<PAGE>

                              SECURITY AGREEMENT
                              ------------------

          This SECURITY AGREEMENT ("Agreement"), dated as of March 18, 1999, is
made by Coast Hotels and Casinos, Inc., a Nevada corporation ("Grantor"), in
favor of Bank of America National Trust and Savings Association, as
Administrative Agent under the Loan Agreement hereafter referred to, and in
favor of each of the Lenders therein named (collectively referred to herein as
"Secured Party"), with reference to the following facts:

                                    RECITALS
                                    --------

          A.   Pursuant to the Loan Agreement of even date herewith by and among
Grantor, the lenders from time to time party thereto (collectively, the
"Lenders" and individually, a "Lender"), and the Administrative Agent (as such
agreement may from time to time be amended, extended, renewed, supplemented or
otherwise modified, the "Loan Agreement"), the Lenders have agreed to extend
certain credit facilities to Grantor.

          B.   The Loan Agreement provides, as a condition of the availability
of such credit facilities, that Grantor shall enter into this Agreement and
shall grant security interests to Secured Party as herein provided.

                                   AGREEMENT
                                   ---------

          NOW, THEREFORE, in order to induce the Lenders to extend the
aforementioned credit facilities, and for other good and valuable consideration,
the receipt and adequacy of which hereby is acknowledged, Grantor hereby
represents, warrants, covenants, agrees, assigns and grants as follows:

          1.   Definitions.  This Agreement is the Security Agreement referred
               -----------
to in the Loan Agreement.  This Agreement is one of the "Loan Documents"
referred to in the Loan Agreement.  Terms defined in the Loan Agreement and not
otherwise defined in this Agreement shall have the meanings defined for those
terms in the Loan Agreement.  Terms defined in the California Uniform Commercial
Code and not otherwise defined in this Agreement or in the Loan Agreement shall
have the meanings defined for those terms in the California Uniform Commercial
Code.  As used in this Agreement, the following terms shall have the meanings
respectively set forth after each:

          "Agreement" means this Security Agreement, and any extensions,
           ---------
     modifications, renewals, restatements, supplements or amendments hereof.

          "Collateral" means and includes all present and future right, title
           ----------
     and interest of Grantor in or to any Property or assets whatsoever, and all
     rights and powers of

                                       -1-
<PAGE>

     Grantor to transfer any interest in or to any Property or assets
     whatsoever, including, without limitation, any and all of the
                 ---------
     following Property:

               (a) All present and future accounts, accounts receivable,
     agreements, contracts, leases, contract rights, rights to payment,
     instruments, documents, chattel paper, security agreements, guaranties,
     letters of credit, undertakings, surety bonds, insurance policies (whether
     or not required by the terms of the Loan Documents), notes and drafts, and
     all forms of obligations owing to Grantor or in which Grantor may have any
     interest, however created or arising and whether or not earned by
     performance;

               (b) All present and future general intangibles, all tax refunds
     of every kind and nature to which Grantor now or hereafter may become
     entitled, however arising, all other refunds, and all deposits, reserves,
     loans, royalties, cost savings, deferred payments, goodwill, choses in
     action, liquidated damages, rights to indemnification, trade secrets,
     computer programs, software, customer lists, trademarks, trade names,
     patents, licenses (except for gaming licenses and liquor licenses, which
     are not transferable), copyrights, technology, processes, proprietary
     information and insurance proceeds of which Grantor is a beneficiary;

               (c) Whether characterized as accounts, general intangibles or
     otherwise, all rents (including, without limitation, prepaid rents, fixed,
                           ---------
     additional and contingent rents), issues, profits, receipts, earnings,
     revenue, income, security deposits, occupancy charges, hotel room charges,
     cabana charges, casino revenues, show ticket revenues, food and beverage
     revenues, room service revenues, merchandise sales revenues, parking,
     maintenance, common area, tax, insurance, utility and service charges and
     contributions, green fees, cart rental fees, instruction fees, membership
     charges, restaurant, snack bar and pro shop revenues;

               (d) All present and future deposit accounts of Grantor,

     including, without limitation, any demand, time, savings, passbook or like
     ---------
     account maintained by Grantor with any bank, savings and loan association,
     credit union or like organization, and all money, Cash and Cash Equivalents
     of Grantor, whether or not deposited in any such deposit account;

               (e) All present and future books and records, including, without
                                                             ---------
     limitation, books of account and ledgers of every kind and nature, all
     electronically recorded data relating to Grantor or the business thereof,
     all receptacles and containers for such records, and all files and
     correspondence;

               (f) All present and future goods, including, without limitation,
                                                 ---------
     all consumer goods, farm products, inventory, equipment, gaming devices and
     associated equipment (including, without limitation, gaming devices and
     associated equipment as

                                       -2-
<PAGE>

     defined in Nevada Revised Statutes Chapter 463), machinery, tools, molds,
     dies, furniture, furnishings, fixtures, trade fixtures, motor vehicles and
     all other goods used in connection with or in the conduct of Grantor's
     business;

               (g) All present and future inventory and merchandise, including,
                                                                     ---------
     without limitation, all present and future goods held for sale or lease or
     to be furnished under a contract of service, all raw materials, work in
     process and finished goods, all packing materials, supplies and containers
     relating to or used in connection with any of the foregoing, and all bills
     of lading, warehouse receipts or documents of title relating to any of the
     foregoing;

               (h) All present and future stocks, bonds, debentures, securities,
     subscription rights, options, warrants, puts, calls, certificates,
     partnership interests, joint venture interests, investment property,
     Investments and/or brokerage accounts and all rights, preferences,
     privileges, dividends, distributions, redemption payments, or liquidation
     payments with respect thereto;

               (i) All present and future accessions, appurtenances, components,
     repairs, repair parts, spare parts, replacements, substitutions, additions,
     issue and/or improvements to or of or with respect to any of the foregoing;

               (j) All other tangible and intangible Property of Grantor;

               (k) All rights, remedies, powers and/or privileges of Grantor
     with respect to any of the foregoing; and

               (l) Any and all proceeds and products of any of the foregoing,

     including, without limitation, all money, accounts, general intangibles,
     ---------
     deposit accounts, documents, instruments, chattel paper, goods, insurance
     proceeds, and any other tangible or intangible property received upon the
     sale or disposition of any of the foregoing;

provided that the term "Collateral", as used in this Agreement, shall not
--------                ----------                                    ---
include (i) Real Property or any interest therein, (ii) any capital stock or
other equity interests in any gaming licensees, (iii) any aircraft owned by the
Grantor on the Closing Date, (iv) any agreement with a third party that,
pursuant to its terms, prohibits the grant of a lien on such agreement; provided
that the Grantor shall use its best efforts to obtain such third party's consent
to assignment of all material agreements; or (v) any Property the purchase of
which was financed by a purchase money security interest, including any Capital
Lease Obligation, permitted under Section 6.9 or 6.10 of the Loan Agreement.

          "Secured Obligations" means any and all present and future Obligations
           -------------------
of any type or nature of Grantor to Secured Party arising under or relating to
the Loan Documents or

                                      -3-
<PAGE>

any one or more of them, whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or noncontingent, including
                                                            ---------
Obligations of performance as well as Obligations of payment, and including
                                                                  ---------
interest that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against Grantor.

          2.   Further Assurances.  At any time and from time to time at the
               ------------------
request of Secured Party, Grantor shall execute and deliver to Secured Party all
such financing statements and other instruments and documents in form and
substance satisfactory to Secured Party as shall be necessary or desirable to
fully perfect, when filed and/or recorded, Secured Party's security interests
granted pursuant to Section 3 of this Agreement, provided that nothing contained
herein shall require the Lien of this Agreement to be prior to that of the 13%
Indenture and the collateral documents securing the same to the extent that such
Indebtedness is permitted by the terms of the Loan Agreement. It is hereby
acknowledged and agreed that, notwithstanding anything contained herein or in
any other Collateral Document, Grantor shall not be required under any
circumstance to take any further action to perfect any interest granted to
Secured Party in any cage cash, deposit accounts, markers, instruments or other
cash items which are used in connection with the casino operations of Grantor.
At any time and from time to time, Secured Party shall be entitled to file
and/or record any or all such financing statements, instruments and documents
held by it, and any or all such further financing statements, documents and
instruments, and to take all such other actions, as Secured Party may deem
appropriate to perfect and to maintain perfected the security interests granted
in Section 3 of this Agreement.  Before and after the occurrence of any Event of
Default, at Secured Party's request, Grantor shall execute all such further
financing statements, instruments and documents, and shall do all such further
acts and things, as may be deemed necessary or desirable by Secured Party to
create and perfect, and to continue and preserve, an indefeasible security
interest in the Collateral in favor of Secured Party, or the priority thereof.
With respect to any Collateral consisting of instruments, documents,
certificates of title or the like, as to which Secured Party's security interest
need be perfected by, or the priority thereof need be assured by, possession of
such Collateral, Grantor will upon demand of Secured Party deliver possession of
same in pledge to Secured Party.  With respect to any Collateral consisting of
securities, instruments, partnership or joint venture interests or the like,
Grantor hereby consents and agrees that the issuers of, or obligors on, any such
Collateral, or any registrar or transfer agent or trustee for any such
Collateral, shall be entitled to accept the provisions of this Agreement as
conclusive evidence of the right of Secured Party to effect any transfer or
exercise any right hereunder or with respect to any such Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by Grantor or any other Person to such issuers or such obligors
or to any such registrar or transfer agent or trustee.

          3.   Security Agreement.  For valuable consideration, Grantor hereby
               ------------------
assigns and pledges to Secured Party, and grants to Secured Party a security
interest in, all presently existing and hereafter acquired Collateral, as
security for the timely payment and performance of the Secured Obligations, and
each of them.  This Agreement is a continuing

                                      -4-
<PAGE>

and irrevocable agreement and all the rights, powers, privileges and remedies
hereunder shall apply to any and all Secured Obligations, including those
arising under successive transactions which shall either continue the Secured
Obligations, increase or decrease them, or from time to time create new Secured
Obligations after all or any prior Secured Obligations have been satisfied, and
notwithstanding the bankruptcy of Grantor or any other Person or any other event
or proceeding affecting any Person.

          4.   Grantor's Representations, Warranties and Agreements.  Except as
               ----------------------------------------- ----------   ------
otherwise disclosed to Secured Party in writing concurrently herewith, Grantor
represents, warrants and agrees that: (a) Grantor will pay, prior to
delinquency, all taxes, charges, Liens and assessments against the portion of
the Collateral owned by it, except such as are timely contested in good faith,
                            ------
and upon its failure to pay or so contest such taxes, charges, Liens and
assessments, Secured Party at its option may pay any of them, and Secured Party
shall be the sole judge of the legality or validity thereof and the amount
necessary to discharge the same; (b) the Collateral will not be used for any
unlawful purpose or in material violation of any Law, regulation or ordinance,
nor used in any way that will void or impair any insurance required to be
carried in connection therewith; (c) Grantor will, to the extent consistent with
good business practice, keep the portion of the Collateral owned by it in
reasonably good repair, working order and condition, and from time to time make
all needful and proper repairs, renewals, replacements, additions and
improvements thereto and, as appropriate and applicable, will otherwise deal
with such portion of the Collateral in all such ways as are considered good
practice by owners of like Property; (d) Grantor will take all reasonable steps
to preserve and protect the Collateral; (e) Grantor will maintain, with
responsible insurance companies, insurance covering the Collateral against such
insurable losses as is required by the Loan Agreement and as is consistent with
sound business practice, and will cause Secured Party to be designated as an
additional insured and loss payee with respect to all insurance (whether or not
required by the Loan Agreement), will obtain the written agreement of the
insurers that such insurance shall not be canceled, terminated or materially
modified to the detriment of Secured Party without at least 30 days prior
written notice to Secured Party, and will furnish copies of such insurance
policies or certificates to Secured Party promptly upon request therefor; (f)
Grantor will promptly notify Secured Party in writing in the event of any
substantial or material damage to the Collateral from any source whatsoever,
and, except for the disposition of collections and other proceeds of the
     ------
Collateral permitted by Section 6 hereof, Grantor will not remove or permit to
be removed any part of the Collateral from the State of Nevada without the prior
written consent of Secured Party, except for such items of the Collateral as are
                                  ------
removed in the ordinary course of business or in connection with any transaction
or disposition otherwise permitted by the Loan Documents; and (g) in the event
Grantor changes its name or its address as either are set forth herein or in the
Loan Agreement, Grantor will notify Secured Party of such name and/or address
change promptly, but in any event, within thirty days.

                                      -5-
<PAGE>

          5.   Secured Party's Rights Re Collateral.  If an Event of Default has
               ------------------------------------
occurred and remains continuing, then at any time without notice or demand and
at the sole expense of Grantor (or if no Event of Default is continuing, at
Secured Party's sole expense and upon reasonable advance notice and at any time
during regular business hours and as often as reasonably requested (but not so
as to materially interfere with the business of Grantor or any of its
Subsidiaries)), Secured Party may, to the extent it may be necessary or
desirable to protect the security hereunder, but Secured Party shall not be
obligated to: (a) enter upon any premises on which Collateral is situated and
examine the same or (b) perform any obligation of Grantor under this Agreement
or any obligation of any other Person under the Loan Documents.  At any time and
from time to time, at the expense of Grantor, Secured Party may, to the extent
it may be necessary or desirable to protect the security hereunder, but Secured
Party shall not be obligated to:  (i) notify obligors on the Collateral that the
Collateral has been assigned to Secured Party; (ii) at any time and from time to
time request from obligors on the Collateral, in the name of Grantor or in the
name of Secured Party, information concerning the Collateral and the amounts
owing thereon; and (iii) while an Event of Default is continuing (and subject to
any inconsistent rights of the Trustee under the 13% Indenture) cause the
Collateral to be registered in the name of Secured Party, as legal owner.
Grantor shall at any time at Secured Party's request mark the Collateral and/or
Grantor's ledger cards, books of account and other records relating to the
Collateral with appropriate notations satisfactory to Secured Party disclosing
that they are subject to Secured Party's security interests.   Secured Party
shall be under no duty or obligation whatsoever to take any action to protect or
preserve the Collateral or any rights of Grantor therein, or to make collections
or enforce payment thereon, or to participate in any foreclosure or other
proceeding in connection therewith.

          6.   Collections on the Collateral.  Except as otherwise provided in
               -----------------------------   ------
any Loan Document, Grantor shall have the right to use and to continue to make
collections on and receive dividends and other proceeds of all of the Collateral
in the ordinary course of business so long as no Event of Default shall have
occurred and be continuing.  Upon the occurrence and during the continuance of
an Event of Default, at the option of Secured Party, Grantor's right to make
collections on and receive dividends and other proceeds of the Collateral and to
use or dispose of such collections and proceeds shall terminate, and (subject to
any prior rights of the Trustee under the 13% Indenture) any and all dividends,
proceeds and collections, including all partial or total prepayments, then held
or thereafter received on or on account of the Collateral will be held or
received by Grantor in trust for Secured Party and immediately delivered in kind
to Secured Party.  Any remittance received by Grantor from any Person shall be
presumed to relate to the Collateral and to be subject to Secured Party's
security interests. Upon the occurrence and during the continuance of an Event
of Default, Secured Party shall have the right at all times (subject to any
inconsistent rights of the Trustee under the 13% Indenture) to receive, receipt
for, endorse, assign, deposit and deliver, in the name of Secured Party or in
the name of Grantor, any and all checks, notes, drafts and other instruments for
the payment of money constituting proceeds of or otherwise

                                      -6-
<PAGE>

relating to the Collateral; and Grantor hereby authorizes Secured Party to
affix, by facsimile signature or otherwise, the general or special endorsement
of it, in such manner as Secured Party shall deem advisable, to any such
instrument in the event the same has been delivered to or obtained by Secured
Party without appropriate endorsement, and Secured Party and any collecting bank
are hereby authorized to consider such endorsement to be a sufficient, valid and
effective endorsement by Grantor, to the same extent as though it were manually
executed by the duly authorized officer of Grantor, regardless of by whom or
under what circumstances or by what authority such facsimile signature or other
endorsement actually is affixed, without duty of inquiry or responsibility as to
such matters, and Grantor hereby expressly waives demand, presentment, protest
and notice of protest or dishonor and all other notices of every kind and nature
with respect to any such instrument.

          7.   Possession of Collateral by Secured Party.   Any or all of the
               -----------------------------------------
Collateral delivered to Secured Party consisting of Cash shall be held in an
interest-bearing account and, when an Event of Default exists, Secured Party
may, in its discretion, apply any such interest to payment of the Secured
Obligations.  Nothing herein shall obligate Secured Party to invest any
Collateral or obtain any particular return thereon.  Upon the occurrence and
during the continuance of an Event of Default, whenever any of the Collateral is
in Secured Party's possession, custody or control, Secured Party may use,
operate and consume the Collateral, whether for the purpose of preserving and/or
protecting the Collateral or for the purpose of performing any of Grantor's
obligations with respect thereto.  Secured Party may at any time deliver or
redeliver the Collateral or any part thereof to Grantor, and the receipt of any
of the same by Grantor shall be complete and full acquittance for the Collateral
so delivered, and Secured Party thereafter shall be discharged from any
liability or responsibility therefor.  So long as Secured Party exercises
reasonable care with respect to any Collateral in its possession, custody or
control, Secured Party shall have no liability for any loss of or damage to such
Collateral, and in no event shall Secured Party have liability for any
diminution in value of Collateral occasioned by economic or market conditions or
events.  Secured Party shall be deemed to have exercised reasonable care within
the meaning of the preceding sentence if the Collateral in the possession,
custody or control of Secured Party is accorded treatment substantially equal to
that which Secured Party accords its own property, it being understood that
Secured Party shall not have any responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Collateral, whether or not Secured Party has or is
deemed to have knowledge of such matters, or (b) taking any necessary steps to
preserve rights against any Person with respect to any Collateral.

          8.   Events of Default.  There shall be an Event of Default hereunder
               -----------------
upon the occurrence and during the continuance of an Event of Default under the
Loan Agreement.

                                      -7-
<PAGE>

          9.   Rights Upon Event of Default.  Upon the occurrence and during the
               ----------------------------
continuance of an Event of Default, Secured Party shall have, in any
jurisdiction where enforcement hereof is sought, in addition to all other rights
and remedies that Secured Party may have under applicable Law or in equity or
under this Agreement (including, without limitation, all rights set forth in
                      ---------
Section 6 hereof) or under any other Loan Document, all rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any jurisdiction,
and, in addition, the following rights and remedies, all of which may be
exercised with or without notice to Grantor and without affecting the
Obligations of Grantor hereunder or under any other Loan Document, or the
enforceability of the Liens and security interests created hereby: (a) to
foreclose the Liens and security interests created hereunder or under any other
agreement relating to any Collateral by any available judicial procedure or
without judicial process; (b) to enter any premises where any Collateral may be
located for the purpose of securing, protecting, inventorying, appraising,
inspecting, repairing, preserving, storing, preparing, processing, taking
possession of or removing the same; (c) to sell, assign, lease or otherwise
dispose of any Collateral or any part thereof, either at public or private sale
or at any broker's board, in lot or in bulk, for cash, on credit or otherwise,
with or without representations or warranties and upon such terms as shall be
acceptable to Secured Party; (d) to notify obligors on the Collateral that the
Collateral has been assigned to Secured Party and that all payments thereon are
to be made directly and exclusively to Secured Party; (e) to collect by legal
proceedings or otherwise all dividends, distributions, interest, principal or
other sums now or hereafter payable upon or on account of the Collateral; (f) to
cause the Collateral to be registered in the name of Secured Party, as legal
owner; (g) to enter into any extension, reorganization, deposit, merger or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith Secured Party may deposit or surrender
control of the Collateral and/or accept other Property in exchange for the
Collateral; (h) to settle, compromise or release, on terms acceptable to Secured
Party, in whole or in part, any amounts owing on the Collateral and/or any
disputes with respect thereto; (i) to extend the time of payment, make
allowances and adjustments and issue credits in connection with the Collateral
in the name of Secured Party or in the name of Grantor; (j) to enforce payment
and prosecute any action or proceeding with respect to any or all of the
Collateral and take or bring, in the name of Secured Party or in the name of
Grantor, any and all steps, actions, suits or proceedings deemed by Secured
Party necessary or desirable to effect collection of or to realize upon the
Collateral, including any judicial or nonjudicial foreclosure thereof or
            ---------
thereon, and Grantor specifically consents to any nonjudicial foreclosure of any
or all of the Collateral or any other action taken by Secured Party which may
release any obligor from personal liability on any of the Collateral, and
Grantor waives any right not expressly provided for in this Agreement to receive
notice of any public or private judicial or nonjudicial sale or foreclosure of
any security or any of the Collateral; and any money or other property received
by Secured Party in exchange for or on account of the Collateral, whether
representing collections or proceeds of Collateral, and whether resulting from
voluntary payments or foreclosure proceedings or other legal action taken by
Secured Party or Grantor may be applied by Secured Party without notice to
Grantor to the Secured Obligations

                                      -8-
<PAGE>

in such order and manner as Secured Party in its sole discretion shall
determine; (k) to insure, process and preserve the Collateral; (l) to exercise
all rights, remedies, powers or privileges provided under any of the Loan
Documents; (m) to remove, from any premises where the same may be located, the
Collateral and any and all documents, instruments, files and records, and any
receptacles and cabinets containing the same, relating to the Collateral, and
Secured Party may, at the cost and expense of Grantor, use such of its supplies,
equipment, facilities and space at its places of business as may be necessary or
appropriate to properly administer, process, store, control, prepare for sale or
disposition and/or sell or dispose of the portion of the Collateral owned by
Grantor or to properly administer and control the handling of collections and
realizations thereon, and Secured Party shall be deemed to have a rent-free
tenancy of premises of Grantor for such purposes and for such periods of time as
reasonably required by Secured Party; (n) to receive, open and dispose of all
mail addressed to Grantor and notify postal authorities to change the address
for delivery thereof to such address as Secured Party may designate; provided
                                                                     --------
that Secured Party agrees that it will promptly deliver over to Grantor such
opened mail as does not relate to the Collateral; and (o) to exercise all other
rights, powers, privileges and remedies of an owner of the Collateral; all at
Secured Party's sole option and as Secured Party in its sole discretion may deem
advisable. Grantor will, at Secured Party's request, assemble the Collateral and
make it available to Secured Party at places which Secured Party may designate,
whether at the premises of Grantor or elsewhere, and will make available to
Secured Party, free of cost, all premises, equipment and facilities of Grantor
for the purpose of Secured Party's taking possession of the Collateral or
storing same or removing or putting the Collateral in salable form or selling or
disposing of same.

          Upon the occurrence and during the continuance of an Event of Default,
Secured Party also shall have the right, without notice or demand, either in
person, by agent or by a receiver to be appointed by a court (and Grantor hereby
expressly consents upon the occurrence and during the continuance of an Event of
Default to the appointment of such a receiver), and without regard to the
adequacy of any security for the Secured Obligations, to take possession of the
Collateral or any part thereof and to collect and receive the rents, issues,
profits, income and proceeds thereof.  Taking possession of the Collateral shall
not cure or waive any Event of Default or notice thereof or invalidate any act
done pursuant to such notice.  The rights, remedies and powers of any receiver
appointed by a court shall be as ordered by said court.

          Any public or private sale or other disposition of the Collateral may
be held at any office of Secured Party, or at Grantor's places of business, or
at any other place permitted by applicable Law, and without the necessity of the
Collateral's being within the view of prospective purchasers.  The Secured Party
may also request, in connection therewith, the Nevada Gaming Commission to
petition a District Court of the State of Nevada for the appointment of a
supervisor to conduct the normal gaming activities on the premises following the
appointment of a receiver.  Secured Party may direct the order and manner of

                                      -9-
<PAGE>

sale of the Collateral, or portions thereof, as it in its sole and absolute
discretion may determine, and Grantor expressly waives any right to direct the
order and manner of sale of any Collateral. Secured Party or any Person on
Secured Party's behalf may bid and purchase at any such sale or other
disposition.  The net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of the Collateral shall be applied, first, to
the expenses (including reasonable attorneys' fees and disbursements) of
retaking, holding, storing, processing and preparing for sale or lease, selling,
leasing, collecting, liquidating and the like, and then to the satisfaction of
the Secured Obligations in such order as shall be determined by Secured Party in
its sole and absolute discretion.  Grantor and any other Person then obligated
therefor shall pay to Secured Party on demand any deficiency with regard thereto
which may remain after such sale, disposition, collection or liquidation of the
Collateral.  Any surplus held by the Security Party and remaining after payment
in full of all the Secured Obligations shall immediately be reassigned and
redelivered to Grantor, or to the person or persons otherwise legally entitled
thereto.

          Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
will send or otherwise make available to Grantor reasonable notice of the time
and place of any public sale thereof or of the time on or after which any
private sale thereof is to be made.  The requirement of sending reasonable
notice conclusively shall be met if such notice is mailed, first class mail,
postage prepaid, to Grantor at its address set forth in the Loan Agreement, or
delivered or otherwise sent to Grantor, at least ten (10) days before the date
of the sale.  Grantor expressly waives any right to receive notice of any public
or private sale of any Collateral or other security for the Secured Obligations
except as expressly provided for in this paragraph.
------

          With respect to any Collateral consisting of securities, partnership
interests, joint venture interests, Investments or the like, and whether or not
any of such Collateral has been effectively registered under the Securities Act
of 1933, as amended, or other applicable Laws, Secured Party may, in its sole
and absolute discretion, sell all or any part of such Collateral at private sale
in such manner and under such circumstances as provided in the Uniform
Commercial Code of California.  Without limiting the foregoing, Secured Party
may (i) approach and negotiate with a limited number of potential purchasers,
and (ii) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing such Collateral for their own
account for investment and not with a view to the distribution or resale
thereof.  In the event that any such Collateral is sold at private sale, Grantor
agrees that if such Collateral is sold for a price which Secured Party in good
faith believes to be reasonable under the circumstances then existing, then (a)
the sale shall be deemed to be commercially reasonable in all respects, (b)
Grantor shall not be entitled to a credit against the Secured Obligations in an
amount in excess of the purchase price, and (c) Secured Party shall not incur
any liability or responsibility to Grantor in connection therewith,
notwithstanding the possibility that a substantially higher price might have
been realized at a public sale.  Grantor recognizes that a ready market may not
exist for such Collateral if it is not regularly traded on a recognized
securities exchange, and that a sale by

                                     -10-
<PAGE>

Secured Party of any such Collateral for an amount substantially less than a pro
rata share of the fair market value of the issuer's assets minus liabilities may
be commercially reasonable in view of the difficulties that may be encountered
in attempting to sell a large amount of such Collateral or Collateral that is
privately traded.

          Upon consummation of any sale of Collateral hereunder, Secured Party
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold.  Each such purchaser at any such sale
shall hold the Collateral so sold absolutely free from any claim or right upon
the part of Grantor or any other Person, and Grantor hereby waives (to the
extent permitted by applicable Laws) all rights of redemption, stay and
appraisal which it now has or may at any time in the future have under any rule
of Law or statute now existing or hereafter enacted.  If the sale of all or any
part of the Collateral is made on credit or for future delivery, Secured Party
shall not be required to apply any portion of the sale price to the Secured
Obligations until such amount actually is received by Secured Party, and any
Collateral so sold may be retained by Secured Party until the sale price is paid
in full by the purchaser or purchasers thereof.  Secured Party shall not incur
any liability in case any such purchaser or purchasers shall fail to pay for the
Collateral so sold, and, in case of any such failure, the Collateral may be sold
again.

          10.  Voting Rights; Dividends; etc.  With respect to any Collateral
               -----------------------------
consisting of securities, partnership interests, joint venture interests,
Investments or the like (referred to collectively and individually in this
Section 10 and in Section 11 as the "Investment Collateral"), so long as no
                                     ---------------------
Event of Default occurs and remains continuing:

          10.1 Voting Rights.  Grantor shall be entitled to exercise any
               -------------
and all voting and other consensual rights pertaining to the Investment
Collateral, or any part thereof, for any purpose not inconsistent with the terms
of this Agreement, the Loan Agreement, or the other Loan Documents; provided,
                                                                    --------
however, that Grantor shall not exercise, or shall refrain from exercising, any
-------
such right if it would result in a Default.

          10.2 Dividend and Distribution Rights.  Except as otherwise
               --------------------------------
provided in any Loan Document, Grantor shall be entitled to receive and to
retain and use any and all dividends or distributions paid in respect of the
Investment Collateral; provided, however, that (subject to any inconsistent
                       --------  -------
prior rights of the Trustee under the 13% Indenture) any and all such dividends
or distributions received in the form of capital stock, certificated securities,
warrants, options or rights to acquire capital stock or certificated securities
forthwith shall be, and the certificates representing such capital stock or
certificated securities, if any, forthwith shall be delivered to Secured Party
to hold as pledged Collateral and shall, if received by Grantor, be received in
trust for the benefit of Secured Party, be segregated from the other Property of
Grantor, and forthwith be delivered to Secured Party as pledged Collateral in
the same form as so received (with any necessary endorsements).

                                       11
<PAGE>

          11.  Rights During Event of Default.  With respect to any Investment
               ------------------------------
Collateral, so long as an Event of Default has occurred and is continuing:

          11.1 Voting, Dividend, and Distribution Rights.  At the option of
               -----------------------------------------
Secured Party, all rights of Grantor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section 10.1
above, and to receive the dividends and distributions which it would otherwise
be authorized to receive and retain pursuant to Section 10.2 above, shall cease,
and all such rights thereupon shall become vested in Secured Party which
thereupon shall have the sole right to exercise such voting and other consensual
rights and to receive and to hold as pledged Collateral such dividends and
distributions.

          11.2 Dividends and Distributions Held in Trust.  All dividends
               -----------------------------------------
and other distributions which are received by Grantor contrary to the provisions
of this Agreement shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Grantor, and (subject to any
inconsistent prior rights of the Trustee under the 13% Indenture) forthwith
shall be paid over to Secured Party as pledged Collateral in the same form as so
received (with any necessary endorsements).

          11.3 Irrevocable Proxy.  Other than any such proxies granted to
               -----------------
the Trustee under the 13% Indenture, Grantor does hereby revoke all previous
proxies with regard to the Investment Collateral and appoints Secured Party
(subject to any inconsistent prior rights of the Trustee under the 13%
Indenture) as its proxyholder, with power when an Event of Default exists to
attend and vote at any and all meetings of the shareholders or other equity
holders of the Persons that issued the Investment Collateral and any
adjournments thereof, held on or after the date of the giving of this proxy and
prior to the termination of this proxy, and to execute any and all written
consents of shareholders or equity holders of such Persons executed on or after
the date of the giving of this proxy and prior to the termination of this proxy,
with the same effect as if Grantor had personally attended the meetings or had
personally voted its shares or other interests or had personally signed the
written consents; provided, however, that the proxyholder shall have rights
                  --------  -------
hereunder only upon the occurrence and during the continuance of an Event of
Default.  Grantor hereby authorizes Secured Party to substitute another Person
as the proxyholder and, upon the occurrence and during the continuance of any
Event of Default, hereby authorizes the proxyholder to file this proxy and any
substitution instrument with the secretary or other appropriate official of the
appropriate Person.  This proxy is coupled with an interest and is irrevocable
until such time as all Secured Obligations have been paid and performed in full.

          12.  Attorney-in-Fact.  Grantor hereby irrevocably nominates and
               ----------------
appoints Secured Party as its attorney-in-fact for the following purposes:  (a)
upon the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of

                                       12
<PAGE>

Default, to do any and every act which Grantor is obligated to do under this
Agreement, at the expense of Grantor and without any obligation to do so; (c) to
prepare, sign, file and/or record, for Grantor, in the name of Grantor, any
financing statement, application for registration, or like paper, and to take
any other action deemed by Secured Party necessary or desirable in order to
perfect or maintain perfected the security interests granted hereby; and (d)
upon the occurrence and during the continuance of an Event of Default, to
execute any and all papers and instruments and do all other things necessary or
desirable to preserve and protect the Collateral and to protect Secured Party's
security interests therein; provided, however, that Secured Party shall be under
                            --------  -------
no obligation whatsoever to take any of the foregoing actions, and, absent bad
faith or actual malice, Secured Party shall have no liability or responsibility
for any act taken or omission with respect thereto.

          13.  Costs and Expenses.  Grantor agrees to pay to Secured Party all
               ------------------
costs and expenses (including, without limitation, reasonable attorneys' fees
                    ---------
and disbursements) incurred by Secured Party in the enforcement or attempted
enforcement of this Agreement, whether or not an action is filed in connection
therewith, and in connection with any waiver or amendment of any term or
provision hereof.  All advances, charges, costs and expenses, including
                                                              ---------
reasonable attorneys' fees and disbursements, incurred or paid by Secured Party
in exercising any right, privilege, power or remedy conferred by this Agreement
(including, without limitation, the right to perform any Secured Obligation of
 ---------
Grantor under the Loan Documents), or in the enforcement or attempted
enforcement thereof, shall be secured hereby and shall become a part of the
Secured Obligations and shall be paid to Secured Party by Grantor, immediately
upon demand, together with interest from the date which is two Business Days
following such demand thereon at the rate(s) provided for under the Loan
Agreement.

          14.  Statute of Limitations and Other Laws.  Until the Secured
               -------------------------------------
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to Secured Party
hereunder shall continue to exist and may be exercised by Secured Party at any
time and from time to time irrespective of the fact that any of the Secured
Obligations may have become barred by any statute of limitations.  Grantor
expressly waives the benefit of any and all statutes of limitation, and any and
all Laws providing for exemption of property from execution or for valuation and
appraisal upon foreclosure, to the maximum extent permitted by applicable Law.

          15.  Other Agreements.  Nothing herein shall in any way modify or
               ----------------
limit the effect of terms or conditions set forth in any other security or other
agreement executed by Grantor or in connection with the Secured Obligations, but
each and every term and condition hereof shall be in addition thereto.  All
provisions contained in the Loan Agreement or any other Loan Document that apply
to Loan Documents generally are fully applicable to this Agreement and are
incorporated herein by this reference.

                                       13
<PAGE>

          16.  Continuing Effect.  This Agreement shall remain in full force and
               -----------------
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable Law, rescinded or reduced in amount, or must otherwise be
restored or returned by the Administrative Agent or any Lender, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though such
payment or performance had not been made.  In the event that any payment or any
part thereof is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

          17.  Release of Grantor.  This Agreement and all Secured Obligations
               ------------------
of Grantor hereunder shall be released when all Secured Obligations have been
paid in full in cash or otherwise performed in full and when no portion of the
Commitment remains outstanding. Upon such release of Grantor's Secured
Obligations hereunder, Secured Party shall return and reassign any pledged
Collateral to Grantor, or to the Person or Persons legally entitled thereto, and
shall endorse, execute, deliver, record and file all instruments and documents,
and do all other acts and things, reasonably required for the return of the
Collateral to Grantor, or to the Person or Persons legally entitled thereto, and
to evidence or document the release of Secured Party's interests arising under
this Agreement, all as reasonably requested by, and at the sole expense of,
Grantor. The Secured Party shall take all action as reasonably required to
evidence or document the release of the Secured Party's interests to any
Collateral which the Grantor sells, transfers or otherwise disposes of as
permitted under the terms of the Loan Agreement, at the sole expense of Grantor.

          18.  Counterparts.  This Agreement may be executed in one or more
               ------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same agreement.

          19.  Additional Powers and Authorization.  The Administrative Agent
               -----------------------------------
has been appointed as the Administrative Agent hereunder pursuant to the Loan
Agreement and shall be entitled to the benefits of the Loan Agreement and the
other Loan Documents. Notwithstanding anything contained herein to the contrary,
the Administrative Agent may employ agents, trustees, or attorneys-in-fact and
may vest any of them with any Property (including, without limitation, any
Collateral pledged hereunder), title, right or power deemed necessary for the
purposes of such appointment.

          20.  GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
               -------------
ACCORDANCE WITH AND GOVERNED BY

                                       14
<PAGE>

THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF.

          21.  WAIVER OF JURY TRIAL.  GRANTOR AND SECURED PARTY EXPRESSLY WAIVE
               --------------------
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE LOAN
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE.  GRANTOR AND SECURED PARTY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT

                                       15
<PAGE>

THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, THE LOAN
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.  THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS.  ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

          IN WITNESS WHEREOF, Grantor has executed this Agreement by its duly
authorized officer as of the date first written above.


                                         "Grantor"

                                         COAST HOTELS AND CASINOS, INC.,
                                         a Nevada corporation



                                         By:______________________________
                                         Gage Parrish, Vice President
                                         and Chief Financial Officer

                                       16
<PAGE>

ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:

"Secured Party"

BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent, and
for and on behalf of the Lenders


By:_____________________________
Janice Hammond, Vice President

                                       17