debtor shall, at the option of Secured Party, become immediately due and payable; (ii) Secured Party shall have and may exercise all of the rights and remedies granted to a secured party under the Uniform Commercial Code; (iii) Secured Party shall have the right, immediately, and without notice or other action, to set-off against any of Debtor's liabilities to Secured Party any money owed by Secured Party in any capacity to Debtor, whether or not due, and Secured Party shall be deemed to have exercised such right of set-off and to have made a charge against any such money immediately upon the occurrence of such default event though actual book entries may be made at some time subsequent thereto; (iv) Secured Party may proceed with or without judicial process to take possession of all or any part of the Collateral; Debtor agrees that upon receipt of notice of Secured Party's intention to take possession of all or any part of said Collateral, Debtor will do everything necessary to make same available to Secured Party (including, without limitation, assembling the Collateral and making it available to Secured Party at a place designated by Secured Party which is reasonably convenient to Debtor and Secured Party); and so long as Secured Party acts in a commercially reasonable manner, Debtor agrees to assign, transfer and deliver at any time the whole or any portion of the Collateral or any rights or interest therein in accordance with the Uniform Commercial Code and without limiting the scope of Secured Party's rights thereunder; (v) Secured Party may sell the Collateral at public or private sale or in any other commercially reasonable manner and, at the option of Secured -100- Party, in bulk or in parcels and with or without having the Collateral at the sale or other disposition, and Debtor agrees that in case of sale or other disposition of the Collateral, or any portion thereof, Secured Party shall apply all proceeds first to all costs and expenses of disposition, including attorneys' fees, and then to Debtor's obligations to Secured Party, (vi) Secured Party may elect to retain the Collateral or any part thereof in satisfaction of all sums due from Debtor upon notice to Debtor and any other party as may be required by the Uniform Commercial Code. All remedies provided in this paragraph shall be cumulative. Secured Party may exercise any one or more of such remedies in addition to any and all other remedies Secured Party may have under any applicable law or in equity. 4.2 Expenses; Disposition. Upon default, all amounts due and to become due hereunder shall, without notice, bear interest at the lesser of (i) twelve percent (12%) per annum or (ii) the maximum rate per annum which Secured Party is permitted by law to charge from the date such amounts are due until paid. Debtor shall pay all reasonable expenses of realizing upon the Collateral hereunder upon default and collecting all liabilities of Debtor to Secured Party, which reasonable expenses shall include attorneys' fees, whether or not litigation is commenced and whether incurred at trial, on appeal, or in any other proceeding. Any notification of a sale or other disposition of Collateral or of other action by Secured Party required to be given by Secured Party, will be sufficient if given personally, mailed, or delivered by facsimile machine or overnight carrier not less than five (5) days prior to the day on which such sale or other disposition will be made or action taken, and such notification shall be deemed reasonable notice. 5.0 MISCELLANEOUS 5.1 No Implied Waivers; Entire Agreement. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular event of default and shall not operate as a waiver of any subsequent default. This Agreement and any Schedule hereunder are non- cancelable. No modification of this Agreement or waiver of any right of Secured Party, hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Agreement and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party. This Agreement and any Schedule hereunder (a "Transaction") embody the entire agreement between the parties and supersede all prior agreements and understandings relating to the same subject matter, except in any case where the Secured Party takes an assignment from a vendor of its security interest in the same Collateral, in which case the terms of the Transaction shall be incorporated into the assigned agreement and shall prevail over any inconsistent terms therein but shall not be construed to create a new contract. -101- 5.2 Choice of Law. This Agreement and the rights of the parties hereto shall be governed by applicable Federal law and the laws of the State of Nevada. Any action arising out of this Agreement may be litigated under the laws of Nevada and submitted to the jurisdiction of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over the Debtor. 5.3 Protection of the Collateral. At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Any payments made by Secured Party shall be immediately due and payable by Debtor and shall bear interest at the rate of fifteen percent (15%) per annum. Until default, Debtor may retain possession of the Collateral and use it in any lawful manner not inconsistent with the provisions of this Agreement and any other agreement between Debtor and Secured Party, and not inconsistent with any policy of insurance thereon. 5.4 Binding Agreement; Time of the Essence. This Agreement shall take effect as a sealed instrument and shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, and assigns. Time is of the essence with respect to the performance of Debtor's obligations under this Agreement and any other agreement between Debtor and Secured Party. 5.5 Enforceability. Any term, clause or provision of this Agreement or of any evidence of indebtedness from Debtor to Secured Party which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining terms or clauses of such provision or the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, clause or provision in any other jurisdiction. 5.6 Notices. Any notices or demands required to be given herein shall be given to the parties in writing by United States first class mail (express, certified or otherwise) at the addresses set forth on page 1 of this Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph. 5.7 Additional Security. If there shall be any other collateral for any of the obligations, or for the obligations of any guarantor thereof, Secured Party may proceed against and/or enforce any or all of the Collateral and such collateral in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Secured Party from whatever source and applied by it to any of the obligations shall be applied in such order of application as Secured Party shall from time to time, in its sole discretion, elect. -102- 6.0 ASSIGNMENT 6.1 SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT HAS IN THE COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT TO A FINANCIAL INSTITUTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY AND PROMPTLY TO SECURED PARTY'S ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET- OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED PARTY'S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE SECURED PARTY'S ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR WILL NOT ASSERT AGAINST SECURED PARTY'S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY. 6.2 DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING OF ALL OR ANY PART OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF SECURED PARTY WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER. 7.0 POWER OF ATTORNEY 7.1 Secured Party is hereby appointed Debtor's attorney-in-fact to sign Debtor's name and to make non-material amendments (including completing and conforming the description of the Collateral) on any document in connection with this Agreement (including any financing statement) and to obtain, adjust, settle, and cancel any insurance required by this Agreement and to endorse any drafts in connection with such insurance. In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the 9th day of Sept., 1998. U.S. BANCORP LEASING & FINANCIAL Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (Debtor) By: By: /s/ Ben Farahi ---------------------------- --------------- An authorized officer thereof Authorized Corporate Officer -103- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -104- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -105- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or -106- remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE OBLIGATION OF THE GUARANTORS TOGETHER HEREUNDER IS LIMITED TO $1,000,000.00, AND IS JOINT AND SEVERAL. -107- IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Witness: Behrouz Ben Farahi /s/ John Bydalek /s/Behrouz Ben Farahi ------------ ------------------ Print Name: John Bydalek an Individual Address: 1175 W. Moana Ln. SS#------------ #200, Reno, NV 89509 Witness: Bahram Bob Farahi /s/ John Bydalek /s/Bahram Bob Farahi ------------ ----------------- Print Name: John Bydalek an Individual Address: SS#------------ Witness: John Farahi /s/ John Bydalek /s/John Farahi ------------ ----------- Print Name: John Bydalek an Individual Address: SS#------------ GUARNATOR'S SIGNATURE MAY NOT BE WITNESSED BY GUARANTOR'S SPOUSE OR OTHER FAMILY MEMBER -108- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -109- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -110- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise -111- by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Monarch Casino & Resort, Inc. By: /s/ Ben Farahi --------------- Ben Farahi [Print Name] ---------- CFO [Title] --- 1175 West Moana Lane, Suite 200 Reno, Nevada 89509 -112- EX-10 6 SCHEDULE TO MASTER LOAN AGREEMENT Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino 1175 W. Moana Lane, Suite 200 Reno, Nevada 89509 $660,395.00 Effective Date 4/19/99 Loan Transaction Number ------ 1. THIS SCHEDULE is made between Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino, as Debtor, and U.S. BANCORP LEASING & FINANCIAL (which, together with its successor and assigns, will be called the "Secured Party") pursuant to the Master Loan Agreement dated as of September 22, 1998 (the "Loan Agreement"), the terms of which (including the definitions) are incorporated herein. If any terms hereof are inconsistent with the terms of the Loan Agreement, the terms hereof shall prevail. 2. FOR VALUE RECEIVED, Debtor hereby promises to pay to the order of Secured Party the principal amount of Six Hundred Sixty Thousand Three Hundred Ninety-Five and 00/100 Dollars ($660,395.00) with interest on any outstanding principal balance at the rate(s) specified herein from the Effective Date hereof until this Schedule shall have been paid in full in accordance with the following payment schedule: sixty (60) installments of $13,211.60 each, including the entire amount of interest accrued on this Schedule at the time of payment of each installment. The first payment shall be due on May 19, 1999 and a like payment shall be due on the same day of each succeeding month thereafter until the entire principal and interest have been paid. At the time of the final installment hereon, all unpaid principal and interest shall be due and owing. Each payment shall be applied first to accrued and unpaid interest, and the balance to the outstanding principal hereof. As a result, such final installment may be substantially more or substantially less than the installments specified herein. 3. The Debtor promises to pay interest on the principal balance outstanding at a rate of 7.40 percent per annum. 4. The Debtor may prepay this Schedule, in whole or in part, by paying simultaneously with an in addition to the prepayment, a premium for such prepayment privilege equal to the specified percent of the amount prepaid in accordance with the following schedule, one (1) to twelve (12) months: five (5.0)%, thirteen (13) to twenty-four (24) months: one (1.0)%, twenty-five (25) to sixty (60): 0%. Notwithstanding the foregoing, payments made within 30 days of the date an installment is due which do not exceed the scheduled amount of such installment shall not be considered prepayments. 5. Each of Debtor, if more than one, and all other parties who at any time may be liable hereon in any capacity, hereby jointly and severally waive diligence, demand, presentment, presentment for payment, protest, notice of protest and notice of dishonor of this Schedule, and authorize the Secured Party, without notice, to grant extensions in the time of payment of and reductions in the rate of interest on any moneys owing on this Schedule. -113- 6. The following property is hereby made Collateral for all purposes under the Loan Agreement: Various items of Hotel fixtures, furniture, and equipment located at the Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino at 3800 S. Virginia St., Reno, Nevada 89502; Washoe County and including but not limited to, all property improvements, miscellaneous upgrades, non-salvageable material, slot machines, kitchen equipment, casino bars, buffet bars, furniture, room accessories and partitions, ice machines, and spas. Whether any of the foregoing is owned now or acquired later; all accessions, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to any of the foregoing; all proceeds relating to any of the foregoing (including insurance, general intangibles and accounts proceeds). 7. The Collateral hereunder shall be based at the following location(s): 3800 S. Virginia Street Reno, NV 89502 COUNTY: Washoe Year 2000. Debtor has reviewed and assessed or will review and assess its business operations and computer systems and applications to address the "year 2000 problem" (that is, that computer applications and equipment used by Debtor, directly or indirectly through third parties, may be unable to properly perform date-sensitive functions before, during and after January 1, 2000). Debtor reasonable believes that the year 2000 problem will not result in a material adverse change in Debtor's business condition (financial or otherwise), operations, properties or prospects or ability to repay Secured Party. Based upon the review, Debtor has developed or will develop and implement a plan to address the year 2000 problem, to remediate any material year 2000 problem, and to complete testing with respect thereto, as soon as practicable and in any event by June 30, 1999. Debtor will promptly deliver such information relating to this covenant as Secured Party requests from time to time. IN WITNESS WHEREOF, Debtor has executed this Schedule this 16th day of April, 1999. Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino By /s/Ben Farahi ------------- Title: An Authorized Officer -114- MASTER LOAN AGREEMENT 1.0 PARTIES, COLLATERAL AND OBLIGATIONS 1.1 This Agreement is dated as of September 22, 1998. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (hereinafter called "Debtor") with offices at 1175 W. Moana Lane, Suite 200, Reno, Nevada 89509 intending to be legally bound, hereby promises to pay to U.S. BANCORP LEASING & FINANCIAL, an Oregon corporation having offices at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177 (hereinafter called "Secured Party"), any amounts set forth on any Schedule to Master Loan Agreement hereunder (the "Schedule(s)", all the terms of which are incorporated herein) and grants a security interest in and assigns, transfers and sets over to and to the successors and assigns thereof, the property specified in any Schedule hereunder wherever located, and any and all proceeds thereof, insurance recoveries, and all replacements, additions, accessions, accessories and substitutions thereto or therefor (hereinafter called the "Collateral"). The security interest granted hereby is to secure payment of any and all liabilities or obligations of Debtor to the Secured Party, matured or unmatured, direct or indirect, absolute or contingent, heretofore arising, now existing or hereafter arising, and whether under this Agreement or under any other writing between Debtor and Secured Party) (all hereinafter called the "obligations" and/or the "liabilities"). 1.2 Joint and Several Liability; Payment Terms. In the event there is more than one Debtor, all obligations shall be considered as joint and several obligations of all Debtors regardless of the source of Collateral or the particular Debtor with which the obligation originated. Interest shall be calculated on the basis of a 360-day year. All payments on any Schedule hereunder shall be made in lawful money of the United States at the post office address of the Secured Party or at such other place as the Secured Party may designate to Debtor in writing from time to time. In no event shall any Schedule hereunder be enforced in any way which permits Secured Party to collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Secured Party shall refund such excess interest to Debtor. In such event, Debtor agrees that Secured Party shall not be subject to any penalties for contracting for or collecting interest in excess of the maximum lawful rate. 1.3 Late Charge. If any of the obligations remains overdue for more than ten (10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount equal to the lesser of (i) five percent (5.0%) of each such overdue amount; or (ii) the maximum percentage of any such overdue amount permitted by applicable law as a late charge. Debtor agrees that the amount of such late charge represents a reasonable estimate of the cost to Secured Party of processing a delinquent payment and that the acceptance of any late charge shall not constitute a waiver of default with respect to the overdue amount or prevent Secured Party from exercising any other available rights and remedies. 2.0 WARRANTIES AND COVENANTS OF DEBTOR Debtor hereby represents, warrants and covenants that: -115- 2.1 Business Organization Status and Authority. (i) Debtor is duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business in all states and countries in which such qualification is necessary; (ii) Debtor has the lawful power and authority to own its assets and to conduct the business in which it is engaged; and to execute and comply with the provisions of this Agreement and any related documents; (iii) the execution and delivery of this Agreement and any related documents have been duly authorized by all necessary action; (iv) no authorization, consent, approval, license or exemption of, or filing or registration with, any or all of the owners of Debtor or any governmental entity was, is or will be necessary to the valid execution, delivery, performance or full enforceability of this Agreement and any related documents. Except as specifically disclosed to Secured Party, Debtor utilizes no trade names in the conduct of its business and/or has not changed its name within the past five years. 2.2 Merger; Transfer of Assets. Debtor will not consolidate or merge with or into any other entity, liquidate or dissolve, distribute, sell, lease, transfer or dispose of all of its properties or assets or any substantial portion thereof other than in the ordinary course of its business, unless the Secured Party shall give its prior written consent, and the surviving, or successor entity or the transferee of such assets, as the case may be, shall assume, by a written instrument which is legal, valid and enforceable against such surviving or successor entity or transferee, all of the obligations of Debtor to Secured Party or any affiliate of Secured Party. 2.3 No Violation of Covenants or Laws. Debtor is not party to any agreement or subject to any restriction which materially and adversely affects its ability to perform its obligations under this Agreement and any related documents. The execution of and compliance with the terms of this Agreement and any related documents does not and will not (i) violate any provision of law, or (ii) conflict with or result in a breach of any order, injunction, or decree of any court or governmental authority or the formation documents of Debtor, or (iii) constitute or result in a default under any agreement, bond or indenture by which Debtor is bound or to which any of its property is subject, or (iv) result in the imposition of any lien or encumbrance upon any of Debtor's assets, except for any liens created hereunder or under any related documents. 2.4 Accurate Information. All financial information submitted to the Secured Party in regard to Debtor, was prepared in accordance with generally accepted accounting principles, consistently applied, and fairly and accurately depicts the financial position and results of operations of Debtor or such other person, as of the respective dates or for the respective periods, to which such information pertains. Debtor had good, valid and marketable title to all the properties and assets reflected as being owned by it on any balance sheets of Debtor submitted to Secured Party as of the dates thereof. 2.5 Judgments; Pending Legal Action. There are no judgments outstanding against Debtor, and there are no actions or proceedings pending or, to the best knowledge of Debtor, threatened against or affecting Debtor or any of its properties in any court or before any governmental entity which, if determined adversely to Debtor, would result in any material adverse change in the business, properties or assets, or in the condition, financial or -116- otherwise, of Debtor or would materially and adversely affect the ability of Debtor to satisfy its obligations under this Agreement and any related documents. 2.6 No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is not in breach of or in default under any loan agreement, indenture, bond, note or other evidence of indebtedness, or any other material agreement or any court order, injunction or decree or any lien, statute, rule or regulation. The operations of Debtor comply with all laws, ordinances and governmental rules and regulations applicable to them. Debtor has filed all Federal, state and municipal income tax returns which are required to be filed and has paid all taxes as shown on said returns and on all assessments billed to it to the extent that such taxes or assessments have become due. Debtor does not know of any other proposed tax assessment against it or of any basis for one. 2.7 Sale Prohibited. Debtor will not sell, dispose of or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Secured Party. 2.8 Location of Collateral. The Collateral will be kept at the location(s) shown on the Schedule(s) hereunder and Debtor will promptly notify Secured Party of any change in the location(s) of the Collateral. Debtor will not remove the Collateral from said location(s) without the prior written consent of Secured Party. 2.9 Collateral not a Fixture. Notwithstanding any presumption of applicable law, and irrespective of any manner of attachment, the Collateral shall not be deemed real property but shall retain its character as personal property. However, Debtor will at the option of Secured Party furnish the latter with a waiver or waivers in recordable form, signed by all persons having an ownership interest in the real estate, of any interest in the Collateral which is or might be deemed to be prior to Secured Party's interest. 2.10 Perfection of Security Interest. Except for (i) the security interest granted hereby and (ii) any other security interest previously disclosed by Debtor to Secured Party in writing, Debtor is the owner of the Collateral free from any adverse lien, security interest or encumbrance. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein. Except as previously disclosed in writing to Secured Party, no financing statement covering any Collateral or any proceeds thereof is on file in any public office. At the request of Secured Party, Debtor will execute, acknowledge and deliver to Secured Party in recordable or fileable form, any document or instrument required by Secured Party to further the purposes of this Agreement, or to perfect its interest in the Collateral or to maintain such perfected interest in full force and effect, including (without limitation) any fixture filings and financial statements and any amendments and continuation statements thereto pursuant to the Uniform Commercial Code, in form satisfactory to Secured Party, and will pay the cost of filing the same or filing or recording this Agreement in all public offices wherever filing or recording is deemed by Secured Party to be necessary or desirable. Debtor hereby agrees that this Agreement shall be and constitute a financing statement for purposes of the Uniform Commercial Code. -117- 2.11 Insurance. Unless otherwise agreed, Debtor will have and maintain insurance from financially sound carriers at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, collision, "mysterious disappearance" and other such risks as Secured Party may require, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to Secured Party; each insurance policy shall name Secured Party as loss payee and shall be payable to Secured Party and Debtor as their interest may appear; all policies of insurance shall provide for ten days' written minimum cancellation notice to Secured Party; Debtor shall furnish Secured Party with certificates or other evidence satisfactory to Secured Party of compliance with the foregoing insurance provisions. 2.12 Use of the Collateral. Debtor will use the Collateral for business purposes only and operate it by qualified personnel in accordance with applicable manufacturers' manuals. Debtor will keep the Collateral free from any adverse lien or encumbrance and in good working order, condition and repair and will not waste or destroy the Collateral or any part thereof; Debtor will keep the Collateral appropriately protected from the elements, and will furnish all required parts and servicing (including any contract service necessary to maintain the benefit of any warranty of the manufacturer); Debtor will not use the Collateral in violation of any statute, ordinance, regulation or order; and Secured Party may examine and inspect the Collateral and any and all books and records of Debtor during business hours at any time; such right of inspection shall include the right to copy Debtor's books and records and to converse with Debtor's officers, employees, agents, and independent accountants. 2.13 Taxes and Assessments. Debtor will pay promptly when due all taxes, assessments, levies, imposts, duties and charges, of any kind or nature, imposed upon the Collateral or for its use or operation or upon this Agreement or upon any instruments evidencing the obligations. 2.14 Financial Statements. Debtor shall furnish Secured Party within ninety (90) days after the close of each fiscal year of Debtor, its financial statements (including, without limitation, a balance sheet, a statement of income and surplus account and a statement of changes in financial position) for the immediately preceding fiscal year, setting forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by Secured Party. Such financial statements shall be prepared at least as a review by Debtor's independent certified accountants and, if prepared as an audit, shall be certified by such accountants. Debtor shall also furnish Secured Party with any other financial information deemed necessary by Secured Party. Each financial statement submitted by Debtor to Secured Party shall be accompanied by a certificate signed by the chief executive officer, the chief operating officer or the chief financial officer of Debtor, certifying that (i) such financial statement was prepared in accordance with the generally accepted accounting principles consistently applied and fairly and accurately presents the Debtor's financial condition and results of operations for the period to which it pertains, and (ii) no event of default has occurred under this Agreement during the period to which such financial statements pertains. -118- 3.0 EVENTS OF DEFAULT 3.1 the following shall be considered events of default: (i) failure on the part of Debtor to promptly perform in complete accordance with its representations, warranties and covenants made in this Agreement or in any other agreement with Secured Party, including, but not limited to, the payment of any liability, with interest, when due, or default by Debtor under the provisions of any other material agreement to which Debtor is party; (ii) the death of Debtor if an individual or the dissolution of Debtor if a business organization; (iii) more than one of the present officers of Debtor leave the business except for reason of the death or disability of an individual; (iv) the filing of any petition or complain under the Federal Bankruptcy Code or other federal or state acts of similar nature, by or against Debtor; or an assignment for the benefit of creditors by Debtor; (v) an application for or the appointment of a Receiver, Trustee or Conservator, voluntary or involuntary, by or against Debtor or for any substantial assets of Debtor, (vi) insolvency of Debtor under either the Federal Bankruptcy Code or applicable principles of equity; (vii) entry of judgment, issuance of any garnishment or attachment, or filing of any lien, claim or government attachment against the Collateral or which, in Secured Party's sole discretion, might impair the Collateral; (viii) the determination by Secured Party that a material misrepresentation of fact has been made by Debtor in this Agreement or in any writing supplementary or ancillary hereto; (ix) a determination by Secured Party that Debtor has suffered a material adverse change in its financial condition from the date of this Agreement; or (x) bankruptcy, insolvency, termination, dissolution or default of any guarantor for Debtor. 4.0 REMEDIES 4.1 Upon the happening of any event of default which is not cured within ten (10) days, or at any time thereafter: (i) all liabilities of Debtor shall, at the option of Secured Party, become immediately due and payable; (ii) Secured Party shall have and may exercise all of the rights and remedies granted to a secured party under the Uniform Commercial Code; (iii) Secured Party shall have the right, immediately, and without notice or other action, to set-off against any of Debtor's liabilities to Secured Party any money owed by Secured Party in any capacity to Debtor, whether or not due, and Secured Party shall be deemed to have exercised such right of set-off and to have made a charge against any such money immediately upon the occurrence of such default event though actual book entries may be made at some time subsequent thereto; (iv) Secured Party may proceed with or without judicial process to take possession of all or any part of the Collateral; Debtor agrees that upon receipt of notice of Secured Party's intention to take possession of all or any part of said Collateral, Debtor will do everything necessary to make same available to Secured Party (including, without limitation, assembling the Collateral and making it available to Secured Party at a place designated by Secured Party which is reasonably convenient to Debtor and Secured Party); and so long as Secured Party acts in a commercially reasonable manner, Debtor agrees to assign, transfer and deliver at any time the whole or any portion of the Collateral or any rights or interest therein in accordance with the Uniform Commercial Code and without limiting the scope of Secured Party's rights thereunder; (v) Secured Party may sell the Collateral at public or private sale or in -119- any other commercially reasonable manner and, at the option of Secured Party, in bulk or in parcels and with or without having the Collateral at the sale or other disposition, and Debtor agrees that in case of sale or other disposition of the Collateral, or any portion thereof, Secured Party shall apply all proceeds first to all costs and expenses of disposition, including attorneys' fees, and then to Debtor's obligations to Secured Party, (vi) Secured Party may elect to retain the Collateral or any part thereof in satisfaction of all sums due from Debtor upon notice to Debtor and any other party as may be required by the Uniform Commercial Code. All remedies provided in this paragraph shall be cumulative. Secured Party may exercise any one or more of such remedies in addition to any and all other remedies Secured Party may have under any applicable law or in equity. 4.2 Expenses; Disposition. Upon default, all amounts due and to become due hereunder shall, without notice, bear interest at the lesser of (i) twelve percent (12%) per annum or (ii) the maximum rate per annum which Secured Party is permitted by law to charge from the date such amounts are due until paid. Debtor shall pay all reasonable expenses of realizing upon the Collateral hereunder upon default and collecting all liabilities of Debtor to Secured Party, which reasonable expenses shall include attorneys' fees, whether or not litigation is commenced and whether incurred at trial, on appeal, or in any other proceeding. Any notification of a sale or other disposition of Collateral or of other action by Secured Party required to be given by Secured Party, will be sufficient if given personally, mailed, or delivered by facsimile machine or overnight carrier not less than five (5) days prior to the day on which such sale or other disposition will be made or action taken, and such notification shall be deemed reasonable notice. 5.0 MISCELLANEOUS 5.1 No Implied Waivers; Entire Agreement. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular event of default and shall not operate as a waiver of any subsequent default. This Agreement and any Schedule hereunder are non- cancelable. No modification of this Agreement or waiver of any right of Secured Party, hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Agreement and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party. This Agreement and any Schedule hereunder (a "Transaction") embody the entire agreement between the parties and supersede all prior agreements and understandings relating to the same subject matter, except in any case where the Secured Party takes an assignment from a vendor of its security interest in the same Collateral, in which case the terms of the Transaction shall be incorporated into the assigned agreement and shall prevail over any inconsistent terms therein but shall not be construed to create a new contract. -120- 5.2 Choice of Law. This Agreement and the rights of the parties hereto shall be governed by applicable Federal law and the laws of the State of Nevada. Any action arising out of this Agreement may be litigated under the laws of Nevada and submitted to the jurisdiction of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over the Debtor. 5.3 Protection of the Collateral. At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Any payments made by Secured Party shall be immediately due and payable by Debtor and shall bear interest at the rate of fifteen percent (15%) per annum. Until default, Debtor may retain possession of the Collateral and use it in any lawful manner not inconsistent with the provisions of this Agreement and any other agreement between Debtor and Secured Party, and not inconsistent with any policy of insurance thereon. 5.4 Binding Agreement; Time of the Essence. This Agreement shall take effect as a sealed instrument and shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, and assigns. Time is of the essence with respect to the performance of Debtor's obligations under this Agreement and any other agreement between Debtor and Secured Party. 5.5 Enforceability. Any term, clause or provision of this Agreement or of any evidence of indebtedness from Debtor to Secured Party which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining terms or clauses of such provision or the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, clause or provision in any other jurisdiction. 5.6 Notices. Any notices or demands required to be given herein shall be given to the parties in writing by United States first class mail (express, certified or otherwise) at the addresses set forth on page 1 of this Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph. 5.7 Additional Security. If there shall be any other collateral for any of the obligations, or for the obligations of any guarantor thereof, Secured Party may proceed against and/or enforce any or all of the Collateral and such collateral in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Secured Party from whatever source and applied by it to any of the obligations shall be applied in such order of application as Secured Party shall from time to time, in its sole discretion, elect. -121- 6.0 ASSIGNMENT 6.1 SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT HAS IN THE COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT TO A FINANCIAL INSTITUTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY AND PROMPTLY TO SECURED PARTY'S ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET- OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED PARTY'S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE SECURED PARTY'S ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR WILL NOT ASSERT AGAINST SECURED PARTY'S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY. 6.2 DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING OF ALL OR ANY PART OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF SECURED PARTY WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER. 7.0 POWER OF ATTORNEY 7.1 Secured Party is hereby appointed Debtor's attorney-in-fact to sign Debtor's name and to make non-material amendments (including completing and conforming the description of the Collateral) on any document in connection with this Agreement (including any financing statement) and to obtain, adjust, settle, and cancel any insurance required by this Agreement and to endorse any drafts in connection with such insurance. In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the 9th day of Sept., 1998. U.S. BANCORP LEASING & FINANCIAL Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (Debtor) By: By: /s/ Ben Farahi -------------------------- --------------- An authorized officer thereof Authorized Corporate Officer -122- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor -123- notice of any such "protest;" and each Guarantor hereby waives demand, presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution -124- or insolvency of the Obligor, or if a receiver, liquidator or conservator be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. -125- No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE OBLIGATION OF THE GUARANTORS TOGETHER HEREUNDER IS LIMITED TO $1,000,000.00, AND IS JOINT AND SEVERAL. -126- IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Witness: Behrouz Ben Farahi /s/ John Bydalek /s/Behrouz Ben Farahi ------------ ------------------ Print Name: John Bydalek an Individual Address: 1175 W. Moana Ln. SS#------------ #200, Reno, NV 89509 Witness: Bahram Bob Farahi /s/ John Bydalek /s/Bahram Bob Farahi ------------ ----------------- Print Name: John Bydalek an Individual Address: SS#------------ Witness: John Farahi /s/ John Bydalek /s/John Farahi ------------ ----------- Print Name: John Bydalek an Individual Address: SS#------------ GUARNATOR'S SIGNATURE MAY NOT BE WITNESSED BY GUARANTOR'S SPOUSE OR OTHER FAMILY MEMBER -127- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor -128- notice of any such "protest;" and each Guarantor hereby waives demand, presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution -129- or insolvency of the Obligor, or if a receiver, liquidator or conservator be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. -130- No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Monarch Casino & Resort, Inc. By: /s/ Ben Farahi --------------- Ben Farahi [Print Name] ---------- CFO [Title] --- 1175 West Moana Lane, Suite 200 Reno, Nevada 89509 -131- EX-10 7 SCHEDULE TO MASTER LOAN AGREEMENT Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino 1175 W. Moana Lane, Suite 200 Reno, Nevada 89509 $812,862.00 Effective Date 5/5/99 Loan Transaction Number ------ 1. THIS SCHEDULE is made between Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino, as Debtor, and U.S. BANCORP LEASING & FINANCIAL (which, together with its successor and assigns, will be called the "Secured Party") pursuant to the Master Loan Agreement dated as of September 22, 1998 (the "Loan Agreement"), the terms of which (including the definitions) are incorporated herein. If any terms hereof are inconsistent with the terms of the Loan Agreement, the terms hereof shall prevail. 2. FOR VALUE RECEIVED, Debtor hereby promises to pay to the order of Secured Party the principal amount of Eight Hundred Twelve Thousand Eight Hundred Sixty-Two and 00/100 Dollars ($812,862.00) with interest on any outstanding principal balance at the rate(s) specified herein from the Effective Date hereof until this Schedule shall have been paid in full in accordance with the following payment schedule: sixty (60) installments of $16,245.63 each, including the entire amount of interest accrued on this Schedule at the time of payment of each installment. The first payment shall be due on June 6, 1999 and a like payment shall be due on the same day of each succeeding month thereafter until the entire principal and interest have been paid. At the time of the final installment hereon, all unpaid principal and interest shall be due and owing. Each payment shall be applied first to accrued and unpaid interest, and the balance to the outstanding principal hereof. As a result, such final installment may be substantially more or substantially less than the installments specified herein. 3. The Debtor promises to pay interest on the principal balance outstanding at a rate of 7.39 percent per annum. 4. The Debtor may prepay this Schedule, in whole or in part, by paying simultaneously with an in addition to the prepayment, a premium for such prepayment privilege equal to the specified percent of the amount prepaid in accordance with the following schedule, one (1) to twelve (12) months: five (5.0)%, thirteen (13) to twenty-four (24) months: one (1.0)%, twenty-five (25) to sixty (60): 0%. Notwithstanding the foregoing, payments made within 30 days of the date an installment is due which do not exceed the scheduled amount of such installment shall not be considered prepayments. 5. Each of Debtor, if more than one, and all other parties who at any time may be liable hereon in any capacity, hereby jointly and severally waive diligence, demand, presentment, presentment for payment, protest, notice of protest and notice of dishonor of this Schedule, and authorize the Secured Party, without notice, to grant extensions in the time of payment of and reductions in the rate of interest on any moneys owing on this Schedule. -132- 6. The following property is hereby made Collateral for all purposes under the Loan Agreement: Various items of Hotel fixtures, furniture, and equipment located at the Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino at 3800 S. Virginia St., Reno, Nevada 89502; Washoe County and including but not limited to, all property improvements, miscellaneous upgrades, non-salvageable material, slot machines, kitchen equipment, casino bars, buffet bars, furniture, room accessories and partitions, ice machines, and spas. Whether any of the foregoing is owned now or acquired later; all accessions, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to any of the foregoing; all proceeds relating to any of the foregoing (including insurance, general intangibles and accounts proceeds). 7. The Collateral hereunder shall be based at the following location(s): 3800 S. Virginia Street Reno, NV 89502 COUNTY: Washoe Year 2000. Debtor has reviewed and assessed or will review and assess its business operations and computer systems and applications to address the "year 2000 problem" (that is, that computer applications and equipment used by Debtor, directly or indirectly through third parties, may be unable to properly perform date-sensitive functions before, during and after January 1, 2000). Debtor reasonable believes that the year 2000 problem will not result in a material adverse change in Debtor's business condition (financial or otherwise), operations, properties or prospects or ability to repay Secured Party. Based upon the review, Debtor has developed or will develop and implement a plan to address the year 2000 problem, to remediate any material year 2000 problem, and to complete testing with respect thereto, as soon as practicable and in any event by June 30, 1999. Debtor will promptly deliver such information relating to this covenant as Secured Party requests from time to time. IN WITNESS WHEREOF, Debtor has executed this Schedule this 5th day of May, 1999. Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino By /s/Ben Farahi ------------- Title: An Authorized Officer -133- MASTER LOAN AGREEMENT 1.0 PARTIES, COLLATERAL AND OBLIGATIONS 1.1 This Agreement is dated as of September 22, 1998. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (hereinafter called "Debtor") with offices at 1175 W. Moana Lane, Suite 200, Reno, Nevada 89509 intending to be legally bound, hereby promises to pay to U.S. BANCORP LEASING & FINANCIAL, an Oregon corporation having offices at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177 (hereinafter called "Secured Party"), any amounts set forth on any Schedule to Master Loan Agreement hereunder (the "Schedule(s)", all the terms of which are incorporated herein) and grants a security interest in and assigns, transfers and sets over to and to the successors and assigns thereof, the property specified in any Schedule hereunder wherever located, and any and all proceeds thereof, insurance recoveries, and all replacements, additions, accessions, accessories and substitutions thereto or therefor (hereafter called the "Collateral"). The security interest granted hereby is to secure payment of any and all liabilities or obligations of Debtor to the Secured Party, matured or unmatured, direct or indirect, absolute or contingent, heretofore arising, now existing or hereafter arising, and whether under this Agreement or under any other writing between Debtor and Secured Party (all hereinafter called the "obligations" and/or the "liabilities"). 1.2 Joint and Several Liability; Payment Terms. In the event there is more than one Debtor, all obligations shall be considered as joint and several obligations of all Debtors regardless of the source of Collateral or the particular Debtor with which the obligation originated. Interest shall be calculated on the basis of a 360-day year. All payments on any Schedule hereunder shall be made in lawful money of the United States at the post office address of the Secured Party or at such other place as the Secured Party may designate to Debtor in writing from time to time. In no event shall any Schedule hereunder be enforced in any way which permits Secured Party to collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Secured Party shall refund such excess interest to Debtor. In such event, Debtor agrees that Secured Party shall not be subject to any penalties for contracting for or collecting interest in excess of the maximum lawful rate. 1.3 Late Charge. If any of the obligations remains overdue for more than ten (10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount equal to the lesser of (i) five percent (5.0%) of each such overdue amount; or (ii) the maximum percentage of any such overdue amount permitted by applicable law as a late charge. Debtor agrees that the amount of such late charge represents a reasonable estimate of the cost to Secured Party of processing a delinquent payment and that the acceptance of any late charge shall not constitute a waiver of default with respect to the overdue amount or prevent Secured Party from exercising any other available rights and remedies. -134- 2.0 WARRANTIES AND COVENANTS OF DEBTOR Debtor hereby represents, warrants and covenants that: 2.1 Business Organization Status and Authority. (i) Debtor is duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business in all states and countries in which such qualification is necessary; (ii) Debtor has the lawful power and authority to own its assets and to conduct the business in which it is engaged; and to execute and comply with the provisions of this Agreement and any related documents; (iii) the execution and delivery of this Agreement and any related documents have been duly authorized by all necessary action; (iv) no authorization, consent, approval, license or exemption of, or filing or registration with, any or all of the owners of Debtor or any governmental entity was, is or will be necessary to the valid execution, delivery, performance or full enforceability of this Agreement and any related documents. Except as specifically disclosed to Secured Party, Debtor utilizes no trade names in the conduct of its business and/or has not changed its name within the past five years. 2.2 Merger; Transfer of Assets. Debtor will not consolidate or merge with or into any other entity, liquidate or dissolve, distribute, sell, lease, transfer or dispose of all of its properties or assets or any substantial portion thereof other than in the ordinary course of its business, unless the Secured Party shall give its prior written consent, and the surviving, or successor entity or the transferee of such assets, as the case may be, shall assume, by a written instrument which is legal, valid and enforceable against such surviving or successor entity or transferee, all of the obligations of Debtor to Secured Party or any affiliate of Secured Party. 2.3 No Violation of Covenants or Laws. Debtor is not party to any agreement or subject to any restriction which materially and adversely affects its ability to perform its obligations under this Agreement and any related documents. The execution of and compliance with the terms of this Agreement and any related documents does not and will not (i) violate any provision of law, or (ii) conflict with or result in a breach of any order, injunction, or decree of any court or governmental authority or the formation documents of Debtor, or (iii) constitute or result in a default under any agreement, bond or indenture by which Debtor is bound or to which any of its property is subject, or (iv) result in the imposition of any lien or encumbrance upon any of Debtor's assets, except for any liens created hereunder or under any related documents. 2.4 Accurate Information. All financial information submitted to the Secured Party in regard to Debtor, was prepared in accordance with generally accepted accounting principles, consistently applied, and fairly and accurately depicts the financial position and results of operations of Debtor or such other person, as of the respective dates or for the respective periods, to which such information pertains. Debtor had good, valid and marketable title to all the properties and assets reflected as being owned by it on any balance sheets of Debtor submitted to Secured Party as of the dates thereof. 2.5 Judgments; Pending Legal Action. There are no judgments outstanding against Debtor, and there are no actions or proceedings pending or, to the best knowledge of Debtor, threatened against or affecting Debtor or any of its properties in any court or before any governmental entity which, if -135- determined adversely to Debtor, would result in any material adverse change in the business, properties or assets, or in the condition, financial or otherwise, of Debtor or would materially and adversely affect the ability of Debtor to satisfy its obligations under this Agreement and any related documents. 2.6 No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is not in breach of or in default under any loan agreement, indenture, bond, note or other evidence of indebtedness, or any other material agreement or any court order, injunction or decree or any lien, statute, rule or regulation. The operations of Debtor comply with all laws, ordinances and governmental rules and regulations applicable to them. Debtor has filed all Federal, state and municipal income tax returns which are required to be filed and has paid all taxes as shown on said returns and on all assessments billed to it to the extent that such taxes or assessments have become due. Debtor does not know of any other proposed tax assessment against it or of any basis for one. 2.7 Sale Prohibited. Debtor will not sell, dispose of or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Secured Party. 2.8 Location of Collateral. The Collateral will be kept at the location(s) shown on the Schedule(s) hereunder and Debtor will promptly notify Secured Party of any change in the location(s) of the Collateral. Debtor will not remove the Collateral from said location(s) without the prior written consent of Secured Party. 2.9 Collateral not a Fixture. Notwithstanding any presumption of applicable law, and irrespective of any manner of attachment, the Collateral shall not be deemed real property but shall retain its character as personal property. However, Debtor will at the option of Secured Party furnish the latter with a waiver or waivers in recordable form, signed by all persons having an ownership interest in the real estate, of any interest in the Collateral which is or might be deemed to be prior to Secured Party's interest. 2.10 Perfection of Security Interest. Except for (i) the security interest granted hereby and (ii) any other security interest previously disclosed by Debtor to Secured Party in writing, Debtor is the owner of the Collateral free from any adverse lien, security interest or encumbrance. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein. Except as previously disclosed in writing to Secured Party, no financing statement covering any Collateral or any proceeds thereof is on file in any public office. At the request of Secured Party, Debtor will execute, acknowledge and deliver to Secured Party in recordable or fileable form, any document or instrument required by Secured Party to further the purposes of this Agreement, or to perfect its interest in the Collateral or to maintain such perfected interest in full force and effect, including (without limitation) any fixture filings and financial statements and any amendments and continuation statements thereto pursuant to the Uniform Commercial Code, in form satisfactory to Secured Party, and will pay the cost of filing the same or filing or recording this Agreement in all public offices wherever filing or recording -136- is deemed by Secured Party to be necessary or desirable. Debtor hereby agrees that this Agreement shall be and constitute a financing statement for purposes of the Uniform Commercial Code. 2.11 Insurance. Unless otherwise agreed, Debtor will have and maintain insurance from financially sound carriers at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, collision, "mysterious disappearance" and other such risks as Secured Party may require, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to Secured Party; each insurance policy shall name Secured Party as loss payee and shall be payable to Secured Party and Debtor as their interest may appear; all policies of insurance shall provide for ten days' written minimum cancellation notice to Secured Party; Debtor shall furnish Secured Party with certificates or other evidence satisfactory to Secured Party of compliance with the foregoing insurance provisions. 2.12 Use of the Collateral. Debtor will use the Collateral for business purposes only and operate it by qualified personnel in accordance with applicable manufacturers' manuals. Debtor will keep the Collateral free from any adverse lien or encumbrance and in good working order, condition and repair and will not waste or destroy the Collateral or any part thereof; Debtor will keep the Collateral appropriately protected from the elements, and will furnish all required parts and servicing (including any contract service necessary to maintain the benefit of any warranty of the manufacturer); Debtor will not use the Collateral in violation of any statute, ordinance, regulation or order; and Secured Party may examine and inspect the Collateral and any and all books and records of Debtor during business hours at any time; such right of inspection shall include the right to copy Debtor's books and records and to converse with Debtor's officers, employees, agents, and independent accountants. 2.13 Taxes and Assessments. Debtor will pay promptly when due all taxes, assessments, levies, imposts, duties and charges, of any kind or nature, imposed upon the Collateral or for its use or operation or upon this Agreement or upon any instruments evidencing the obligations. 2.14 Financial Statements. Debtor shall furnish Secured Party within ninety (90) days after the close of each fiscal year of Debtor, its financial statements (including, without limitation, a balance sheet, a statement of income and surplus account and a statement of changes in financial position) for the immediately preceding fiscal year, setting forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by Secured Party. Such financial statements shall be prepared at least as a review by Debtor's independent certified accountants and, if prepared as an audit, shall be certified by such accountants. Debtor shall also furnish Secured Party with any other financial information deemed necessary by Secured Party. Each financial statement submitted by Debtor to Secured Party shall be accompanied by a certificate signed by the chief executive officer, the chief operating officer or the chief financial officer of Debtor, certifying that (i) such financial statement was prepared in accordance with the generally accepted accounting principles consistently applied and fairly and accurately presents the -137- Debtor's financial condition and results of operations for the period to which it pertains, and (ii) no event of default has occurred under this Agreement during the period to which such financial statements pertains. 3.0 EVENTS OF DEFAULT 3.1 the following shall be considered events of default: (i) failure on the part of Debtor to promptly perform in complete accordance with its representations, warranties and covenants made in this Agreement or in any other agreement with Secured Party, including, but not limited to, the payment of any liability, with interest, when due, or default by Debtor under the provisions of any other material agreement to which Debtor is party; (ii) the death of Debtor if an individual or the dissolution of Debtor if a business organization; (iii) more than one of the present officers of Debtor leave the business except for reason of the death or disability of an individual; (iv) the filing of any petition or complain under the Federal Bankruptcy Code or other federal or state acts of similar nature, by or against Debtor; or an assignment for the benefit of creditors by Debtor; (v) an application for or the appointment of a Receiver, Trustee or Conservator, voluntary or involuntary, by or against Debtor or for any substantial assets of Debtor, (vi) insolvency of Debtor under either the Federal Bankruptcy Code or applicable principles of equity; (vii) entry of judgment, issuance of any garnishment or attachment, or filing of any lien, claim or government attachment against the Collateral or which, in Secured Party's sole discretion, might impair the Collateral; (viii) the determination by Secured Party that a material misrepresentation of fact has been made by Debtor in this Agreement or in any writing supplementary or ancillary hereto; (ix) a determination by Secured Party that Debtor has suffered a material adverse change in its financial condition from the date of this Agreement; or (x) bankruptcy, insolvency, termination, dissolution or default of any guarantor for Debtor. 4.0 REMEDIES 4.1 Upon the happening of any event of default which is not cured within ten (10) days, or at any time thereafter: (i) all liabilities of Debtor shall, at the option of Secured Party, become immediately due and payable; (ii) Secured Party shall have and may exercise all of the rights and remedies granted to a secured party under the Uniform Commercial Code; (iii) Secured Party shall have the right, immediately, and without notice or other action, to set-off against any of Debtor's liabilities to Secured Party any money owed by Secured Party in any capacity to Debtor, whether or not due, and Secured Party shall be deemed to have exercised such right of set-off and to have made a charge against any such money immediately upon the occurrence of such default event though actual book entries may be made at some time subsequent thereto; (iv) Secured Party may proceed with or without judicial process to take possession of all or any part of the Collateral; Debtor agrees that upon receipt of notice of Secured Party's intention to take possession of all or any part of said Collateral, Debtor will do everything necessary to make same available to Secured Party (including, without limitation, assembling the Collateral and making it available to Secured Party at a place designated by Secured Party which is reasonably convenient to Debtor and Secured Party); and so long as Secured -138- Party acts in a commercially reasonable manner, Debtor agrees to assign, transfer and deliver at any time the whole or any portion of the Collateral or any rights or interest therein in accordance with the Uniform Commercial Code and without limiting the scope of Secured Party's rights thereunder; (v) Secured Party may sell the Collateral at public or private sale or in any other commercially reasonable manner and, at the option of Secured Party, in bulk or in parcels and with or without having the Collateral at the sale or other disposition, and Debtor agrees that in case of sale or other disposition of the Collateral, or any portion thereof, Secured Party shall apply all proceeds first to all costs and expenses of disposition, including attorneys' fees, and then to Debtor's obligations to Secured Party, (vi) Secured Party may elect to retain the Collateral or any part thereof in satisfaction of all sums due from Debtor upon notice to Debtor and any other party as may be required by the Uniform Commercial Code. All remedies provided in this paragraph shall be cumulative. Secured Party may exercise any one or more of such remedies in addition to any and all other remedies Secured Party may have under any applicable law or in equity. 4.2 Expenses; Disposition. Upon default, all amounts due and to become due hereunder shall, without notice, bear interest at the lesser of (i) twelve percent (12%) per annum or (ii) the maximum rate per annum which Secured Party is permitted by law to charge from the date such amounts are due until paid. Debtor shall pay all reasonable expenses of realizing upon the Collateral hereunder upon default and collecting all liabilities of Debtor to Secured Party, which reasonable expenses shall include attorneys' fees, whether or not litigation is commenced and whether incurred at trial, on appeal, or in any other proceeding. Any notification of a sale or other disposition of Collateral or of other action by Secured Party required to be given by Secured Party, will be sufficient if given personally, mailed, or delivered by facsimile machine or overnight carrier not less than five (5) days prior to the day on which such sale or other disposition will be made or action taken, and such notification shall be deemed reasonable notice. 5.0 MISCELLANEOUS 5.1 No Implied Waivers; Entire Agreement. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular event of default and shall not operate as a waiver of any subsequent default. This Agreement and any Schedule hereunder are non- cancelable. No modification of this Agreement or waiver of any right of Secured Party, hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Agreement and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party. This Agreement and any Schedule hereunder (a "Transaction") embody the entire agreement between the parties and supersede all prior -139- agreements and understandings relating to the same subject matter, except in any case where the Secured Party takes an assignment from a vendor of its security interest in the same Collateral, in which case the terms of the Transaction shall be incorporated into the assigned agreement and shall prevail over any inconsistent terms therein but shall not be construed to create a new contract. 5.2 Choice of Law. This Agreement and the rights of the parties hereto shall be governed by applicable Federal law and the laws of the State of Nevada. Any action arising out of this Agreement may be litigated under the laws of Nevada and submitted to the jurisdiction of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over the Debtor. 5.3 Protection of the Collateral. At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Any payments made by Secured Party shall be immediately due and payable by Debtor and shall bear interest at the rate of fifteen percent (15%) per annum. Until default, Debtor may retain possession of the Collateral and use it in any lawful manner not inconsistent with the provisions of this Agreement and any other agreement between Debtor and Secured Party, and not inconsistent with any policy of insurance thereon. 5.4 Binding Agreement; Time of the Essence. This Agreement shall take effect as a sealed instrument and shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, and assigns. Time is of the essence with respect to the performance of Debtor's obligations under this Agreement and any other agreement between Debtor and Secured Party. 5.5 Enforceability. Any term, clause or provision of this Agreement or of any evidence of indebtedness from Debtor to Secured Party which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining terms or clauses of such provision or the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, clause or provision in any other jurisdiction. 5.6 Notices. Any notices or demands required to be given herein shall be given to the parties in writing by United States first class mail (express, certified or otherwise) at the addresses set forth on page 1 of this Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph. 5.7 Additional Security. If there shall be any other collateral for any of the obligations, or for the obligations of any guarantor thereof, Secured Party may proceed against and/or enforce any or all of the Collateral and such collateral in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Secured Party from whatever source -140- and applied by it to any of the obligations shall be applied in such order of application as Secured Party shall from time to time, in its sole discretion, elect. 6.0 ASSIGNMENT 6.1 SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT HAS IN THE COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT TO A FINANCIAL INSTITUTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY AND PROMPTLY TO SECURED PARTY'S ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET- OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED PARTY'S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE SECURED PARTY'S ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR WILL NOT ASSERT AGAINST SECURED PARTY'S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY. 6.2 DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING OF ALL OR ANY PART OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF SECURED PARTY WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER. 7.0 POWER OF ATTORNEY 7.1 Secured Party is hereby appointed Debtor's attorney-in-fact to sign Debtor's name and to make non-material amendments (including completing and conforming the description of the Collateral) on any document in connection with this Agreement (including any financing statement) and to obtain, adjust, settle, and cancel any insurance required by this Agreement and to endorse any drafts in connection with such insurance. In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the 9th day of Sept., 1998. U.S. BANCORP LEASING & FINANCIAL Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (Debtor) By: By: /s/ Ben Farahi ------------------------ --------------- An authorized officer thereof Authorized Corporate Officer -141- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -142- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -143- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise -144- by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE OBLIGATION OF THE GUARANTORS TOGETHER HEREUNDER IS LIMITED TO $1,000,000.00, AND IS JOINT AND SEVERAL. -145- IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Witness: Behrouz Ben Farahi /s/ John Bydalek /s/Behrouz Ben Farahi ------------ ------------------ Print Name: John Bydalek an Individual Address: 1175 W. Moana Ln. SS#------------ #200, Reno, NV 89509 Witness: Bahram Bob Farahi /s/ John Bydalek /s/Bahram Bob Farahi ------------ ----------------- Print Name: John Bydalek an Individual Address: SS#------------ Witness: John Farahi /s/ John Bydalek /s/John Farahi ------------ ----------- Print Name: John Bydalek an Individual Address: SS#------------ GUARNATOR'S SIGNATURE MAY NOT BE WITNESSED BY GUARANTOR'S SPOUSE OR OTHER FAMILY MEMBER -146- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -147- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -148- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or -149- remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Monarch Casino & Resort, Inc. By: /s/ Ben Farahi --------------- Ben Farahi [Print Name] ---------- CFO [Title] --- 1175 West Moana Lane, Suite 200 Reno, Nevada 89509 -150- EX-10 8 SCHEDULE TO MASTER LOAN AGREEMENT Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino 1175 W. Moana Lane, Suite 200 Reno, Nevada 89509 $1,627,810.00 Effective Date 5/24/99 Loan Transaction Number ------- 1. THIS SCHEDULE is made between Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino, as Debtor, and U.S. BANCORP LEASING & FINANCIAL (which, together with its successor and assigns, will be called the "Secured Party") pursuant to the Master Loan Agreement dated as of September 22, 1998 (the "Loan Agreement"), the terms of which (including the definitions) are incorporated herein. If any terms hereof are inconsistent with the terms of the Loan Agreement, the terms hereof shall prevail. 2. FOR VALUE RECEIVED, Debtor hereby promises to pay to the order of Secured Party the principal amount of One Million, Six Hundred Twenty-Seven Thousand, Eight Hundred Ten and 00/100 ($1,627,810.00) with interest on any outstanding principal balance at the rate(s) specified herein from the Effective Date hereof until this Schedule shall have been paid in full in accordance with the following payment schedule: sixty (60) installments of $32,648.92 each, including the entire amount of interest accrued on this Schedule at the time of payment of each installment. The first payment shall be due on June 18, 1999 and a like payment shall be due on the same day of each succeeding month thereafter until the entire principal and interest have been paid. At the time of the final installment hereon, all unpaid principal and interest shall be due and owing. Each payment shall be applied first to accrued and unpaid interest, and the balance to the outstanding principal hereof. As a result, such final installment may be substantially more or substantially less than the installments specified herein. 3. The Debtor promises to pay interest on the principal balance outstanding at a rate of 7.54 percent per annum. 4. The Debtor may prepay this Schedule, in whole or in part, by paying simultaneously with an in addition to the prepayment, a premium for such prepayment privilege equal to the specified percent of the amount prepaid in accordance with the following schedule, one (1) to twelve (12) months: five (5.0)%, thirteen (13) to twenty-four (24) months: one (1.00)%, twenty-five (25) to sixty (60): 0%. Notwithstanding the foregoing, payments made within 30 days of the date an installment is due which do not exceed the scheduled amount of such installment shall not be considered prepayments. 5. Each of Debtor, if more than one, and all other parties who at any time may be liable hereon in any capacity, hereby jointly and severally waive diligence, demand, presentment, presentment for payment, protest, notice of protest and notice of dishonor of this Schedule, and authorize the Secured Party, without notice, to grant extensions in the time of payment of and reductions in the rate of interest on any moneys owing on this Schedule. -151- 6. The following property is hereby made Collateral for all purposes under the Loan Agreement: Various items of Hotel fixtures, furniture, and equipment located at the Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino at 3800 S. Virginia St., Reno, Nevada 89502; Washoe County and including but not limited to, all property improvements, miscellaneous upgrades, non-salvageable material, slot machines, kitchen equipment, casino bars, buffet bars, furniture, room accessories and partitions, ice machines, and spas. Whether any of the foregoing is owned now or acquired later; all accessions, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to any of the foregoing; all proceeds relating to any of the foregoing (including insurance, general intangibles and accounts proceeds). 7. The Collateral hereunder shall be based at the following location(s): 3800 S. Virginia Street Reno, NV 89502 COUNTY: Washoe Year 2000. Debtor has reviewed and assessed or will review and assess its business operations and computer systems and applications to address the "year 2000 problem" (that is, that computer applications and equipment used by Debtor, directly or indirectly through third parties, may be unable to properly perform date-sensitive functions before, during and after January 1, 2000). Debtor reasonable believes that the year 2000 problem will not result in a material adverse change in Debtor's business condition (financial or otherwise), operations, properties or prospects or ability to repay Secured Party. Based upon the review, Debtor has developed or will develop and implement a plan to address the year 2000 problem, to remediate any material year 2000 problem, and to complete testing with respect thereto, as soon as practicable and in any event by June 30, 1999. Debtor will promptly deliver such information relating to this covenant as Secured Party requests from time to time. IN WITNESS WHEREOF, Debtor has executed this Schedule this 20th day of May, 1999. Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino By /s/Ben Farahi -------------- Title: An Authorized Officer -152- MASTER LOAN AGREEMENT 1.0 PARTIES, COLLATERAL AND OBLIGATIONS 1.1 This Agreement is dated as of September 22, 1998. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (hereinafter called "Debtor") with offices at 1175 W. Moana Lane, Suite 200, Reno, Nevada 89509 intending to be legally bound, hereby promises to pay to U.S. BANCORP LEASING & FINANCIAL, an Oregon corporation having offices at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177 (hereinafter called "Secured Party"), any amounts set forth on any Schedule to Master Loan Agreement hereunder (the "Schedule(s)", all the terms of which are incorporated herein) and grants a security interest in and assigns, transfers and sets over to and to the successors and assigns thereof, the property specified in any Schedule hereunder wherever located, and any and all proceeds thereof, insurance recoveries, and all replacements, additions, accessions, accessories and substitutions thereto or therefor (hereinafter called the "Collateral"). The security interest granted hereby is to secure payment of any and all liabilities or obligations of Debtor to the Secured Party, matured or unmatured, direct or indirect, absolute or contingent, heretofore arising, now existing or hereafter arising, and whether under this Agreement or under any other writing between Debtor and Secured Party (all hereinafter called the "obligations" and/or the "liabilities"). 1.2 Joint and Several Liability; Payment Terms. In the event there is more than one Debtor, all obligations shall be considered as joint and several obligations of all Debtors regardless of the source of Collateral or the particular Debtor with which the obligation originated. Interest shall be calculated on the basis of a 360-day year. All payments on any Schedule hereunder shall be made in lawful money of the United States at the post office address of the Secured Party or at such other place as the Secured Party may designate to Debtor in writing from time to time. In no event shall any Schedule hereunder be enforced in any way which permits Secured Party to collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Secured Party shall refund such excess interest to Debtor. In such event, Debtor agrees that Secured Party shall not be subject to any penalties for contracting for or collecting interest in excess of the maximum lawful rate. 1.3 Late Charge. If any of the obligations remains overdue for more than ten (10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount equal to the lesser of (i) five percent (5.0%) of each such overdue amount; or (ii) the maximum percentage of any such overdue amount permitted by applicable law as a late charge. Debtor agrees that the amount of such late charge represents a reasonable estimate of the cost to Secured Party of processing a delinquent payment and that the acceptance of any late charge shall not constitute a waiver of default with respect to the overdue amount or prevent Secured Party from exercising any other available rights and remedies. 153- 2.0 WARRANTIES AND COVENANTS OF DEBTOR Debtor hereby represents, warrants and covenants that: 2.1 Business Organization Status and Authority. (i) Debtor is duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business in all states and countries in which such qualification is necessary; (ii) Debtor has the lawful power and authority to own its assets and to conduct the business in which it is engaged; and to execute and comply with the provisions of this Agreement and any related documents; (iii) the execution and delivery of this Agreement and any related documents have been duly authorized by all necessary action; (iv) no authorization, consent, approval, license or exemption of, or filing or registration with, any or all of the owners of Debtor or any governmental entity was, is or will be necessary to the valid execution, delivery, performance or full enforceability of this Agreement and any related documents. Except as specifically disclosed to Secured Party, Debtor utilizes no trade names in the conduct of its business and/or has not changed its name within the past five years. 2.2 Merger; Transfer of Assets. Debtor will not consolidate or merge with or into any other entity, liquidate or dissolve, distribute, sell, lease, transfer or dispose of all of its properties or assets or any substantial portion thereof other than in the ordinary course of its business, unless the Secured Party shall give its prior written consent, and the surviving, or successor entity or the transferee of such assets, as the case may be, shall assume, by a written instrument which is legal, valid and enforceable against such surviving or successor entity or transferee, all of the obligations of Debtor to Secured Party or any affiliate of Secured Party. 2.3 No Violation of Covenants or Laws. Debtor is not party to any agreement or subject to any restriction which materially and adversely affects its ability to perform its obligations under this Agreement and any related documents. The execution of and compliance with the terms of this Agreement and any related documents does not and will not (i) violate any provision of law, or (ii) conflict with or result in a breach of any order, injunction, or decree of any court or governmental authority or the formation documents of Debtor, or (iii) constitute or result in a default under any agreement, bond or indenture by which Debtor is bound or to which any of its property is subject, or (iv) result in the imposition of any lien or encumbrance upon any of Debtor's assets, except for any liens created hereunder or under any related documents. 2.4 Accurate Information. All financial information submitted to the Secured Party in regard to Debtor, was prepared in accordance with generally accepted accounting principles, consistently applied, and fairly and accurately depicts the financial position and results of operations of Debtor or such other person, as of the respective dates or for the respective periods, to which such information pertains. Debtor had good, valid and marketable title to all the properties and assets reflected as being owned by it on any balance sheets of Debtor submitted to Secured Party as of the dates thereof. 2.5 Judgments; Pending Legal Action. There are no judgments outstanding against Debtor, and there are no actions or proceedings pending or, to the best knowledge of Debtor, threatened against or affecting Debtor or any of its properties in any court or before any governmental entity which, if -154- determined adversely to Debtor, would result in any material adverse change in the business, properties or assets, or in the condition, financial or otherwise, of Debtor or would materially and adversely affect the ability of Debtor to satisfy its obligations under this Agreement and any related documents. 2.6 No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is not in breach of or in default under any loan agreement, indenture, bond, note or other evidence of indebtedness, or any other material agreement or any court order, injunction or decree or any lien, statute, rule or regulation. The operations of Debtor comply with all laws, ordinances and governmental rules and regulations applicable to them. Debtor has filed all Federal, state and municipal income tax returns which are required to be filed and has paid all taxes as shown on said returns and on all assessments billed to it to the extent that such taxes or assessments have become due. Debtor does not know of any other proposed tax assessment against it or of any basis for one. 2.7 Sale Prohibited. Debtor will not sell, dispose of or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Secured Party. 2.8 Location of Collateral. The Collateral will be kept at the location(s) shown on the Schedule(s) hereunder and Debtor will promptly notify Secured Party of any change in the location(s) of the Collateral. Debtor will not remove the Collateral from said location(s) without the prior written consent of Secured Party. 2.9 Collateral not a Fixture. Notwithstanding any presumption of applicable law, and irrespective of any manner of attachment, the Collateral shall not be deemed real property but shall retain its character as personal property. However, Debtor will at the option of Secured Party furnish the latter with a waiver or waivers in recordable form, signed by all persons having an ownership interest in the real estate, of any interest in the Collateral which is or might be deemed to be prior to Secured Party's interest. 2.10 Perfection of Security Interest. Except for (i) the security interest granted hereby and (ii) any other security interest previously disclosed by Debtor to Secured Party in writing, Debtor is the owner of the Collateral free from any adverse lien, security interest or encumbrance. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein. Except as previously disclosed in writing to Secured Party, no financing statement covering any Collateral or any proceeds thereof is on file in any public office. At the request of Secured Party, Debtor will execute, acknowledge and deliver to Secured Party in recordable or fileable form, any document or instrument required by Secured Party to further the purposes of this Agreement, or to perfect its interest in the Collateral or to maintain such perfected interest in full force and effect, including (without limitation) any fixture filings and financial statements and any amendments and continuation statements thereto pursuant to the Uniform Commercial Code, in form satisfactory to Secured Party, and will pay the cost of filing the same or filing or -155- recording this Agreement in all public offices wherever filing or recording is deemed by Secured Party to be necessary or desirable. Debtor hereby agrees that this Agreement shall be and constitute a financing statement for purposes of the Uniform Commercial Code. 2.11 Insurance. Unless otherwise agreed, Debtor will have and maintain insurance from financially sound carriers at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, collision, "mysterious disappearance" and other such risks as Secured Party may require, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to Secured Party; each insurance policy shall name Secured Party as loss payee and shall be payable to Secured Party and Debtor as their interest may appear; all policies of insurance shall provide for ten days' written minimum cancellation notice to Secured Party; Debtor shall furnish Secured Party with certificates or other evidence satisfactory to Secured Party of compliance with the foregoing insurance provisions. 2.12 Use of the Collateral. Debtor will use the Collateral for business purposes only and operate it by qualified personnel in accordance with applicable manufacturers' manuals. Debtor will keep the Collateral free from any adverse lien or encumbrance and in good working order, condition and repair and will not waste or destroy the Collateral or any part thereof; Debtor will keep the Collateral appropriately protected from the elements, and will furnish all required parts and servicing (including any contract service necessary to maintain the benefit of any warranty of the manufacturer); Debtor will not use the Collateral in violation of any statute, ordinance, regulation or order; and Secured Party may examine and inspect the Collateral and any and all books and records of Debtor during business hours at any time; such right of inspection shall include the right to copy Debtor's books and records and to converse with Debtor's officers, employees, agents, and independent accountants. 2.13 Taxes and Assessments. Debtor will pay promptly when due all taxes, assessments, levies, imposts, duties and charges, of any kind or nature, imposed upon the Collateral or for its use or operation or upon this Agreement or upon any instruments evidencing the obligations. 2.14 Financial Statements. Debtor shall furnish Secured Party within ninety (90) days after the close of each fiscal year of Debtor, its financial statements (including, without limitation, a balance sheet, a statement of income and surplus account and a statement of changes in financial position) for the immediately preceding fiscal year, setting forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by Secured Party. Such financial statements shall be prepared at least as a review by Debtor's independent certified accountants and, if prepared as an audit, shall be certified by such accountants. Debtor shall also furnish Secured Party with any other financial information deemed necessary by Secured Party. Each financial statement submitted by Debtor to Secured Party shall be accompanied by a certificate signed by the chief executive officer, the chief operating officer or the chief financial officer of Debtor, certifying that (i) such financial statement was prepared in accordance with the generally accepted accounting -156- principles consistently applied and fairly and accurately presents the Debtor's financial condition and results of operations for the period to which it pertains, and (ii) no event of default has occurred under this Agreement during the period to which such financial statements pertains. 3.0 EVENTS OF DEFAULT 3.1 the following shall be considered events of default: (i) failure on the part of Debtor to promptly perform in complete accordance with its representations, warranties and covenants made in this Agreement or in any other agreement with Secured Party, including, but not limited to, the payment of any liability, with interest, when due, or default by Debtor under the provisions of any other material agreement to which Debtor is party; (ii) the death of Debtor if an individual or the dissolution of Debtor if a business organization; (iii) more than one of the present officers of Debtor leave the business except for reason of the death or disability of an individual; (iv) the filing of any petition or complaint under the Federal Bankruptcy Code or other federal or state acts of similar nature, by or against Debtor; or an assignment for the benefit of creditors by Debtor; (v) an application for or the appointment of a Receiver, Trustee or Conservator, voluntary or involuntary, by or against Debtor or for any substantial assets of Debtor, (vi) insolvency of Debtor under either the Federal Bankruptcy Code or applicable principles of equity; (vii) entry of judgment, issuance of any garnishment or attachment, or filing of any lien, claim or government attachment against the Collateral or which, in Secured Party's sole discretion, might impair the Collateral; (viii) the determination by Secured Party that a material misrepresentation of fact has been made by Debtor in this Agreement or in any writing supplementary or ancillary hereto; (ix) a determination by Secured Party that Debtor has suffered a material adverse change in its financial condition from the date of this Agreement; or (x) bankruptcy, insolvency, termination, dissolution or default of any guarantor for Debtor. 4.0 REMEDIES 4.1 Upon the happening of any event of default which is not cured within ten (10) days, or at any time thereafter: (i) all liabilities of Debtor shall, at the option of Secured Party, become immediately due and payable; (ii) Secured Party shall have and may exercise all of the rights and remedies granted to a secured party under the Uniform Commercial Code; (iii) Secured Party shall have the right, immediately, and without notice or other action, to set-off against any of Debtor's liabilities to Secured Party any money owed by Secured Party in any capacity to Debtor, whether or not due, and Secured Party shall be deemed to have exercised such right of set-off and to have made a charge against any such money immediately upon the occurrence of such default event though actual book entries may be made at some time subsequent thereto; (iv) Secured Party may proceed with or without judicial process to take possession of all or any part of the Collateral; Debtor agrees that upon receipt of notice of Secured Party's intention to take possession of all or any part of said Collateral, Debtor will do everything necessary to make same available to Secured Party (including, without limitation, assembling the Collateral and making it available to Secured Party at a place designated by Secured Party which is reasonably convenient to Debtor and Secured Party); and so long as Secured Party acts in a commercially reasonable manner, Debtor agrees to assign, -157- transfer and deliver at any time the whole or any portion of the Collateral or any rights or interest therein in accordance with the Uniform Commercial Code and without limiting the scope of Secured Party's rights thereunder; (v) Secured Party may sell the Collateral at public or private sale or in any other commercially reasonable manner and, at the option of Secured Party, in bulk or in parcels and with or without having the Collateral at the sale or other disposition, and Debtor agrees that in case of sale or other disposition of the Collateral, or any portion thereof, Secured Party shall apply all proceeds first to all costs and expenses of disposition, including attorneys' fees, and then to Debtor's obligations to Secured Party, (vi) Secured Party may elect to retain the Collateral or any part thereof in satisfaction of all sums due from Debtor upon notice to Debtor and any other party as may be required by the Uniform Commercial Code. All remedies provided in this paragraph shall be cumulative. Secured Party may exercise any one or more of such remedies in addition to any and all other remedies Secured Party may have under any applicable law or in equity. 4.2 Expenses; Disposition. Upon default, all amounts due and to become due hereunder shall, without notice, bear interest at the lesser of (i) twelve percent (12%) per annum or (ii) the maximum rate per annum which Secured Party is permitted by law to charge from the date such amounts are due until paid. Debtor shall pay all reasonable expenses of realizing upon the Collateral hereunder upon default and collecting all liabilities of Debtor to Secured Party, which reasonable expenses shall include attorneys' fees, whether or not litigation is commenced and whether incurred at trial, on appeal, or in any other proceeding. Any notification of a sale or other disposition of Collateral or of other action by Secured Party required to be given by Secured Party, will be sufficient if given personally, mailed, or delivered by facsimile machine or overnight carrier not less than five (5) days prior to the day on which such sale or other disposition will be made or action taken, and such notification shall be deemed reasonable notice. 5.0 MISCELLANEOUS 5.1 No Implied Waivers; Entire Agreement. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular event of default and shall not operate as a waiver of any subsequent default. This Agreement and any Schedule hereunder are non- cancelable. No modification of this Agreement or waiver of any right of Secured Party, hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Agreement and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party. This Agreement and any Schedule hereunder (a "Transaction") embody the entire agreement between the parties and supersede all prior agreements and understandings relating to the same subject matter, except in any case where the Secured Party takes an assignment from a vendor of -158- its security interest in the same Collateral, in which case the terms of the Transaction shall be incorporated into the assigned agreement and shall prevail over any inconsistent terms therein but shall not be construed to create a new contract. 5.2 Choice of Law. This Agreement and the rights of the parties hereto shall be governed by applicable Federal law and the laws of the State of Nevada. Any action arising out of this Agreement may be litigated under the laws of Nevada and submitted to the jurisdiction of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over the Debtor. 5.3 Protection of the Collateral. At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Any payments made by Secured Party shall be immediately due and payable by Debtor and shall bear interest at the rate of fifteen percent (15%) per annum. Until default, Debtor may retain possession of the Collateral and use it in any lawful manner not inconsistent with the provisions of this Agreement and any other agreement between Debtor and Secured Party, and not inconsistent with any policy of insurance thereon. 5.4 Binding Agreement; Time of the Essence. This Agreement shall take effect as a sealed instrument and shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, and assigns. Time is of the essence with respect to the performance of Debtor's obligations under this Agreement and any other agreement between Debtor and Secured Party. 5.5 Enforceability. Any term, clause or provision of this Agreement or of any evidence of indebtedness from Debtor to Secured Party which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining terms or clauses of such provision or the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, clause or provision in any other jurisdiction. 5.6 Notices. Any notices or demands required to be given herein shall be given to the parties in writing by United States first class mail (express, certified or otherwise) at the addresses set forth on page 1 of this Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph. 5.7 Additional Security. If there shall be any other collateral for any of the obligations, or for the obligations of any guarantor thereof, Secured Party may proceed against and/or enforce any or all of the Collateral and such collateral in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Secured Party from whatever source and applied by it to any of the obligations shall be applied in such order of application as Secured Party shall from time to time, in its sole discretion, elect. -159- 6.0 ASSIGNMENT 6.1 SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT HAS IN THE COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT TO A FINANCIAL INSTITUTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY AND PROMPTLY TO SECURED PARTY'S ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET- OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED PARTY'S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE SECURED PARTY'S ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR WILL NOT ASSERT AGAINST SECURED PARTY'S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY. 6.2 DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING OF ALL OR ANY PART OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF SECURED PARTY WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER. 7.0 POWER OF ATTORNEY 7.1 Secured Party is hereby appointed Debtor's attorney-in-fact to sign Debtor's name and to make non-material amendments (including completing and conforming the description of the Collateral) on any document in connection with this Agreement (including any financing statement) and to obtain, adjust, settle, and cancel any insurance required by this Agreement and to endorse any drafts in connection with such insurance. In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the 9th day of Sept., 1998. U.S. BANCORP LEASING & FINANCIAL Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (Debtor) By: By: /s/ Ben Farahi --------------------- --------------- An authorized officer thereof Authorized Corporate Officer -160- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -161- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -162- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or -163- remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE OBLIGATION OF THE GUARANTORS TOGETHER HEREUNDER IS LIMITED TO $1,000,000.00, AND IS JOINT AND SEVERAL. -164- IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Witness: Behrouz Ben Farahi /s/ John Bydalek /s/Behrouz Ben Farahi ------------ ------------------ Print Name: John Bydalek an Individual Address: 1175 W. Moana Ln. SS#------------ #200, Reno, NV 89509 Witness: Bahram Bob Farahi /s/ John Bydalek /s/Bahram Bob Farahi ------------ ----------------- Print Name: John Bydalek an Individual Address: SS#------------ Witness: John Farahi /s/ John Bydalek /s/John Farahi ------------ ----------- Print Name: John Bydalek an Individual Address: SS#------------ GUARNATOR'S SIGNATURE MAY NOT BE WITNESSED BY GUARANTOR'S SPOUSE OR OTHER FAMILY MEMBER -165- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -166- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -167- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or -168- remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Monarch Casino & Resort, Inc. By: /s/ Ben Farahi -------------- Ben Farahi [Print Name] ---------- CFO [Title] --- 1175 West Moana Lane, Suite 200 Reno, Nevada 89509 -169- EX-10 9 SCHEDULE TO MASTER LOAN AGREEMENT Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino 1175 W. Moana Lane, Suite 200 Reno, Nevada 89509 $427,030.12 Effective Date 6/23/99 Loan Transaction Number ------ 1. THIS SCHEDULE is made between Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino, as Debtor, and U.S. BANCORP LEASING & FINANCIAL (which, together with its successor and assigns, will be called the "Secured Party") pursuant to the Master Loan Agreement dated as of September 22, 1998 (the "Loan Agreement"), the terms of which (including the definitions) are incorporated herein. If any terms hereof are inconsistent with the terms of the Loan Agreement, the terms hereof shall prevail. 2. FOR VALUE RECEIVED, Debtor hereby promises to pay to the order of Secured Party the principal amount of Four Hundred Twenty-Seven Thousand, Thirty and 12/100 Dollars ($427,030.12) with interest on any outstanding principal balance at the rate(s) specified herein from the Effective Date hereof until this Schedule shall have been paid in full in accordance with the following payment schedule: sixty (60) installments of $8,617.81 each, including the entire amount of interest accrued on this Schedule at the time of payment of each installment. The first payment shall be due on July 16, 1999 and a like payment shall be due on the same day of each succeeding month thereafter until the entire principal and interest have been paid. At the time of the final installment hereon, all unpaid principal and interest shall be due and owing. Each payment shall be applied first to accrued and unpaid interest, and the balance to the outstanding principal hereof. As a result, such final installment may be substantially more or substantially less than the installments specified herein. 3. The Debtor promises to pay interest on the principal balance outstanding at a rate of 7.80 percent per annum. 4. The Debtor may prepay this Schedule, in whole or in part, by paying simultaneously with an in addition to the prepayment, a premium for such prepayment privilege equal to the specified percent of the amount prepaid in accordance with the following schedule, one (1) to twelve (12) months: five (5.0)%, thirteen (13) to twenty-four (24) months: one (1.0)%, twenty-five (25) to sixty (60): 0%. Notwithstanding the foregoing, payments made within 30 days of the date an installment is due which do not exceed the scheduled amount of such installment shall not be considered prepayments. 5. Each of Debtor, if more than one, and all other parties who at any time may be liable hereon in any capacity, hereby jointly and severally waive diligence, demand, presentment, presentment for payment, protest, notice of protest and notice of dishonor of this Schedule, and authorize the Secured Party, without notice, to grant extensions in the time of payment of and reductions in the rate of interest on any moneys owing on this Schedule. -170- 6. The following property is hereby made Collateral for all purposes under the Loan Agreement: Various items of Hotel fixtures, furniture, and equipment located at the Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino at 3800 S. Virginia St., Reno, Nevada 89502; Washoe County and including but not limited to, all property improvements, miscellaneous upgrades, non-salvageable material, slot machines, kitchen equipment, casino bars, buffet bars, furniture, room accessories and partitions, ice machines, and spas. Whether any of the foregoing is owned now or acquired later; all accessions, additions, replacements, and substitutions relating to any of the foregoing; all records of any kind relating to any of the foregoing; all proceeds relating to any of the foregoing (including insurance, general intangibles and accounts proceeds). 7. The Collateral hereunder shall be based at the following location(s): 3800 S. Virginia Street Reno, NV 89502 COUNTY: Washoe Year 2000. Debtor has reviewed and assessed or will review and assess its business operations and computer systems and applications to address the "year 2000 problem" (that is, that computer applications and equipment used by Debtor, directly or indirectly through third parties, may be unable to properly perform date-sensitive functions before, during and after January 1, 2000). Debtor reasonable believes that the year 2000 problem will not result in a material adverse change in Debtor's business condition (financial or otherwise), operations, properties or prospects or ability to repay Secured Party. Based upon the review, Debtor has developed or will develop and implement a plan to address the year 2000 problem, to remediate any material year 2000 problem, and to complete testing with respect thereto, as soon as practicable and in any event by June 30, 1999. Debtor will promptly deliver such information relating to this covenant as Secured Party requests from time to time. IN WITNESS WHEREOF, Debtor has executed this Schedule this 15th day of June, 1999. Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino By /s/Ben Farahi -------------- Title: An Authorized Officer -171- MASTER LOAN AGREEMENT 1.0 PARTIES, COLLATERAL AND OBLIGATIONS 1.1 This Agreement is dated as of September 22, 1998. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (hereinafter called "Debtor") with offices at 1175 W. Moana Lane, Suite 200, Reno, Nevada 89509 intending to be legally bound, hereby promises to pay to U.S. BANCORP LEASING & FINANCIAL, an Oregon corporation having offices at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177 (hereinafter called "Secured Party"), any amounts set forth on any Schedule to Master Loan Agreement hereunder (the "Schedule(s)", all the terms of which are incorporated herein) and grants a security interest in and assigns, transfers and sets over to and to the successors and assigns thereof, the property specified in any Schedule hereunder wherever located, and any and all proceeds thereof, insurance recoveries, and all replacements, additions, accessions, accessories and substitutions thereto or therefor (hereafter called the "Collateral"). The security interest granted hereby is to secure payment of any and all liabilities or obligations of Debtor to the Secured Party, matured or unmatured, direct or indirect, absolute or contingent, heretofore arising, now existing or hereafter arising, and whether under this Agreement or under any other writing between Debtor and Secured Party) (all hereinafter called the "obligations" and/or the "liabilities"). 1.2 Joint and Several Liability; Payment Terms. In the event there is more than one Debtor, all obligations shall be considered as joint and several obligations of all Debtors regardless of the source of Collateral or the particular Debtor with which the obligation originated. Interest shall be calculated on the basis of a 360-day year. All payments on any Schedule hereunder shall be made in lawful money of the United States at the post office address of the Secured Party or at such other place as the Secured Party may designate to Debtor in writing from time to time. In no event shall any Schedule hereunder be enforced in any way which permits Secured Party to collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Secured Party shall refund such excess interest to Debtor. In such event, Debtor agrees that Secured Party shall not be subject to any penalties for contracting for or collecting interest in excess of the maximum lawful rate. 1.3 Late Charge. If any of the obligations remains overdue for more than ten (10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount equal to the lesser of (i) five percent (5.0%) of each such overdue amount; or (ii) the maximum percentage of any such overdue amount permitted by applicable law as a late charge. Debtor agrees that the amount of such late charge represents a reasonable estimate of the cost to Secured Party of processing a delinquent payment and that the acceptance of any late charge shall not constitute a waiver of default with respect to the overdue amount or prevent Secured Party from exercising any other available rights and remedies. -172- 2.1 Business Organization Status and Authority. (i) Debtor is duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business in all states and countries in which such qualification is necessary; (ii) Debtor has the lawful power and authority to own its assets and to conduct the business in which it is engaged; and to execute and comply with the provisions of this Agreement and any related documents; (iii) the execution and delivery of this Agreement and any related documents have been duly authorized by all necessary action; (iv) no authorization, consent, approval, license or exemption of, or filing or registration with, any or all of the owners of Debtor or any governmental entity was, is or will be necessary to the valid execution, delivery, performance or full enforceability of this Agreement and any related documents. Except as specifically disclosed to Secured Party, Debtor utilizes no trade names in the conduct of its business and/or has not changed its name within the past five years. 2.2 Merger; Transfer of Assets. Debtor will not consolidate or merge with or into any other entity, liquidate or dissolve, distribute, sell, lease, transfer or dispose of all of its properties or assets or any substantial portion thereof other than in the ordinary course of its business, unless the Secured Party shall give its prior written consent, and the surviving, or successor entity or the transferee of such assets, as the case may be, shall assume, by a written instrument which is legal, valid and enforceable against such surviving or successor entity or transferee, all of the obligations of Debtor to Secured Party or any affiliate of Secured Party. 2.3 No Violation of Covenants or Laws. Debtor is not party to any agreement or subject to any restriction which materially and adversely affects its ability to perform its obligations under this Agreement and any related documents. The execution of and compliance with the terms of this Agreement and any related documents does not and will not (i) violate any provision of law, or (ii) conflict with or result in a breach of any order, injunction, or decree of any court or governmental authority or the formation documents of Debtor, or (iii) constitute or result in a default under any agreement, bond or indenture by which Debtor is bound or to which any of its property is subject, or (iv) result in the imposition of any lien or encumbrance upon any of Debtor's assets, except for any liens created hereunder or under any related documents. 2.4 Accurate Information. All financial information submitted to the Secured Party in regard to Debtor, was prepared in accordance with generally accepted accounting principles, consistently applied, and fairly and accurately depicts the financial position and results of operations of Debtor or such other person, as of the respective dates or for the respective periods, to which such information pertains. Debtor had good, valid and marketable title to all the properties and assets reflected as being owned by it on any balance sheets of Debtor submitted to Secured Party as of the dates thereof. 2.5 Judgments; Pending Legal Action. There are no judgments outstanding against Debtor, and there are no actions or proceedings pending or, to the best knowledge of Debtor, threatened against or affecting Debtor or any of its properties in any court or before any governmental entity which, if determined adversely to Debtor, would result in any material adverse change in the business, properties or assets, or in the condition, financial or -173- otherwise, of Debtor or would materially and adversely affect the ability of Debtor to satisfy its obligations under this Agreement and any related documents. 2.6 No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is not in breach of or in default under any loan agreement, indenture, bond, note or other evidence of indebtedness, or any other material agreement or any court order, injunction or decree or any lien, statute, rule or regulation. The operations of Debtor comply with all laws, ordinances and governmental rules and regulations applicable to them. Debtor has filed all Federal, state and municipal income tax returns which are required to be filed and has paid all taxes as shown on said returns and on all assessments billed to it to the extent that such taxes or assessments have become due. Debtor does not know of any other proposed tax assessment against it or of any basis for one. 2.7 Sale Prohibited. Debtor will not sell, dispose of or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Secured Party. 2.8 Location of Collateral. The Collateral will be kept at the location(s) shown on the Schedule(s) hereunder and Debtor will promptly notify Secured Party of any change in the location(s) of the Collateral. Debtor will not remove the Collateral from said location(s) without the prior written consent of Secured Party. 2.9 Collateral not a Fixture. Notwithstanding any presumption of applicable law, and irrespective of any manner of attachment, the Collateral shall not be deemed real property but shall retain its character as personal property. However, Debtor will at the option of Secured Party furnish the latter with a waiver or waivers in recordable form, signed by all persons having an ownership interest in the real estate, of any interest in the Collateral which is or might be deemed to be prior to Secured Party's interest. 2.10 Perfection of Security Interest. Except for (i) the security interest granted hereby and (ii) any other security interest previously disclosed by Debtor to Secured Party in writing, Debtor is the owner of the Collateral free from any adverse lien, security interest or encumbrance. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein. Except as previously disclosed in writing to Secured Party, no financing statement covering any Collateral or any proceeds thereof is on file in any public office. At the request of Secured Party, Debtor will execute, acknowledge and deliver to Secured Party in recordable or fileable form, any document or instrument required by Secured Party to further the purposes of this Agreement, or to perfect its interest in the Collateral or to maintain such perfected interest in full force and effect, including (without limitation) any fixture filings and financial statements and any amendments and continuation statements thereto pursuant to the Uniform Commercial Code, in form satisfactory to Secured Party, and will pay the cost of filing the same or filing or recording this Agreement in all public offices wherever filing or recording is deemed by Secured Party to be necessary or desirable. Debtor hereby agrees that this Agreement shall be and constitute a financing statement for purposes of the Uniform Commercial Code. -174- 2.11 Insurance. Unless otherwise agreed, Debtor will have and maintain insurance from financially sound carriers at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, collision, "mysterious disappearance" and other such risks as Secured Party may require, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to Secured Party; each insurance policy shall name Secured Party as loss payee and shall be payable to Secured Party and Debtor as their interest may appear; all policies of insurance shall provide for ten days' written minimum cancellation notice to Secured Party; Debtor shall furnish Secured Party with certificates or other evidence satisfactory to Secured Party of compliance with the foregoing insurance provisions. 2.12 Use of the Collateral. Debtor will use the Collateral for business purposes only and operate it by qualified personnel in accordance with applicable manufacturers' manuals. Debtor will keep the Collateral free from any adverse lien or encumbrance and in good working order, condition and repair and will not waste or destroy the Collateral or any part thereof; Debtor will keep the Collateral appropriately protected from the elements, and will furnish all required parts and servicing (including any contract service necessary to maintain the benefit of any warranty of the manufacturer); Debtor will not use the Collateral in violation of any statute, ordinance, regulation or order; and Secured Party may examine and inspect the Collateral and any and all books and records of Debtor during business hours at any time; such right of inspection shall include the right to copy Debtor's books and records and to converse with Debtor's officers, employees, agents, and independent accountants. 2.13 Taxes and Assessments. Debtor will pay promptly when due all taxes, assessments, levies, imposts, duties and charges, of any kind or nature, imposed upon the Collateral or for its use or operation or upon this Agreement or upon any instruments evidencing the obligations. 2.14 Financial Statements. Debtor shall furnish Secured Party within ninety (90) days after the close of each fiscal year of Debtor, its financial statements (including, without limitation, a balance sheet, a statement of income and surplus account and a statement of changes in financial position) for the immediately preceding fiscal year, setting forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by Secured Party. Such financial statements shall be prepared at least as a review by Debtor's independent certified accountants and, if prepared as an audit, shall be certified by such accountants. Debtor shall also furnish Secured Party with any other financial information deemed necessary by Secured Party. Each financial statement submitted by Debtor to Secured Party shall be accompanied by a certificate signed by the chief executive officer, the chief operating officer or the chief financial officer of Debtor, certifying that (i) such financial statement was prepared in accordance with the generally accepted accounting principles consistently applied and fairly and accurately presents the Debtor's financial condition and results of operations for the period to which it pertains, and (ii) no event of default has occurred under this Agreement during the period to which such financial statements pertains. -175- 3.0 EVENTS OF DEFAULT 3.1 the following shall be considered events of default: (i) failure on the part of Debtor to promptly perform in complete accordance with its representations, warranties and covenants made in this Agreement or in any other agreement with Secured Party, including, but not limited to, the payment of any liability, with interest, when due, or default by Debtor under the provisions of any other material agreement to which Debtor is party; (ii) the death of Debtor if an individual or the dissolution of Debtor if a business organization; (iii) more than one of the present officers of Debtor leave the business except for reason of the death or disability of an individual; (iv) the filing of any petition or complain under the Federal Bankruptcy Code or other federal or state acts of similar nature, by or against Debtor; or an assignment for the benefit of creditors by Debtor; (v) an application for or the appointment of a Receiver, Trustee or Conservator, voluntary or involuntary, by or against Debtor or for any substantial assets of Debtor, (vi) insolvency of Debtor under either the Federal Bankruptcy Code or applicable principles of equity; (vii) entry of judgment, issuance of any garnishment or attachment, or filing of any lien, claim or government attachment against the Collateral or which, in Secured Party's sole discretion, might impair the Collateral; (viii) the determination by Secured Party that a material misrepresentation of fact has been made by Debtor in this Agreement or in any writing supplementary or ancillary hereto; (ix) a determination by Secured Party that Debtor has suffered a material adverse change in its financial condition from the date of this Agreement; or (x) bankruptcy, insolvency, termination, dissolution or default of any guarantor for Debtor. 4.0 REMEDIES 4.1 Upon the happening of any event of default which is not cured within ten (10) days, or at any time thereafter: (i) all liabilities of Debtor shall, at the option of Secured Party, become immediately due and payable; (ii) Secured Party shall have and may exercise all of the rights and remedies granted to a secured party under the Uniform Commercial Code; (iii) Secured Party shall have the right, immediately, and without notice or other action, to set-off against any of Debtor's liabilities to Secured Party any money owed by Secured Party in any capacity to Debtor, whether or not due, and Secured Party shall be deemed to have exercised such right of set-off and to have made a charge against any such money immediately upon the occurrence of such default event though actual book entries may be made at some time subsequent thereto; (iv) Secured Party may proceed with or without judicial process to take possession of all or any part of the Collateral; Debtor agrees that upon receipt of notice of Secured Party's intention to take possession of all or any part of said Collateral, Debtor will do everything necessary to make same available to Secured Party (including, without limitation, assembling the Collateral and making it available to Secured Party at a place designated by Secured Party which is reasonably convenient to Debtor and Secured Party); and so long as Secured Party acts in a commercially reasonable manner, Debtor agrees to assign, transfer and deliver at any time the whole or any portion of the Collateral or any rights or interest therein in accordance with the Uniform Commercial Code and without limiting the scope of Secured Party's rights thereunder; (v) Secured Party may sell the Collateral at public or private sale or in any other commercially reasonable manner and, at the option of Secured Party, in bulk or in parcels and with or without having the Collateral at -176- the sale or other disposition, and Debtor agrees that in case of sale or other disposition of the Collateral, or any portion thereof, Secured Party shall apply all proceeds first to all costs and expenses of disposition, including attorneys' fees, and then to Debtor's obligations to Secured Party, (vi) Secured Party may elect to retain the Collateral or any part thereof in satisfaction of all sums due from Debtor upon notice to Debtor and any other party as may be required by the Uniform Commercial Code. All remedies provided in this paragraph shall be cumulative. Secured Party may exercise any one or more of such remedies in addition to any and all other remedies Secured Party may have under any applicable law or in equity. 4.2 Expenses; Disposition. Upon default, all amounts due and to become due hereunder shall, without notice, bear interest at the lesser of (i) twelve percent (12%) per annum or (ii) the maximum rate per annum which Secured Party is permitted by law to charge from the date such amounts are due until paid. Debtor shall pay all reasonable expenses of realizing upon the Collateral hereunder upon default and collecting all liabilities of Debtor to Secured Party, which reasonable expenses shall include attorneys' fees, whether or not litigation is commenced and whether incurred at trial, on appeal, or in any other proceeding. Any notification of a sale or other disposition of Collateral or of other action by Secured Party required to be given by Secured Party, will be sufficient if given personally, mailed, or delivered by facsimile machine or overnight carrier not less than five (5) days prior to the day on which such sale or other disposition will be made or action taken, and such notification shall be deemed reasonable notice. 5.0 MISCELLANEOUS 5.1 No Implied Waivers; Entire Agreement. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular event of default and shall not operate as a waiver of any subsequent default. This Agreement and any Schedule hereunder are non- cancelable. No modification of this Agreement or waiver of any right of Secured Party, hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Agreement and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party. This Agreement and any Schedule hereunder (a "Transaction") embody the entire agreement between the parties and supersede all prior agreements and understandings relating to the same subject matter, except in any case where the Secured Party takes an assignment from a vendor of its security interest in the same Collateral, in which case the terms of the Transaction shall be incorporated into the assigned agreement and shall prevail over any inconsistent terms therein but shall not be construed to create a new contract. 5.2 Choice of Law. This Agreement and the rights of the parties hereto shall be governed by applicable Federal law and the laws of the State of Nevada. Any action arising out of this Agreement may be litigated under -177- the laws of Nevada and submitted to the jurisdiction of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over the Debtor. 5.3 Protection of the Collateral. At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Any payments made by Secured Party shall be immediately due and payable by Debtor and shall bear interest at the rate of fifteen percent (15%) per annum. Until default, Debtor may retain possession of the Collateral and use it in any lawful manner not inconsistent with the provisions of this Agreement and any other agreement between Debtor and Secured Party, and not inconsistent with any policy of insurance thereon. 5.4 Binding Agreement; Time of the Essence. This Agreement shall take effect as a sealed instrument and shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, and assigns. Time is of the essence with respect to the performance of Debtor's obligations under this Agreement and any other agreement between Debtor and Secured Party. 5.5 Enforceability. Any term, clause or provision of this Agreement or of any evidence of indebtedness from Debtor to Secured Party which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining terms or clauses of such provision or the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, clause or provision in any other jurisdiction. 5.6 Notices. Any notices or demands required to be given herein shall be given to the parties in writing by United States first class mail (express, certified or otherwise) at the addresses set forth on page 1 of this Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph. 5.7 Additional Security. If there shall be any other collateral for any of the obligations, or for the obligations of any guarantor thereof, Secured Party may proceed against and/or enforce any or all of the Collateral and such collateral in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Secured Party from whatever source and applied by it to any of the obligations shall be applied in such order of application as Secured Party shall from time to time, in its sole discretion, elect. 6.0 ASSIGNMENT 6.1 SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT HAS IN THE COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT TO A FINANCIAL INSTITUTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY AND PROMPTLY TO SECURED PARTY'S ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR -178- SET-OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED PARTY'S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE SECURED PARTY'S ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR WILL NOT ASSERT AGAINST SECURED PARTY'S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY. 6.2 DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING OF ALL OR ANY PART OF THE COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF SECURED PARTY WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER. 7.0 POWER OF ATTORNEY 7.1 Secured Party is hereby appointed Debtor's attorney-in-fact to sign Debtor's name and to make non-material amendments (including completing and conforming the description of the Collateral) on any document in connection with this Agreement (including any financing statement) and to obtain, adjust, settle, and cancel any insurance required by this Agreement and to endorse any drafts in connection with such insurance. In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the 9th day of Sept., 1998. U.S. BANCORP LEASING & FINANCIAL Golden Road Motor Inn, Inc. dba Atlantis Hotel and Casino (Debtor) By: By: /s/ Ben Farahi ----------------------- --------------- An authorized officer thereof Authorized Corporate Officer -179- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -180- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -181- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall not be construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise -182- by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE OBLIGATION OF THE GUARANTORS TOGETHER HEREUNDER IS LIMITED TO $1,000,000.00, AND IS JOINT AND SEVERAL. -183- IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Witness: Behrouz Ben Farahi /s/ John Bydalek /s/Behrouz Ben Farahi ------------ ------------------ Print Name: John Bydalek an Individual Address: 1175 W. Moana Ln. SS#------------ #200, Reno, NV 89509 Witness: Bahram Bob Farahi /s/ John Bydalek /s/Bahram Bob Farahi ------------ ----------------- Print Name: John Bydalek an Individual Address: SS#------------ Witness: John Farahi /s/ John Bydalek /s/John Farahi ------------ ----------- Print Name: John Bydalek an Individual Address: SS#------------ GUARNATOR'S SIGNATURE MAY NOT BE WITNESSED BY GUARANTOR'S SPOUSE OR OTHER FAMILY MEMBER -184- GUARANTY In order to induce U.S. BANCORP LEASING & FINANCIAL (the "Creditor") to enter into one or more financing arrangements in the form of lease(s) or loan(s) (referred to herein as the "Transaction") with, or otherwise directly or indirectly making property available to GOLDEN ROAD MOTOR INN, INC. dba Atlantis Hotel & Casino (the "Obligor") and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such notes, security agreements, loan agreements, lease agreements, entered into between Obligor and Creditor together with any and all schedules and riders thereto and any and all other instruments or agreements including, without limitation, pledge agreements and assignments, executed and delivered by Obligor in connection therewith, being hereinafter collectively called the "Agreements"), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, EACH OF THE UNDERSIGNED (EACH OF WHOM IS HEREINAFTER CALLED A "GUARANTOR"), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR'S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, AND WHETHER DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE "OBLIGATIONS"). Each Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising and however and whenever evidenced; and each Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs emanating from any failure of Obligor to fully, promptly and completely satisfy the Obligations. For purposes hereof, (i) "losses, liabilities and costs" shall include (without limitation), all losses, liabilities, obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys' fees) and (ii) "emanating" from an event or cause shall include (without limitation) in any way directly or indirectly being caused by or in any other way arising out of such event or cause. Each Guarantor hereby waives any notice of default or nonpayment or of late or inadequate satisfaction in regard to the Obligations. In particular (and not in limitation of the foregoing), each Guarantor hereby agrees that, in enforcing this Guaranty, Creditor shall not be required (i) to demand payment of the amount due (known as "demand"); (ii) to present for payment any evidence of the Obligations (known as "presentment" or "presentment for payment"); (iii) to give notice that amounts due have not been paid (known as "notice of dishonor"); or (iv) to obtain an official certification of nonpayment (known as "protest") or to give any Guarantor notice of any such "protest;" and each Guarantor hereby waives demand, -185- presentment, presentment for payment, notice of dishonor, protest and notice of protest, as aforesaid. Each Guarantor hereby further waives notice of acceptance hereof and any and all other notices to which such Guarantor may be entitled. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be extended, renewed, continued, amended, modified, composed, accelerated, supplemented, compromised, settled or released in Creditor's sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold or surrendered in Creditor's sole discretion. Each Guarantor hereby agrees that no such extension, renewal, continuation, amendment, modification, composition, acceleration, supplement, compromise, settlement, release, exchange, sale or surrender shall in any way impair, affect or release the liability of any Guarantor hereunder or constitute a waiver of any of Creditor's rights hereunder. This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of each Guarantor hereunder shall continue and survive the repossession of any property or other property leased pursuant to the Agreements (or any property in which Creditor has a security interest securing any of the Obligations) whether or not any such repossession constitutes an "election of remedies" against the Obligor or any other person. Each Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever (including, without limitation, invalidity or voidness ab initio and/or partial or complete unenforceability as a result of impossibility or impracticability of performance or frustration of the purpose of the Agreements). The obligations of the Guarantors hereunder are joint and several and shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever. Each Guarantor hereby agrees that its obligations hereunder are direct and primary and that Creditor may proceed directly and in the first instance against each or any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy or security for any of the Obligations. Each Guarantor hereby waives any right to require Creditor to proceed against the Obligor or to proceed against any other Guarantor or to proceed against any other guarantor of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of any Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect. In the event of any default in regard to any Guarantor's obligations hereunder, or in the event of death, incompetency, termination, dissolution or insolvency of the Obligor, or if a receiver, liquidator or conservator -186- be appointed for any part of the property or assets of the Obligor, or if the Obligor makes an assignment for the benefit of creditors, or if the Obligor shall file a voluntary petition in bankruptcy or any involuntary petition in bankruptcy shall be filed against it then, and in any such case, each Guarantor agrees to pay to Creditor, upon demand, the full amount which would be payable hereunder by such Guarantor if all the Obligations and Indebtedness including, but not limited to, any remaining payments owing pursuant to the Agreements or any of the other guaranteed Agreements, were then due and payable. Notwithstanding any provision hereof or any provision of any other instrument or agreement, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy any Guarantor's obligations hereunder except full, complete and final payment and satisfaction of all the Obligations, Indebtedness and Indemnities; (ii) each Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor's business or any bankruptcy, insolvency or business failure of the Obligor or any other person; and (iii) no Guarantor shall have any right of subrogation against the Obligor, and each Guarantor hereby waives any and all rights of subrogation it may have against the Obligor, to enforce any right or remedy which Creditor has or may hereafter have against the Obligor, and waives the benefits of, and any and all rights to participate in, any security or securities now or hereafter held by Creditor. It is expressly understood by each Guarantor that payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit the Guarantor in any way. Each Guarantor hereby further acknowledges that such Guarantor is not and shall be not construed as a "Creditor" of Obligor by virtue of this Guaranty. Each Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information, furnished to Creditor in connection with the Agreements or any of the other Guaranteed Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and that all such information remains true, complete and accurate, and that there have been no material adverse changes in such Guarantor's financial condition as of the date hereof. In the event of any breach of any Guarantor's representations and warranties herein or any material adverse change in the financial condition of any Guarantor, upon the request of Creditor, such Guarantor shall promptly furnish to Creditor such additional security for the performance of such Guarantor's obligations hereunder as Creditor may reasonably request. No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received at Creditor's principal corporate headquarters at P.O. Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177; provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise -187- by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder. Each Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term "Creditor" includes Creditor and any successor or assign of Creditor. This Guaranty shall be binding upon each Guarantor, and upon the legal successors, representatives, and assigns of such Guarantor. Each and every waiver made herein by any Guarantor is and shall be deemed to be and construed as an absolute, irrevocable and unconditional waiver of the right waived. This Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any term or provision of this Guaranty shall be unenforceable, invalid or prohibited in any jurisdiction under applicable law, such term or provision shall be ineffective in such jurisdiction but only to the extent of such unenforceability, invalidity or prohibition, and the remainder of such term or provision, and the other terms and provisions of the Guaranty, shall not thereby be affected or impaired in such jurisdiction, nor shall any of the terms or provisions of the Guaranty be thereby affected or impaired in any way in any other jurisdiction. This Guaranty shall be governed by the construed in accordance with Federal Law and the laws of the State of Nevada, and that service of process by certified mail, return receipt requested, will be sufficient to confer personal jurisdiction over such Guarantor for purposes of litigating any actions arising hereunder in the courts of such State. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any Guarantor. In the event of any conflict between the provisions of this Guaranty and those of any such other guaranty, the provisions of this Guaranty shall govern. Each Guarantor hereby agrees and acknowledges that time is of the essence with regard to the performance of such Guarantor's obligations hereunder. This Guaranty shall take effect as a sealed instrument. IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty to be duly executed and delivered as of 9th day of Sept., 1998. Monarch Casino & Resort, Inc. By: /s/ Ben Farahi --------------- Ben Farahi [Print Name] ---------- CFO [Title] --- 1175 West Moana Lane, Suite 200 Reno, Nevada 89509 -188- -----END PRIVACY-ENHANCED MESSAGE-----