The Company's business strategy draws upon its extensive gaming management experience gained from successfully operating the Eldorado. Key elements of the Company's strategy include the following:

        Personal Service and High Quality Amenities.    One of the cornerstones of the Company's business strategy is to provide its customers with an extraordinary level of personal service. The Company's senior management is actively involved in the daily operations of the Eldorado, frequently interacting with hotel, restaurant and gaming patrons to ensure that they are receiving the highest level of personal attention. Management believes that extraordinary personal service is an integral part of fostering customer loyalty and generating repeat business. Management regularly conducts feedback sessions and focus groups with customers to elicit comments and suggestions on ways it can improve each customer's experience at the Eldorado. Additionally, management personally responds to suggestions made on comment cards placed in each of the Eldorado's hotel rooms. Furthermore, management continually strives to instill in each employee a dedication to superior service designed to exceed guests' expectations.

        In addition to personalized service, the Eldorado has earned a reputation for high quality amenities and an excellent price-to-value relationship. Locals and visitors alike are attracted to the Eldorado's selection of dining venues and exceptional food quality, for which the Eldorado has received national recognition. Management believes that the Eldorado's excellent cuisine adds to the overall atmosphere and prestige of the hotel and therefore emphasizes outstanding food and ambiance and a wide variety of dining choices.

        The Eldorado continually monitors its casino operations to react to changing market conditions and customer demands. The Company targets premium-play customers as well as the value-conscious gaming patron with its state-of-the-art casino featuring the latest in game technology, electronic displays and customer-convenient features.

        Marketing to Target Gaming Patrons.    The Company primarily targets its marketing programs to four segments of the gaming market: the free and independent traveler, preferred casino customers, local patrons and the wholesale/specialty groups.

        The free and independent traveler segment consists of those travelers not affiliated with groups who make their reservations directly with the Eldorado or through independent travel agents. To attract the independent traveler, the Company uses print media, radio, television and direct mail to advertise in northern California, the Pacific Northwest and other regional travel markets.

        Preferred casino customers are those patrons who maintain the necessary level of gaming criteriaactivity to become established casino guests. The Company uses a broad special events agenda and an extensivea guest development program, including providing casino credit, to attract and retain preferred casino customers. In addition, the Company utilizes its quality hotel rooms, excellent restaurant venues and other amenities to offer complimentaries to a broad spectrum of established casino guests, from the frequent players who place relatively modest wagers to the true premium players who consistently wager high amounts. The Company believes that the ability to reward the more modest gaming patrons fosters intense loyalty and repeat business.

        Wholesale/specialty groups consist of those customers participating in travel packages offered by air tour operators, groups of up to 100 people with strong gaming profiles and visitors attending tournaments at the National Bowling Stadium. The Eldorado sales force targets this segment by attending trade shows in order to establish relationships with airlines, travel agents, meeting planners and wholesalers. The Eldorado has developed special marketing programs and tools to cultivate relationships with these air tour operators and specialty groups, including offering familiarization tours of the Eldorado. The Eldorado attempts to utilize this market segment as a means of creating a consistent utilization of its rooms during the calendar year.

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        We seek to attract and retain local customers through frequent promotions that highlight our quality gaming and dining experience, as well as being an active supporter of numerous Reno market events and organizations.

        The Eldorado has a state-of-the-art, real-time customer tracking system which comprehensively tracks its gaming customers throughout the casino. Customers are given an electronically readable card to insert into slot machines and to provide to floor supervisors at table games. The slot machines automatically transmit gaming data to a central computer and floor supervisors manually enter certain data relating to gaming customers which is then computerized. In 2002, the Eldorado enhanced its customer tracking program with the purchase of several computerized gaming tables from MindPlay LLC. This technologically advanced product, along with our slot tracking system, provides data relating to gaming customers' gaming habits, maximum and minimum wagers, the total amount wagered and length of play and assists us in better providing our customers with prompt recognition and complimentaries based on their levels of gaming. In 2002, the Eldorado enhanced the way its customers can redeem earned complimentaries available for redemption throughout the property. This innovation is enhanced by a friendly, knowledgeable staff and a conveniently located promotion center. In addition, "Club Eldorado," the casino's full-service slot club, offers an array of special events and exciting tournaments and convenient ways of earning complimentaries.

        The cost incurred by the Company for advertising in 20022003 was $4,035,000$3,457,000 compared with $3,946,000$4,035,000 in 2001.2002.

        Strategic Expansion and Improvements.    Since opening the Eldorado in 1973, the Company has employed a strategy of periodic expansion and improvement in order to maintain and enhance its position as a leader in the Reno market. Continuing this strategy, the Company has undertaken a number of improvements over the past five years. In May 1997, the Eldorado opened a state-of-the-art 566-seat showroom which added an entertainment experience that management believes attracts a larger and broader audience of entertainment seekers. The showroom features the only nightly production show of its kind in downtown Reno. In addition, the Company opened a new VIP Lounge in December 1997, offering a relaxing atmosphere, including a complimentary full service bar and VIP room registration for preferred casino customers. In 1998, the Eldorado opened a new slot area across from the property's microbrewery,The Brew Brothers, and a portion ofChoices Restaurant was enclosed and remodeled into a 78-seat Asian cuisine restaurant, theGolden Fortune. In December 1999 the Eldorado opened theBuBinga Lounge, a sophisticated intimate nightclub, featuring live music, a dance floor, and two themed bars, all presented in an elegant atmosphere. In 2000,Choices Restaurant was remodeled adding a sushi bar. In December 2000, two retail outlets across fromThe Brew Brothers were removed and additional slot machines were added. In the first quarter of 2002, the Eldorado began a room renovation project, to be completed in various phases, which is currently expected to be completed in the latter partfirst half of 2005.2006. In December 2003, the Eldorado moved and remodeled its exclusive high-limit slot area on the casino floor, adding a luxurious bar and restrooms. Also completed in December 2003 was a new casino cabaret which features live music and shows various sporting events on its state-of-the-art big screen plasma televisions.

        The Company owns a 31,000 square foot piece of property across the street from and west of the Eldorado which could be used for further expansion of the Eldorado, although there are no immediatecurrent plans for the development of this site.

Eldorado Hotel & Casino

        The Eldorado is centrally positioned in the heart of Reno's prime gaming area and room base. Easily accessible to both foot and vehicular traffic, the Eldorado is strategically located directly off Interstate 80, the principal highway linking the Reno market with San Francisco, Sacramento and other cities in its primary visitor market of northern California. With three towers, including a 26-story tower that lights up with over 2,000 feet of neon at night, the Eldorado is visible from Interstate 80, attracting visitors to the downtown area and generating interest in the property. Management believes the Eldorado serves as a downtown landmark, situated to attract a large volume of foot traffic from other casinos as well as from the local populace. In addition, the Eldorado is easily accessible to visitors competing in and attending the various bowling tournaments that are held in the National Bowling Stadium, which is located just one block away.

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        As of December 31, 2002,2003, the Eldorado offered approximately 84,000 square feet of gaming space, with approximately 1,7521,587 slot machines, 7063 table games consisting of blackjack, craps, roulette, Pai Gow Poker, Let It Ride®, Caribbean stud poker, mini-baccarat, two keno games and a poker room. The Eldorado's casino includes a mix of slot machines and table games which management believes makes it attractive to both middle-income and premium-play customers. Slot machines, which are offered in

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denominations from 1 cent to $100, generated approximately 64%65% of the Eldorado's total gaming revenues in 2002.2003. A diverse selection of table games and a variety of table limits allowencourage play from a wide range of gaming customers, which management believes makes the Eldorado one of the premier table games casinos in the Reno market.

        The interior of the hotel is designed to create a European ambiance and offers 816 finely-appointed rooms and suites, including 18 specialty suites, 93 "Eldorado Player's Spa Suites" with bedside spas and 26 one-bedroom andone- or two-bedroom penthouse suites. Hotel guests enjoy panoramic views of Reno's skyline and the majestic Sierra Nevada mountain range. Management believes that attention to detail, decor and architecture have created an identifiable and innovative presence in the Reno market for the Eldorado. In 20022003 and 2001,2002, the Eldorado achieved a 89.0% and 89.6% average hotel occupancy rate of 88.7% and 89.0%, respectively, and an Average Daily Rate ("ADR") of approximately $57 and $56, in 2002 and $59 in 2001.respectively.

        The Eldorado is nationally recognized for its exceptional cuisine. Management believes that the Eldorado's superior cuisine and wide-ranging selection of dining opportunities are crucial factors in attracting and retaining customers. All of the Eldorado's dining venues, which range from buffet to gourmet, offer high quality food at reasonable prices. The following chart details the Eldorado's dining venues, their respective seating capacities and their outstanding attributes, including the awards and distinctions each has received.

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ELDORADO RESTAURANTS

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        The Eldorado's selection of high-quality food and beverages reflects the Carano family's emphasis on the dining experience. Eldorado chefs utilize homemade pasta, carefully chosen imported ingredients, fresh seafood and top quality USDA choice cuts of beef. Throughout the property, beverage offerings includeThe Brew Brothers microbrewed beers and wines from the Ferrari Carano Winery.

        The Eldorado features a 566-seat showroom and theBuBinga Lounge, which is an intimate nightclub,nightclub. It also offers a cabaret on the casino floor and a VIP lounge. Other amenities offered by the Eldorado include two retail shops, a versatile 12,400 square foot convention center and an outdoor

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plaza located diagonal to the Eldorado which hosts a variety of special events. The Eldorado has parking facilities for over 1,0001,100 vehicles including a 656-space self-park garage and a 369-space valet parking facility.

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Silver Legacy Resort Casino

        The Silver Legacy opened in July 1995 as the first major newly-constructed hotel/casino in the Reno market since 1978 and its first themed mega-resort. Plans for the Silver Legacy were originally formulated in 1993 by the Company and Mandalay, who jointly recognized the potential synergies of constructing a new hotel/casino in between the Eldorado and Mandalay's property, Circus Circus-Reno.

        The Silver Legacy's design is inspired by Nevada's rich mining heritage and the legend of Sam Fairchild, a fictitious silver baron who "struck it rich" on the site of the casino. Silver Legacy's hotel, the tallest building in northern Nevada, is a "Y"-shaped structure with three wings, consisting of 37-, 34- and 31-floor tiers. Silver Legacy's opulent interior showcases a casino built around Sam Fairchild's famed 120-foot tall mining rig, which appears to mine for silver. The rig is situated beneath a 180-foot diameter dome, which is a distinctive landmark on the Reno skyline. The interior surface of the dome features dynamic sound and laser light shows, providing visitors with a unique experience when they are in the casino. The Company's management believes that the Silver Legacy is a "must see" attraction for visitors to the Reno market.

        The Silver Legacy is situated on two city blocks, encompassing 240,000 square feet in downtown Reno. The hotel currently offers 1,710 guest rooms, including 145141 player spa suites, and eight penthouse suites and seven hospitality suites. Many of the Silver Legacy's guest rooms feature views of Reno's skyline and the Sierra Nevada mountain range. The Silver Legacy's 10-story parking facility can accommodate approximately 1,800 vehicles. At December 31, 2002,2003, the Silver Legacy's casino featured approximately 87,300 square feet of gaming space and contained 2,0641,910 slot machines and 8177 table games, including blackjack, craps, roulette, Pai Gow Poker, Let It Ride®, Caribbean stud poker, Baccarat and Pai Gow, a keno lounge and a race and sports book. "Club Legacy," the Silver Legacy's slot club, offers customers exciting special events and tournaments and convenient ways of earning complimentaries.

        The Silver Legacy's dining options are offered in six venues:

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Sterling's Seafood Steakhouse, which has a seating capacity of 168,approximately 170, offering the finest in steaks and seafood along with an extensive wine list, featured inWine Spectator magazine, table sidetableside desserts and an extravagant Sunday Brunch;



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the Victorian Buffet, which has a seating capacity of approximately 500;



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Fairchild's Oyster Bar, which has a seating capacity of 56,approximately 55, offering a comfortable drink and a quick bite;



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Sweetwater Cafe, which has a seating capacity of 333,approximately 330, offering an extensive menu that includes American classics and Chinese cuisine 24-hours a day;



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Fresh Express Food Court, which has a seating capacity of approximately 110, offering a range of options including a deli and grill, authentic Asian cuisine and American classics; and



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Sips Coffee House, situated in the hotel lobby, offers gourmet coffee and teas.

        In addition, the hotel sponsors entertainment events which are held in the hotel's convention area. The Silver Legacy's other amenities include retail shops, exercise facilities, a beauty salon and an outdoor swimming pool and sundeck, as well as a video arcade.

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        The Eldorado, Silver Legacy, and Circus Circus-Reno properties are connected in a "seamless" manner by 200-foot wide skyway corridors. These enclosed corridors serve as entertainment bridgeways

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between the three properties and house several restaurants and retail shops. The Eldorado, Silver Legacy and Circus Circus-Reno comprise the heart of the Reno market's prime gaming area and room base, providing the most extensive and the broadest variety of gaming, entertainment, lodging and dining amenities in the Reno area, with an aggregate of 4,098 rooms, 20 restaurants and enough parking to accommodate over 6,000 vehicles, and as of December 31, 2002,2003, approximately 5,3284,960 slot machines and 224200 table games. The Company's management believes that the centralized location and critical mass of these three properties, together with the ease of access between the facilities, provide the Eldorado with significant advantages over other freestanding hotel/casinos in the Reno market.

Silver Legacy Joint Venture

        Background.    The Silver Legacy was developed by the Silver Legacy Joint Venture, which was formed pursuant to the Agreement of Joint Venture of Circus and Eldorado Joint Venture dated as of March 1, 1994 (the "Original Joint Venture Agreement"), between ELLC and Galleon, Inc. ("Mandalay Sub"). Under the terms of the Original Joint Venture Agreement, ELLC and Mandalay Sub (each a "Partner" and, together, the "Partners") each acquired a 50% interest in the Silver Legacy Joint Venture (each Partner's "Percentage Interest"). Each of the Partners was obligated to contribute cash or property to the Silver Legacy Joint Venture with a value approximating 15% of the total budgeted cost for developing and constructing the Silver Legacy. To satisfy their respective contribution obligations, ELLC contributed the land on which Silver Legacy was constructed, at an agreed value of $25 million, and $26.9 million in cash, and Mandalay Sub contributed $51.9 million in cash. In addition, pursuant to the Original Joint Venture Agreement, Mandalay Sub's parent corporation, Mandalay Resort Group, provided certain loans to the Silver Legacy Joint Venture relating to the development and construction of the Silver Legacy (the remaining balance of which was repaid in 1997) and also provided credit support for a $230 million credit agreement originally entered into by the Silver Legacy Joint Venture on May 30, 1995 (the "Original Silver Legacy Credit Agreement") to fund the balance of the Silver Legacy's development and construction costs. In return, Mandalay Resort Group received from the Silver Legacy Joint Venture an annual fee equal to 1.5% of the average outstanding principal balance of such financing until March 5, 2002.

        On March 5, 2002, the Partners executed a new amendment and restatement of the Original Joint Venture Agreement (as further amended in April 2002, the "New Joint Venture Agreement"), the terms of which are summarized below, and the Silver Legacy Joint Venture and its wholly-owned finance subsidiary, Silver Legacy Capital Corp., issued $160 million principal amount of 10¹/8% mortgage notes due 2012 (the "Silver Legacy Notes"). Concurrently with the issuance of the Silver Legacy Notes, the Silver Legacy Joint Venture (i) repaid the entire outstanding balance of the Original Silver Legacy Credit Agreement, (ii) entered into a new senior secured credit facility comprised of a $20.0 million term loan facility that will amortize over a period of five years and a $20.0 million revolving facility with a five year maturity (the "New Silver Legacy Credit Agreement"), and (iii) made distributions of $10.0 million to ELLC and $20.0 million to Mandalay Sub, utilizing the balance of the net proceeds of the Silver Legacy Notes and $26.0 million of borrowings under the New Silver Legacy Credit Agreement. The New Silver Legacy Credit Agreement is secured by a first priority security interest in substantially all of the existing and future assets (other than certain licenses which may not be pledged under applicable law) of the Silver Legacy Joint Venture and a first priority pledge of and security interest in all of the Partnership interests in the Silver Legacy Joint Venture. The Silver Legacy Notes are secured by a security interest in the same assets and pledges of and security interest in the same Partnership interests which are junior to the security interests and pledges securing the New Silver Legacy Credit Agreement.

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        Silver Legacy Joint Venture Agreement.    The following is a summary of the New Joint Venture Agreement. The summary is qualified in its entirety by reference to the New Joint Venture Agreement, a copy of which is incorporated by reference as Exhibit 10.1.210.1.3 to this report.

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        Additional Capital Contributions.    The New Joint Venture Agreement provides that the Partners shall not be permitted or required to contribute additional capital to the Silver Legacy Joint Venture without the consent of the Partners, which consent may be given or withheld in each Partner's sole and absolute discretion.

        Partnership Distributions.    Subject to any contractual restrictions to which the Silver Legacy Joint Venture is subject, including the indenture relating to the Silver Legacy Notes, and prior to the occurrence of a "Liquidating Event," the Silver Legacy Joint Venture will be required by the New Joint Venture Agreement to make distributions to its Partners as follows:

(a)  The

An amount equal to the estimated taxable income of the Silver Legacy Joint Venture allocable to each Partner multiplied by the greater of the maximum marginal federal income tax rate applicable to individuals for such period (as of the date hereof, 38.6%) or the maximum marginal federal income tax rate applicable to corporations for such period (as of the date hereof both rates are 35%); provided, however, that if the State of Nevada enacts an income tax (including any franchise tax based on income), the applicable tax rate for any tax distributions subsequent to the effective date of such income tax shall be increased by the higher of the maximum marginal individual tax rate or corporate income tax rate imposed by such tax (after reduction for the federal tax benefit for the deduction of state taxes, using the maximum marginal federal, individual or corporate rate, respectively).





(b)

Annual distributions of remaining "Net Cash From Operations" in proportion to the Percentage Interests of the Partners.





(c)

Distributions of "Net Cash From Operations" in amounts or at times that differ from those described in (a) and (b) above, provided in each case that both Partners agree in writing to the distribution in advance thereof.

        As defined in the New Joint Venture Agreement, the term "Net Cash From Operations" means the gross cash proceeds received by the Silver Legacy Joint Venture, less the following amounts: (i) cash operating expenses and payments of other expenses and obligations of the Silver Legacy Joint Venture, including interest and scheduled principal payments on Silver Legacy Joint Venture indebtedness, including indebtedness owed to the Partners, if any, (ii) all capital expenditures made by the Silver Legacy Joint Venture, and (iii) such reasonable reserves as the Partners deem necessary in good faith and in the best interests of the Silver Legacy Joint Venture to meet anticipated future obligations and liabilities of the Silver Legacy Joint Venture (less any release of reserves previously established, as similarly determined).

        The Managing Partner.    The New Joint Venture Agreement designates Mandalay Sub as the Silver Legacy Joint Venture's managing partner with responsibility and authority for the day-to-day management of the business affairs of the Silver Legacy Joint Venture, including overseeing the day-to-day operations of Silver Legacy and other Silver Legacy Joint Venture business, preparation of the Silver Legacy Joint Venture's budgets and implementation of the decisions made by the Partners. The managing partner is also responsible for the preparation and submission of the Silver Legacy Joint Venture's annual business plan for review and approval by the Silver Legacy Joint Venture's executive committee, utilizing the special voting procedures and the procedure for resolving deadlocks described below.

        The New Joint Venture Agreement provides that the managing partner shall appoint the general manager, subject to approval of the appointment by the executive committee, utilizing the special voting procedures and the procedure for resolving deadlocks described below. Under the terms of the

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New Joint Venture Agreement, the general manager may be removed by ELLC or Mandalay Sub upon 30 days written notice. The New Joint Venture Agreement also provides that the managing partner shall appoint the other principal senior management of the Silver Legacy Joint Venture and Silver Legacy, who shall perform such functions, duties, and responsibilities as the managing partner may assign, and shall serve at the direction and pleasure of the managing partner.

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        The New Joint Venture Agreement provides that the unanimous approval of both Partners is required for certain actions, including the admission of an additional partner, the purchase of additional real property, encumbrances on Silver Legacy, sales or other dispositions of all or substantially all of the assets of the Silver Legacy Joint Venture, refinancing or incurrence of indebtedness involving in excess of $250,000 other than in the ordinary course of business, capital improvements involving more than $250,000 that are not included in an approved annual business plan, and any obligation, contract, agreement, or commitment with a partner or an affiliate of a partner which is not specifically permitted by the New Joint Venture Agreement.

        Replacement of the Managing Partner.    If the actual net operating results of the business of the Silver Legacy Joint Venture for any four consecutive quarters are less than 80% of the projected amount as set forth in the Silver Legacy Joint Venture's annual business plan, after appropriate adjustments for factors affecting similar business in the vicinity of the Silver Legacy, ELLC may require Mandalay Sub to resign from its position as managing partner.

        In addition, in the event Mandalay Sub resigns as managing partner, ELLC will have the right and option to become the managing partner of the Silver Legacy Joint Venture and assume all the obligations of the managing partner under the New Joint Venture Agreement, or the Partners are required to attempt to appoint a third party to manage the day-to-day business affairs of the Silver Legacy Joint Venture. In such event, if the Partners are unable to agree on a manager, then the Silver Legacy Joint Venture shall be dissolved and liquidated in accordance with the provisions of the New Joint Venture Agreement.

        The Executive Committee.    An executive committee of the Silver Legacy Joint Venture is authorized to review, monitor and oversee the performance of the management of the Silver Legacy. The executive committee of the Silver Legacy Joint Venture shall consist of five members, with three members appointed by the managing partner and two members appointed by the other Partner. In the event that neither of the Partners is the managing partner, then the executive committee shall consist of five members, with two members appointed by each Partner and a fifth member appointed by a third party manager selected by the Partners. Each Partner may, at any time, appoint alternate members to the executive committee and the alternates will have all the powers of a regular committee member in the event of the absence or inability of a regular committee member to serve. With the exception of the special voting procedures described below, each member of the executive committee is entitled to one vote on each matter decided by the executive committee and each action of the executive committee must be approved by a majority of all of the members of the executive committee, who may be present or voting by proxy. The current members of the executive committee are Stephen J. Greathouse, Frank R. Baldwin and Yvette E. Landau, each of whom was appointed by Mandalay Sub, and Robert M. Jones and Gene Carano, each of whom was appointed by ELLC.

        Subject to the requirement of unanimous approval of the Partners for certain actions, the duties of the executive committee include, but are not limited to, (i) reviewing, adjusting, approving, developing, and supervising the Silver Legacy Joint Venture's annual business plan, (ii) reviewing and approving the terms of any loans made to the Silver Legacy Joint Venture, (iii) approving all material purchases, sales, leases or other dispositions of Silver Legacy Joint Venture property, other than in the ordinary course of business, and (iv) approving the appointment of the General Manager, who is the Silver Legacy Joint Venture's Chief Executive Officer, and the Controller, who is the Silver Legacy Joint

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Venture's Chief Financial Officer and Accounting Officer, and determining the compensation of the General Manager and the Controller.

        The New Joint Venture Agreement provides special voting procedures for the executive committee's approval of the annual business plan, the appointment of the general manager and the determination of the general manager's compensation. In voting on these matters, the members of the executive committee appointed by the managing partner shall have a total of two votes and the

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members of the executive committee appointed by the other Partner shall have a total of two votes. The managing partner shall designate which two of the three members of the executive committee appointed by the managing partner are to exercise the two votes. If the executive committee is deadlocked in deciding any matter which is subject to the special voting procedures, then the meeting may be adjourned to another meeting date. If the executive committee remains deadlocked with respect to its approval of an annual business plan until the end of the second month of the fiscal year described in the annual business plan, then either Partner may by written notice cause the approval of the annual business plan to be submitted to a nationally recognized accounting firm mutually agreeable to the Partners (the "Accountant") for resolution. The Accountant shall consider the positions of the members of the executive committee and the Partners, and shall decide whether to approve the annual business plan, or to modify the annual business plan and approve it with such modifications. The decision of the Accountant on these matters shall have the same effect as the approval of the annual business plan by the executive committee. If the executive committee remains deadlocked with respect to its approval of the appointment of a general manager for a period of one month following the effective date of the resignation or removal of the previous general manager, then the executive committee shall assume the duties of the general manager until such time as the executive committee can reach a decision on the appointment and compensation of a new general manager. In exercising the duties of the general manager, the executive committee shall act and vote in accordance with the special voting procedures described above. If the executive committee remains deadlocked on the determination of the compensation of the general manager for a period of one month following the first meeting on the proposed compensation, then either Partner may by written notice cause the determination of such compensation to be submitted to the Accountant for resolution. In that event, the Accountant shall consider the positions of the executive committee, and shall adopt a compensation arrangement consistent with the position advocated by at least one member of the executive committee. The decision of the Accountant on any matter which is subject to the special voting procedures shall be final and binding on the executive committee and the Partners.

        Transfer of Partnership Interests.    Except as expressly permitted by the New Joint Venture Agreement, neither Partner may transfer all or any portion of its interest in the Silver Legacy Joint Venture or any rights therein without the unanimous consent of both Partners. The New Joint Venture Agreement provides that a Partner may transfer or convey all or any portion of its interest in the Silver Legacy Joint Venture to an affiliate of such Partner (subject to certain limitations), members of the Partner's family (which includes the Partner's spouse, natural or adoptive lineal descendants, and trusts for their benefit), another Partner, a personal representative of the Partner or any person or entity approved by the unanimous consent of the Partners.

        Unless otherwise agreed by Mandalay Sub, Donald L. Carano or a member of his immediate family acceptable to Mandalay Sub, which acceptance may not be unreasonably withheld, or an affiliate controlled by Donald L. Carano or a member of his immediate family acceptable to Mandalay Sub, which acceptance may not be unreasonably withheld, is required to be the manager of and control ELLC (or, if applicable, any entity that is a permitted transferee and to which ELLC has transferred its interest in the Silver Legacy Joint Venture). Unless otherwise agreed by ELLC, which may not be unreasonably withheld, Mandalay Sub (or, if applicable, any entity that is a permitted transferee and to which Mandalay Sub has transferred its interest in the Silver Legacy Joint Venture) is required to be controlled by Mandalay Resort Group. In the event the limitation in this paragraph with respect to

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either Partner is breached, the other Partner will have the right (but not be required) to exercise the buy-sell provisions described below.

        Limitation on Partners' Actions.    The New Joint Venture Agreement includes each Partner's covenant and agreement not to (i) take any action to require partition or to compel any sale with respect to its Silver Legacy Joint Venture interest, (ii) take any action to file a certificate of dissolution or its equivalent with respect to itself, (iii) take any action that would cause a bankruptcy of such

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Partner, (iv) withdraw or attempt to withdraw from the Silver Legacy Joint Venture, (v) exercise any power under the Nevada Uniform Silver Legacy Joint Venture Act to dissolve the Silver Legacy Joint Venture, (vi) transfer all or any portion of its interest in the Silver Legacy Joint Venture (other than as permitted hereunder), (vii) petition for judicial dissolution of the Silver Legacy Joint Venture, or (viii) demand a return of such Partner's contributions or profits (or a bond or other security for the return of such contributions or profits) without the unanimous consent of the Partners. The New Joint Venture Agreement also provides that if a Partner attempts to (A) cause a partition or (B) withdraw from the Silver Legacy Joint Venture or dissolve the Silver Legacy Joint Venture, or otherwise take any action in breach of its aforementioned agreements, the Silver Legacy Joint Venture shall continue and (1) the breaching Partner shall immediately cease to have the authority to act as a Partner, (2) the other Partner shall have the right (but shall not be obligated unless it was so obligated prior to such breach) to manage the affairs of the Silver Legacy Joint Venture, (3) the breaching Partner shall be liable in damages, without requirement of a prior accounting, to the Silver Legacy Joint Venture for all costs and liabilities that the Silver Legacy Joint Venture or any Partner may incur as a result of such breach, (4) distributions to the breaching Partner shall be reduced to 75% of the distributions otherwise payable to the breaching Partner and (5) the breaching Partner shall continue to be liable to the Silver Legacy Joint Venture for any obligations of the Silver Legacy Joint Venture pursuant to the New Joint Venture Agreement, and to be jointly and severally liable with the other Partners for any debts and liabilities (whether actual or contingent, known or unknown) of the Silver Legacy Joint Venture existing at the time the breaching Partner withdraws or dissolves.

        Buy-Sell Provision.    At any time on or after July 1, 2005 either Partner (provided such Partner is not in default of any of the provisions of the New Joint Venture Agreement) may make an offer to purchase ("Offer") the interest of the other Partner, which will constitute an irrevocable offer by the Partner giving the Offer either to (i) purchase all, but not less than all, of the interest of the Silver Legacy Joint Venture of the other Partner free of liens and encumbrances for the amount specified in the Offer (the "Sales Price"), or (ii) sell all, but not less than all, of its interest in the Silver Legacy Joint Venture free of liens and encumbrances to the other Partner for the amount specified in the Offer (the "Purchase Price"). The Partner receiving an Offer will have a period of two months to accept the Offer to sell at the Sales Price or, in the alternative, to require that the offering Partner sell its interest to the other Partner at the Purchase Price. The closing of the transaction for the sale or purchase of the Silver Legacy Joint Venture interest shall occur not later than six months after the notice of election or at such other time as may be required by the Nevada Gaming Authorities. Subject to any agreements to which the Silver Legacy Joint Venture is a party, the Partner purchasing the Silver Legacy Joint Venture interest (the "Purchasing Partner") shall be entitled to encumber the Silver Legacy Joint Venture property in order to finance the purchase, provided that the other Partner (the "Selling Partner") will have no liability, contingent or otherwise, under such financing. The Purchasing Partner may assign all or part of its right to purchase the Silver Legacy Joint Venture interest of the Selling Partner to an affiliate of the Purchasing Partner, provided that no such assignment relieves the Purchasing Partner of its obligations in the event of a default by the affiliate.

        Dissolution, Winding Up and Liquidation.    The New Joint Venture Agreement provides that the Silver Legacy Joint Venture shall dissolve and commence winding up and liquidating upon the first to occur of any of (i) January 1, 2053, (ii) the sale of all or substantially all of the Silver Legacy Joint Venture property, (iii) the unanimous vote of the Partners to dissolve, wind up, and liquidate the Silver

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Legacy Joint Venture, (iv) the happening of any other event that makes it unlawful or impossible to carry on the business of the Silver Legacy Joint Venture, (v) the occurrence of an Event of Bankruptcy (as defined the New Joint Venture Agreement) of a Partner, or (vi) the Partners are unable to agree upon a replacement managing partner as provided in the New Joint Venture Agreement (each, a "Liquidating Event").

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        The New Joint Venture Agreement also includes the Partners' agreement that the Silver Legacy Joint Venture shall not dissolve prior to the occurrence of a Liquidating Event, notwithstanding any provision of the Nevada Uniform Silver Legacy Joint Venture Act to the contrary. If it is determined by a court of competent jurisdiction that the Silver Legacy Joint Venture has dissolved prior to the occurrence of a Liquidating Event, the Partners have agreed to continue the business of the Silver Legacy Joint Venture without a winding up or liquidation.

        Upon the occurrence of a Liquidating Event, the Silver Legacy Joint Venture will continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. The managing partner will be responsible for overseeing the winding up and liquidation of the Silver Legacy Joint Venture, taking full account of the Silver Legacy Joint Venture's liabilities and assets, causing the assets to be liquidated as promptly as is consistent with obtaining the fair market value thereof, and causing the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed (i) first, to the payment and discharge of all of the Silver Legacy Joint Venture's debts and liabilities to creditors other than Partners, (ii) second, to the payment and discharge of all of the Silver Legacy Joint Venture's debts and liabilities to Partners, and (iii) the balance, if any, to the Partners in the amount of their respective capital accounts, after giving effect to all contributions, distributions, and allocations for all periods or portions thereof.

Reno Market

        The Reno market, one of the larger gaming markets in the United States, generated approximately $900 million of gaming revenues in 2002. As of December 31, 2002, the Reno market featured approximately 16,049 hotel rooms, 23,534 slot machines and 680 table games. For the twelve months ended December 31, 2002, the Reno market had an estimated 75.2% average hotel occupancy rate.

        Reno is the second largest metropolitan area in Nevada, with a population of approximately 348,000357,000 according to the most recently available U. S.U.S. census data, and is located at the base of the Sierra Nevada Mountains along Interstate 80, approximately 135 miles east of Sacramento, California and 225 miles east of San Francisco, California. Reno is a destination resort market that primarily attracts "drive-in" visitors by offering gaming as well as numerous other summer and winter recreational activities. In addition to gaming, the Reno area features numerous national forests, mountains and lakes (including Lake Tahoe) and offers outstanding year-round opportunities for outdoor activities of all types. Management believes that approximately two-thirds of visitors to the Reno market arrive by some form of ground transportation. The Reno area enjoys relatively mild weather, with abundant sunshine throughout the year and low humidity. Reno's annual snowfall is modest, although heavier snowfall in the mountain passes around Reno can obstruct traffic to Reno. Special annual events in the Reno area include Hot August Nights, the National Championship Air Races, the Reno Balloon Races, Street Vibrations, the Reno/Tahoe Open PGA golf tournament and the Reno Rodeo. According to the Reno-Sparks Convention and Visitors Authority (the "Visitors Authority") and the Nevada Commission on Tourism, the greater Reno area attracted an estimated 4.94.7 million visitors for the twelve months ended June 30, 20022003 compared to 5.24.9 million for the same period in 2001.2002.

        Approvals have been obtained for two public works projects in the downtown area of Reno. The first project will lower the train tracks which run between Reno's downtown district and separate the Eldorado and the two adjoining properties from the rest of the downtown gaming facilities.

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Construction on this project, which commenced in early 2003, is expected to be completed in 2006 and will be organized in such a manner that it will not prevent pedestrian or vehicular traffic from crossing the railroad tracks within the downtown area.2006. The second project involves the construction of a downtown special events center next to the National Bowling Stadium. ThisConstruction of this project iscommenced in Janaury 2004 and expected to be finishedcompleted in 2005. At this time,December 2004. While we believe the construction of these projects has had a minimal impact on our operations, we cannot determine the effect of these projects on our operations, particularlytheir impact during their remaining periods of construction periods.or after their completion.

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        The following table sets forth certain statistical information for the Reno market for the years 19981999 through 20022003 as reported by the Visitors Authority, the Nevada Commission on Tourism and the Nevada State Gaming Control Board.

The Reno Market

(1)

For the twelve months ended December 31 for each period shown.

(2)

As of December 31 for each period shown.

(3)

Calculated from information provided by the Nevada State Gaming Control Board.

(4)

For the twelve months ended June 30 for each period shown.

        The National Bowling Stadium, located approximately one block from the Eldorado and Silver Legacy, opened in February 1995 at a reported cost of approximately $48 million. The state-of-the-art facility, which features 80 bowling lanes, has been selected to host tournaments for the American Bowling Congress (the "ABC") and the Women's International Bowling Congress (the "WIBC") two of every three years through 2009 and is expected to host many other tournaments for other bowling organizations. The National Bowling Stadium was the site of the WIBC's National Championship Bowling Tournament in 1997, 2000 and 20002003 and has been selected as the site of that tournament in 2003, 2006 and 2009. The National Bowling Stadium was the site of the ABC's National Championship Bowling Tournament in 1998 and 2001 and has been selected as the site of that tournament in 2004, 2007, 2010, 2013 and 2007.2016. According to the Visitors Authority, bowling tournaments held at the National Bowling Stadium attract visitors from markets that do not normally contribute substantially to Reno's visitor profile. The National Bowling Stadium also features a large-screen movie theater, nightclub and retail space and can be configured to host special events and conventions.

        At December 31, 2002,2003, nine scheduled airlines and a number of other charter airlines were providing daily departures on 7489 flights betweenfrom Reno andto approximately 1617 other North American cities, providing outbound available seats for more than 9,012over 10,000 people daily. The primary user of the airport is Southwest Airlines, with approximately 41 daily outbound flights as of December 31, 2002.2003. The Eldorado and the Silver Legacy are within a 10-minute drive of the airport, making them easily accessible to visitors traveling to Reno by air.

Competition

        The gaming industry includes land-based casinos, dockside casinos, riverboat casinos, casinos located on Native American reservations and other forms of legalized gaming. There is intense

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competition among companies in the gaming industry, many of which have significantly greater resources than we do. Certain states have legalized casino gaming and other states may legalize gaming in the future. Legalized casino gaming in these states and on Native American reservations near our markets or changes to gaming laws in states surrounding Nevada could increase competition and could adversely affect our operations. The Company also competes to a lesser extent, with gaming facilities in other jurisdictions with dockside gaming facilities, state-sponsored lotteries, on-and-off track pari-mutuel wagering, Internet gaming, card clubs, riverboat casinos and other forms of legalized gambling.

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        The Company competes for customers primarily on the basis of locations,location, range and pricing of amenities and overall atmosphere. Of the 35 casinos currently operating in the Reno market, the Company competes principally with the eight other hotel-casinos that, like the Eldorado, each generate at least $36 million in annual gaming revenues, including the Silver Legacy. Although no hotel-casino projects are currently under construction in the Reno area, we cannot predict the extent to which new projects will be undertaken or the extent to which current hotel and/or casino space may be expanded in the near future. The Company expects that any additional rooms added in the Reno market will increase competition for visitor revenue. There can be no assurance that any growth in Reno's current room base or gaming capacity will not adversely affect our financial condition or results of operations. The Company also competes with hotel-casinos located in the nearby Lake Tahoe region as well as those in Las Vegas, Nevada. A substantial number of customers travel to both Reno and the Lake Tahoe area during their visits. Consequently, the Company believes that the Eldorado's success is influenced to some degree by the success of the Lake Tahoe market. While the Company does not anticipate a decline in the popularity of either Reno or Lake Tahoe as tourtourist destination areas in the foreseeable future, any such decline could adversely affect our operation.operations.

        Land-based, riverboat, or dockside casino gaming (other than that conducted on Native American-owned land) is currently legal in ten11 states and casino gaming on Native American-owned land is legal in at least 29a number of states, including California, Washington, and Oregon. Management believes the Reno market draws over 50% of its visitors from California. In addition to gaming on Native American-owned land, California allows other non-casino style gaming, including pari-mutuel wagering, a state-sponsored lottery, card clubs, bingo, and off-track betting. The competitive impact on Nevada gaming establishments, in general, and our operations, in particular, from the continued growth of gaming outside Nevada cannot be determined at this time. The Company believes that the expansion of casino gaming on Native American lands in California, and to a lesser extent in Washington and Oregon, could have a material adverse affect on its operations depending on the nature, location, and scope of those operations.

        On March 7, 2000, California voters approved Proposition 1A which amended the California constitution and legalized "Nevada-style" gaming on Native American reservations. The passage of this amendment has allowed the expansion of existing Native American gaming operations, as well as the opening of new Native American gaming facilities. Additionally, numerous tribes have announced that they intend to open gaming facilities.facilities in California. There are approximately 107 federally recognized Native American tribes in California. In order to conduct gaming operations in California, aA total of 61 Native American tribe must entertribes entered into a compactcompacts with the state. As of December 31, 2002, the State of California hadduring 1999 and 2000 that are currently in effect. Each of these Native American tribes may operate up to two gaming facilities. Nine of these Native American tribes are presently not operating a casino. Two Native American tribes entered into compacts with approximately 61 tribes.the State of California in 2003 that are currently in effect. Each of these Native American tribetribes may operate one gaming facility; however, neither is presently operating a casino. Under action taken by the National Indian Gaming Commission, gaming devices similar in California is limitedappearance to slot machines, but which are deemed to be technological enhancements to bingo style gaming, are not subject to such limits and may be used by tribes without state permission. Currently there are 53 Native American casinos in operation in the State of California. These Native American tribes are currently allowed to operate a maximum of 2,000 slot machines, and there may not be more than two gaming facilities on any one reservation. Underas well as other games. Certain compacts are currently being renegotiated with the Governor of California's interpretationstate. While the outcome of the compacts, all Native American tribesnegotiations is yet to be determined, the possibility exists that the current facilities operating in California are permittedwill be allowed to operate a totalexpand the scope and size of approximately 45,000 slot machines. However, there remains substantial uncertainty as totheir operations, including an increase in the total number of slot machines authorized by the compacts and it is possible that the approximately 45,000-machine limit will increase, and, if so, the increase may be substantial. The 20-year compacts have a one-time negotiation clause that must be executed in 2003. While the tribes are not required to renegotiate their compacts, approximately 21 tribes are expected to begin negotiations with the Governor of California beginning in March 2003 inmachines.

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an effort to obtain the right to operate more slot machines than the current maximum allowance per tribe of 2,000. In addition to allowing the expansion of slot machines, the compacts allow for the expansion of other casino-style games, including blackjack and poker. Most        Many existing Native American gaming facilities in northern California are modest compared to Reno market casinos. However, there are several more significant Native American casinos which currently compete with the Reno market, including: (1) the Cache Creek Indian Bingo & Casino in Brooks, California, approximately 58 miles northwest of Sacramento and (2) the Jackson Rancheria Casino, Hotel and Conference Center in Jackson, California, approximately 59 miles southeast of Sacramento and (3) the Thunder Valley Casino in Auburn, California, approximately 21 miles northeast of Sacramento. Thunder Valley Casino opened on June 9, 2003 and offers approximately 1,906 slot machines and 111 table games, dining and entertainment amenities and parking for 4,500 vehicles. This project has been open approximately eight months, and during the third and fourth quarter of 2003, we

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believe it had a significant impact on our operating results. Based on its size, proximity, and potential expansion capabilities, we believe Thunder Valley Casino could further impact our operations in the future. While we cannot predict the extent of the future impact, it could be significant. Management believes the greatest impact from Thunder Valley Casino to the Eldorado's customer base is to its day-trippers, those patrons whose visit is for one day and does not include an overnight stay. These customers are typically not tracked players, as they tend not to be as loyal a customer as those who visit for more than one day at a time. Day-trippers primarily visit Reno in the second and third quarters when the weather is more favorable.

        In addition to the existing gaming facilities, numerous Native American tribes have announced that they are in the process of developing or are considering establishing large-scale hotel and gaming facilities in northern California, including two which have entered into development and management agreements with established gaming operators. Station Casinos, Inc. has entered into agreements with the United Auburn Indian Community to develop and manage Thunder Valley Casino, a gaming and entertainment facility being constructed on a 49-acre site approximately 21 miles northeast of Sacramento. Station Casinos, Inc. has announced that Thunder Valley Casino is anticipated to offer between 1,250 and 2,000 slot machines and 100 table games, dining and entertainment amenities, and parking for 3,000 vehicles. Construction is reported to have commenced in October 2002 with the property to be completed in phases, including an anticipated opening of the casino in the June or July 2003.California. Other tribes are at various stages of planning new or expanded facilities in northern California, including facilities within a one hourone-hour drive of San Francisco or Sacramento.

        The competitive impact on Nevada gaming establishments, in general, and our operations, in particular, from the continued growth of gaming outside Nevada cannot be determined at this time. However, the Company believes that the expansion of casino gaming on Native American lands in California, and to a lesser extent in Washington and Oregon, could have a material adverse affect on future operations, depending on the nature, location, and scope of those operations.

Nevada Regulation and Licensing

        The ownership and operation of casino gaming facilities in Nevada are subject to the Nevada Gaming Control Act (the "Nevada Act") and regulations promulgated thereunder as well as 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 various local and governmental authorities (collectively with the Nevada Commission and the Nevada Board, the "Nevada Gaming Authorities"). The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which seek to, among other things, (i) prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity, (ii) establish and maintain responsible accounting practices and procedures, (iii) maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable recordkeeping and requiring the filing of periodic reports with the Nevada Gaming Authorities, (iv) prevent cheating and fraudulent practices and (v) provide a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations.

        Resorts, which operates the Eldorado, is licensed by the Nevada Gaming Authorities and is a corporate licensee (a "Corporate Licensee") under the terms of the Nevada Act. The gaming license requires the periodic payment of fees and taxes and is not transferable. Resorts and Capital each are registered by the Nevada Commission as a publicly traded corporation (a "Registered Corporation"). Registered Corporations are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may request. No person may become a member of, or receive any percentage of the profits from, the Company without first obtaining licenses and approvals from the Nevada Gaming Authorities. All of the members of Resorts have obtained the licenses and approvals necessary to own their respective interests in the Company. The Company has obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities at the Eldorado.

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        The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company in order to determine whether such individual is suitable or should be licensed as a business associate of the Company. Officers, directors and certain key employees of the Company must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

        If the Nevada Gaming Authorities were to find an officer, director or key employee of the Company unsuitable for licensing or unsuitable to continue having a relationship with the Company, the Company would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company 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 is 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 the Company must be reported to, or approved by, the Nevada Commission.

        If it were determined that the Nevada Act was violated by the Company, the gaming licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company 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.

        The Nevada Commission may, in its discretion, require the holder of any debt security of the Company, including the 10¹/2% Senior Subordinated Notes due 2006 of Resorts and Capital, to file applications, be investigated and be found suitable to own such debt security. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Company can be sanctioned, including the loss of its licenses, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest or any distribution whatsoever, (ii) recognizes any voting right by such unsuitable person in connection with such securities, (iii) pays the unsuitable person remuneration in any form or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.

        Any beneficial holder of a Registered Corporation's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated and have his suitability as a beneficial holder of a Registered Corporation's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

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        The Nevada Act requires any person who acquires beneficial ownership of more than 5% of a Registered Corporation's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a Registered Corporation's voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Gaming Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of a Registered Corporation's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of a Registered Corporation, any change in a Registered Corporation's corporate charter, bylaws, management, policies or operations or any of its gaming affiliates or any other action which the Nevada Commission finds to be inconsistent with holding the Registered Corporation's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by shareholders, (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in 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 of the Company's securities if the record owner, after request, fails to identify the beneficial owner of such securities. Any shareholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the voting securities of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. A Registered Corporation is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a member of or to have any other relationship with such corporation, the Registered Corporation (i) pays that person any dividend or interest upon voting securities of such corporation, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities, including, if necessary, the immediate purchase of such voting securities for cash at fair market value.

        A Registered Corporation 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. A Registered Corporation is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require the stock certificates of a Registered Corporation to bear a legend indicating that the securities are subject to the Nevada Act.

        Neither the Company nor a Registered Corporation may make a public offering of its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada or to retire or extend obligations incurred for such purposes. Such approval, if given, does not constitute a finding,

17

recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful.

        Changes in control of a Registered Corporation through merger, consolidation, stock or asset acquisitions, management or consulting agreements or any act or conduct by a person whereby he obtains control may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission with respect to a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling shareholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as a part of the approval process relating to the transaction.

        The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Registered Corporations 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 required in certain circumstances from the Nevada Commission before a Registered Corporation may make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management may be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by a Registered Corporation's Board of Directors in response to a tender offer made directly to the Registered Corporation's shareholders for the purposes of acquiring control of the Registered Corporation.

        License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or 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 certain types of entertainment isare furnished in connection with the selling of food or refreshments.

        Any person who is licensed, required to be licensed, registered, required to be registered or is under common control with such person (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Gaming Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees or employ a person in the foreign operation who has been denied a license or finding of suitability in Nevada for the reason of personal unsuitability.

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Internal Revenue Service Regulations

        The Internal Revenue Service requires operators of casinos located in the United States to file information returns for U.S. citizens, including names and addresses of winners, for keno, bingo and slot machine winnings in excess of stipulated amounts. The Internal Revenue Service also requires operators to withhold taxes on some keno, bingo and slot machine winnings of nonresident aliens. We are unable to predict the extent, to which these requirements, if extended, might impede or otherwise adversely affect operations of, and/or income from, the other games.

        Regulations adopted by the Financial Crimes Enforcement Network of the Treasury Department and the Nevada gaming regulatory authorities require the reporting of currency transactions in excess of $10,000 occurring within a gaming day, including identification of the patron by name and social security number. This reporting obligation began in May 1985 and may have resulted in the loss of gaming revenues to jurisdictions outside the United States which are exempt from the ambit of these regulations.

Other Laws and Regulations

        The sale of alcoholic beverages at the Eldorado isand the Silver Legacy are subject to licensing, control and regulation by applicable local regulatory agencies. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any license, and any disciplinary action could, and revocation would, have a material adverse effect upon our operations.

        The Eldorado and the Silver Legacy are subject to extensive state and local regulations and, on a periodic basis, must obtain various licenses and permits, including those required to sell alcoholic beverages. The Company believes that it has obtained all required licenses and permits and that our business is conducted in substantial compliance with applicable laws.

Environmental Matters

        As is the case with any owner or operator of real property, the Company is subject to a variety of federal, state and local governmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Federal, state and local environmental laws and regulations also impose liability on potentially responsible parties, including the owners or operators of real property, to clean up, or contribute to the cost of cleaning up, sites at which hazardous wastes or materials were disposed of or released. The Company does not have environmental liability insurance to cover such events.

        Certain of the Company's properties and former properties, including the Silver Legacy property, had or have varying degrees of petroleum contamination in the soil and/or groundwater. In each instance where such petroleum contamination has been identified, investigation or remediation activities have been undertaken or are ongoing. The possibility exists that additional contamination, as yet unknown, may exist at these or other of the Company's properties. In addition, under the terms of an Environmental Indemnity, dated May 30, 1995 (the "Environmental Indemnity"), the Company agreed jointly and severally with Mandalay to indemnify, defend and hold harmless the agents and lenders under a bank credit facility of the Silver Legacy Joint Venture which was paid in full on March 5, 2002 from and against any and all Environmental Losses (as defined in the Environmental Indemnity) suffered or incurred on the premises of the Silver Legacy or arising through the ownership, use, occupancy or operation thereof. Generally, liability under the Environmental Indemnity covers the period prior to the date the lenders foreclose on and take possession of the real property securing their loans to the Silver Legacy Joint Venture. The agents and lenders are not required to seek payments from the Silver Legacy Joint Venture before pursuing payments from the Company and Mandalay for Environmental Losses. In all cases, the Company believes that the contamination arose from activities

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of prior owners or occupants, or from offsite sources and not as a result of any actions or operations conducted by the Company.

        In 1998 the Silver Legacy received reimbursement and indemnification from Chevron Company USA of $750,000 for petroleum contamination identified on the Silver Legacy property. The possibility exists that other responsible parties may be identified for this or other sites, and the Company will determine whether to seek contribution or reimbursement from such parties. In addition, reimbursement for some of the expenditures has been, and further reimbursement may be, obtained from the State of Nevada Petroleum Fund which has been established to reimburse parties for costs incurred in clean-up of underground storage tank related contamination.

        The Company's properties and former propertiesGroundwater in the vicinity of the Eldorado property is also lie withincontaminated by a chlorinated solvent known as perchloroethylene or "PCE." This contaminant is widespread in the proposedReno/Sparks area. The Central Truckee Meadows Remediation District, encompassing much of the Citycities of Reno which willand Sparks, was established pursuant to state legislation to address groundwater contaminated with solvents as identifiedthis contamination. The Central Truckee Meadows Remediation District is managed by Washoe County under the direction of the Nevada Division of Environmental Protection.Protection, and is currently conducting investigations and developing a remediation plan. Funding for the Central Truckee Meadows Remediation District is provided through assessments to water customers which are calculated on the basis of water use. The annual assessment to the Company doesis currently $178, plus an additional sum based on the amount of water used, which in our most recent annual assessment amounted to approximately $18,000. It is possible that additional assessments may be made against properties that receive special benefits from the Central Truckee Meadows Remediation District, such as clean-up of contamination affecting a specific parcel. The legislation implementing this program exempts property owners who did not cause or contribute to the contamination from civil and criminal liability for the cost of remediation and any related damages, except to the extent of unpaid assessments. We do not believe that it haswe have contributed to this solvent contamination. The Company has not beencontamination, however, we expect that we will be required to conduct any remediation orallow the Central Truckee Meadows Remediation District access to our property for continued investigation, of this matter norincluding access to contribute toward any costs associated therewith. However, the possibility remains that funding of the investigation or remediation of this regional groundwater issue could result in a special assessment on the Company's properties or former properties among others within the Remediation District. The possibility exists that the entire area of contamination, or a portion thereof, could be listed under the Comprehensive Environmental Response, Compensation and Liability Act of 1980.monitoring wells.

        Asbestos has been determined to be present in the sheetrock of approximately 400 of the Eldorado's older hotel rooms. Removal of the asbestos will be required only in the event of the demolition of the affected rooms or if the asbestos is otherwise disturbed. Management currently has no plans to renovate or demolish the affected rooms in a manner that would require removal of the asbestos at this time.

        The possibility exists that additional contamination, as yet unknown, may exist at the Eldorado or Silver Legacy. In all cases, however, the Company believes that any such contamination would have arisen from activities of prior owners or occupants, or from offsite sources and not as a result of any of our actions or operations. The Company does not believe that our expenditures for environmental investigations or remediation will have a material adverse effect on our financial condition or results of operations.

        The Company has expended approximately $740,000$743,000 in connection with environmental matters from January 1, 1993 through December 31, 2002,2003, of which approximately $2,830 was expended during 2003 and approximately $1,990 was expended during 2002 and approximately $225 was expended in 2001.2002.

Employees

        As of December 31, 2002,2003, the Company had 2,1101,914 employees, the substantial majority of whom are nonmanagement personnel. The number of people employed at any time is subject to seasonal fluctuation. None of the Company's employees are covered by a collective bargaining agreement. The Company believes that employee relations are excellent.

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Factors that May Affect the Company's Future Results

(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

        Certain information included in this report and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by

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the fact that they do not relate strictly to historical or current facts. The Company has based these forward-looking statements on its current expectations about future events. These forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance and business, including:

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current and future operations; and



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statements that include the words "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan" or similar expressions.

        Such statements include information relating to capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition. From time to time, oral or written forward-looking statements are also included in the Company's periodic reports on Forms 10-Q and 8-K, press releases and other materials released to the public.

        Any or all of the forward-looking statements in this report and in any other public statements the Company makes may turn out to be wrong. This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this report, such as government regulation and the competitive environment, will be important in determining the Company's future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements.

        The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in the Company's subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. The following discussion of risks, uncertainties and possible inaccurate assumptions relevant to the Company's business includes factors the Company believes could cause its actual results to differ materially from expected and historical results. Other factors beyond those listed below could also adversely affect the Company. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

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As described under "Competition," in this Item 1, the Eldorado and Silver Legacy operate in a very competitive environment. The growth in the number of hotel rooms and/or casino capacity in Reno or the spread of legalized gaming in other jurisdictions, including the growth of Native American gaming in northern California and northwestthe northwestern United States, could negatively affect future operating results.



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As discussed under "Nevada Regulation and Licensing" in this Item 1, the Eldorado's and the Silver Legacy's gaming operations are highly regulated by governmental authorities in Nevada, and our future operations may be significantly impacted by this regulation.



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Changes in applicable gaming, tax or other laws or regulations could have a significant effect on the operations of the Eldorado and Silver Legacy. As a result of federal legislation passed in 1996, the National Gambling Impact Study Commission conducted a two-year study of the gaming industry in the United States and has reported its findings and recommendations to Congress. It is possible that this report may result in additional regulation and taxation of the gaming industry.



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The Eldorado's and Silver Legacy's operations are affected by changes in general economic and market conditions nationally as well as such conditions in the Reno area where the Eldorado's

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and Silver Legacy's operations are conducted and in those areas where their customers live, including California.



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Any future security alerts and/or terrorist attacks similar to those that occurred on September 11, 2001 could adversely affect the operations of the Eldorado and Silver Legacy.

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United States military action in Iraq, or increased security concerns or terrorist activity resulting therefrom could adversely affect our operations.



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The highway between Reno and northern California, where a large number of the Eldorado's and Silver Legacy's customers reside, experience winter weather conditions from time to time that limit the number of customers who visit Reno during such periods.



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Because all of the operations of the Eldorado and Silver Legacy are in Reno, the Company is subject to greater risk than a gaming company that is geographically diversified. Any economic, weather or other conditions which adversely impact gaming operations in the Reno area will impact all of the operations of the Eldorado and Silver Legacy.



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Construction relating to two recently approved public works projects in the downtown Reno area to lower the train tracks and build a downtown special events center could disrupt the downtown area during construction and impact the operations of the Eldorado and Silver Legacy.



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The gaming industry represents a significant source of tax revenues to the state, county and local jurisdictions in which gaming is conducted.conducted and, in 2003, Nevada increased the state taxes we pay. From time to time, various state and federal legislators and officials have proposed a variety of changes in tax laws, or in the administration of the laws, affecting the gaming industry, including a federal gaming tax.



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The Company believes that its recorded tax balances are adequate. However, it is not possible to determine with certainty the likelihood of possible changes in the tax laws or their administration. These changes, if adopted, could have a material negative effect on the Eldorado's operating results and the operating results of the Silver Legacy.



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The interest rate on a portion of the Company's debt is subject to fluctuation based on changes in short-term interest rates. Interest expense could increase as a result of this factor.



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Claims have been brought against the Company in various legal proceedings, and additional legal and tax claims arise from time to time. It is possible that the Company's cash flows and results of operations could be affected from time to time by the resolution of one or more of these contingencies. The Company believes that the ultimate disposition of current matters will not have a material impact on its financial condition or results of operations. See the further discussion under "Legal Proceedings" in Item 3 of this Form 10-K.



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There is intense competition to attract and retain management and key employees in the gaming industry. The Eldorado's business or the business of the Silver Legacy could be adversely affected in the event of the inability to recruit or retain key personnel.

Item 2.    Properties.

        The Company's executive offices are located inside the Eldorado, which is situated on an approximately 159,000 square foot parcel at 345 North Virginia Street, Reno, Nevada. The CompanyResorts owns the entire parcel, except for approximately 30,000 square feet which is leased by the Company from C, S and Y Associates, a general partnership of which Donald Carano is a general partner. See "Compensation Committee Interlocks and Insider Participation" in Item 11 of this report. The lease expires on June 30, 2027. Annual rent is equal to the greater of (i) $400,000 and (ii) an amount based on a decreasing percentage of the Eldorado's gross gaming revenues ranging from 3.0% of the first $6.5 million of gross gaming revenues to 0.1% of gross gaming revenues in excess of $75.0 million. Rent in 20022003 totaled

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