-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SDxXVh19zUFZvaiisX5ql0Fd2VOERvAPVg6Y6fn3Dn7yondeFvUFjZJYvEyBeci7 EJVSDUdelzGhlo4B7ZEdJQ== 0000912057-01-506540.txt : 20010409 0000912057-01-506540.hdr.sgml : 20010409 ACCESSION NUMBER: 0000912057-01-506540 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALADDIN GAMING ENTERPRISES INC CENTRAL INDEX KEY: 0001059128 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 880379695 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49715 FILM NUMBER: 1592105 BUSINESS ADDRESS: STREET 1: 831 PILOT ROAD CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7027367114 MAIL ADDRESS: STREET 1: 831 PILOT ROAD CITY: LAS VEGAS STATE: NV ZIP: 89119 10-K 1 a2041833z10-k.txt 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE) /X/ Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000 / / Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 333-49715
ALADDIN GAMING ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Nevada 88-0379695 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3667 Las Vegas Boulevard South, Las Vegas, 89109 Nevada (Address of principal executive offices) (Zip Code)
(702) 785-5555 (Registrant's telephone number, including area code) Securities registered pursuant to section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / Not applicable. Indicate the number of shares outstanding of each of the registrants' classes of common stock as of March 16, 2001: Class A Common Stock, no par value, 2,000,000 shares authorized, 1,107,500 issued and Class B Common Stock, non-voting, no par value, 8,000,000 shares authorized, 2,215,000 issued. DOCUMENTS INCORPORATED BY REFERENCE Not applicable. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS GENERAL Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Gaming Enterprises"), has no other business or activity other than its investment in Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Gaming Enterprises' sole material asset is 25% of the common membership interests of Gaming Holdings ("Holdings Common Membership Interests"). Gaming Holdings is a holding company, the material assets of which are 100% of the outstanding common membership interests and 100% of the outstanding Series A preferred interests of Aladdin Gaming, LLC ("Gaming"). Aladdin Capital Corp. ("Capital") is a wholly-owned subsidiary of Gaming Holdings and was incorporated solely for the purpose of serving as a co-issuer of the Gaming Holdings 13 1/2% Senior Discount Notes ("Notes"). Capital does not have any material operations or assets and has no revenues. Aladdin Holdings, LLC, a Delaware limited liability company ("AHL"), indirectly holds a majority interest in Gaming Holdings. The members of AHL are the Trust Under Article Sixth u/w/o Sigmund Sommer ("Sommer Trust"), which holds a 95% interest in AHL, and GW Vegas, LLC, a Nevada limited liability company, a wholly owned subsidiary of the Trust Company of the West, which holds a 5% interest in AHL. As of December 31, 2000, Holdings Common Membership Interests were held 39.953125% by London Clubs Nevada Inc ("LCNI"), a subsidiary of London Clubs International plc ("London Clubs"); 31.859375% by Sommer Enterprises, LLC, a Nevada limited liability company ("Sommer Enterprises"), which is a subsidiary of AHL; 25.0% by Gaming Enterprises, which is a subsidiary of Sommer Enterprises; 3.0% by GAI, LLC, a Nevada limited liability company, which is owned by Richard J. Goeglein, the President and Chief Executive Officer of Gaming Holdings; and 0.1875% by Jose Rueda, a former executive of Gaming Holdings. Except where the context otherwise requires, Gaming Holdings and its subsidiaries are collectively referred to herein as "Company." Much of the following information relates to Gaming Holdings and its subsidiaries and is included due to the relative significance of Gaming Holdings to Gaming Enterprises. NARRATIVE DESCRIPTION OF BUSINESS ALADDIN. The operations of the Company have been primarily limited to the design, development, construction and, as of August 18, 2000, the operation of a new Aladdin Resort & Casino ("Aladdin"). The Aladdin is the centerpiece of an approximately 35-acre world-class resort, casino and entertainment complex ("Complex") located at the center of Las Vegas Boulevard ("Las Vegas Strip"). The Aladdin includes a hotel which has 2,567 rooms ("Hotel"), comprised of deluxe guestrooms, resort guestrooms, suites, luxury rooms and mega suites. In addition, the Hotel provides an outdoor swimming pool complex and will contain an approximately 32,000 square foot spa, which is currently being constructed, and will be operated, by a subsidiary of Steiner Leisure Limited pursuant to a fifteen year lease with an option to renew for an additional five years. Construction of the spa is expected to be completed in the Fourth Quarter, 2001. The Aladdin has six restaurants, one of which is leased to an unrelated third party, which together offer a wide range of dining selections. Food service facilities at the Aladdin include a buffet, P.F. Chang's, a contemporary Asian restaurant, and a 24-hour casual dining facility. Additionally, on the main casino floor, Aladdin operates a Starbucks Coffee franchise, subject to a license agreement with Starbucks Corporation. The Aladdin's mezzanine level offers views of the main casino floor and the Las Vegas Strip 1 and features an Italian restaurant, a steakhouse, and a fine dining restaurant located within The London Club at Aladdin. The Aladdin's casino ("Casino") main gaming area contains approximately 2,300 slot machines, 68 table games, keno and a race and sports book facility. Included on a separate level of the Casino is an approximately 15,000 square foot luxurious gaming section ("The London Club at Aladdin") that contains approximately 30 high denomination table games and approximately 85 high denomination slot machines. See "London Clubs." The Aladdin also includes on the mezzanine level of the main building over 90,000 square feet of convention, conference, trade show and reception facilities, including a 37,000-square foot main ballroom, 12,000 square feet of pre-function space and 41,000 square feet of breakout space in 15 separate rooms. THE COMPLEX. The Complex, which has been designed to promote casino traffic and to provide customers with a wide variety of entertainment alternatives, is comprised of: (i) the Aladdin; (ii) a themed entertainment shopping mall with approximately 496,000 square feet of retail space ("Desert Passage"); (iii) the renovated 7,000 seat Theater for the Performing Arts ("Theater"); and (iv) an approximately 4,800 space car parking facility ("Carpark" and, together with the Desert Passage, hereinafter, "Mall Project"). The Mall Project is separately owned in part by an affiliate of the Sommer Trust. The Aladdin has space designated on the mezzanine level for a 1,200-seat production showroom. The Company has been in negotiations with a third party to lease the space, build out the theater and operate and manage the showroom and an associated nightclub. There can be no assurances that the Company will reach a definitive agreement for the development and operation of such space. The Company has evaluated its options in connection with an approximately 5-acre parcel of land, which the Company owns adjacent to the Complex, which options included: (a) seeking a joint venture partner and financing for a second hotel casino; or (b) selling the parcel to a third party. On March 13, 2001, Gaming entered into a non-binding agreement in principle to sell the parcel to an unrelated third party, which sale proceeds would be used to reduce Gaming's indebtedness under the Bank Credit Facility. There can be no assurance that Gaming and the third party can reach a definitive purchase and sale agreement for the parcel. The theming of the Aladdin and the Desert Passage has been designed to create an environment based upon the Legends of the 1001 Arabian Nights, including the tales of Aladdin, Ali Baba and the 40 Thieves, Sinbad and other legendary stories woven around ancient wealth and wonders. The Aladdin theme is crafted through the interior and exterior architecture of the Complex. The Aladdin's exterior is a highly articulated streetscape and exterior facade that evokes the Legends of the 1001 Arabian Nights. The interior of the Aladdin utilizes rich colors, textures and design, enhancing the fantasy of a mystical, romantic time and place. A significant feature of the Desert Passage is the themed area known as the "Lost City," which is a re-creation of an ancient mystical mountain city and houses a variety of specialty shops and restaurants underneath a 85-foot high ceiling. DESERT PASSAGE. Aladdin Bazaar Holdings, LLC ("Bazaar Holdings"), which is owned 99% by an affiliate of the Sommer Trust, and TrizecHahn Bazaar Centers, Inc. ("THB"), a subsidiary of TrizecHahn Centers, Inc. ("TrizecHahn"), have entered into a joint venture agreement and formed Aladdin Bazaar, LLC ("Bazaar") to develop, construct, own and operate the Desert Passage. The Desert Passage contains approximately 496,000 square feet of retail space, including an array of high-fashion specialty stores, exotic boutiques, theme restaurants, cafes, and other entertainment offerings. The Desert Passage is directly connected to the Casino and began operations on August 17, 2000. LONDON CLUBS. London Clubs, a multi-national casino operator, owns through LCNI approximately 40% of the outstanding Holdings Common Membership Interests, and various preferred interests of Gaming Holdings. The Sommer Trust and its affiliates agreed that they will cause Sommer Enterprises and 2 Gaming Enterprises to vote their Holdings Common Membership Interests so that (taking into account Holdings Common Membership Interests held by London Clubs or its affiliates) London Clubs controls fifty percent of the voting power of Gaming Holdings. London Clubs has extensive experience in the international marketing of casinos to premium players and maintains a strong presence in the United Kingdom and the Middle East. In addition to its equity ownership of Gaming Holdings, London Clubs, through its subsidiary LCNI, acts as marketing consultant to The London Club at Aladdin, the luxurious 30,000 square foot area, which includes 15,000 square feet of gaming area, located on the mezzanine level of the Casino and caters to the needs of the premium-play guest. The Company believes that The London Club at Aladdin is the first of its kind in the United States which is based on the European concept of luxurious, full service gaming areas for premium players. The London Club at Aladdin Hotel guests are escorted through a private entrance to a dedicated registration lobby and then taken via a private elevator to the Hotel's premium suites. Once there, the 24-hour butler and concierge cater to The London Club at Aladdin guest. In the elegantly appointed The London Club at Aladdin, the customer may dine in the 100-seat exclusive restaurant, which offers fine cuisine from around the world. London Clubs operates six casinos in London, one near Johannesburg, South Africa, two in Egypt and one in Lebanon. In addition, London Clubs has two new casinos in the course of development in the United Kingdom and a further casino development in Freeport, Grand Bahamas. Each of London Clubs' casinos offers its own individual style, but with comparable internationally recognized standards of service. London Clubs has established substantial goodwill and customer loyalty from high-end customers in the United Kingdom, Europe, Asia and the Middle East. In addition, London Clubs is an experienced service provider to high-end gaming customers and brings a wealth of knowledge to the Aladdin in building and maintaining relationships with and customer loyalty from such clientele. London Clubs also provides the Company with superb promotional opportunities, not only by word of mouth through its network of contacts, but also through international sporting sponsorships and its international print publications, which are distributed to members worldwide utilizing London Clubs' substantial database of premium clientele. STRATEGY As a result of the Aladdin's initial financial performance from its opening and during the Fourth Quarter of 2000, which performance did not achieve the Company's expectations, the Company undertook a review of the operating strategy for its slot, hotel and marketing efforts. The Casino's slot operations were restructured by improving the slot product quality, reconfiguring of the slot floor layout, developing a "mid-limit" slot room and lounge and aggressively competing in the video poker market. These efforts were made all with a goal to compete aggressively in the Las Vegas Strip slot market as well as to maximize slot revenue. The Company further examined its Hotel customer mix from the opening of the Aladdin and determined that, on a annual basis, it would target the Hotel's occupancy with 25% casino customers, 25% convention groups, 25% leisure travelers and 25% "free and independent" travelers. The Company believes that such hotel customer mix should maximize utilization of the Hotel consistent with the goal of maximization of profitability. Lastly, the Company has reviewed its marketing efforts and has recently hired several new executives to focus the Aladdin's advertising/marketing generally and the Casino marketing in particular. For the Aladdin, the strategy is to market the Aladdin as a hip, fun, new, must-see property and to bolster the Aladdin's presence for those visitors already in Las Vegas. The Casino marketing efforts will center around expansion of the casino customer data base, the utilization of such data base and the development of casino events tailored to increase Casino customer visitations. 3 CONSTRUCTION BUDGET AND SCHEDULE The development of the Aladdin commenced during the first quarter of 1998 and the Aladdin opened to the public on August 18, 2000. The Company is currently auditing the various construction contracts and finalizing payments to the contractors. The total construction and pre-opening budget for the Aladdin was $1.02 billion. As of March 15, 2001, there were approximately 475 mechanic's liens recorded against the Complex totaling approximately $68.8 million of which amount approximately 400 mechanic's liens totaling approximately $35.8 million related to the Desert Passage. Pursuant to the agreements between Gaming and Bazaar, Bazaar indemnifies Gaming for such liens and has an obligation to cause such liens to be removed or released and discharged. The Company has put Bazaar on notice of these obligations. As to the liens related to the Aladdin, the Company (from the remaining proceeds of the Bank Credit Facility) and Fluor Daniel, the Design/Builder of the Aladdin, are finalizing payments to those contractors to which there is no dispute on the amount owed, which will result in a material reduction of the Aladdin-related liens. As to the Aladdin-related liens that will remain after such payments, the Company believes that these liens and claims are, in general, disputed by Gaming, unsubstantiated, without merit, overstated and/or duplicative. COMPETITION The hotel casino industry is highly competitive. Hotel casinos located on or near the Las Vegas Strip ("Strip Hotels") compete with other Strip Hotels and with other major hotel casinos in downtown Las Vegas. Aladdin competes with a large number of hotel casinos in the Las Vegas area, with many of the competitors being subsidiaries or divisions of large public companies that may have greater financial or other resources than the Company; however, no major expansions on the Las Vegas Strip have commenced or are expected to commence within the next twelve months. Competitors of the Aladdin include themed resorts on the Las Vegas Strip such as Bellagio, Mandalay Bay Resort, Mirage, Caesars Palace, Treasure Island Hotel and Casino, Bally's Casino Resort, Monte Carlo Resort & Casino, Luxor Hotel and Casino, Paris Casino Resort and Venetian Hotel Casino. Several other Las Vegas resort casinos have announced future expansions or new hotel casinos. The hotel casino operations of the Company also compete, to some extent, with other hotel casino facilities in Nevada, Atlantic City and worldwide and with the state lotteries. In addition, certain states have recently legalized, and others may or are likely to legalize, casino gaming in specific areas. The passage of the Indian Gaming Regulatory Act in 1988 has led to increases in American Indian gaming operations. The Company expects many competitors to enter such new jurisdictions that authorize gaming. Some of these competitors may have greater financial and other resources than the Company. The Company believes that the legalization of large-scale land-based casino gaming in or near certain major metropolitan areas, particularly in California, from which the Company attracts customers, could have an adverse effect on the Las Vegas market. Such proliferation of gaming activities could significantly and adversely affect the business of the Company. The Desert Passage competes with retail malls in or near Las Vegas, including the Fashion Show Mall, the Forum Shops at Caesars Palace, the Canal Shoppes at the Venetian Hotel Casino and retailers in theme-oriented resorts, all of which may attract consumers away from the Desert Passage and the Complex. EMPLOYEES As of March 12, 2001, the Company had approximately 3,100 full-time equivalent employees. 4 SERVICE MARKS The Company owns four federally registered trademarks utilizing "Aladdin" for use in connection with casinos and casino entertainment services and hotel and restaurant services (collectively, "Marks") and has various other trademark applications pending. The Company has filed the appropriate documentation with the United States Patent and Trademark Office to ensure the validity of its Marks through the period of time the Aladdin is under construction. A lien on the Marks was granted to the Bank Lenders on February 26, 1998. REGULATION AND LICENSING The ownership and operation of casino gaming facilities in the state of Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, "Nevada Act"); and (ii) various local regulations (collectively, "Gaming Approvals"). The operation of the Casino by the Company are subject to the licensing and regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada Board"), and the Clark County Liquor and Gaming Licensing Board ("CCLGLB"). The Nevada Commission, the Nevada Board, and the CCLGLB are collectively referred to as the "Nevada Gaming Authorities." The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Any change in such laws, regulations and procedures could have a material adverse effect on the proposed gaming operations of the Aladdin and the financial condition and results of operations of Aladdin Gaming, LLC, which is defined for this section only as "Company." As operator and manager of the Aladdin, the Company conducts nonrestricted gaming operations at the Casino and is licensed by the Nevada Gaming Authorities. A nonrestricted gaming license permits the holder to operate sixteen or more slot machines, or any number of slot machines with at least one table game. The gaming license requires the periodic payment of fees and is not be transferable. No person is able to become a member of, or receive any percentage of the profits of, the Company without first obtaining Gaming Approvals. In connection with the registration and licensing of Gaming Holdings as a holding company and a member, each direct and indirect owner of Gaming Holdings, including, but not limited to, Gaming Enterprises, London Clubs, LCNI, London Clubs Holdings, Ltd. (a wholly-owned subsidiary of London Clubs and the holding company for LCNI), AHL, the Sommer Trust, Sommer Enterprises, GAI and their respective owners (collectively, "Aladdin Owners") obtained from the Nevada Gaming Authorities the applicable Gaming Approvals. Capital is subject to being called forward for a finding of suitability as a co-issuer of the Notes in the discretion of the Nevada Gaming Authorities. Gaming Holdings is a "publicly traded corporation" as that term is defined in the Nevada Act. If the Company issues an initial public offering of equity it will also become a "publicly traded corporation" ("IPO Entity") as that term is defined in the Nevada Act. In order for a company that is a publicly traded corporation to receive a gaming license, the Nevada Commission must exempt the company from a regulatory provision in the Nevada Act which makes publicly traded corporations ineligible to apply for or hold a gaming license. However, the Nevada Commission has exempted companies from this provision in the past and has granted gaming licenses to publicly traded corporations. If the Company becomes an IPO Entity, the Company intends to apply for an exemption from this eligibility requirement ("Exemption"). In connection with licensing and receipt of the Exemption, Gaming Holdings, London Clubs, Enterprises and the Company will each also be required to be registered by the Nevada Commission as a publicly traded corporation ("Registered Company"). The following regulatory requirements will be applicable to the Company, Gaming Holdings and the Aladdin owners (collectively, "Aladdin Owners"). 5 As a Registered Company and an entity licensed by the Nevada Gaming Authorities ("Company Licensee"), the Company is required to periodically submit detailed financial information and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a member of, or receive any percentage of profits from, a Company Licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company, Gaming Holdings and the Aladdin Owners to determine whether such individual is suitable or should be licensed as a business associate of a Company Licensee. Officers, managers and certain key employees of the Company and Gaming Holdings must file applications with the Nevada Gaming Authorities and will be required to be licensed or found suitable by the Nevada Gaming Authorities in connection with the Company's application. The Nevada Gaming Authorities may deny an application for licensing or a finding of suitability for any cause 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 entity with whom the applicant is employed or for whom the applicant serves, 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 Company position. If the Nevada Gaming Authorities were to find an officer, manager or key employee of the Company or Gaming Holdings unsuitable for licensing or to continue having a relationship with the Company or Gaming Holdings, the Company or Gaming Holdings, as the case may be, would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company or Gaming Holdings, as the case may be, 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 will be required to be reported to or approved by the Nevada Commission. If it were determined that the Nevada Act was violated by the Company or Gaming Holdings, the Gaming Approvals they hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company, Gaming Holdings 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 Aladdin and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the Aladdin) could be forfeited to the state of Nevada. Limitation, conditioning or suspension of any Gaming Approval or license or the appointment of a supervisor could (and revocation of any Gaming Approval would) materially adversely affect the gaming operations of the Aladdin and the financial position and results of operations of the Company and the Issuers. Any beneficial holder of a Registered Company's voting or non-voting securities (including warrants exercisable into such securities) regardless of the number of shares owned, may be required to file an application, be investigated, and have its suitability as a beneficial holder of the Registered Company's securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the state of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires beneficial ownership of more than 5% of a Registered Company's voting securities (including warrants exercisable into voting securities) to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% 6 of a Registered Company's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of the Registered Company's voting securities (including warrants exercisable into 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 shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Registered Company, and change in the Registered Company's corporate charter, bylaws, management, policies or operations of the Registered Company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders or interest holders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for information purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners. The applicant is required to pay all costs of investigation. Under new provisions of the Nevada Act and under certain circumstances, an "institutional investor" as defined in the Nevada Act, which intends to acquire not more than 15% of any class of nonvoting securities of a privately-held corporation, limited partnership or limited liability company that is also a registered holding or intermediary company or the holder of a gaming license, may apply to the Nevada Commission for a waiver of the usual prior licensing or finding of suitability requirement if such institutional investor holds such nonvoting securities for investment purposes only. An institutional investor shall not be deemed to hold nonvoting securities for investment purposes unless the nonvoting securities were acquired and are held in the ordinary course of business as an institutional investor, do not give the institutional investor management authority, and do not, directly or indirectly, allow the institutional investor to vote for the election or appointment of members of the board of directors, a general partner or manager, cause any change in the articles of organization, operating agreement, other organic document, management, policies or operations, or cause any other action that the Nevada Commission finds to be inconsistent with holding nonvoting securities for investment purposes only. Activities that are not deemed to be inconsistent with holding nonvoting securities for investment purposes only include: (i) nominating any candidate for election or appointment to the entity's board of directors or equivalent in connection with a debt restructuring; (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 the entity's 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 nonvoting 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 of a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder or beneficial owner found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock or other equity securities of a Registered Company beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Registered Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company, 7 the Registered Company: (i) pays that person any dividend, distribution or interest upon voting securities of the Registered Company; (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; (iii) pays remuneration in any form to that person for services rendered or otherwise; or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities including, if necessary, the immediate purchase of said voting securities for cash at fair market value. The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Company (such as the Notes) to file an application, be investigated and be found suitable to own the debt security of a Registered Company. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Company can be sanctioned, including the loss of approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. Gaming Enterprises, the Company and Gaming Holdings may not make a public offering of any securities (including, but not limited to, the Common Stock of Enterprises upon the exercise of the Warrants) without the prior approval of the Nevada Commission if the securities or the 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, 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. In connection with the original registration and licensing of Gaming Holdings and the Company, London Clubs was also registered as a "publicly traded corporation" and became a Registered Company. On March 22, 2001, the Nevada Commission granted London Clubs prior approval to make public offerings for a period of two (2) years, subject to certain conditions (the "Shelf Approval"). However, the Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board. The Shelf Approval does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful. Changes in control of a Registered Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct whereby a person obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Company must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Company. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Nevada Legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Companies that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain 8 circumstances, required from the Nevada Commission before the Registered Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Registered Company's Board of Directors in response to a tender offer made directly to the Registered Company's stockholders or interest holders for the purposes of acquiring the Registered Company. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the state of Nevada and to Clark County, Nevada. 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 will also be paid by the Company where certain entertainment is provided in a cabaret, nightclub, cocktail lounge or casino showroom in connection with admissions and the serving or selling of food, refreshments or merchandise. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation 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 also required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities or enter into associations that are harmful to the state of Nevada or its ability to collect gaming taxes and fees, or employ, contract with or associate with a person in the foreign operation who has been denied a license or a finding of suitability in Nevada on the ground of personal unsuitability. The sale of alcoholic beverages by the Company on the premises of the Aladdin is also subject to licensing, control and regulation by the CCLGLB. All licenses are revocable and are not transferable. The CCLGLB has full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material effect on the financial position and results of operations of the Company and the Issuers. CERTAIN FACTORS In addition to factors discussed elsewhere in this Annual Report on Form 10-K, the following are important factors that could impact the Company and its operations and financial condition. LIQUIDITY AND CAPITAL RESOURCES. The Company estimates that cash on hand and projected internally generated funds will be sufficient to fund the Company's current operations, however, such amounts will not be sufficient to fund all of the Company's principal and interest payments on its debt during 2001. Therefore, the Company will continue to rely on cash equity contributions from the Sommer Trust and London Clubs. There can be no assurances that such cash equity contributions will be made, or if made, will be sufficient to fund all the Company's principal and interest payments on its debt. To the extent that this source of liquidity is insufficient, the Company will have to seek other forms of capital, which may include, incurring additional indebtedness, to the extent permitted under the Company's various credit facilities, sale of an adjacent 5-acre parcel of undeveloped land, reaching an agreement with the Company's creditors reducing the Company's liquidity needs and/or cash equity infusions. However, there can be no assurances that such sources of liquidity will be available to the Company, or if available, will be sufficient to address the Company's liquidity and capital resource needs. 9 FUTURE COMPLIANCE WITH DEBT COVENANTS. Pursuant to Gaming's credit facilities, it must maintain on a quarterly basis certain financial covenants. Absent an improvement in Gaming's operating results or cash equity contributions to Gaming pursuant to the Keep-Well Agreement, Gaming estimates that, based on its results year-to-date, it may not be in compliance with the financial covenant levels contained in Gaming's credit facilities for the quarter ended June 30, 2001. Failure to achieve such financial covenant levels will constitute defaults under the credit facilities. While the Company has commenced discussions with the lenders regarding further revisions to Gaming's financial covenant levels, there can be no assurances that such discussions will result in reducing the financial covenants to achievable levels. LIENS. Currently there are numerous liens filed on the Aladdin parcel, which liens relate to both the construction of the Aladdin and the Desert Passage. The Company and Fluor Daniel, the design/builder of the Aladdin, are currently finalizing payments to those contractors who worked on the Aladdin to which there is no dispute on the amounts owed. With such payments, the Company expects that any remaining liens that are related to the Aladdin are, in general, disputed by Gaming, unsubstantiated, without merit, overstated and/or duplicative. As to the liens on the Desert Passage, the Company has been advised that Bazaar and/or its tenants, as applicable, are having such liens removed, discharged and/or bonded. However, in the interim, such liens remain on Gaming's parcel, which provides certain statutory remedies to the lien holder, including seeking a foreclosure action. COMPETITION. The hotel casino industry is highly competitive and many of the Company's competitors are larger than the Company and have greater resources. Further, as California, especially Southern California, is a major market for the Company's customers, expansion of casino gaming in California will be competitive with the Aladdin and may have an adverse impact on the Company's results. ECONOMIC UNCERTAINTY. With the recent decline in the United States stock market and the slow down in the United States economy, there is increasing concern that, if these trends continue, they will adversely impact consumer spending, especially in the leisure and gaming industry. To the extent that the economy does continue to slow down, the Company's operating results may be adversely effected. The current issues regarding electricity supply and cost thereof, especially in California, may also undermine consumer confidence in spending money on discretionary activities, such as leisure and gaming. To the extent such occur, the Company's operating results may be adversely effected. ITEM 2. PROPERTIES. Gaming Enterprises does not own or lease any property. The Company owns approximately 21.8 acres of land in Las Vegas, Nevada upon which the Aladdin and the Complex's central utility plant are located as well as two adjacent vacant parcels. Of such land, 6.2 acres is subject to a lease to Northwind Aladdin, LLC, an unrelated entity that is the owner and operator of the central utility plant for the Complex. The Company has evaluated its options in connection with an approximately 5-acre parcel of land, which the Company owns adjacent to the Complex, which options included: (a) seeking a joint venture partner and financing for a second hotel casino; or (b) selling the parcel to a third party. On March 13, 2001, Gaming entered into a non-binding agreement in principle to sell the parcel to an unrelated third party, which sale proceeds will be used to reduce Gaming's indebtedness under the Bank Credit Facility. There can be no assurance that Gaming and the third party can reach a definitive purchase and sale agreement for the parcel. ITEM 3. LEGAL PROCEEDINGS. Gaming Enterprises is not currently party to any material pending litigation. In December, 2000, Bazaar initiated an arbitration against Gaming alleging various defaults by Gaming under the respective agreements between the parties and seeking damages in excess of $10 million. Gaming has responded to the allegations and asserted its own claims against Bazaar and seeks 10 damages in an amount to be determined. Gaming will continue to vigorously pursue these matters and believes that the liability, if any, is minimal. There can be no assurance about the outcome of these matters. In December, 2000, Korte-Bellew & Associates, the contractor who renovated the Theater ("KBA"), initiated in Nevada State District Court an action seeking foreclosure on its mechanic's lien and payment of approximately $7.5 million. The District Court action has been stayed pending arbitration as required by the contract between Gaming and KBA. While there can be no assurances, Gaming does not believe that it owes any remaining moneys to KBA and believes that Gaming has further causes of action challenging the validity of KBA's mechanic's lien. Mr. Jack Sommer, the Chairman of the Gaming Holdings Board and the Gaming Board and a trustee of the Sommer Trust, and the other trustees of the Sommer Trust, were named co-defendants in a legal action relating to the then existing Aladdin hotel and casino. The suit was commenced by members of the Aronow family ("Aronow Plaintiffs") in May 1995 in the Supreme Court of the State of New York, County of New York. In their complaint, the Aronow Plaintiffs alleged that Mr. Sommer and the Aronow Plaintiffs were parties to a joint venture to acquire and develop the Aladdin hotel and casino and that Mr. Sommer breached such alleged agreement when the Sommer Trust acquired an interest in the Aladdin hotel and casino in December, 1994. The Aronow Plaintiffs sought (among other remedies) to impress a constructive trust upon the Sommer Trust's interest in the Aladdin hotel and casino, an accounting, compensatory damages of not less than $200 million and punitive damages of not less than $500 million. On January 27, 2000, each of the Aronow Plaintiffs' claims against the trustees was dismissed. On October 17, 2000, the Appellate Division, First Judicial District, affirmed the dismissal of the Aronow Plaintiffs' Complaint. On January 16, 2001, the New York Court of Appeals denied the Aronow Plaintiffs' Motion for Leave to Appeal to the Court of Appeals as against Jack Sommer as Trustee of the Sommer Trust and as against the other Trustees of the Sommer Trust. The Court of Appeals also dismissed the Aronow Plaintiffs' Motion for Leave to Appeal to the Court of Appeals as against Jack Sommer individually on the ground that the order sought to be appealed from did not finally determine an action within the meaning of the New York State constitution. It is not known at this time whether the Aronow Plaintiffs will attempt to reargue, or file a petition for certiorari in the United States Supreme Court, with respect to the Court of Appeals decision. It also is not known at this time whether the Aronow Plaintiffs will at some future date renew their motion for leave to appeal to the Court of Appeals as against Jack Sommer individually. As such, there is no way to evaluate the success of any appeal or motion for reargument. Any adverse decision could have a material and adverse effect on the Company. If the decision of the Appellate Division stands, there can be no liability as a result of the Aronow Plaintiffs' lawsuit. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. 11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Neither the capital stock of Gaming Enterprises nor the membership interests of Gaming Holdings has been registered under the Securities Act of 1933 nor under Section 12 of the Securities Exchange Act of 1934. There is no established trading market for either the capital stock of Gaming Enterprises or the common membership interests of Gaming Holdings. Gaming Enterprises is not aware of any bid quotations for the capital stock of Gaming Enterprises or the common membership interests of Gaming Holdings. See Item 12 regarding the numbers of shareholders for Gaming Enterprises. Since inception, Gaming Enterprises has not paid any dividends on its equity and due to the Company's current long-term debt arrangements restrict, subject to certain exceptions, the payment of dividends on the Company's equity. See Exhibit 10.12 to this Form 10-K for additional information on the covenants, conditions and restrictions on the Company under the Bank Credit Facility. ITEM 6. SELECTED FINANCIAL DATA. The historical selected financial data set forth below should be read in conjunction with "Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and Notes thereto included elsewhere in this Form 10-K. The statement of operations data for the years ended December 31, 2000, 1999 and 1998, and the balance sheet data at December 31, 2000, 1999 and 1998 are derived from and are elsewhere in this Form 10-K. Due to the brief operating history, comparisons between periods may not be relevant and the historical results are not necessarily indicative of the results of operations to be expected in the future.
YEAR ENDED DECEMBER 31, ------------------------------ 2000 1999 1998(1) -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Gross revenues.............................................. None None None Promotional Allowances...................................... None None None Net revenues................................................ None None None Operating expenses.......................................... $ 1 $ 1 $ 3 Operating income (loss)..................................... $ (1) $ (1) $ (3) Interest income (expense), net.............................. None None None Net loss.................................................... $ 8,564 $ 8,487 $10,620 Per Share Data: Loss before extraordinary item.............................. $ 2.58 $ 2.56 $ 3.56 Extraordinary item.......................................... None None None Basic and diluted loss per share............................ $ 2.58 $ 2.56 $ 3.56 Other Data: Capital expenditures........................................ None None None Cash dividends per common membership interest............... None None None
DECEMBER 31, ------------------------------ 2000 1999 1998 -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Total assets................................................ $ 1 $ 8,563 $17,050 Long-term debt (including current maturities)............... None None None Stockholders' equity........................................ $ 1 8,559 17,047
12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the various other reports which have been previously filed with the United States Securities and Exchange Commission ("SEC"), which may be inspected, without charge, at the Public Reference Section of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the SEC internet site address: http://www.sec.gov. DEVELOPMENT ACTIVITIES Gaming Enterprises has no business or activities other than its investment in Gaming Holdings. Until August 18, 2000, the operations of the Company were limited to constructing and developing, and applying for the appropriate gaming licenses for, the Aladdin. RESULTS OF OPERATIONS Enterprises has no business or activities or material assets other than its investment in Gaming Holdings. Until August 18, 2000, the Company was in the development stage and did not have any historical operating income as there was no operating revenues. The Company's operating expenses primarily have consisted of interest, amortization costs, expenses related to the Notes and pre-opening costs. Due to the short operating period, there will not be a comparative discussion of prior periods included in this Form 10-K. Historical results may not be indicative of future operating results. The Company operated the Aladdin 136 days during the calendar year 2000, producing gross revenues of $137.0 million. Casino revenue represented 52% of gross revenue, hotel 27% of gross revenue, food and beverage 18% of gross revenue, and entertainment and other revenue 3% of gross revenue. The net loss for the year was $76.2 million, inclusive of pre-opening expenses totaling $28.9 million. Because Gaming Enterprises' only material asset is its 25% interest in Gaming Holdings, Gaming Enterprises records 25% of Gaming Holdings' losses and preferred dividend in arrears as equity in loss of unconsolidated affiliate. However, Gaming Enterprises has discontinued applying the equity method as the investment in Gaming Holdings has been reduced to zero. Gaming Enterprises will resume applying the equity method after cummulative net income exceeds the unrecognized losses. Gaming Enterprises recorded a net loss of approximately $8.6 million for the year ended December 31, 2000. REVENUES The Casino revenues (inclusive of The London Club at Aladdin) of $70.5 million were derived $33.0 million from slot operations, $36.9 million from table games and $.6 million from other sources of gaming revenue. The London Club at Aladdin produced $21.5 million of Casino revenues, $19.5 million from table games and $2.0 million from slot operations. The overall table games gross win percentage was approximately 21% for the 136 day period while the average daily win per table game was $3,099. The Company expects the normal gross win percentage to be approximately 17.5% for table games. The table games gross win percentage has decreased during the First Quarter 2001 to approximately 14.8%. The average daily net win per slot machine was approximately $92 during the period. The Company experienced hotel occupancy of 86% at an average daily rate of $129 during the 136 day period. The Company did not book any substantial convention groups until October, 2000. In addition, the Aladdin experienced normal issues relating to the initial occupancy of the facilities. These issues were resolved during September, 2000. The Company believes the occupancy and average daily rate were 13 negatively impacted by the lack of free and independent traveler demand and the lack of booking of convention room occupancy during the period. During the First Quarter 2001, the Company completed organizational changes to its marketing and advertising functions. The Company has repositioned its advertising to market the Aladdin as a hip, fun, new, must-see property. With these new advertising and promotional campaigns, reservation call volume increased approximately 37% beginning mid-February, 2001 and Hotel occupancy increased from 78.7% and 90.1% during January and February, 2001, respectively, to approximately 99% during March, 2001. This trend in occupancy is expected to continue into April, 2001, which is estimated to achieve occupancy in excess of 95%. The Company also hired two new Casino marketing executives during March, 2001, who have been focused on slot and table games marketing. Casino marketing efforts have been focused on enhancing the data base, implementing an aggressive direct mail program and increasing the number of special events and promotions. The Company estimates the new programs will begin to improve Casino revenues during the Second Quarter 2001. There can be no assurances that such improvement will be significant or that other negative factors could arise offsetting such improvement. During February, 2001, the Company completed the redesign and layout of the slot gaming floor. The number of slot machines was reduced from 2,800 to approximately 2,350. The slot floor reconfiguration was intended to improve the overall competitiveness of the slot product and enhance traffic flow through the Casino. A "mid-limit" slot room and lounge in the main Casino was completed, as well as enhancement to the slot product in The London Club at Aladdin. The average daily net win per slot machine was $66, $78 and $97 (estimated) for January, February and March 2001, respectively. OTHER FACTORS AFFECTING EARNINGS The Company incurred pre-opening expenses of $28.9 million during the period prior to opening the Aladdin. The Company expenses pre-opening costs as incurred. The Company has written off $2.6 million of project development costs and expenses related to the originally contemplated second hotel casino project that was to be adjacent to the Complex. Such costs and expenses were determined to be related to services that will be of little or no future value. The Company has implemented costs savings and labor efficiency programs throughout all the operations. The full-time equivalent number of employees has decreased from approximately 4,500 at the opening of the Aladdin to approximately 3,100 as of March 12, 2001. There can be no assurances that the measures implemented will significantly improve the Company's results of operations. LIQUIDITY AND CAPITAL RESOURCES In connection with the development of the Aladdin, Gaming entered into a $410 million (which was subsequently reduced to $403.7 million) bank credit facility ("Bank Credit Facility") with various lenders and The Bank of Nova Scotia, as Administrative Agent, and an $80 million furniture, fixture and equipment financing with General Electric Capital Corporation ("FF&E Facility"). From January 1, 2000 to March 30, 2001, the Company received a total of approximately $148.0 million in capital and debt infusions as follows: (a) $81.0 million in payments pursuant to the Bank Completion Guaranty, which was funded by London Clubs during 2000; (b) in July, 2000, the Bank Credit Facility was increased by $50 million, with the addition of a new "Term D Loan," which increased the Bank Credit Facility to $453.7 million, which funds were used for construction and pre-opening expenses; (c) in December, 2000, a $5 million increase was made to the Term A Loan of the Bank Credit Facility, which increased the Bank Credit Facility to $458.7 million, which funds were utilized by Gaming for working capital; (d) in January, 2001, a $5 million advanced payment under the Keep-Well Agreement, which was funded by London Clubs; and (e) on March 30, 2001, the Sommer Trust funded an additional $7 million 14 pursuant to the Keep-Well Agreement to satisfy the Sponsors' obligations under the Keep-Well Agreement for the fiscal period ended December 31, 2000. On March 30, 2001, Gaming and the various lenders under the Bank Credit Facility amended the Bank Credit Facility. This amendment provided: (a) a waiver of Gaming's compliance with the total debt to EBITDA ratio, the interest coverage ratio and the EBITDA covenants required pursuant to the Bank Credit Facility for the fiscal quarters ending on or prior to March 31, 2001; (b) a waiver until August 18, 2001, of the requirement to fund the FF&E reserve, provided that Gaming cannot make certain restricted payments until the FF&E reserve is funded as otherwise required by the Bank Credit Facility; (c) a waiver of the default that otherwise would have occurred as a result of a "going concern" qualification to the Company's auditor's report in respect of the Company's financial statements for the fiscal year ended December 31, 2000; (d) amendments to certain of Gaming's financial covenants. The foregoing is qualified in its entirety by the "Sixth Amendment to Credit Agreement," dated March 30, 2001. There can be no assurances that Gaming can comply with the revised financial covenant levels. Absent an improvement in Gaming's operating results or cash equity contributions to Gaming pursuant to the Keep-Well Agreement, as defined below, Gaming estimates that, based on its results year-to-date, it may not be in compliance with the revised financial covenant levels for the quarter ended June 30, 2001. Corresponding amendments and waivers have been made to the FF&E Facility. London Clubs, the Sommer Trust, and Aladdin Bazaar Holdings, LLC ("Bazaar Holdings"), which is indirectly owned 99% by the Sommer Trust, are guarantors under a completion guaranty ("Bank Completion Guaranty") for the benefit of the lenders under the Bank Credit Facility, under which they have agreed to guarantee, among other things, the completion of the Aladdin. As of March 16, 2001, the Aladdin has not achieved "final completion" within the meaning of the Bank Completion Guaranty, the occurrence of which would cause the Bank Completion Guaranty to terminate. In July, 2000, Jack Sommer, the Company's Chairman of the Board, and his spouse, Laura Sommer, each became a party to the Bank Completion Guaranty. The Bank Completion Guaranty is not subject to any maximum dollar limitations. For payments made pursuant to the Bank Completion Guaranty, Gaming Holdings issues (i) Series A Preferred Shares in exchange for the contribution of such payments and (ii) Series D Preferred Shares representing a profits-only interest in Gaming Holdings. The holders of the Notes are not entitled to the benefit of the Bank Completion Guaranty, however, London Clubs, the Sommer Trust and Bazaar Holdings have entered into a limited completion guaranty for the benefit of the Noteholders ("Noteholder Completion Guaranty") under which they guarantee completion of the Aladdin, subject to certain important exceptions, limitations and qualifications. The Noteholder Completion Guaranty contains certain intercreditor provisions which significantly limit the rights of the Trustee under the Noteholder Completion Guaranty. There can be no assurance that the parties to either the Bank Completion Guaranty or the Noteholder Completion Guaranty will be able to make such payments to the Company if required pursuant to these agreements. AHL, Bazaar Holdings and London Clubs entered into the Keep-Well Agreement ("Keep-Well Agreement") in favor of the lenders under the Bank Credit Facility. The Sommer Trust joined and became a party to the Keep-Well Agreement in July, 2000 (collectively, AHL, Bazaar Holdings, London Clubs and the Sommer Trust, "Sponsors"). The Sponsors and The Bank of Nova Scotia amended the definition of "Keep-Well Termination Date" on March 30, 2001. The Keep-Well Agreement is the joint and several agreement of the Sponsors to make certain quarterly cash equity contributions to Gaming if Gaming fails to comply with the Minimum Fixed Charge Coverage Ratio set forth in the Bank Credit Facility, but in no event shall the aggregate cash equity contributions required to be made in any fiscal year of Gaming exceed $30.0 million. Based on Gaming's EBITDA from August 18, 2000, to December 31, 2000, approximately $12 million was due from the Sponsors under the Keep-Well Agreement ("Fourth Quarter 2000 Keep-Well Payment"). In January, 2001, London Clubs made an advance payment of $5 million against the Fourth Quarter 2000 Keep-Well Payment. The Sommer Trust paid the balance of the Fourth Quarter 2000 Keep-Well Payment on March 30, 2001. There can be no assurances that the Sponsors will, 15 or will be able to, make further cash equity contributions to Gaming if required pursuant to the Keep-Well Agreement. During the twelve months ended December 31, 2000, approximately $360.2 million had been expended primarily on the development of the Aladdin, of which approximately $337.8 million had been expended in construction, furniture, fixtures and equipment, and capitalized interest, approximately $5.7 million in debt issuance and member equity costs, and approximately $17.4 million in pre-opening costs, net interest expense, and other current assets. As of March 22, 2001, the Company had unrestricted funds available of approximately $13.4 million. The estimated principal and interest payments pursuant to the Bank Credit Facility for the next twelve months are as follows:
DUE DATE FORM AMOUNT --------------------- ---- ------ 3/30/01 Principal $ 4.8 million 3/30/01 Interest $ 0.2 million 5/1/01 Interest $11.3 million 6/29/01 Principal $ 4.8 million 6/29/01 Interest $ 0.1 million 8/1/01 Interest $ 9.7 million 9/28/01 Principal $ 5.8 million 9/28/01 Interest $ 0.1 million 11/1/01 Interest $ 9.6 million 12/31/01 Principal $ 5.8 million 12/31/01 Interest $ 0.1 million 2/1/02 Interest $9.5 million ------------- TOTAL ............................. $61.8 million =============
The estimated principal and interest payments pursuant to the FF&E Facility for the next twelve months are as follows:
DUE DATE FORM AMOUNT --------------------- ---- ------ 6/1/01 Principal $ .65 million 6/1/01 Lease Payment $ 3.35 million 6/1/01 Interest $ .47 million 9/3/01 Principal $ .65 million 9/3/01 Lease Payment $ 3.33 million 9/3/01 Interest $ .45 million 12/1/01 Principal $ .70 million 12/1/01 Lease Payment $ 3.32 million 12/1/01 Interest $ .43 million 3/1/02 Principal $ .70 million 3/1/02 Lease Payment $ 3.31 million 3/1/02 Interest $ .41 million -------------- TOTAL .................................. $17.77 million ==============
The Company estimates that cash on hand and projected internally generated funds will be sufficient to fund the Company's current operations; however, such amounts will not be sufficient to fund all the principal and interest payments on the Company's debt during 2001. The Company and the Sponsors are seeking alternatives to improve the Company's current liquidity, which alternatives may include incurring 16 additional indebtedness, to the extent permitted under the Company's various credit facilities, sale of an adjacent 5-acre parcel of undeveloped land, reaching an agreement with the Company's creditors reducing the Company's liquidity needs and/or cash equity infusions. In order for the Company to fund all the principal and interest payments, the Company will continue to rely on payments by the Sponsors pursuant to the Keep-Well Agreement. However, there can be no assurances that the Company or the Sponsors will be able to improve the Company's current liquidity or that the Sponsors will continue to perform pursuant to the Keep-Well Agreement. In the event the Company's liquidity does not improve or that the Sponsors do not perform under the Keep-Well Agreement or that the Company is unable to reach agreements with its creditors reducing the Company's liquidity needs, there would be serious doubt as to whether or not the Company will be able to continue as a going concern. MARKET RISK Beginning July 20, 2000, Gaming has the following interest rate derivative financial instruments in effect: (i) an interest rate collar with an amortizing notional amount of $245.7 million ($237.1 million at December 31, 2000), a maximum and minimum interest rate of 8.00% and 6.25%, respectively, and a maturity date of June 30, 2005, (ii) an interest rate collar with an amortizing notional amount of $159.2 million ($158.4 million at December 31, 2000), a maximum rate of 8.00%, a minimum rate of 6.25% and a maturity date of June 30, 2005; (iii) an interest rate collar with a notional amount of $50 million, a maximum rate of 8.00%, a minimum rate of 6.25%, and a maturity of June 30, 2005. All rates noted above are the three-month LIBOR equivalents only and do not include the impact of the basis point additions to LIBOR that are used in calculating interest expense on Gaming's term loans. The fair market value of Gaming's interest rate derivative financial instruments as provided by the counterparty, is a net payable of approximately $10.7 million at December 31, 2000 which is not included in the Company's consolidated financial statements. The notional amounts do not represent amounts exchanged by the parties, and thus are not a measure of exposure of Gaming. The amounts exchanged are based on the notional amounts and other terms of the swaps. The variable rates are subject to change over time as LIBOR fluctuates. Neither Gaming nor the counterparty, which is a prominent financial institution, is required to collateralize their respective obligations under these swaps. Gaming is exposed to loss if the counterparty defaults. However, the Company considers the risk of non-performance to be minimal as the counterparty is a member of the Bank Credit Facility. Gaming has a credit facility with various financial institutions which consists of four separate term loans. Gaming pays interest on each term loan at LIBOR plus between 150 and 300 basis points. Gaming has entered into the collar instruments discussed above to assist in managing interest variability on its long-term debt. If the notional amounts on the collar differs from the long-term debt balances, Gaming may be exposed to additional interest rate variability. On the aforementioned collar instruments, Gaming will pay the hedge counterparty to the extent that the three-month LIBOR drops below 6.25% and will receive payments from the hedge counterparty to the extent the three-month LIBOR exceeds 8.0% on the then outstanding notional amount of such instruments. CERTAIN FORWARD LOOKING STATEMENTS Certain information included in this Form 10-K 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 statements that are forward-looking 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. Such statements include, without limitation, those relating to the Bank Credit Facility, FF&E Facility, the Keep-Well Agreement and other agreements, plans for future operations, current operations, other business development activities, capital 17 spending, financing sources and the effect of regulation (including gaming and tax regulations) and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to the current development and operations, the Company's liquidity and the extent of the Company's alternatives thereto, the sources and extent of the Sponsors' liquidity and the Sponsors' payments under the Keep-Well Agreements, dependence on existing management, leverage and debt service, domestic or international economic conditions, changes in federal or state tax laws or the administration of such laws, changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions) and retention of licenses and approvals under applicable jurisdictional laws and regulations (including gaming laws and regulations). ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. There is incorporated by reference the information appearing under the caption "Market Risk" in Item 7 of this Form 10-K. 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Report of Independent Public Accountants To the Board of Directors of Aladdin Gaming Enterprises, Inc.: We have audited the accompanying balance sheets of Aladdin Gaming Enterprises, Inc. ("Enterprises") as of December 31, 2000 and 1999, and the related statements of operations, stockholders' equity/(deficit) and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of Enterprises' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatment. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enterprises as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles general accepted in the United States. The accompanying financial statements have been prepared assuming that Enterprises will continue as a going concern. As discussed in Note 2 to the financial statements, Enterprises' sole material asset is its investment in Aladdin Gaming Holdings, LLC, an unconsolidated affiliate, which has disclosed that cash on hand and projected internally generated funds will not be sufficient to fund principal and interest payments in fiscal 2001 on its debt and that it may not be in compliance with certain debt covenants in fiscal 2001 and future periods which raises substantial doubt about Enterprises' ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. ARTHUR ANDERSEN LLP Las Vegas, Nevada April 2, 2001 19 ALADDIN GAMING ENTERPRISES, INC. BALANCE SHEETS DECEMBER 31, 2000 AND 1999 (IN THOUSANDS EXCEPT FOR SHARE DATA)
DECEMBER 31, 2000 DECEMBER 31, 1999 ----------------- ----------------- ASSETS Cash and cash equivalents................................... $ 1 $ 1 Investment in unconsolidated affiliate...................... -- 8,562 -------- -------- $ 1 $ 8,563 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY/(DEFICIT) Payable to related party.................................... $ 6 $ 4 Common Stock................................................ Class A, no par value, 2,000,000 shares authorized, 1,107,500 issued and outstanding as of December 31, 2000 and December 31, 1999 Class B, no par value and non-voting, 8,000,000 shares authorized, 2,215,000 shares issued and outstanding and 2,215,000 shares reserved pursuant to the warrant agreement as of December 31, 2000 and December 31, 1999.................................................... 13,247 13,247 Additional paid-in capital.................................. 14,420 14,420 Accumulated deficit......................................... (27,672) (19,108) -------- -------- $ 1 $ 8,563 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 20 ALADDIN GAMING ENTERPRISES, INC. STATEMENT OF OPERATIONS YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED DECEMBER 31, ------------------------------------ 2000 1999 1998 ---------- ---------- ---------- Other expenses........................................... $ 2 $ 1 $ 3 Equity in loss of unconsolidated affiliate............... 8,562 8,487 10,617 Income tax expense (benefit)............................. -- -- -- ---------- ---------- ---------- Net loss............................................. $ 8,564 $ 8,488 $ 10,620 ========== ========== ========== Basic and diluted loss per share......................... $ 2.58 $ 2.56 $ 3.56 Shares used in per share calculation..................... 3,322,500 3,322,500 2,984,990
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 21 ALADDIN GAMING ENTERPRISES, INC. STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
COMMON STOCK ADDITIONAL ACCUMULATED CLASS A AND B PAID-IN CAPITAL DEFICIT TOTAL ------------- --------------- ----------- -------- BALANCE, JANUARY 1, 1998..................... -- 1 -- 1 Net loss..................................... -- -- (10,620) (10,620) Issuance of Class A common stock, 1,107,499 shares issued, and Class B common stock, 2,215,000 shares issued.................... 13,247 -- -- 13,247 Issuance of Warrants to purchase Class B common stock, 2,215,000 warrants issued.... -- 15,000 -- 15,000 Equity costs from unconsolidated affiliate... -- (581) -- (581) ------- ------- -------- -------- BALANCE, DECEMBER 31, 1998................... 13,247 14,420 (10,620) 17,047 Net loss..................................... -- -- (8,488) (8,488) ------- ------- -------- -------- BALANCE, DECEMBER 31, 1999................... 13,247 14,420 (19,108) 8,559 Net loss..................................... -- -- (8,564) (8,564) ------- ------- -------- -------- BALANCE, DECEMBER 31, 2000................... $13,247 $14,420 $(27,672) $ (5) ======= ======= ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 22 ALADDIN GAMING ENTERPRISES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------ 2000 1999 1998 -------- -------- -------- Cash flows from operating activities: Net loss.................................................. $ (8,564) $(8,488) $(10,620) Loss of unconsolidated affiliate.......................... 8,562 8,487 10,617 Increase in related party payable......................... 2 1 3 -------- ------- -------- Net cash used in operating activities....................... -- -- -- -------- ------- -------- Cash flows used in investing activities: Investment in unconsolidated affiliate.................... -- -- (15,000) -------- ------- -------- Cash flows from financing activities: Proceeds from the issuance of stock....................... -- -- -- Proceeds from the issuance of warrants.................... -- -- 15,000 -------- ------- -------- Net cash provided by financing activities................... -- -- 15,000 -------- ------- -------- Net increase in cash and cash equivalents................... -- -- -- Cash and cash equivalents at beginning of period............ 1 1 1 -------- ------- -------- Cash and cash equivalents at end of period.................. $ 1 $ 1 $ 1 ======== ======= ======== Supplemental disclosures of non-cash investing and financing activities: Stockholders' equity contribution book value Land.................................................... -- -- $ 6,247 Construction in progress................................ -- -- 7,000 Equity costs from unconsolidated affiliate.............. -- -- (581)
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 23 ALADDIN GAMING ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS AND EQUITY METHOD ACCOUNTING Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Gaming Enterprises"), has no other business or activity other than its investment in Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Gaming Enterprises' sole material asset is 25% of the common membership interests of Gaming Holdings ("Holdings Common Membership Interests"). Gaming Holdings is a holding company, the material assets of which are 100% of the outstanding common membership interests and 100% of the outstanding Series A preferred interests of Aladdin Gaming, LLC ("Gaming"). Aladdin Capital Corp. ("Capital") is a wholly-owned subsidiary of Gaming Holdings and was incorporated solely for the purpose of serving as a co-issuer of the Gaming Holdings 13 1/2% Senior Discount Notes ("Notes"). Capital does not have any material operations or assets and has no revenues. Aladdin Holdings, LLC, a Delaware limited liability company ("AHL"), indirectly holds a majority interest in Gaming Holdings. The members of AHL are the Trust Under Article Sixth u/w/o Sigmund Sommer ("Sommer Trust"), which holds a 95% interest in AHL, and GW Vegas, LLC, a Nevada limited liability company, a wholly owned subsidiary of the Trust Company of the West, which holds a 5% interest in AHL. As of December 31, 2000, Holdings Common Membership Interests were held 39.953125% by London Clubs Nevada Inc ("LCNI"), a subsidiary of London Clubs International plc ("London Clubs"); 31.859375% by Sommer Enterprises, LLC, a Nevada limited liability company ("Sommer Enterprises"), which is a subsidiary of AHL; 25.0% by Gaming Enterprises, which is a subsidiary of Sommer Enterprises; 3.0% by GAI, LLC, a Nevada limited liability company, which is owned by Richard J. Goeglein, the President and Chief Executive Officer of Gaming Holdings; and 0.1875% by Jose Rueda, a former executive of Gaming Holdings. Except where the context otherwise requires, Gaming Holdings and its subsidiaries are collectively referred to herein as "Company." Much of the following information relates to Gaming Holdings and its subsidiaries and is included due to the relative significance of Gaming Holdings to Gaming Enterprises. Until August 18, 2000, the operations of the Company had been primarily limited to the design, development and construction of the new Aladdin Resort and Casino ("Aladdin"). The Aladdin, which commenced operations on August 18, 2000, is the centerpiece of an approximately 35-acre world-class resort, casino and entertainment complex ("Complex") located at the center of Las Vegas Boulevard. The Aladdin includes a luxury themed hotel of approximately 2,600 rooms, an approximately 116,000 square foot casino and six restaurants. The Complex is comprised of: (i) the Aladdin; (ii) a themed entertainment shopping mall with approximately 496,000 square feet of retail space ("Desert Passage"); (iii) the newly renovated 7,000 seat Theater of the Performing Arts ("Theater"); and (iv) an approximately 4,800 space car parking facility ("Carpark" and, together with the Desert Passage, hereinafter, "Mall Project"). The Mall Project is separately owned in part by an affiliate of the Sommer Trust. Enterprises' interest in Gaming Holdings has been accounted for under the equity method. However, Enterprises has discontinued applying the equity method as the investment in Gaming Holdings has been reduced to zero. Enterprises will resume applying the equity method after cumulative net income exceeds the unrecognized losses. 24 ALADDIN GAMING ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS Gaming Enterprises considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. INCOME TAXES Gaming Enterprises accounts for income taxes using the liability method as set forth in the SFAS No. 109, "Accounting For Income Taxes". Under the liability method, deferred taxes are provided based on the temporary differences between the financial reporting basis and the tax basis of Gaming Enterprises' assets and liabilities. There was no income tax expense or benefit recorded for the period ending December 31, 2000, 1999 and 1998 as there was a net loss for each period and the realization of any deferred tax asset is uncertain. LOSS PER BASIC AND DILUTED SHARE Loss per basic and diluted share is based on the weighted average number of shares outstanding. Basic and diluted shares outstanding were 3,322,500, 3,322,500 and 2,984,990 for the years ended December 31, 2000, 1999 and 1998. Diluted shares include stock options and warrants when dilutive. Due to the loss accumulated during the three year peiod, Gaming Enterprises' warrants would be anti-dilutive and therefore have not been utilized in the computation of dilutive shares. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that entities record all derivatives as assets or liabilities measured at fair value, with the change in fair value recognized in earnings or in other comprehensive income, depending on the use of the derivative and whether it qualifies for hedge accounting. SFAS No. 133 amends or supercedes several current accounting statements. In July 1999, the FASB issued SFAS No. 137 which delays the effective date of SFAS No. 133 from fiscal year 2000 to fiscal year 2001. Gaming Holdings is in the process of analyzing SFAS No. 133 and the impact on its consolidated financial position and results of operations. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. LIQUIDITY AND MANAGEMENT'S PLAN Absent an improvement in Gaming's operating results or cash equity contributions to Gaming pursuant to the Keep-Well Agreement, Gaming estimates that, based on its results year-to-date, it may not be in compliance with the quarter ended June 30, 2001, financial covenant levels contained in the Bank Credit Facility and the FF&E Facility, as amended, both as defined in Note 6 of Aladdin Gaming Holdings LLC's consolidated financial statements. The Company estimates that cash on hand and projected 25 ALADDIN GAMING ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. LIQUIDITY AND MANAGEMENT'S PLAN (CONTINUED) internally generated funds will be sufficient to fund the Company's current operations, however, such amounts will not be sufficient to fund all the principal and interest payments on the Company's debt during fiscal 2001. In order for the Company to fund all of its principal and interest payments, the Company will continue to rely on payments from its sponsors, the Sommer Trust and London Clubs (collectively, with their respective affiliates, "Sponsors"), pursuant to the Keep-Well Agreement. Further, the Company and the Sponsors are seeking alternatives to improve the Company's current liquidity, which alternatives may include incurring additional indebtedness, to the extent permissible under the Company's various credit facilities, sale of an adjacent 5-acre parcel of undeveloped land, reaching an agreement with the Company's creditors reducing the Company's liquidity needs and/or equity infusions from either a third party and/or the Sponsors. 3. INVESTMENT IN UNCONSOLIDATED AFFILIATE As discussed in Note 1, Gaming Enterprises holds a 25% interest in Gaming Holdings. Enterprises' interest in Gaming Holdings has been accounted for under the equity method. However, Enteprises has discontinued applying the equity method as the investment in Gaming Holdings has been reduced to zero. Enterprises will resume applying the equity method after cumulative net income exceeds the unrecognized losses. Summarized condensed financial information of Gaming Holdings as of and for the years ended December 31, 2000 and 1999, is as follows:
2000 1999 -------- -------- (IN THOUSANDS) Aladdin Gaming Holdings, LLC Statement of Operations Data: Net Revenue............................................... $124,295 -- Net Loss.................................................. 76,229 $ 26,112 Gaming Enterprises' share of net loss..................... 19,057 6,528 Balance Sheet Data: Assets: Current Assets.......................................... $ 82,416 $ 89,592 Property and equipment, net............................. 657,470 346,337 Other assets............................................ 32,966 32,771 -------- -------- Total assets............................................ $772,852 $468,700 ======== ======== Liabilities and Members' Equity Liabilities............................................... $740,831 $441,464 Members' equity Gaming Enterprises...................................... (18,641) 8,562 Other members........................................... 50,662 18,674 -------- -------- Total liabilities and members' equity................... $772,852 $468,700 ======== ========
The changes in Gaming Enterprises' investment in unconsolidated affiliate is as follows:
2000 1999 -------- -------- (IN THOUSANDS Beginning investment balance................................ $ 8,562 $ 17,049 Equity in net loss.......................................... (8,562) (8,487) ------- -------- Ending Investment Balance................................. $ -- $ 8,562 ======= ========
26 ALADDIN GAMING ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENT IN UNCONSOLIDATED AFFILIATE (CONTINUED) The consolidated financial statements, and notes thereto, of Gaming Holdings are attached hereto as Exhibit 99.01 and incorporated herein by this reference. 4. EQUITY CONTRIBUTIONS On February 26, 1998, Sommer Enterprises, LLC contributed land and $7 million of predevelopment costs in exchange for 100% of the Class A Common Stock in Gaming Enterprises. Gaming Enterprises contributed the land, the $7 million of predevelopment costs and the net proceeds, $15 million allocable from the sale of the warrants to Gaming Holdings in exchange for 25% of the common membership interests in Gaming Holdings. NOTE 5. INCOME TAXES Gaming Enterprises has adopted the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"), whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. SFAS 109 requires recognition of a future tax benefit of net operating loss carryforwards and certain other temporary differences to the extent that realization of such benefit is more likely than not; otherwise, a valuation allowance is applied. The deferred tax asset is comprised of the net operating loss carryforward related to Gaming Enterprises' tax allocation of Aladdin Gaming Holdings, LLC's taxable loss. SFAS 109 requires recognition of the future tax benefit of this asset to the extent realization of such benefits is more likely than not; otherwise, a valuation allowance is applied. At December 31, 2000, the Company determined that approximately $12.1 million, of tax benefits did not meet the realization criteria because of the Company's historical operating results. Accordingly, a valuation allowance was applied to reserve against the applicable deferred tax asset. At December 31, 2000, the Company had net operating loss carryforwards available for income tax purposes of approximately $12.1 million, which expire in 2020. NOTE 6. PRIVATE OFFERING On February 26, 1998, Gaming Holdings, Gaming Capital Corp. ("Capital," together with Gaming Holdings, the "Issuers") and Gaming Enterprises consummated a private offering ("Offering") under Rule 144A of the Securities Act of 1933. The private offering consisted of 221,500 units ("Units"), each unit consisting of (i) $10,000 principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 ("Notes') of Gaming Holdings and Capital and (ii) 10 Warrants ("Warrants") to purchase 10 shares of Class B non-voting Common Stock, no par value, of Gaming Enterprises. The Notes and the Warrants became separately transferable on July 23, 1998 and the Warrants became exercisable on July 23, 1998 and will expire on March 1, 2010. The total amount paid for the warrants was $15 million and is reflected as additional paid-in capital in the accompanying financial statements. 27 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 28 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth the executive officers and the directors of Gaming Enterprises, Gaming Holdings, Gaming and Capital. A "director" of the Gaming Holdings or Gaming as such term is used in this Form 10-K, shall refer to a person who sits on the Board of Managers of Gaming Holdings ("Gaming Holdings Board") or Gaming ("Gaming Board").
NAME AGE POSITION - ---- -------- ------------------------------------------ Jack Sommer............................... 53 Chairman of the Gaming Holdings Board and the Gaming Board; Director of Capital; and President and Director of Gaming Enterprises Richard J. Goeglein....................... 66 Chief Executive Officer and President of Gaming Holdings, Gaming and Capital; Director of Gaming Holdings, Gaming and Capital Alan Goodenough........................... 57 Director of Gaming Holdings, Gaming and Capital G. Barry C. Hardy......................... 53 Director of Gaming Holdings, Gaming and Capital William Timmins........................... 53 Director of Gaming Holdings, Gaming, and Capital; Executive Vice President of Gaming Holdings and Gaming, President/Chief Operating Officer of the Aladdin Resort & Casino Roy Ramm.................................. 50 Director of Gaming Holdings, Gaming and Capital Viola Sommer.............................. 79 Director of Gaming Holdings, Gaming, Capital and Gaming Enterprises Patricia Becker........................... 49 Senior Vice President/Corporate Affairs and Legal and Secretary of Gaming Holdings, Gaming and Capital and Secretary of Gaming Enterprises Barbara Falvey............................ 42 Senior Vice President/Human Resources of Gaming Holdings, Gaming and Capital Thomas A. Lettero......................... 44 Senior Vice President/Chief Financial Officer/ Treasurer of Gaming Holdings, Gaming and Capital and Treasurer of Gaming Enterprises Mark A. Clayton........................... 35 Vice President and General Counsel of Gaming Holdings and Gaming
Jack Sommer has been the Chairman of the Gaming Holdings Board and a director of Capital since November, 1997 and has been the Chairman of the Gaming Board since February, 1998 and President and Director of Gaming Enterprises since December, 1997. Mr. Sommer is both a trustee and contingent beneficiary of the Trust. He has over 25 years of experience in developing residential and commercial real estate, including luxury residential projects such as North Shore Towers, in Queens County, New York, and The Sovereign at 425 East 58th Street in Manhattan. Jack Sommer is the son of Viola Sommer. 29 Richard J. Goeglein has been Chief Executive Officer and a director of Gaming Holdings, Gaming and Capital since November, 1997 and has been a director of Gaming since February, 1998. Mr. Goeglein served as a member of the Gaming Oversight Committee of Marriott Corporation ("Marriott") and through Gaming Associates, provided consulting services to Marriott's gaming operations situated outside of the United States through December 1997. Mr. Goeglein served as a director of Hollywood Park, Inc. until October 1998. Mr. Goeglein has spent over 30 years in the hotel/casino and food service industries. Previously, Mr. Goeglein served as Executive Vice President and member of the Board of Directors of Holiday Inns and Holiday Corp., and led the management team that consummated the 1980 acquisition of Harrah's Hotels and Casino ("Harrah's") for Holiday Inns. Subsequently, Mr. Goeglein served as President and Chief Executive Officer of Harrah's and President and Chief Operating Officer of Holiday Corp. Alan Goodenough has been a director of Gaming Holdings, Gaming and Capital since February, 1998. Since August, 1999, Mr. Goodenough has been the Executive Chairman of London Clubs, having previously served as Chief Executive since 1993. Mr. Goodenough has wide experience in the leisure and gaming industry having been a board director of Pleasurama plc and subsequently Mecca Leisure Group plc. G. Barry C. Hardy has been a director of Gaming Holdings, Gaming and Capital since February, 1998. Mr. Hardy has served as Chief Operating Officer of London Clubs since June 1999 and before that as Finance Director of London Clubs since 1989. Previously, Mr. Hardy served as a board director of Pleasurama plc and subsequently Mecca Leisure Group plc and has over 23 years' experience in the leisure and gaming industry. William Timmins has been a director of Gaming Holdings, Gaming and Capital since December, 1998 and has been Executive Vice President of Gaming Holdings, Gaming and Capital and President and Chief Operating Officer of the Aladdin Resort & Casino since February 2000. Mr. Timmins has served as Executive Director of London Clubs since June 1999, before that as Director of International Operations of London Clubs since March, 1996. Mr. Timmins has over thirty years of experience in the casino industry. Before joining London Clubs, Mr. Timmins was the Managing Director of Societe Participation Investisments Casino, the third largest gaming company in France, from 1990 until 1995. Roy Ramm has been a Director of Gaming and Gaming Holdings since October 21, 2000. Mr. Ramm has served as the Compliance and Security Director of London Clubs since 1998 having joined the London Clubs group in 1996. Prior to London Clubs, Mr. Ramm was Commander Specialist Operations (Crime) at New Scotland Yard with London's Metropolitan Police Service where he served for 27 years. Mr. Ramm is a Council member of the British Casino Association and is a member of the FBI National Academy Graduates Association. Viola Sommer has been a director of Gaming Holdings and Capital since July, 2000 and a director of Gaming Enterprises since July 12, 2000. Mrs. Sommer is both a trustee and beneficiary of the Trust. She is a member of the Jockey Club and a trustee of the National Racing Museum and Racing Hall of Fame. She is a Trustee Emeritus of NYRA. Viola Sommer is the mother of Jack Sommer. Patricia Becker has been the Senior Vice President/Corporate Affairs and Legal of Gaming Holdings, Gaming and Capital and Secretary of Gaming Holdings, Gaming and Capital since March, 1999 and Secretary of Gaming Enterprises since July 12, 2000. Ms. Becker currently is a director of Fitzgerald's Gaming Corporation and chairs the Compliance Committee. On December 5, 2000, Fitzgerald's Gaming Corporation filed a petition for bankruptcy under Chapter 11 of Title 11 of the United States Code and has been acting as a debtor-in-possession since such petition date. From 1993 to 1995, Ms. Becker was Chief of Staff for Nevada Governor, Bob Miller. From 1985 to 1993, Ms. Becker was with Harrah's Hotels and Casinos, where she held the position of Senior Vice President and General Counsel. Prior to joining Harrah's, Ms. Becker was a member of the Nevada State Gaming Control Board. 30 Barbara D. Falvey has been the Senior Vice President of Human Resources of Gaming Holdings, Gaming and Capital since February 2000. From July 1998 to January 2000, Ms. Falvey was the Vice President of Organization Development and Training for Caesars World, Inc. From 1996 to 1998, Ms. Falvey was Vice President of Human Resources for The Desert Inn in Las Vegas. Thomas A. Lettero has been the Senior Vice President/Chief Financial Officer of Gaming Holdings, Gaming and Capital and Treasurer of Gaming Enterprises since March, 2000. From December 1994 to March 2000, Mr. Lettero was the Executive Vice President and Chief Financial Officer of Stratosphere Corporation, which filed for reorganization under Chapter 11 of the Bankruptcy Code with its wholly-owned subsidiary, Stratosphere Gaming Corp., on January 27, 1997. The effective date for the companies' Restated Second Amended Plan of Reorganization was October 14, 1998. Previously, Mr. Lettero has held senior executive, financial and administrative positions with Mirage Hotel and Casino, MGM Grand Hotel Casino, Main Street Station, Bullwackers casinos and Palace Casinos. Mark A. Clayton has been Vice President and General Counsel of Gaming Holdings and Gaming since April, 1999 and was from June, 1998 to April, 1999 Vice President and Associate General Counsel of Gaming Holdings and Gaming. From July 1995 until June 1998, Mr. Clayton served as Vice President and General Counsel of Showboat, Inc. From May 1993 until October 1993 and from October 1993 until June 1995, Mr. Clayton served as Deputy Chief and the Chief, respectively, of the Corporate Securities Division of the Nevada State Gaming Control Board. COMMITTEES There are currently no committees of the Board of Directors of Gaming Enterprises. The Gaming Holdings Operating Agreement provides that there will be Executive Management Committees which will be responsible for the day to day management of Gaming Holdings and Gaming. The Executive Management Committee includes the following persons: the President and Chief Executive Officer of Gaming; the Chief Financial Officer of Gaming; the President and Chief Operating Officer of the Aladdin; the Senior Vice President of Human Resources of Gaming; and the Senior Vice President/Corporate Affairs of Gaming. The Gaming Holdings Board may also establish committees of the Gaming Holdings Board as it may deem necessary or advisable. Each of London Clubs and Sommer Enterprises is entitled to have one of its nominee Gaming Holdings Board members on each such committee. The Gaming Holdings Board has established a Compensation Committee that currently consists of Messrs. Sommer, Goodenough, Hardy, Ramm and Mrs. Sommer and an Audit Committee that currently consists of Messrs. Sommer, Goodenough and Hardy. 31 ITEM 11. EXECUTIVE COMPENSATION. Gaming Enterprises has not compensated any of its officers during 2000, 1999 or 1998. The following table summarizes the compensation earned during 2000, 1999 and 1998 by Gaming Holdings', Gamings' and Capital's Chief Executive Officer and the four highest compensated executive officers of the Gaming Holdings, Gaming or Capital who earned over $100,000 in 2000, 1999 and 1998.
ANNUAL COMPENSATION(1) LONG-TERM ------------------------------------- COMPENSATION/ OTHER ANNUAL RESTRICTED STOCK ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS COMPENSATION(1) - --------------------------- -------- -------- -------- ------------ ---------------- --------------- Richard J. Goeglein, Chief Executive Officer....... 2000 $683,077(2) $0 $ 17,665(3) $0 $29,821(4) 1999 $647,753(2) $0 $ 17,665(3) $0 $ 7,911(4) 1998 $630,770(2) $0 $248,379(5) $0 $22,137(4) William Timmins, Executive Vice President(6)....... 2000 $352,003 $0 $ 10,000(3) $0 $ 755(4) 1999 $141,077 $0 $0 $0 $ 66(4) 1998 $0 $0 $0 $0 $ 0 Thomas A. Lettero, Senior Vice President and Chief Financial Officer(6).... 2000 $229,231 $300,000 $ 6,539(3) $0 $ 215(4) 1999 $0 $0 $0 $0 $ 0 1998 $0 $0 $0 $0 $ 0 David Attaway, Senior Vice President(8)............ 2000 $370,331 $0 $ 12,000(3) $0 $ 471(4) 1999 $308,104 $0 $ 12,000(3) $0 $ 204(4) 1998 $204,669 $0 $181,663(7) $0 $ 136(4) Mark A. Clayton, Esq. Vice President and General Counsel......... 2000 $230,154 $0 $0 $0 $ 154(4) 1999 $175,531 $0 $0 $0 $ 108(4) 1998 $ 70,908(9) $0 $0 $0 $ 54(4)
- -------------------------- (1) All of the executive officers of the Company are compensated by Gaming. Compensation has been paid on the Company's behalf by Aladdin Holdings, LLC until February 26, 1998. (2) Includes $150,000 paid to GAI in 2000, 1999 and 1998 for consulting fees. (3) Represents automobile allowance paid to executive including federal income tax gross-up. (4) Represents life and disability insurance premiums paid on behalf of the executive. (5) Represents automobile allowance of $19,536 and moving expenses of $228,843 including federal income tax gross-up paid to Mr. Goeglein. (6) Messrs. Timmins and Lettero became officers of the Company in 2000 and in 1999 Mr. Timmins was compensated for services which he rendered to the Company prior to becoming an officer. (7) Represents moving expenses of $173,163 and automobile allowance of $8,500 paid to Mr. Attaway including federal income tax gross-up. (8) Mr. Attaway resigned all of his positions effective January 5, 2001, and, pursuant to Mr. Attaway's employment agreement, the Company paid Mr. Attaway $475,000 in January, 2001. (9) Mr. Clayton's employment with the Company began in 1998. 32 EMPLOYMENT AGREEMENTS Richard J. Goeglein, William Timmins, Patricia Becker, Barbara Falvey and Thomas Lettero (collectively, "Officers") each signed an employment agreement ("Employment Agreement") with the Company. The initial term of Mr. Goeglein's Employment Agreement is five years and six months, and the remaining Officers' Employment Agreements have varying durations depending upon when the Employment Agreements were executed. Pursuant to each Employment Agreement, the Officers have such authority, responsibilities and duties as are customarily associated with their positions with the Company. The Employment Agreements provide that, during the term of their employment, the Officers, other than for Ms. Becker, will devote their full time, efforts and attention to the business and affairs of Gaming and for Ms. Becker, she will devote 60% of her time, efforts and attention to the business and affairs of Gaming. The terms of the Employment Agreements provide for current annual base salary for the Officers as follows: Mr. Goeglein, $600,000; Mr. Timmins, $475,000, Ms. Becker, $255,000 ($215,000, base salary, $40,000 as member of compliance committee), Ms. Falvey, $200,000, and Mr. Lettero, $400,000, plus for Messrs. Timmins and Lettero and Ms. Becker and Ms. Falvey, any bonus granted by the Board of Directors based on relevant criteria and performance standards, and for Mr. Goeglein a bonus based upon "on target" performances, ranging from 50% to 75% of his base salary, and subject to certain tax provisions. Gaming's Board will consider increases to the Officers' base salary no less frequently than annually, commencing at the end of each Officer's first employment year. Any increase in base salary shall be within the sole discretion of Gaming's Board. The Employment Agreements provide that the Officers' salary cannot be reduced. After the initial term of Mr. Goeglein's and Ms. Becker's Employment Agreements, Gaming has agreed to retain Mr. Goeglein as a consultant to Gaming for an additional five years at $100,000 per year and to retain Ms. Becker as a member of the Company's Compliance Committee for an additional three years at $50,000 per year. The Officers are entitled to receive other employee benefits from Gaming, such as automobile allowance, health, pension and retirement and reimbursement of certain expenses. Pursuant to the terms of the Employment Agreement, as amended, Mr. Goeglein purchased for a total purchase price of $1,200, unvested Gaming Common Membership Interests which were contributed to Gaming Holdings on February 26, 1998 in return for unvested Holdings Common Membership Interests representing 2.0% of the Holdings Common Membership Interests ("Restricted Membership Interests") subject to the receipt of applicable Nevada Gaming Approval. Gaming Enterprises' interest in Gaming Holdings will be unaffected by the vesting of the Officer's Restricted Membership Interests. Mr. Goeglein's Restricted Membership Interests become fully vested at the earlier of July 1, 2002 or the date on which such interests become publicly traded, conditioned upon Mr. Goeglein's continued relationship with Gaming. If Mr. Goeglein's employment with Gaming and Gaming Holdings terminates, Gaming and Gaming Holdings have the right to repurchase any unvested portion of Mr. Goeglein's Restricted Membership Interest for an amount equal to the purchase price originally paid by Mr. Goeglein for the Common Membership Interests. Under certain circumstances as set forth in the Employment Agreement, including if an initial public offering with respect to the Restricted Membership Interests has not occurred prior to the full vesting of such interests, Mr. Goeglein has the right to sell his vested Restricted Membership Interests to Gaming Holdings at fair market value (subject to the receipt of applicable Gaming Approvals and to certain restrictions on restricted payments set forth in the Note Indenture and the Bank Credit Facility). If Gaming Holdings does not satisfy its obligation to purchase the Restricted Membership Interests within seven days, Mr. Goeglein has the right to require Gaming to purchase such interests at fair market value (subject to certain restrictions on Restricted Payments set forth in the Note Indenture). After Gaming has satisfied its obligation to purchase the Restricted Membership Interests, Gaming Holdings has the right to call such interests from Gaming for nominal consideration. The Company is obligated to develop an equity compensation arrangement, or the economic equivalent thereof, for Messrs. Timmins, Lettero, Ms. Becker and Ms. Falvey. 33 The Employment Agreements may be terminated by Gaming with or without Cause (as defined in each Employment Agreement) or by the Officers for Good Reason (as defined in each Employment Agreement). If an Officer is terminated for Cause, he shall be entitled only to such salary, bonus and benefits then accrued or vested. If an Officer is terminated without Cause or upon a Change in Control (as defined in the Employment Agreements), the Officer shall be entitled to such salary, bonus and benefits to which he would have been entitled for the remainder of the term or twelve months, whichever is longer (in the case of Mr. Goeglein, any such amount remaining in connection with his term plus certain other amounts). Each Officer has agreed not to compete with Gaming during the term of the Employment Agreements (plus one additional year if the Officer was terminated for Cause) and has agreed to refrain from certain other activities in competition with Gaming. Each of the Employment Agreements provides that Gaming shall indemnify and hold the Officers harmless to the fullest extent permitted by Nevada law against costs, expenses, liabilities and losses, including reasonable attorneys' fees and disbursements of counsel, incurred or suffered by the Officer in connection with his services as an employee of Gaming during the term of the respective Employment Agreement. Mr. Goeglein's Employment Agreement provided Mr. Goeglein with relocation expense reimbursement, an interest-free mortgage loan of $500,000 from AHL and certain excise tax gross-up provisions. GAI CONSULTING AGREEMENT Gaming has entered into a consulting agreement (as amended, "Consulting Agreement") with GAI. The Consulting Agreement was subsequently amended on February 26, 1998, to add Gaming Holdings as a party and, pursuant to which amendment, GAI contributed its Common Membership Interests in Gaming to Gaming Holdings in return for Holdings Common Membership Interests. Pursuant to the Consulting Agreement, GAI will render such consulting services as are reasonably requested by the Gaming Board until June 30, 2002. During the term of the Consulting Agreement, Gaming shall pay GAI a retainer of $12,500 each month as payment for remaining on call to provide services and expertise for such month. In addition, GAI purchased a 3% Common Membership Interest in Gaming, which was contributed to Gaming Holdings on February 26, 1998 in return for a 3% Holdings Common Membership Interest ("GAI Membership Interest") for a purchase price of $1,800. The GAI Membership Interest is fully vested and is subject to certain anti-dilution provisions contained in the Consulting Agreement (but subject to dilution upon exercise of the warrant) issued in connection with the offering of the Notes). In addition: (a) if Richard Goeglein is terminated from his employment with Gaming other than for "Cause" or voluntarily terminates for "Good Reason" (as such terms are defined in Mr. Goeglein's Employment Agreement with Gaming) after the consummation of the Funding Transactions and the Offering; or (b) if an initial public offering in respect of the GAI Membership Interest has not occurred prior to July 1, 2002, GAI has the right to sell any shares purchased under the Consulting Agreement back to Gaming Holdings at their fair market value at the time of such sale (subject to the receipt of applicable Gaming Approvals and to certain restrictions on restricted payments set forth in the Notes Indenture and the Bank Credit Facility). If Gaming Holdings does not satisfy its obligation to purchase the GAI Membership Interest within seven days, GAI has the right to require Gaming to purchase such interests at fair market value. After Gaming has satisfied its obligation to purchase the GAI Membership Interest, Gaming Holdings will have the right to call such interests from Gaming at nominal value. Pursuant to the Consulting Agreement, GAI has certain "piggyback" registration rights with respect to its interests purchased pursuant to the Consulting Agreement. Gaming Holdings has agreed to indemnify GAI, its legal counsel and independent accountants against all expenses, claims, losses, damages 34 and liabilities which may arise out of certain acts or omissions committed in connection with the registration of such membership interests, and, in connection with certain acts or omissions not committed in connection with the registration of such membership interests, to the same extent that other senior management and directors of Gaming and Gaming Holdings are indemnified. For further details on the Consultant Agreement, see Exhibit 10.35 to the Company's Registration Statement on Form S-4, Amendment No. 1, filed June 10, 1998, Part II, Item 21. Mr. Goeglein has granted a third party an option to acquire 15% of GAI's interest in Gaming Holdings, subject to receipt of all necessary gaming regulatory approvals. The Company believes that any exercise of the option will not have a material adverse effect on the Company. BONUS AND INCENTIVE PLANS Gaming and Gaming Holdings are currently developing bonus and/or incentive plans (subject to supermajority approval by the Gaming Holdings members, such approval not to be unreasonably withheld). It is expected that the terms of any such plans would be comparable to those customary in the industry. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following tables set forth certain information with respect to the beneficial ownership of and the capital stock of Gaming Enterprises and the common membership interests of Gaming Holdings by: (i) each person who, to the knowledge of Gaming Enterprises or the Company, beneficially owns more than 5% of the outstanding capital stock or membership interests (as the case may be); (ii) the directors of Gaming Enterprises and Gaming Holdings; (iii) all executive officers of Gaming Enterprises and Gaming Holdings included in the Executive Compensation Table under "Item 11. Executive Compensation;" and (iv) all directors and executive officers of Gaming Enterprises and Gaming Holdings, respectively, as a group. Neither the capital stock of Gaming Enterprises nor the membership interests of Gaming Holdings is presently listed or traded on any securities exchange or securities market. ALADDIN GAMING ENTERPRISES, INC.
CLASS A COMMON STOCK --------------------------------------------------------- PRIOR TO EXERCISE OF THE ASSUMING FULL EXERCISE OF WARRANTS CLASS A THE WARRANTS CLASS A COMMON STOCK(5) COMMON STOCK (5)(6) --------------------------- --------------------------- NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE SHARES OF CLASS SHARES OF CLASS BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY NAME OF BENEFICIAL OWNER OWNED OWNED OWNED OWNED - ------------------------ ------------ ------------ ------------ ------------ Viola Sommer, Jack Sommer and Eugene Landsberg, as trustees of the Sommer Trust(1)(2).............. 1,093,103 98.7% 1,093,103 98.7% Jack Sommer(1)(2)................................. 1,093,103 98.7% 1,093,103 98.7% Jack Sommer(3).................................... 14,398 1.3% 14,398 1.3% Thomas A. Lettero(4).............................. 0 0% 0 0% All Directors and Executive Officers as a group(4)........................................ 1,107,500 100% 1,107,500 100%
35 ALADDIN GAMING ENTERPRISES, INC.
CLASS B COMMON STOCK --------------------------------------------------------- PRIOR TO EXERCISE OF THE ASSUMING FULL EXERCISE OF WARRANTS CLASS B THE WARRANTS CLASS B COMMON STOCK COMMON STOCK (5)(6) --------------------------- --------------------------- NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE SHARES OF CLASS SHARES OF CLASS BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY NAME OF BENEFICIAL OWNER OWNED OWNED OWNED OWNED - ------------------------ ------------ ------------ ------------ ------------ Viola Sommer, Jack Sommer and Eugene Landsberg, as trustees of the Sommer Trust(1)(2).............. 2,186,205 98.7% 2,186,205 49.4% Jack Sommer(1)(2)................................. 2,186,205 98.7% 2,186,205 49.4% Jack Sommer(3).................................... 28,795 1.3% 28,795 * Thomas A. Lettero(4).............................. 0 0% 0 0% All Directors and Executive Officers as a group(4)........................................ 2,215,000 100% 2,215,000 50%
- ------------------------ * Represents less than one percent of the outstanding shares of Class B Common Stock. (1) The Sommer Trust has an option to acquire 5% of the common membership interest in AHL from GW Vegas (representing all of GW Vegas' common membership interest in AHL). Such option is exercisable at any time prior to December 2001. The address of the Sommer Trust is 280 Park Avenue, New York, New York 10017. (2) Includes Gaming Holdings Common Membership Interests held by the Sommer Trust. Mr. Jack Sommer, who is Chairman and a director of Gaming and Gaming Holdings and a director of Capital and director and the President of Gaming Enterprises, is a trustee and contingent beneficiary of the Sommer Trust. Mrs. Sommer, Mr. Sommer and Mr. Landsberg are each deemed to beneficially own the same interest as the Sommer Trust owns in Gaming Enterprises because each of them is a trustee of the Sommer Trust. (3) Subject to receipt of the necessary gaming regulatory approvals, Mr. Sommer will own this interest directly rather than through the Sommer Trust. (4) The directors of Gaming Enterprises are Mr. Sommer and Mrs. Sommer. The executive officers of Gaming Enterprises are Messrs. Sommer and Lettero and Ms. Becker. The address for Mr. Lettero and Ms. Becker is 3667 Las Vegas Boulevard South, Las Vegas, Nevada 89109. (5) The Class A Common Stock and Class B Common Stock in Gaming Enterprises held by Sommer Enterprises were pledged on February 26, 1998 to the Bank Lenders under the Credit Agreement. (6) Upon the exercise of the Warrants, holders of the Warrant Shares will own 50% of the outstanding Class B Common Stock and 0% of the outstanding Class A Common Stock of the Issuer. 36 ALADDIN GAMING HOLDINGS, LLC.
PERCENTAGE OWNERSHIP OF PERCENTAGE OWNERSHIP OF GAMING HOLDINGS GAMING HOLDINGS COMMON COMMON MEMBERSHIP INTERESTS MEMBERSHIP INTERESTS BENEFICIALLY OWNED BENEFICIALLY OWNED PRIOR TO ASSUMING EXERCISE OF THE FULL EXERCISE OF THE NAME OF BENEFICIAL OWNER WARRANTS(7) WARRANTS(8) - ------------------------ --------------------------- ----------------------- Viola Sommer, Jack Sommer and Eugene Landsberg, as trustees of the Sommer Trust(1)(2)(3)............... 56.859375% 47.390210% Jack Sommer(2)(3)..................................... 56.859375% 47.390210% London Clubs(3)....................................... 50.0% 50.0% Alan Goodenough(3).................................... 0.0% 0.0% G. Barry C. Hardy(3).................................. 0.0% 0.0% William Timmins(3).................................... 0.0% 0.0% Roy Ramm(3)........................................... 0.0% 0.0% Richard J. Goeglein(4)(5)(6).......................... 3.0% 2.500% Thomas A. Lettero(5).................................. 0.0% 0.0% David Attaway(5)...................................... 0.0% 0.0% Mark A. Clayton(5).................................... 0.0% 0.0% Jose Rueda(5)......................................... 0.1875% 0.156274% All Directors and Executive Officers as a group (9 persons)(9)...................................... 100% 90.0%
- ------------------------ * Represents less than one percent of the outstanding Holdings Common Membership Interests. (1) The Sommer Trust has an option to acquire 5% of the common membership interests in AHL from GW Vegas (representing all of GW Vegas' common membership interests in AHL). Such option is exercisable at any time prior to December, 2001. The address of the Sommer Trust is 280 Park Avenue, Floor 38 West, New York, New York 10017. (2) Includes Gaming Holdings Common Membership Interests held by the Sommer Trust. Mr. Jack Sommer, who is Chairman and a director of Gaming Holdings and Gaming and a director of Capital and Gaming Enterprises, is a trustee and contingent beneficiary of the Sommer Trust. Mrs. Sommer, Mr. Sommer and Mr. Landsberg are each deemed to beneficially own the same interest as the Sommer Trust owns in Gaming Holdings because each of them is a trustee of the Sommer Trust. The address for Mrs. Sommer, Mr. Sommer and Mr. Landsberg is 280 Park Avenue, Floor 38 West, New York, New York 10017. (3) London Clubs owns 39.953125% of the Gaming Holdings Common Membership Interests. On November 30, 1998, London Clubs and the Sommer Trust agreed that the Sommer Trust and its affiliates shall vote their respective Holdings Common Membership Interests and cause Gaming Enterprises to vote its Holdings Common Membership Interests so that (taking into account Holdings Common Membership Interests held by London Clubs or its affiliates) London Clubs controls fifty percent of the voting power of Gaming Holdings. Mr. Alan Goodenough is Executive Chairman of London Clubs and a director of Gaming Holdings, Gaming and Capital. Mr. G. Barry C. Hardy is Chief Operating Officer of London Clubs and a director of Gaming Holdings, Gaming and Capital. William Timmins is Executive Director of London Clubs and is a director of Gaming Holdings, Gaming and Capital. Roy Ramm is Compliance and Security Director of London Clubs and a director of Gaming Holdings, Gaming and Capital. The address of London Clubs and Messrs. Goodenough, Hardy and Ramm is 10 Brick Street, London, W1J 7HQ, United Kingdom. 37 (4) Mr. Richard J. Goeglein, who is Chief Executive Officer, President and a director of Gaming Holdings, Gaming and Capital, beneficially owns 100% of GAI, which holds 3% of the Holdings Common Membership Interests. Mr. Goeglein has granted to a third party an option to acquire 15% of GAI's interest in Gaming Holdings. Mr. Goeglein's address is 3667 Las Vegas Boulevard South, Las Vegas, Nevada 89109. (5) The address of Messrs. Goeglein, Timmins, Lettero, Attaway, Clayton and Rueda is 3667 Las Vegas Boulevard South, Las Vegas, Nevada 89109. Mr. Rueda is a former executive of the Company. (6) Mr. Goeglein has the right to acquire beneficial ownership of Gaming Holdings Common Membership Interests representing an aggregate of 2% of such interests, which right does not vest within 60 days. See "Item 11. Executive Compensation." (7) Gaming Holdings owns 100% of the Common Membership Interests and Series A Preferred Interests of Gaming. The Common Membership Interests were, on closing of the Bank Credit Facility, pledged to the Bank Lenders. The Series A Preferred Interests were, on closing of the Notes offering, pledged to the Trustee for the benefit of the Note Holders. (8) Gaming Enterprises owns 25% of the Gaming Holdings Common Membership Interests. Upon full exercise of the warrants issued in connection with the offering of the Notes, holders of the shares issued upon conversion of warrants will indirectly own 10% of the outstanding Holdings Common Membership Interests. (9) Mr. Attaway resigned all his positions with the Company effective January 5, 2001. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. THE SALLE PRIVEE AGREEMENT Gaming, London Clubs and LCNI are parties to an agreement ("Salle Privee Agreement") which relates to The London Club at Aladdin. Under the Salle Privee Agreement, London Clubs has agreed to guaranty the obligations of LCNI. In consideration for the services to be furnished by LCNI under the Salle Privee Agreement, Gaming will pay to LCNI a performance-based incentive fee ("Incentive Marketing and Consulting Fee") calculated as follows: (i) 10% of The London Club at Aladdin EBITDA (defined in the Salle Privee Agreement to mean gross revenue attributable to The London Club at Aladdin, less all costs and expenses directly attributable to The London Club at Aladdin), up to and including $15.0 million of EBITDA; plus (ii) 12.5% of The London Club at Aladdin EBITDA, in excess of $15.0 million, up to and including $17.0 million; plus (iii) 25% of The London Club at Aladdin EBITDA, in excess of $17.0 million, up to and including $20.0 million; plus (iv) 50% of The London Club at Aladdin EBITDA, in excess of $20.0 million. The foregoing thresholds will be adjusted in accordance with consumer price index changes every five years. OTHER PAYMENTS TO CONTROLLING STOCKHOLDERS In consideration for certain expenses incurred by the Sommer Trust prior to February 26, 1998, relating to the management and coordination of the development of the Aladdin, Gaming reimbursed $3.0 million to the Sommer Trust on February 26, 1998. In addition, Gaming will reimburse certain ongoing out-of-pocket expenses of the Sommer Trust relating to the development of the Aladdin, not to exceed $0.9 million. In November, 1998, the Sommer Trust agreed to defer reimbursement. As of December 31, 2000, the Sommer Trust had received approximately $3.3 million of the total $3.9 million reimbursement. In consideration for its obligations under the Keep-Well Agreement and related arrangements, under the London Clubs Purchase Agreement, the parties agreed that London Clubs receive (a) an initial fee of 1.0% of Gaming's indebtedness with respect to a $265.0 million portion of the Bank Credit Facility, which is supported and enhanced by the Keep-Well Agreement, which fee was paid on February 26, 1998, and (b) an annual fee of 1.5%, payable in arrears, of Gaming's annual average indebtedness with respect to a $265.0 million portion of the Bank Credit Facility, which is supported and enhanced by the Keep-Well Agreement for each relevant twelve month period ending on an anniversary of the closing date of the Bank 38 Credit Facility, which amount shall reflect the extent, if any, by which the obligations under the Keep-Well Agreement are reduced or eliminated over time. As of December 31, 2000, the Company has accrued approximately $11.3 million in Keep-Well fees payable to London Clubs. Additionally, Gaming agreed to reimburse approximately $2.8 million to London Clubs for certain expenses incurred relating to the Aladdin; however, in November, 1998, London Clubs agreed to defer the payment of approximately $189,000 of this reimbursement. As of December 31, 2000, London Clubs received approximately $2.4 million of this $2.8 million reimbursement obligation. MUSIC INDEBTEDNESS PAYMENTS BY THE SOMMER TRUST AND MR. SOMMER During 1998, the Sommer Trust paid approximately $260,000 to certain trade creditors on behalf of Aladdin Music, LLC ("Aladdin Music"), a subsidiary of Gaming, and Mr. Sommer individually paid $500,000 to a trade creditor on behalf of Aladdin Music. Further, during the first quarter of 1999, the Sommer Trust paid approximately $747,000 to a trade creditor on behalf of Aladdin Music. To the extent permissible, Aladdin Music has agreed, if and when Aladdin Music secures a joint venture partner and financing for the hotel casino, a previously contemplated 1,000 room hotel casino to be integrated with the Complex, to reimburse the Sommer Trust and Mr. Sommer such advanced funds. KEEP-WELL AGREEMENT On February 26, 1998, London Clubs, AHL and Bazaar Holdings entered into the Keep-Well Agreement in favor of the Administrative Agent and the lenders under the Bank Credit Facility. The Sommer Trust joined and became a party to the Keep-Well Agreement in July, 2000 (collectively, AHL, Bazaar Holdings, London Clubs and the Sommer Trust, "Sponsors"). The Keep-Well Agreement is the joint and several agreement of the Sponsors to make certain quarterly cash equity contributions to Gaming from and after the Conversion Date if Gaming fails to comply the minimum fixed charge coverage ratio set forth in the Bank Credit Facility. Under the Keep-Well Agreement, the Sponsors are not required to contribute an aggregate of more than $150 million to Gaming ($30 million in any one fiscal year) and are not required to contribute any amounts to Gaming on or after the earlier of the date on which Gaming complies with all of the financial covenants set forth in the Credit Agreement for six consecutive quarterly periods or the date on which the aggregate outstanding principal amounts of the Credit Agreement are reduced below certain amounts. The Keep-Well Agreement was amended in March, 2001. For a discussion of the amendment and payments under the Keep-Well Agreement, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations". BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY London Clubs, the Sommer Trust and Bazaar Holdings have entered into the Bank Completion Guaranty in favor of the Bank Lenders. Pursuant to the Bank Completion Guaranty, such parties have guaranteed, among other things, the timely completion of the Aladdin. The Bank Completion Guaranty is not subject to any maximum dollar limitations. While holders of the Notes are not party to the Bank Completion Guaranty, London Clubs, the Sommer Trust and Bazaar Holdings have entered into the Noteholder Completion Guaranty for the benefit of the holders of the Notes. ARRANGEMENTS WITH RICHARD GOEGLEIN AND GAI Gaming has entered into the Consulting Agreement with GAI. Pursuant to the Consulting Agreement, GAI will render such consulting services as are reasonably requested by the Board of Gaming until June 30, 2002. During the term of the Consulting Agreement, Gaming shall pay GAI a retainer of $12,500 per month as payment for remaining on call to provide services and expertise for such month. Pursuant to the Consulting Agreement, GAI purchased 3% of the Common Membership Interests in Gaming (which were contributed to Gaming Holdings on February 26, 1998 for a 3% interest in Gaming Holdings) for $1,800. Such membership interest is fully vested, subject to certain anti-dilution provisions, put rights and certain "piggyback" registration rights. See "Item 10. Directors and Executive Officers of the Registrant-GAI Consulting Agreement." In addition, Mr. Goeglein's Employment Agreement provided Mr. Goeglein with a relocation expense reimbursement, an interest free mortgage loan of $500,000 from AHL and certain excise tax gross-up provisions. 39 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(l) The following consolidated financial statements of the Company and its subsidiaries have been filed as a part of this report (See "Part II, Item 8: Financial Statements and Supplementary Data"): Report of Independent Public Accountants; Balance Sheets as of December 31, 2000 and 1999; Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998; Statements of Stockholders' Equity for the Years Ended December 31, 2000, 1999 and 1998; Statements of Cash Flows for the Year Ended December 31, 2000, 1999 and 1998; and Notes to Consolidated Financial Statements: (a)(2) All schedules are omitted because they are not required, inapplicable, or the information is otherwise shown in the financial statements or notes thereto. (a)(3) The following exhibits(1) are filed as part of this Form 10-K or incorporated herein by reference.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 3.1 Articles of Organization of Aladdin Gaming Holdings, LLC ("Gaming Holdings") are incorporated herein by reference from Aladdin Gaming Enterprises, Inc.'s ("Enterprises") (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.3. 3.2 Articles of Incorporation of Aladdin Capital Corp. ("Capital") are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.4. 3.3 Articles of Organization of Aladdin Gaming, LLC ("Gaming") are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.5. 3.4 Articles of Incorporation of Enterprises are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.1; Amendment No. 1 to Articles of Incorporation of Enterprises is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.2. 3.5 Operating Agreement of Gaming Holdings is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed on June 10, 1998, Part II, Item 16, Exhibit 3.7.
- ------------------------ (1) Copies of exhibits to this Form 10-K will be furnished to any requesting security holder who furnishes the Company a list identifying the exhibits to be copied by the Company at a charge of $.25 per page. Alternatively, these exhibits can be inspected, without charge, at the Public Reference Section of the SEC located at 450 Fifth Street, NW, Washington, DC 20549 or at the SEC internet site: http:// www.sec.gov. 40
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 3.6 Bylaws of Capital are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.8. 3.7 Operating Agreement of Gaming is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.9. 3.8 Bylaws of Enterprises are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.6. 4.1 Warrant Agreement, dated February 26, 1998, among Enterprises and State Street Bank and Trust Company, as Warrant Agent ("Warrant Agent") is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 4.1. 4.2 Warrant Registration Rights Agreement, dated February 26, 1998, among Enterprises and the Initial Purchasers (as defined) is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 4.2. 4.3 Equity Participation Agreement, dated February 26, 1998, among Sommer Enterprises, LLC, Enterprises, London Clubs Nevada, Inc. ("LCNI") and the Trustee (as defined) is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 4.3. 10.1 Indenture, dated February 26, 1998, among Gaming Holdings, Capital and State Street Bank and Trust Company, as Trustee ("Trustee") is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.1. 10.2 Note Registration Rights Agreement, dated February 26, 1998, among Gaming Holdings, Capital and Merrill Lynch, Pierce Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. ("Initial Purchasers") is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.2. 10.3 Noteholder Completion Guaranty, dated February 26, 1998, among the Trust under Articles Sixth u/w/o Sigmund Sommer, London Clubs International, plc ("London Clubs"), Aladdin Bazaar Holdings, LLC and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed on June 10, 1998, Part II, Item 16, Exhibit 10.3. 10.4 Disbursement Agreement, dated February 26, 1998, among Gaming Holdings, Gaming, The Bank of Nova Scotia, as Administrative Agent under the Bank Credit Facility, Disbursement Agent, and Securities Intermediary, U.S. Bank National Association as Servicing Agent and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1 filed on June 10, 1998, Part II, Item 16, Exhibit 10.4. 10.5 The LLC Interest Pledge and Security Agreement, dated February 26, 1998, between Gaming Holdings and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.5.
41
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 10.6 The Gaming Holdings Collateral Account Agreement, dated February 26, 1998, between Gaming Holdings and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.6. 10.7 Subsidiary Guaranty, dated February 26, 1998, among subsidiaries of London Clubs and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.7. 10.8 Amended and Restated London Clubs Purchase Agreement, dated February 26, 1998, among LCNI, London Clubs, Gaming Holdings, Aladdin Holdings, LLC, Gaming, Sommer Enterprises, LLC, and the Trust Under Article Sixth u/w/o Sigmund Sommer is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.8. 10.9 Closing Schedules to Amended and Restated London Clubs Purchase Agreement are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.9. 10.10 Contribution Agreement, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund Sommer, Aladdin Holdings, LLC, Sommer Enterprises, LLC, London Clubs and LCNI is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.10. 10.11 Salle Privee Agreement, dated February 26, 1998, among Gaming, LCNI and London Clubs is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.11. 10.12 Credit Agreement, dated February 26, 1998, among Gaming, a syndicate of lenders ("Bank Lenders"), The Bank of Nova Scotia as Administrative Agent, Merrill Lynch Capital Corporation as Syndication Agent and CIBC Oppenheimer Corp as Documentation Agent is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1 filed June 10, 1998, Part II, Item 16, Exhibit 10.13; First Amendment to Credit Agreement dated January 29, 1999, by and among Gaming, Bank Lenders, The Bank of Nova Scotia, as Administrative Agent, Merrill Lynch Capital Corporation as Syndication Agent and CIBC Oppenheimer Corp. as Documentation Agent is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-K for the year ended December 31, 1999, Part IV Item 14, Exhibit 10.12; Second Amendment to Credit Agreement, dated as of April 5, 1999, effective March 10, 1999, among Aladdin Gaming, LLC, various financial institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 8-K, dated April 27, 1999, Item 7, Exhibit 10.01; Third Amendment to Credit Agreement, dated as of June 1, 2000, among Aladdin Gaming, LLC, Various Financial Institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.01; Fourth Amendment to Credit Agreement, dated as of July 27, 2000, among Aladdin Gaming, LLC, Various Financial Institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.02; Fifth Amendment to Credit Agreement, dated as of December 29, 2000, among Aladdin Gaming, LLC, Various Financial Institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. which is attached as an exhibit.
42
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 10.13 Bank Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs, Aladdin Bazaar Holdings, LLC and the Bank Lenders is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.14. First Amendment to Guaranty of Performance and Completion, dated as of April 5, 1999, effective March 10, 1999, by London Clubs International, plc, the Trust Under Article Sixth Under the Will of Sigmund Sommer, Aladdin Bazaar Holding, LLC and The Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC 333-49715) Form 8-K, dated April 27, 1999, Item 7, Exhibit 10.02. 10.14 Keep-Well Agreement, dated February 26, 1998, among Aladdin Holdings, LLC, London Clubs and Aladdin Bazaar Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.15. 10.15 Design/Build Contract, dated December 4, 1997, between Gaming and Fluor Daniel, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.16; Amendment No. 1 to Design/Build Contract, dated January 21, 1998, between Gaming and Fluor Daniel, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.17; Amendment No. 2 to Design/Build Contract, dated January 28, 1998, between Gaming and Fluor Daniel, Inc. is incorporated herein by reference from Enterprises' File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.18; Fluor Guaranty, dated December 4, 1997, between the Company and Fluor Corporation is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.19. 10.16 Site Work, Development and Construction Agreement, dated February 26, 1998, among Gaming, Aladdin Bazaar, LLC and Aladdin Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.20. 10.17 Construction, Operation and Reciprocal Easement Agreement, dated February 26, 1998, among Gaming, Aladdin Bazaar, LLC and Aladdin Music Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.21. 10.18 Common Parking Area Use Agreement, dated February 26, 1998, between Gaming and Aladdin Bazaar, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.22. 10.19 Music Project Lease, dated February 26, 1998, between Gaming and Aladdin Music Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 2, filed on July 22, 1998, Part II, Item 16, Exhibit 10.23; and Lease Termination Agreement, dated November 20, 2000, by and between Aladdin Gaming, LLC and Aladdin Music Holdings, LLC which is attached as an exhibit. 10.20 Mall Project Lease, dated February 26, 1998, between Gaming and Aladdin Bazaar, LLC is incorporated herein by reference from Enterprises' (SEC File No.333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.24;
43
EXHIBIT NO. DESCRIPTION - --------------------- ----------- and Lease Termination Agreement, dated November 20, 2000, by and between Aladdin Gaming, LLC and Aladdin Bazaar, LLC which is attached as an exhibit. 10.21 Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated February 26, 1998, made by Gaming to Stewart Title of Nevada, as trustee for the benefit of the Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.25; First Amendment to Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated as of July 27, 2000, made by and between Aladdin Gaming, LLC, as Trustor, and Stewart Title of Nevada, as Trustee, for the benefit of The Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.05. 10.22 Development Agreement, dated December 3, 1997, between Aladdin and Northwind Aladdin, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.26. 10.23 Energy Service Agreement, dated September 24, 1998, between Aladdin and Northwind Aladdin, LLC is incorporated herein by reference from Enterprises; (SEC File No. 333-49715) Form 10-K for the year ended December 31, 1999, Part IV, Item 14, Exhibit 10.23. Amendment and Agreement to the Energy Service Agreement, dated September 25, 1998, between Northwind Aladdin, LLC and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.01. Second Amendment and Agreement to the Energy Service Agreement, dated May 28, 1999, between Northwind Aladdin, LLC and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.02. Third Amendment and Agreement to the Energy Service Agreement, dated May 28, 1999, between Northwind Aladdin, LLC and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.03. Consent and Ratification and Reaffirmation Agreement, dated May 27, 1999, between The Bank of Nova Scotia in its capacity as the Administrative Agent for the Lenders and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.05. Energy Services Coordination Agreement, dated May 28, 1999, between Aladdin Gaming, LLC and Aladdin Bazaar, LLC is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.04. Subordination Non-Disturbance and Attornment Agreement and Consent, dated June 7, 1999, between The Bank of Nova Scotia, as the administrative agent for the Aladdin Lenders, Northwind Aladdin, LLC, Aladdin Gaming, LLC and State Street Bank and Trust Company, as collateral agent for the Northwind Noteholders, Aladdin Music, LLC and Aladdin Music Holdings, LLC is incorporated herein by reference from the Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.06. 10.24 Energy Lease, dated December 3, 1997, between Gaming and Northwind Aladdin, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.28. 10.25 Unicom Guaranty, dated December 3, 1997, between Unicom Corporation and Gaming is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.29.
44
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 10.26 Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated September 3, 1997, between TH Bazaar Centers, Inc. and Aladdin Bazaar Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.30; First Amendment to the Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated October 16, 1997, is incorporated herein by reference to Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.31; Second Amendment to Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated May 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.50. 10.27 Music Project Memorandum of Understanding and Letter of Intent, dated September 2, 1997, between Gaming and Planet Hollywood International, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.32; Amendment to Music Project Memorandum of Understanding and Letter of Intent, dated October 15, 1997, between Gaming and Planet Hollywood International, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed June 10, 1998, Part II, Item 16, Exhibit 10.50. 10.28 GAI Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming, and GAI, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.34. 10.29 Goeglein Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Richard J. Goeglein is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.35. 10.30 McKennon Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and James H. McKennon is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.36. 10.31 Klerk Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Cornelius T. Klerk is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.37. 10.32 Galati Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Lee A. Galati is incorporated herein by reference to Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.38. 10.33 Rueda Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Jose A. Rueda is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.39. 10.34 GAI Consulting Agreement, dated July 1, 1997, between GAI, LLC and Gaming as amended as of January, 1998 is incorporated herein by reference from Enterprises' (SEC File No. 333-49715)
45
EXHIBIT NO. DESCRIPTION - --------------------- ----------- Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.40. 10.35 Employment and Consulting Agreement, dated July 1, 1997, between Gaming and Richard J. Goeglein, as amended as of January, 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.41. 10.36 Employment Agreement, dated July 28, 1997, between Gaming and James H. McKennon is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.42. Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and James McKennon, dated January 27, 1999 is incorporated herein by reference from Enterprises' (SEC 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.01. 10.37 Employment Agreement, dated July 26, 1997, between Gaming and Cornelius T. Klerk is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.43. Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Cornelius T. Klerk, dated January 27, 1999, is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.02. 10.38 Employment Agreement, dated August 19, 1997, between Gaming and Lee A. Galati is incorporated herein by reference from the Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.44. Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Lee Galati, dated January 27, 1999, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.04. 10.39 Employment Agreement, dated July 1, 1997, between Gaming and Jose A. Rueda is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.45. Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Jose A. Rueda, dated January 27, 1999 is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.03. 10.40 FF&E Commitment Letter, dated January 23, 1998, between Gaming and General Electric Capital Corporation is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed April 9, 1998, Part II, Item 16, Exhibit 10.46; Facilities Agreement between General Electric Capital Corporation and Gaming, dated June 26, 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 1998, Part II, Item 6, Exhibit 10.01; Amendment No. 1 to Facilities Agreement between General Electric Capital Corporation and Gaming, dated September 2, 1998; Agreement of Amendment, dated as of June 2, 2000, among General Electric Capital Corporation, GMAC Commercial Mortgage Corporation and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.03; Agreement of Amendment No. 3 dated as of July 27, 2000, among General Electric Capital Corporation, GMAC Commercial Mortgage
46
EXHIBIT NO. DESCRIPTION - --------------------- ----------- Corporation and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.04; Agreement of Amendment No. 4, dated as of December 29, 2000, among General Electric Capital Corporation, GMAC Commercial Mortgage Corporation and Aladdin Gaming, LLC which is attached as an exhibit. 10.41 Intercreditor Agreement by and among The Bank of Nova Scotia, General Electric Capital Corporation and Gaming, dated as of June 30, 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 1998, Part II, Item 6, Exhibit 10.02. 10.42 Mall Commitment Letter, dated December 29, 1997, between Aladdin Bazaar, LLC and Fleet National Bank, as Administrative Agent is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.47. 10.43 Purchase Agreement, dated February 18, 1998, among Gaming Holdings, Capital, Enterprises, Aladdin Holdings, LLC, the Trust under Article Sixth u/w/o Sigmund Sommer, London Clubs and the Initial Purchasers is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.48. 10.44 Contributed Land Appraisal prepared by HVS International is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.49. 10.45 Employment Agreement dated February 25, 2000 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and William Timmins is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.45; Amendment No. 1 to the Employment Agreement of William Timmins, dated as of May 24, 2000, between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and William Timmins is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.07. 10.46 Employment Agreement dated December 29, 1999 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and David Attaway is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.46. 10.47 Employment Agreement dated January 31, 2000 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and Barbara Falvey is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.47. 10.48 Employment Agreement dated March 7, 2000 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and Thomas Lettero is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.48. 10.49 Letter Agreement, dated December 10, 1999 between the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs International, plc, London Clubs Nevada, Inc., Aladdin Gaming Holdings, LLC, Sommer Enterprises, LLC, Aladdin Gaming Enterprises, Inc., GAI, LLC and Aladdin Holdings, LLC. Letter Agreement, dated February 23, 2000, between the Trust under Article Sixth u/w/o Sigmund Sommer, London Clubs International plc, London Clubs Nevada, Inc., Aladdin Gaming Holdings, LLC, Sommer Enterprises, LLC, Aladdin Gaming Enterprises,
47
EXHIBIT NO. DESCRIPTION - --------------------- ----------- Inc. and GAI, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.49. 10.50 Amendment of Agreements, effective as of July 27, 2000, by and among Aladdin Gaming, LLC, Various Financial Institutions and The Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.06 10.51 Employment Agreement of Patricia Becker, dated as of July 27, 2000, between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Patricia Becker is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.08. 21.01 List of Subsidiaries which is attached as an exhibit. 99.01 Consolidated Financial Statements of Aladdin Gaming Holdings, LLC and subsidiaries which is attached as an exhibit.
- ------------------------ (b) Reports on Form 8-K. During the fourth quarter of the fiscal year ended December 31, 2000, Gaming Enterprises did not file any Current Report on Form 8-K. (c) The exhibits required by Item 601 of Regulation S-K filed as part of this Report or incorporated herein by reference are listed in Item 14(a)(3) above, and the exhibits filed herewith are listed on the Index to Exhibits which accompanies this Report. (d) See Item 14(a)(2) of this Report. 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by this undersigned, thereunto duly authorized. REGISTRANT: ALADDIN GAMING ENTERPRISES, INC. By: /s/ JACK SOMMER ----------------------------------------- Jack Sommer, PRESIDENT AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER)
DATE: April 2, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. April 2, 2001 By: /s/ JACK SOMMER ----------------------------------------- Jack Sommer, PRESIDENT AND DIRECTOR April 2, 2001 By: /s/ THOMAS A. LETTERO ----------------------------------------- Thomas A. Lettero, TREASURER (PRINCIPAL ACCOUNTING OFFICER) April 2, 2001 By: /s/ VIOLA SOMMER ----------------------------------------- Viola Sommer, DIRECTOR
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. Other than this Form 10-K, Aladdin Gaming Enterprises, Inc. has not issued, and will not be issuing, any annual report to its security holders covering Aladdin Gaming Enterprises, Inc.'s last fiscal year. Aladdin Gaming Enterprises, Inc. has not sent, and will not send, any proxy statement, form of proxy or other proxy soliciting material to its security holders. 49 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 3.1 Articles of Organization of Aladdin Gaming Holdings, LLC ("Gaming Holdings") are incorporated herein by reference from Aladdin Gaming Enterprises, Inc.'s ("Enterprises") (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.3. 3.2 Articles of Incorporation of Aladdin Capital Corp. ("Capital") are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.4. 3.3 Articles of Organization of Aladdin Gaming, LLC ("Gaming") are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.5. 3.4 Articles of Incorporation of Enterprises are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.1; Amendment No. 1 to Articles of Incorporation of Enterprises is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.2. 3.5 Operating Agreement of Gaming Holdings is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed on June 10, 1998, Part II, Item 16, Exhibit 3.7. 3.6 Bylaws of Capital are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.8. 3.7 Operating Agreement of Gaming is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.9. 3.8 Bylaws of Enterprises are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 3.6. 4.1 Warrant Agreement, dated February 26, 1998, among Enterprises and State Street Bank and Trust Company, as Warrant Agent ("Warrant Agent") is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 4.1. 4.2 Warrant Registration Rights Agreement, dated February 26, 1998, among Enterprises and the Initial Purchasers (as defined) is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 4.2. 4.3 Equity Participation Agreement, dated February 26, 1998, among Sommer Enterprises, LLC, Enterprises, London Clubs Nevada, Inc. ("LCNI") and the Trustee (as defined) is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 4.3.
50
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.1 Indenture, dated February 26, 1998, among Gaming Holdings, Capital and State Street Bank and Trust Company, as Trustee ("Trustee") is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.1. 10.2 Note Registration Rights Agreement, dated February 26, 1998, among Gaming Holdings, Capital and Merrill Lynch, Pierce Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. ("Initial Purchasers") is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.2. 10.3 Noteholder Completion Guaranty, dated February 26, 1998, among the Trust under Articles Sixth u/w/o Sigmund Sommer, London Clubs International, plc ("London Clubs"), Aladdin Bazaar Holdings, LLC and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed on June 10, 1998, Part II, Item 16, Exhibit 10.3. 10.4 Disbursement Agreement, dated February 26, 1998, among Gaming Holdings, Gaming, The Bank of Nova Scotia, as Administrative Agent under the Bank Credit Facility, Disbursement Agent, and Securities Intermediary, U.S. Bank National Association as Servicing Agent and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1 filed on June 10, 1998, Part II, Item 16, Exhibit 10.4. 10.5 The LLC Interest Pledge and Security Agreement, dated February 26, 1998, between Gaming Holdings and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.5. 10.6 The Gaming Holdings Collateral Account Agreement, dated February 26, 1998, between Gaming Holdings and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.6. 10.7 Subsidiary Guaranty, dated February 26, 1998, among subsidiaries of London Clubs and the Trustee is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.7. 10.8 Amended and Restated London Clubs Purchase Agreement, dated February 26, 1998, among LCNI, London Clubs, Gaming Holdings, Aladdin Holdings, LLC, Gaming, Sommer Enterprises, LLC, and the Trust Under Article Sixth u/w/o Sigmund Sommer is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.8. 10.9 Closing Schedules to Amended and Restated London Clubs Purchase Agreement are incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.9. 10.10 Contribution Agreement, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund Sommer, Aladdin Holdings, LLC, Sommer Enterprises, LLC, London Clubs and LCNI is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.10.
51
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.11 Salle Privee Agreement, dated February 26, 1998, among Gaming, LCNI and London Clubs is incorporated herein by reference from Enterprises' (SEC File No. 333- 49715) Registration Statement on Form S-1 filed on April 9, 1998, Part II, Item 16, Exhibit 10.11. 10.12 Credit Agreement, dated February 26, 1998, among Gaming, a syndicate of lenders ("Bank Lenders"), The Bank of Nova Scotia as Administrative Agent, Merrill Lynch Capital Corporation as Syndication Agent and CIBC Oppenheimer Corp as Documentation Agent is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1 filed June 10, 1998, Part II, Item 16, Exhibit 10.13; First Amendment to Credit Agreement dated January 29, 1999, by and among Gaming, Bank Lenders, The Bank of Nova Scotia, as Administrative Agent, Merrill Lynch Capital Corporation as Syndication Agent and CIBC Oppenheimer Corp. as Documentation Agent is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-K for the year ended December 31, 1999 Part IV, Item 14, Exhibit 10.12; Second Amendment to Credit Agreement, dated as of April 5, 1999, effective March 10, 1999, among Aladdin Gaming, LLC, various financial institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 8-K, dated April 27, 1999, Item 7, Exhibit 10.01; Third Amendment to Credit Agreement, dated as of June 1, 2000, among Aladdin Gaming, LLC, Various Financial Institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.01; Fourth Amendment to Credit Agreement, dated as of July 27, 2000, among Aladdin Gaming, LLC, Various Financial Institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.02; Fifth Amendment to Credit Agreement, dated as of December 29, 2000, among Aladdin Gaming, LLC, Various Financial Institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and CIBC Oppenheimer Corp. which is attached as an exhibit. 10.13 Bank Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs, Aladdin Bazaar Holdings, LLC and the Bank Lenders is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.14. First Amendment to Guaranty of Performance and Completion, dated as of April 5, 1999, effective March 10, 1999, by London Clubs International, plc, the Trust Under Article Sixth Under the Will of Sigmund Sommer, Aladdin Bazaar Holding, LLC and The Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC 333-49715) Form 8-K, dated April 27, 1999, Item 7, Exhibit 10.02. 10.14 Keep-Well Agreement, dated February 26, 1998, among Aladdin Holdings, LLC, London Clubs and Aladdin Bazaar Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.15;
52
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.15 Design/Build Contract, dated December 4, 1997, between Gaming and Fluor Daniel, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.16; Amendment No. 1 to Design/Build Contract, dated January 21, 1998, between Gaming and Fluor Daniel, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.17; Amendment No. 2 to Design/Build Contract, dated January 28, 1998, between Gaming and Fluor Daniel, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.18; Fluor Guaranty, dated December 4, 1997, between the Company and Fluor Corporation is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.19. 10.16 Site Work, Development and Construction Agreement, dated February 26, 1998, among Gaming, Aladdin Bazaar, LLC and Aladdin Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.20. 10.17 Construction, Operation and Reciprocal Easement Agreement, dated February 26, 1998, among Gaming, Aladdin Bazaar, LLC and Aladdin Music Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.21. 10.18 Common Parking Area Use Agreement, dated February 26, 1998, between Gaming and Aladdin Bazaar, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.22. 10.19 Music Project Lease, dated February 26, 1998, between Gaming and Aladdin Music Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 2, filed on July 22, 1998, Part II, Item 16 Exhibit 10.23; and Lease Termination Agreement, dated November 20, 2000, by and between Aladdin Gaming, LLC and Aladdin Music Holdings, LLC which is attached as an exhibit. 10.20 Mall Project Lease, dated February 26, 1998, between Gaming and Aladdin Bazaar, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333- 49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.24; and Lease Termination Agreement, dated November 20, 2000, by and between Aladdin Gaming, LLC and Aladdin Bazaar, LLC which is attached as an exhibit. 10.21 Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated February 26, 1998, made by Gaming to Stewart Title of Nevada, as trustee for the benefit of the Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.25; First Amendment to Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated as of July 27, 2000, made by and between Aladdin Gaming, LLC, as Trustor, and Stewart Title of Nevada, as Trustee, for the benefit of The Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.05.
53
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.22 Development Agreement, dated December 3, 1997, between Aladdin and Northwind Aladdin, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.26. 10.23 Energy Service Agreement, dated September 24, 1998, between Aladdin and Northwind Aladdin, LLC is incorporated herein by reference from Enterprises; (SEC File No. 333-49715) Form 10-K for the year ended December 31, 1999, Part IV, Item 14, Exhibit 10.23. Amendment and Agreement to the Energy Service Agreement, dated September 25, 1998, between Northwind Aladdin, LLC and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.01. Second Amendment and Agreement to the Energy Service Agreement, dated May 28, 1999, between Northwind Aladdin, LLC and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.02. Third Amendment and Agreement to the Energy Service Agreement, dated May 28, 1999, between Northwind Aladdin, LLC and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.03. Consent and Ratification and Reaffirmation Agreement, dated May 27, 1999, between The Bank of Nova Scotia in its capacity as the Administrative Agent for the Lenders and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.05. Energy Services Coordination Agreement, dated May 28, 1999, between Aladdin Gaming, LLC and Aladdin Bazaar, LLC is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.04. Subordination Non-Disturbance and Attornment Agreement and Consent, dated June 7, 1999, between The Bank of Nova Scotia, as the administrative agent for the Aladdin Lenders, Northwind Aladdin, LLC, Aladdin Gaming, LLC and State Street Bank and Trust Company, as collateral agent for the Northwind Noteholders, Aladdin Music, LLC and Aladdin Music Holdings, LLC is incorporated herein by reference from the Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended June 30, 1999, Part II, Item 6, Exhibit 10.06. 10.24 Energy Lease, dated December 3, 1997, between Gaming and Northwind Aladdin, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.28. 10.25 Unicom Guaranty, dated December 3, 1997, between Unicom Corporation and Gaming is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.29.
54
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.26 Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated September 3, 1997, between TH Bazaar Centers, Inc. and Aladdin Bazaar Holdings, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.30; First Amendment to the Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated October 16, 1997, is incorporated herein by reference to Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.31; Second Amendment to Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated May 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.50. 10.27 Music Project Memorandum of Understanding and Letter of Intent, dated September 2, 1997, between Gaming and Planet Hollywood International, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.32; Amendment to Music Project Memorandum of Understanding and Letter of Intent, dated October 15, 1997, between Gaming and Planet Hollywood International, Inc. is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed June 10, 1998, Part II, Item 16, Exhibit 10.33. 10.28 GAI Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming, and GAI, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.34. 10.29 Goeglein Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Richard J. Goeglein is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.35. 10.30 McKennon Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and James H. McKennon is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.36. 10.31 Klerk Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Cornelius T. Klerk is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.37. 10.32 Galati Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Lee A. Galati is incorporated herein by reference to Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.38. 10.33 Rueda Contribution and Amendment Agreement, dated February 26, 1998, among Gaming Holdings, Gaming and Jose A. Rueda is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.39.
55
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.34 GAI Consulting Agreement, dated July 1, 1997, between GAI, LLC and Gaming as amended as of January, 1998 is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.40. 10.35 Employment and Consulting Agreement, dated July 1, 1997, between Gaming and Richard J. Goeglein, as amended as of January, 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.41. 10.36 Employment Agreement, dated July 28, 1997, between Gaming and James H. McKennon is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.42. Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and James McKennon, dated January 27, 1999 is incorporated herein by reference from Enterprises' (SEC 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.01. 10.37 Employment Agreement, dated July 26, 1997, between Gaming and Cornelius T. Klerk is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.43. Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Cornelius T. Klerk, dated January 27, 1999, is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.02. 10.38 Employment Agreement, dated August 19, 1997, between Gaming and Lee A. Galati is incorporated herein by reference from the Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.44 Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Lee Galati, dated January 27, 1999, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.04. 10.39 Employment Agreement, dated July 1, 1997, between Gaming and Jose A. Rueda is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.45. Amendment No. 2 to the Employment Agreement between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Jose A. Rueda, dated January 27, 1999 is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q for the quarter ended March 31, 1999, Part II, Item 6, Exhibit 10.03.
56
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.40 FF&E Commitment Letter, dated January 23, 1998, between Gaming and General Electric Capital Corporation is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed April 9, 1998, Part II, Item 16, Exhibit 10.46; Facilities Agreement between General Electric Capital Corporation and Gaming, dated June 26, 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 1998, Part II, Item 6, Exhibit 10.01; Amendment No. 1 to Facilities Agreement between General Electric Capital Corporation and Gaming, dated September 2, 1998; Agreement of Amendment, dated as of June 2, 2000, among General Electric Capital Corporation, GMAC Commercial Mortgage Corporation and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.03; Agreement of Amendment No. 3 dated as of July 27, 2000, among General Electric Capital Corporation, GMAC Commercial Mortgage Corporation and Aladdin Gaming, LLC is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.04; Agreement of Amendment No. 4, dated as of December 29, 2000, among General Electric Capital Corporation, GMAC Commercial Mortgage Corporation and Aladdin Gaming, LLC which is attached as an exhibit. 10.41 Intercreditor Agreement by and among The Bank of Nova Scotia, General Electric Capital Corporation and Gaming, dated as of June 30, 1998, is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 1998, Part II, Item 6, Exhibit 10.02. 10.42 Mall Commitment Letter, dated December 29, 1997, between Aladdin Bazaar, LLC and Fleet National Bank, as Administrative Agent is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.47. 10.43 Purchase Agreement, dated February 18, 1998, among Gaming Holdings, Capital, Enterprises, Aladdin Holdings, LLC, the Trust under Article Sixth u/w/o Sigmund Sommer, London Clubs and the Initial Purchasers is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, filed on April 9, 1998, Part II, Item 16, Exhibit 10.48. 10.44 Contributed Land Appraisal prepared by HVS International is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Registration Statement on Form S-1, Amendment No. 1, filed June 10, 1998, Part II, Item 16, Exhibit 10.49. 10.45 Employment Agreement dated February 25, 2000 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and William Timmins is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.45; Amendment No. 1 to the Employment Agreement of William Timmins, dated as of May 24, 2000, between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and William Timmins is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.07. 10.46 Employment Agreement dated December 29, 1999 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and David Attaway is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.46.
57
EXHIBIT NO. DESCRIPTION - --------------------- ------------------------------------------------------------ 10.47 Employment Agreement dated January 31, 2000 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and Barbara Falvey is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.47. 10.48 Employment Agreement dated March 7, 2000 between Aladdin Gaming Holdings, LLC, Aladdin Gaming, LLC and Thomas Lettero is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.48. 10.49 Letter Agreement, dated December 10, 1999 between the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs International, plc, London Clubs Nevada, Inc., Aladdin Gaming Holdings, LLC, Sommer Enterprises, LLC, Aladdin Gaming Enterprises, Inc., GAI, LLC and Aladdin Holdings, LLC. Letter Agreement, dated February 23, 2000, between the Trust under Article Sixth u/w/o Sigmund Sommer, London Clubs International plc, London Clubs Nevada, Inc., Aladdin Gaming Holdings, LLC, Sommer Enterprises, LLC, Aladdin Gaming Enterprises, Inc. and GAI, LLC is incorporated herein by reference from Enterprises (SEC File No. 333-49715) Form 10-K filed March 30, 2000, Part IV, Item 14, Exhibit 10.49. 10.50 Amendment of Agreements, effective as of July 27, 2000, by and among Aladdin Gaming, LLC, Various Financial Institutions and The Bank of Nova Scotia is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.06 10.51 Employment Agreement of Patricia Becker, dated as of July 27, 2000, between Aladdin Gaming, LLC, Aladdin Gaming Holdings, LLC and Patricia Becker is incorporated herein by reference from Enterprises' (SEC File No. 333-49715) Form 10-Q filed August 14, 2000, Part II, Item 6, Exhibit 10.08. 21.01 List of Subsidiaries which is attached as an exhibit. 99.01 Consolidated Financial Statements of Aladdin Gaming Holdings, LLC and subsidiaries which is attached as an exhibit.
58 EX-10.12 2 a2041833zex-10_12.txt EXHIBIT 10.12 EXHIBIT 10.12 ================================================================================ FIFTH AMENDMENT TO CREDIT AGREEMENT Dated as of December 29, 2000 (amending the Credit Agreement, dated as of February 26, 1998) between ALADDIN GAMING, LLC, as the Borrower, and THE BANK OF NOVA SCOTIA, as the Administrative Agent for Various Financial Institutions. ================================================================================ FIFTH AMENDMENT TO CREDIT AGREEMENT THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "FIFTH AMENDMENT TO CREDIT AGREEMENT") is dated as of December 29, 2000, by and between ALADDIN GAMING, LLC, a Nevada limited-liability company (the "BORROWER") and THE BANK OF NOVA SCOTIA, as administrative agent (together with any successor thereto in such capacity, the "ADMINISTRATIVE AGENT") for the various financial institutions as are or may become parties hereto (collectively, the "LENDERS"). In consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Lenders, the Administrative Agent, Merrill Lynch Capital Corporation, as the syndication agent for the Lenders, and CIBC Oppenheimer Corp., as the documentation agent for the Lenders, have heretofore entered into (v) that certain Credit Agreement (the "CA") dated as of February 26, 1998, (w) that certain First Amendment to Credit Agreement (the "FIRST AMENDMENT TO CREDIT AGREEMENT") dated as of January 29, 1999, (x) that certain Second Amendment to Credit Agreement (the "SECOND AMENDMENT TO CREDIT AGREEMENT") dated as of April 5, 1999, effective as of March 10, 1999, (y) that certain Third Amendment to Credit Agreement (the "THIRD AMENDMENT TO CREDIT AGREEMENT") dated as of June 2, 2000 and (z) that certain Fourth Amendment to Credit Agreement (the "FOURTH AMENDMENT TO CREDIT AGREEMENT") dated as of July 27, 2000 (the CA, as amended by the First Amendment to Credit Agreement, the Second Amendment to Credit Agreement, the Third Amendment to Credit Agreement and the Fourth Amendment to Credit Agreement shall be referred to herein as the "CREDIT AGREEMENT"); and WHEREAS, SECTION 2.3.4 of the CA, as amended by CLAUSE (h) of SECTION 2.1 of the Third Amendment to Credit Agreement, provides, in relevant part, that the Borrower may request an additional borrowing of a loan deemed to have been made as a Term A Loan, a Term B Loan or a Term C Loan in an aggregate amount not to exceed $5,000,000 by any Lender which agrees to make such Loan; and 1 WHEREAS, Scotiabank, as one of the Lenders, has agreed to make such additional loan as a Term A Loan in the amount of $5,000,000, subject to the terms of this Fifth Amendment to Credit Agreement and the other terms and provisions of the Loan Documents; and WHEREAS, each of the parties hereto is willing, on the terms and subject to the conditions hereinafter set forth, to so amend the Credit Agreement. NOW, THEREFORE, in consideration of the agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION I.1. CERTAIN DEFINED TERMS. The following terms (whether or not italicized) when used in this Fifth Amendment to Credit Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings: "EFFECTIVE DATE" is defined in SECTION 3.1. "FIFTH AMENDMENT TO CREDIT AGREEMENT" is defined in the PREAMBLE. "FIRST AMENDMENT TO CREDIT AGREEMENT" is defined in the FIRST RECITAL. "FOURTH AMENDMENT TO CREDIT AGREEMENT" is defined in the FIRST RECITAL. "SECOND AMENDMENT TO CREDIT AGREEMENT" is defined in the FIRST RECITAL. "THIRD AMENDMENT TO CREDIT AGREEMENT" is defined in the FIRST RECITAL. SECTION I.2. OTHER DEFINED TERMS; CONSTRUCTION. For purposes of this Fifth Amendment to Credit Agreement, capitalized terms used but not defined herein shall have the meanings assigned to them in the Credit Agreement, as amended by this Fifth Amendment to Credit Agreement, and the rules of construction set forth in ARTICLE I of the CA shall apply to this Fifth Amendment to Credit Agreement. ARTICLE II AMENDMENTS SECTION II.1. AMENDMENTS. The parties hereto hereby agree as follows: 2 (a) The introductory clause of the FIFTH RECITAL in the CA shall be deemed to be deleted in its entirety and the following shall be substituted in its place: "WHEREAS, the Borrower expects to fund the costs to construct the Hotel/Casino Component and pay for the Equipment Component and the Borrower's expenses, if any, with respect to the Energy Project Component, which are expected pursuant to the Main Project Budget to cost $921,469,139 in the aggregate, by". (b) CLAUSE (e) of the FIFTH RECITAL in the CA shall be deemed to be deleted in its entirety and the following CLAUSE (e) shall be substituted in its place: "(e) obtaining Loans from the Lenders in an aggregate amount of $458,750,000, all as further described in the following recital;" (c) CLAUSE (a) of the SIXTH RECITAL in the CA shall be deemed to be deleted in its entirety and the following CLAUSE (a) shall be substituted in its place: "(a) Term A Loans from the Term A Lenders in the aggregate principal amount not exceed $134,750,000;" (d) CLAUSE (b) of SECTION 3.1.1 of the Credit Agreement, as amended by CLAUSE (gg) of SECTION 3.1 of the Fourth Amendment to Credit Agreement, shall be deemed to be deleted in its entirety and the following CLAUSE (b) shall be substituted in its place: "(b) The principal amount of the Term A Loans, the Term B Loans, the Term C Loans and the Term D Loans shall be amortized (the "SCHEDULED AMORTIZATION") on the dates and in the amounts set forth on SCHEDULE II annexed to the Fifth Amendment to Credit Agreement." ARTICLE III CONDITIONS PRECEDENT AND COVENANT SECTION III.1. CONDITIONS TO EFFECTIVENESS. This Fifth Amendment to Credit Agreement shall be and become effective on the date (the "EFFECTIVE DATE") on which each of the following conditions precedent shall have been satisfied. (a) DELIVERIES. The Administrative Agent shall have received counterparts of (i) the Ratification and Reaffirmation executed by Authorized Representatives of each of 3 the parties thereto; (ii) this Fifth Amendment to Credit Agreement executed by Authorized Representatives of the Borrower and the Administrative Agent; (iii) all documentation required by the Lenders to evidence and secure the additional Term A Loan; (iv) a consent from GECC to the execution and delivery hereof in form and content satisfactory to the Administrative Agent; and (v) delivery of such other items required by the Administrative Agent or any of the Lenders. (b) INCUMBENCY, ETC. The Administrative Agent shall have received (with copies for each Lender) a certificate, dated as of the date of the Fifth Amendment to Credit Agreement, of an Authorized Representative of (i) the Borrower certifying (x) as to the incumbency and signatures of the Person or Persons authorized to execute and deliver this Fifth Amendment to Credit Agreement and any instruments or agreements required hereunder, (y) as to an attached copy of one or more resolutions or other authorizations of the manager of the Borrower certified by the Authorized Representative of such manager as being in full force and effect on the date hereof, authorizing the execution, delivery and performance of this Fifth Amendment to Credit Agreement, the additional Term A Note and any instruments or agreements required hereunder, and (z) that the Organizational Documents of the Borrower have not been modified since the date on which they were last delivered to the Administrative Agent, (ii) each signatory to the Ratification and Reaffirmation certifying (x) as to the incumbency and signatures of the Person or Persons authorized to execute and deliver the Ratification and Reaffirmation on behalf of such signatory, (y) as to an attached copy of one or more resolutions or other authorizations of (A) the Board of Directors certified by the Authorized Representative of such signatory or (B) the manager of such signatory certified by the Authorized Representative of such manager, as applicable, each as being in full force and effect on the 4 date hereof, authorizing the execution, delivery and performance of the Ratification and Reaffirmation, and (z) that the Organizational Documents of such signatory have not been modified since the date on which they were last delivered to the Administrative Agent, upon which certificate the Administrative Agent and each Lender (collectively, the "FINANCING PARTIES") may conclusively rely until it shall have received a further certificate of an Authorized Representative of the Borrower canceling or amending such prior certificate. (c) FEES. All reasonable fees and costs and expenses of Mayer, Brown & Platt and other professionals employed by the Administrative Agent and all other reasonable expenses of the Administrative Agent in connection with the negotiation, execution and delivery of this Fifth Amendment to Credit Agreement and the transactions contemplated herein shall have been paid in full. (d) SATISFACTORY LEGAL FORM. Each Financing Party and its counsel shall have received all information, approvals, opinions, documents or instruments as each Financing Party or its counsel may have reasonably requested, and all documents executed or submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory in form and substance to each Financing Party and its counsel. (e) DEFAULT. After giving effect to this Fifth Amendment to Credit Agreement the following statements shall be true and correct: (i) to the best knowledge of the Borrower, no act or condition exists which, with the giving of notice or passage of time would constitute a "DEFAULT" or "EVENT OF DEFAULT" (as defined in the Credit Agreement, the GECC Facilities Agreement and the Discount Note Indenture) has occurred and is continuing as of the date hereof and (ii) no material adverse change in the financial condition, business, property, prospects or ability of the Borrower to perform in all material respects its obligations under any Operative Document or any of the documents evidencing and securing the FF&E Financing to which it is a party. (f) CONSENTS AND APPROVALS. All approvals and consents required to be taken, given or obtained, as the case may be, by or from any Governmental Instrumentality or another Person, or by or from any trustee (including, without limitation, GECC and the Discount Note Indenture Trustee) or holder of any indebtedness or obligation of the Borrower, that are necessary or, in the reasonable opinion of the Administrative Agent, advisable in connection with the execution, delivery and performance of this Fifth Amendment to Credit Agreement by all parties hereto, shall have been taken, given or 5 obtained, as the case may be, shall be in full force and effect and the time for appeal with respect to any thereof shall have expired (or, if an appeal shall have been taken, the same shall have been dismissed) and shall not be subject to any pending proceedings or appeals (administrative, judicial or otherwise) and shall be in form and substance satisfactory to the Administrative Agent. (g) DELIVERY OF FIFTH AMENDMENT TO CREDIT AGREEMENT, ETC. The Borrower shall have delivered this Fifth Amendment to Credit Agreement to all Persons entitled under the Operative Documents to receive delivery hereof and thereof, as the case may be, and arranged for or caused the recording and/or filing thereof, as required. (h) OPINIONS. The Administrative Agent shall have received such opinions of counsel as it deems necessary, dated as of the date of the Fifth Amendment to Credit Agreement and addressed to the Administrative Agent, the Lenders and, if applicable, the Disbursement Agent, which shall be in form and substance satisfactory to the Administrative Agent. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce the Administrative Agent to enter into this Fifth Amendment to Credit Agreement on behalf of the Lenders, the Borrower hereby reaffirms, as of the date of this Fifth Amendment to Credit Agreement, its representations and warranties contained in Article VI of the Credit Agreement and the Disbursement Agreement and additionally represents and warrants unto each Financing Party as set forth in this ARTICLE IV. SECTION IV.1. MATTERS PERTAINING TO THE GECC FACILITIES AGREEMENT AND THE DISCOUNT NOTE INDENTURE. The Borrower has performed all of its obligations under the GECC Facilities Agreement and the Discount Note Indenture and, after giving effect to this Fifth Amendment to Credit Agreement, no "DEFAULT" or "EVENT OF DEFAULT" exists under the GECC Facilities Agreement (without giving effect to the GECC Intercreditor Agreement) or the Discount Note Indenture. SECTION IV.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution, delivery and performance by the Borrower of this Fifth Amendment to Credit Agreement, the Term A Note and each other document executed or to be executed by it in connection with this Fifth Amendment to Credit Agreement are within the Borrower's powers, have been duly authorized by all necessary action, and do not (a) contravene the Borrower's Organizational Documents; 6 (b) contravene any contractual restriction binding on or affecting any of the Aladdin Parties and/or the London Clubs Parties; (c) contravene any court decree or order or Legal Requirement binding on or affecting any of the Aladdin Parties and/or the London Clubs Parties; or (d) result in, or require the creation or imposition of, any Lien on any property of the Borrower, any of the other Aladdin Parties, any other Person which executes and delivers documents with respect to the Fifth Amendment to Credit Agreement in favor of the Lenders, except as expressly permitted by the Operative Documents, the GECC Facilities Agreement, the Discount Note Indenture and other Instruments binding on such Persons, as the case may be, and the Financing Parties may conclusively rely on such representation and warranty. SECTION IV.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower or any other Person of this Fifth Amendment to Credit Agreement or any other document to be executed by it or any other Person in connection with this Fifth Amendment to Credit Agreement. SECTION IV.4. VALIDITY, ETC. This Fifth Amendment to Credit Agreement constitutes, and each other document executed by the Borrower in connection with this Fifth Amendment to Credit Agreement, on the due execution and delivery thereof, will constitute, the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors rights generally and by general principles of equity. SECTION IV.5. LIMITATION. Except as expressly provided hereby, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement and each other Operative Document shall remain unamended and unwaived and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. The amendments and modifications set forth herein shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement, the GECC Facilities Agreement, any Operative Document, the Discount Note Indenture or other Instrument referred to therein or herein, or of any transaction or further or future action on the part of the Borrower or any other Person which would require the consent of the Agents, the Lenders, GECC or the Discount Note Indenture Trustee or any other Person. 7 SECTION IV.6. OFFSETS AND DEFENSES. The Borrower has no offsets or defenses to its obligations under the Loan Documents and no claims or counterclaims against any of the Agents, the Lenders or the Construction Consultant. SECTION IV.7. RELEASE BY THE BORROWER. (a) As an inducement to the Administrative Agent to enter into this Fifth Amendment to Credit Agreement on behalf of the Lenders, the Borrower hereby releases and discharges the Lenders and the Agents, and their respective successors and assigns, and all officers, directors, employees, agents, representatives, insurers and attorneys of each of them from all actions, counterclaims, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands whatsoever, in law, admiralty or equity, against the Lenders, the Agents and/or their successors and assigns which the Borrower ever had, now has or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of this Fifth Amendment to Credit Agreement (the "RELEASED CLAIMS"). (b) In order to induce the Administrative Agent to accept the release set forth herein on behalf of the Lenders, the Borrower represents that: (i) such release constitutes a legal, valid and binding obligation of the Borrower, enforceable against it in accordance with its terms. The execution and delivery of, and the performance and compliance by the Borrower with such release will not conflict with, or constitute on the part of the Borrower a violation or breach of, or a default under, and will not require any authorization, consent, approval or other action by, or any notice to, or filing with any court or administrative body or any other Person pursuant to, any mortgage, deed of trust, loan agreement, trust agreement or other agreement or instrument to which the Borrower or any of its property is subject or any laws and other governmental requirements; and (ii) the Borrower (A) has not sold, transferred, conveyed, abandoned or otherwise disposed of any of the Released Claims, whether or not known, suspected or claimed that the Borrower has, had or may have, against the Lenders, any Agent and/or any of their successors, predecessors (including, without limitation, all predecessors by virtue of merger) and assigns, as the case may be and (B) has sought the advice of counsel with respect to the execution and delivery of this Fifth Amendment to Credit Agreement and the Borrower understands the legal implications with respect to the release set forth herein and the other documents executed by the Borrower in connection herewith. 8 (c) The Borrower hereby acknowledges that it may hereafter discover facts in addition to or different from those which it now knows or believes to be true with respect to the subject matter of the release set forth herein, but that it is the Borrower's intention to, and it does, hereby fully, finally and forever settle the Released Claims; in furtherance of such intention, the Borrower acknowledges that the release set forth herein shall be and remain in effect as a full and complete release, notwithstanding the subsequent discovery or existence of any such additional or different facts. ARTICLE V MISCELLANEOUS PROVISIONS SECTION V.1. RESERVATION OF RIGHTS. The Borrower agrees that neither this Fifth Amendment to Credit Agreement nor the making of any Advance by the Disbursement Agent and the Administrative Agent's consent thereto either before or after the date hereof shall constitute (w) an approval of all or any portion of any Advance Request, (x) a waiver or forbearance by the Disbursement Agent or the Administrative Agent under any of the Loan Documents, (y) the acceptance by the Disbursement Agent or the Administrative Agent of any course of conduct by the Borrower, the Completion Guarantors or any other Person or (z) an agreement by the Administrative Agent to amend any of the Loan Documents without all required approvals including, without limitation, approval from the Required Lenders and GECC, as applicable. The Borrower further agrees that the Administrative Agent and the Disbursement Agent reserve all rights, remedies and options under the Loan Documents to require the Borrower to satisfy in all respects the conditions relating to each Advance and perform all of its obligations under the Loan Documents which are then due and owing or are susceptible of performance, as the case may be. SECTION V.2. RATIFICATION OF AND REFERENCES TO THE CREDIT AGREEMENT. This Fifth Amendment to Credit Agreement shall be deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as amended by this Fifth Amendment to Credit Agreement, shall continue in full force and effect and is hereby ratified, approved and confirmed in each and every respect. All references to the Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Credit Agreement, as amended by this Fifth Amendment to Credit Agreement. SECTION V.3. HEADINGS. The various headings of this Fifth Amendment to Credit Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Fifth Amendment to Credit Agreement or any provisions hereof. 9 SECTION V.4. APPLICABLE LAW. THIS FIFTH AMENDMENT TO CREDIT AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS FIFTH AMENDMENT TO CREDIT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE. SECTION V.5. CROSS-REFERENCES. References in this Fifth Amendment to Credit Agreement to any Article or Section are, unless otherwise specified, to such Article or Section of this Fifth Amendment to Credit Agreement. SECTION V.6. LOAN DOCUMENT. This Fifth Amendment to Credit Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with the terms and provisions of the Credit Agreement. SECTION V.7. SUCCESSORS AND ASSIGNS. This Fifth Amendment to Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SECTION V.8. COUNTERPARTS. This Fifth Amendment to Credit Agreement may be executed by the parties hereto in any number of counterparts and on separate counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. 10 IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amendment to Credit Agreement as of the day and year first above written. ALADDIN GAMING, LLC By: --------------------------------------- Name: Title: THE BANK OF NOVA SCOTIA, as the Administrative Agent By: --------------------------------------- Name: Title: 11
Schedule II To Fifth Amendment to Credit Agreement - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- SCHEDULED SCHEDULED SCHEDULED SCHEDULED REPAYMENT OF REPAYMENT OF TERM REPAYMENT OF REPAYMENT OF DATE TERM A LOAN B LOAN TERM C LOAN TERM D LOAN ($136MM) ($114MM) ($160MM) ($50MM) - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of First Quarter following the Conversion Date 4.00 0.30 0.40 None - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Second Quarter thereafter 4.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Third Quarter thereafter 4.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Fourth Quarter thereafter 4.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Fifth Quarter thereafter 5.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Sixth Quarter thereafter 5.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Seventh Quarter thereafter 5.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Eighth Quarter thereafter 5.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Ninth Quarter thereafter 7.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Tenth Quarter thereafter 7.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Eleventh Quarter thereafter 7.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twelfth Quarter thereafter 7.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Thirteenth Quarter thereafter 8.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Fourteenth Quarter thereafter 8.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Fifteenth Quarter thereafter 8.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Sixteenth Quarter thereafter 8.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Seventeenth Quarter thereafter 10.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Eighteenth Quarter thereafter 10.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Nineteenth Quarter thereafter 10.00 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- --------------
12
- ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- SCHEDULED SCHEDULED SCHEDULED SCHEDULED REPAYMENT OF REPAYMENT OF TERM REPAYMENT OF REPAYMENT OF DATE TERM A LOAN B LOAN TERM C LOAN TERM D LOAN ($136MM) ($114MM) ($160MM) ($50MM) - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twentieth Quarter thereafter 8.75 0.30 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-First Quarter thereafter 17.00 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Second Quarter thereafter 17.00 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Third Quarter thereafter 17.00 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Fourth Quarter thereafter 17.00 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Fifth Quarter thereafter 20.00 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Sixth Quarter thereafter 20.00 0.40 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Seventh Quarter thereafter 23.80 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Eighth Quarter thereafter 23.80 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Twenty-Ninth Quarter thereafter 25.50 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Thirtieth Quarter thereafter 25.50 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Thirty-First Quarter thereafter 25.50 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Thirty-Second Quarter thereafter 25.50 0.125 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Thirty-Third Quarter thereafter 25.50 - ------------------------------------------------------- ------------------ ------------------- ----------------- -------------- End of Thirty-Fourth Quarter thereafter 20.625 - ------------------------------------------------------- ------------------ ------------------- ----------------- --------------
13 EX-10.19 3 a2041833zex-10_19.txt EXHIBIT 10.19 EXHIBIT 10.19 LEASE TERMINATION AGREEMENT This Lease Termination Agreement ("Agreement") is entered into as of ______________, 2000 (the "Effective Date"), by and between ALADDIN GAMING, LLC, a Nevada limited liability company (the "Lessor") and ALADDIN MUSIC HOLDINGS, LLC, a Nevada limited liability company (the "Lessee"), based upon the following recitals. WHEREAS, Lessor is the owner in fee simple of certain real property located at 3667 Las Vegas Boulevard South, Clark County, Nevada; and WHEREAS, Lessor and Lessee did enter into that certain Lease, dated as of February 26, 1998, by and between Lessor and Lessee (the "Lease"), whereby Lessor did lease to Lessee and Lessee did lease from Lessor the Demised Premises (as defined therein); and WHEREAS, Lessor and Lessee wish to give effect to Section 7.1.19(c), of that certain Fourth Amendment to Credit Agreement, dated as of July 20, 2000, amending that certain Credit Agreement dated as of February 26, 1998, by and among Lessor, Various Financial Institutions, The Bank of Nova Scotia and Merrill Lynch Capital Corporation, which provides, among other things, that after the Demised Premises are created as a separate legal parcel, Lessor and Lessee shall terminate the Lease. NOW, THEREFORE, in consideration of the terms, covenants, conditions and provisions hereinafter set forth and other good and valuable consideration, the receipt and sufficiency are hereby acknowledged, the parties hereby agree to terminate the Lease, subject to the following terms and conditions: 1. TERMINATION OF LEASE. As of the Effective Date, and subject to the rights and obligations of the parties as set forth herein, the Lease shall be terminated and of no further force or effect, and Lessor hereby expressly assumes all of the covenants, duties and obligations of Lessee under that certain Construction, Operation and Reciprocal Easement Agreement, dated as of February 26, 1998, by and among Lessor, Aladdin Bazaar, LLC and Lessee, as amended to date (the "REA"). Notwithstanding the foregoing, the termination of the Lease shall be expressly conditioned (which conditions are conditions precedent) as follows: (a) This Agreement shall be fully executed by the parties; and (b) Lessee shall have paid in full, as of the Effective Date, all rents of any kind and other fees and charges due and owing under the Lease, including without limitation Lessee's portion of all taxes, assessments (general and special), utilities and expenses. 2. REPRESENTATIONS AND WARRANTIES OF LESSOR. Lessor hereby represents and warrants, which representations and warranties shall be true and correct as of the Effective Date (unless otherwise specified below): (a) That Lessor is the fee simple owner of the Demised Premises and is the Lessor under the Lease. (b) That the execution, delivery and performance of this Agreement by Lessor will not, with or without the giving of notice and/or the passage of time, violate or constitute a default under any provision of law, any administrative regulation or any judicial, administrative or arbitration order, award, judgment or decree applicable to Lessor or the Demised Premises or conflict with any other agreement or obligation by which Lessor or the Demised Premises are bound. (c) That there are no actions or claims pending or to Lessor's knowledge threatened before any court, governmental agency, arbitrator or other tribunal which would prevent Lessor from completing the transactions provided herein in accordance with the terms of this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents and warrants, which representations and warranties shall be true and correct as of the Effective Date: (a) That Lessee is the lessee of the Demised Premises and has not heretofore assigned, transferred or sublet its interest under the Lease, except as provided for in the Lease. (b) That the execution, delivery and performance of this Agreement by Lessee will not, with or without the giving of notice and/or the passage of time, violate or constitute a default under any provision of law, any administrative regulation or any judicial, administrative or arbitration order, award, judgment or decree applicable to Lessee or the Demised Premises or conflict with, violate, result in a breach or termination of or cause a default under any other agreement or obligation by which Lessee or the Demised Premises are bound. (c) That there are no actions or claims pending or to Lessee's knowledge threatened before any court, governmental agency, arbitrator or other tribunal which would prevent Lessee from completing the transactions provided herein in accordance with the terms of this Agreement. 4. SURVIVAL PROVISIONS. All Lease provisions, including without limitation Article V (Environmental Matters), Article VI (Surrender of Premises) and Article XXII (Indemnity and Liability), which state that they shall survive the termination of the Lease, shall, notwithstanding this Agreement, survive as set forth in the Lease. 5. INDEMNIFICATIONS. From and after the Effective Date, Lessee shall indemnify, defend and hold Lessor harmless from and against any and all demands, liabilities, judgments or expenses (including without limitation attorneys' fees and expenses) arising out of or relating to Lessee's possession and/or use of the Demised Premises under the Lease prior to the Effective Date. From and after the Effective Date, Lessor shall indemnify, defend and hold Lessee harmless from and against any and all demands, liabilities, judgments or expenses (including without limitation attorneys' fees and expenses) arising out of or relating to Lessor's possession and/or use of the Demised Premises under this Agreement after the Effective Date. From and after the execution hereof by both parties, each party shall indemnify, defend and hold the other party harmless from and against any and all claims, demands, liabilities, judgments or expenses (including without limitation attorneys' fees and expenses) arising out of or resulting from said party's breach of any of its representations, warranties or covenants set forth herein. The indemnifications set forth herein shall survive indefinitely irrespective of any other limitation of liability contained herein or in law or equity. 6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the termination of the lease and shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns, and may not be waived, modified, or amended, except in a writing signed in advance by all of the parties hereto. 7. SEVERABILITY. The invalidity of any provision of this Agreement, or portion of a provision, shall not affect the validity of any other provision of this Agreement, or the remaining portion of the applicable provision. 8. GOVERNING LAW. This Agreement shall be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the internal laws of the State of Nevada applicable to contracts made in that State. 9. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, including without limitation third party beneficiary rights. 10. TIME OF ESSENCE. Time is of the essence of this Agreement and of all of the terms and conditions hereof. 11. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument. Facsimile copies hereof and facsimile signatures hereon shall have the force and effect of originals. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above-written. [Signatures follow] "Lessor" ALADDIN GAMING, LLC, a Nevada limited liability company By: -------------------------------- Richard Goeglein, President, CEO "Lessee" ALADDIN MUSIC HOLDINGS, LLC, a Nevada limited liability company By: -------------------------------- Jack Sommer, Manager EX-10.20 4 a2041833zex-10_20.txt EXHIBIT 10.20 EXHIBIT 10.20 LEASE TERMINATION AGREEMENT This Lease Termination Agreement ("Agreement") is entered into as of ______________, 2000 (the "Effective Date"), by and between ALADDIN GAMING, LLC, a Nevada limited liability company (the "Lessor") and ALADDIN BAZAAR, LLC, a Delaware limited liability company (the "Lessee"), based upon the following recitals. WHEREAS, Lessor is the owner in fee simple of certain real property located at 3667 Las Vegas Boulevard South, Clark County, Nevada; and WHEREAS, Lessor and Lessee did enter into that certain Lease, dated as of February 26, 1998, by and between Lessor and Lessee (the "Lease"), whereby Lessor did lease to Lessee and Lessee did lease from Lessor the Demised Premises (as defined therein); and WHEREAS, Lessor and Lessee wish to give effect to Section 1.3(iii) of the Lease as well as to Section 7.1.19(b), of that certain Credit Agreement, dated as of February 26, 1998 (as amended to date), by and among Lessor, Various Financial Institutions, The Bank of Nova Scotia and Merrill Lynch Capital Corporation, which provides, among other things, that after the Demised Premises are created as a separate legal parcel, Lessor and Lessee shall terminate the Lease in connection with the transfer of fee simple title to the Demised Premises to Lessee. NOW, THEREFORE, in consideration of the terms, covenants, conditions and provisions hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree to terminate the Lease, subject to the following terms and conditions: 1. TERMINATION OF LEASE. As of the Effective Date, and subject to the rights and obligations of the parties as set forth herein, the Lease shall be terminated and of no further force or effect. Notwithstanding the foregoing, the termination of the Lease shall be expressly conditioned (which conditions are conditions precedent) as follows: (a) This Agreement shall be fully executed by the parties; and (b) Fee simple title to the Demised Premises shall be conveyed to Lessee; and (c) Lessee shall have paid in full, as of the Effective Date, all rents of any kind and other fees and charges due and owing under the Lease, including without limitation Lessee's portion of all taxes, assessments (general and special), utilities and expenses. 2. REPRESENTATIONS AND WARRANTIES OF LESSOR. Lessor hereby represents and warrants, which representations and warranties shall be true and correct as of the Effective Date (unless otherwise specified below): (a) That Lessor is the fee simple owner of the Demised Premises and is the Lessor under the Lease. (b) That the execution, delivery and performance of this Agreement by Lessor will not, with or without the giving of notice and/or the passage of time, violate or constitute a default under any provision of law, any administrative regulation or any judicial, administrative or arbitration order, award, judgment or decree applicable to Lessor or the Demised Premises or conflict with any other agreement or obligation by which Lessor or the Demised Premises are bound. (c) That there are no actions or claims pending or to Lessor's knowledge threatened before any court, governmental agency, arbitrator or other tribunal which would prevent Lessor from completing the transactions provided herein in accordance with the terms of this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents and warrants, which representations and warranties shall be true and correct as of the Effective Date: (a) That Lessee is the lessee of the Demised Premises and has not heretofore assigned, transferred or sublet its interest under the Lease, except as provided for in the Lease. (b) That the execution, delivery and performance of this Agreement by Lessee will not, with or without the giving of notice and/or the passage of time, violate or constitute a default under any provision of law, any administrative regulation or any judicial, administrative or arbitration order, award, judgment or decree applicable to Lessee or the Demised Premises or conflict with, violate, result in a breach or termination of or cause a default under any other agreement or obligation by which Lessee or the Demised Premises are bound. (c) That there are no actions or claims pending or to Lessee's knowledge threatened before any court, governmental agency, arbitrator or other tribunal which would prevent Lessee from completing the transactions provided herein in accordance with the terms of this Agreement. 4. SURVIVAL PROVISIONS. All Lease provisions, including without limitation Article IV (Surrender of Premises), which state that they shall survive the termination of the Lease, shall, notwithstanding this Agreement, survive as set forth in the Lease. 5. INDEMNIFICATIONS. From and after the Effective Date, Lessee shall indemnify, defend and hold Lessor harmless from and against any and all demands, liabilities, judgments or expenses (including without limitation attorneys' fees and expenses) arising out of or relating to Lessee's possession and/or use of the Demised Premises under the Lease prior to the Effective Date. From and after the execution hereof by both parties, each party shall indemnify, defend and hold the other party harmless from and against any and all claims, demands, liabilities, judgments or expenses (including without limitation attorneys' fees and expenses) arising out of or resulting from said party's breach of any of its representations, warranties or covenants set forth herein. The indemnifications set forth herein shall survive indefinitely irrespective of any other limitation of liability contained herein or in law or equity. 6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the termination of the lease and shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns, and may not be waived, modified, or amended, except in a writing signed in advance by all of the parties hereto. 7. SEVERABILITY. The invalidity of any provision of this Agreement, or portion of a provision, shall not affect the validity of any other provision of this Agreement, or the remaining portion of the applicable provision. 8. GOVERNING LAW. This Agreement shall be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the internal laws of the State of Nevada applicable to contracts made in that State. 9. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, including without limitation third party beneficiary rights. 10. TIME OF ESSENCE. Time is of the essence of this Agreement and of all of the terms and conditions hereof. 11. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument. Facsimile copies hereof and facsimile signatures hereon shall have the force and effect of originals. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above-written. "Lessor" ALADDIN GAMING, LLC, a Nevada limited liability company By: ---------------------------------- Richard Goeglein Its: President, CEO [Signatures continue on next page] "Lessee" ALADDIN BAZAAR, LLC, a Nevada limited liability company By: Aladdin Bazaar Holdings, LLC, a Nevada limited liability company Its: Member By: Aladdin Management Corporation, a Nevada corporation Its: Manager By: ------------------------- Jack Sommer Its: Vice President By: TH Bazaar Centers Inc., a Delaware corporation Its: Member By: ------------------------- Its: ------------------------- By: ------------------------- Its: ------------------------- EX-10.40 5 a2041833zex-10_40.txt EXHIBIT 10.40 EXHIBIT 10.40 AGREEMENT OF AMENDMENT NO. 4 THIS AGREEMENT OF AMENDMENT NO. 4 (this "Amendment") is made as of the 28th day of December, 2000, among GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND AS AGENT FOR CERTAIN PARTICIPANTS ("GE Capital"), GMAC COMMERCIAL MORTGAGE CORPORATION ("GMAC CMC"), and ALADDIN GAMING, LLC ("Aladdin Gaming"). GE Capital and Aladdin Gaming have heretofore executed that certain Facilities Agreement dated as of June 26, 1998, as amended (the "Facilities Agreement"), and pursuant thereto that certain Master Lease Agreement dated as of June 26, 1998, as amended (the "Lease Agreement"; and together with the Facilities Agreement being sometimes hereinafter collectively referred to as the "Agreements"). Capitalized terms used herein without definition shall have the meaning given them in the Agreements. GE Capital has heretofore assigned to GMAC CMC certain of its right, title, interest and obligations pursuant to the Agreements. NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, the parties agree as follows: SECTION 1. CONSENT TO AMENDMENTS AND CONFIRMATION. Section 1.1. GE Capital and GMAC CMC hereby consent to the amendments of the Senior Credit Agreement specified in Article II of that certain Fifth Amendment to Senior Credit Agreement dated as of December 29, 2000 (the "Fifth Amendment"), by and among Aladdin Gaming, the various financial institutions as are or may become parties thereto, The Bank of Nova Scotia, as Administrative Agent for the Lenders (the "Administrative Agent"), Merrill Lynch Capital Corporation, as Syndication Agent for the Lenders, and CIBC Oppenheimer Corp., as Documentation Agent for the Lenders. SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall be and become effective on the date (the "Effective Date") on which each of the following conditions precedent shall have been satisfied. Section 2.1. EXECUTION OF DOCUMENTS. GE Capital and GMAC CMC shall have received counterparts of (i) this Amendment executed by Authorized Representatives of Aladdin Gaming, the Administrative Agent, GE Capital and GMAC CMC; (ii) the Fifth Amendment executed by Authorized Representatives of the parties thereto; (iii) delivery of such other items required by GE Capital and GMAC CMC. Section 2.2. INCUMBENCY, ETC. GE Capital and GMAC CMC shall have received a certificate, dated as of the date of this Amendment, of an Authorized Representative of (i) Aladdin Gaming certifying: (x) as to the incumbency and signatures of the Person or Persons 1 authorized to execute and deliver this Amendment and any instruments or agreements required hereunder, (y) as to an attached copy of one or more resolutions or other authorizations of the manager of Aladdin Gaming certified by the Authorized Representative of such manager as being in full force and effect on the date hereof, authorizing the execution, delivery and performance of this Amendment and any instruments or agreements required hereunder, and (z) that the Organizational Documents of Aladdin Gaming have not been modified other than by the letter agreement dated December 10, 1999, a true, correct and complete copy of which shall have been delivered to GE Capital and GMAC CMC, upon which certificates the Financing Parties may conclusively rely until they shall have received a further certificate of an Authorized Representative of Aladdin Gaming canceling or amending such prior certificate. Section 2.3. FEES. All reasonable fees and costs and expenses of Ober, Kaler, Grimes & Shriver and other professionals employed by the Financing Parties and all other reasonable expenses of the Financing Parties in connection with the negotiation, execution and delivery of this Amendment and the transactions contemplated herein shall have been paid in full. Section 2.4. SATISFACTORY LEGAL FORM. Each Financing Party and its counsel shall have received all information, approvals, opinions, documents or instruments as each Financing Party or its counsel may have reasonably requested, and all documents executed or submitted pursuant hereto by or on behalf of Aladdin Gaming shall be satisfactory in form and substance to each Financing Party and its counsel. Section 2.5. DEFAULT. After giving effect to this Amendment and the Fourth Amendment the following statements shall be true and correct: (i) to the best knowledge of Aladdin Gaming, no act or condition exists which, with the giving of notice or passage of time would constitute a "DEFAULT" or "EVENT OF DEFAULT" (as defined in the Senior Credit Agreement, the Discount Note Indenture, or in the Agreements) has occurred and is continuing as of the date hereof, and (ii) no material adverse change in (A) the financial condition, business, property, prospects or ability of Aladdin Gaming to perform in all material respects its obligations under any Operative Document, or (B) the financial condition, business, property, prospects and ability of the Design/Builder, Fluor or the Contractors to perform in all material respects their respective obligations under any Operative Document to which it is a party has occurred since the Closing Date. Section 2.6. CONSENTS AND APPROVALS. All approvals and consents required to be taken, given or obtained, as the case may be, by or from any Governmental Instrumentality or another Person, or by or from any trustee (including, without limitation, the Financing Parties and the Administrative Agent for itself and on behalf of the Lenders and the Discount Note Indenture Trustee) or holder of any indebtedness or obligation of Aladdin Gaming, that are necessary or, in the reasonable opinion of GE Capital and GMAC CMC, advisable in connection 2 with the execution, delivery and performance of this Amendment by all parties hereto, shall have been taken, given or obtained, as the case may be, shall be in full force and effect and the time for appeal with respect to any thereof shall have expired (or, if an appeal shall have been taken, the same shall have been dismissed) and shall not be subject to any pending proceedings or appeals (administrative, judicial or otherwise) and shall be in form and substance satisfactory to GE Capital and GMAC CMC. Section 2.7. DELIVERY OF AMENDMENT. Aladdin Gaming shall have delivered this Amendment to all Persons entitled under the Operative Documents to receive delivery hereof. Section 2.8. OPINIONS. GE Capital and GMAC CMC shall have received such opinions of counsel as it deems necessary, dated as of the date of this Amendment and addressed to the Financing Parties, which shall be in form and substance satisfactory to the Financing Parties. SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce each Financing Party to enter into this Amendment, Aladdin Gaming hereby reaffirms, as of the Effective Date, its representations and warranties contained in Section 8 of the Facilities Agreement and additionally represents and warrants unto each Financing Party as set forth in this Section 3. Section 3.1. MATTERS PERTAINING TO THE FACILITIES AGREEMENT. (a) After giving effect to this Amendment and the Fourth Amendment and the performance by Aladdin Gaming of its obligation to keep the Main Project Budget In Balance, no "DEFAULT" or "EVENT OF DEFAULT" exists under the Senior Credit Agreement or the Agreements (without giving effect to the Intercreditor Agreement) or the Discount Note Indenture. Section 3.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution, delivery and performance by Aladdin Gaming of this Amendment and each other document executed or to be executed by it in connection with this Amendment are within Aladdin Gaming's powers, have been duly authorized by all necessary action, and do not: (a) contravene Aladdin Gaming's Organizational Documents; (b) contravene any contractual restriction binding on or affecting any of the Aladdin Parties and/or the London Clubs Parties; (c) contravene any court decree or order or Legal Requirement binding on or affecting any of the Aladdin Parties and/or the London Clubs Parties; or (d) result in, or require the creation or imposition of, any Lien on any property of Aladdin Gaming except as expressly permitted by the Operative Documents, and the Financing Parties may conclusively rely on such representations and warranties. Section 3.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by Aladdin Gaming or any other Person of this Amendment or any other document to be executed 3 by it in connection with this Amendment. Section 3.4. VALIDITY, ETC. This Amendment constitutes, and each other document executed by Aladdin Gaming in connection with this Amendment, on the due execution and delivery thereof, will constitute, the legal, valid and binding obligations of Aladdin Gaming enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors rights generally and by general principles of equity. Section 3.5. LIMITATION. Except as expressly provided hereby, all of the representations, warranties, terms, covenants and conditions of the Agreement and each other Operative Document shall remain unamended and unwaived and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. The amendments, modifications and consents set forth herein shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Agreements, any Operative Document, or other Instrument referred to therein or herein, or of any transaction or further or future action on the part of Aladdin Gaming or any other Person which would require the consent of the Financing Parties, the Administrative Agent, the Lenders, GECC or the Discount Note Indenture Trustee. Section 3.6. OFFSETS AND DEFENSES. Aladdin Gaming has no offsets or defenses to its obligations under the Operative Documents or the documents evidencing and securing the FF&E Financing and no claims or counterclaims against any of the Financing Parties, the Administrative Agent, the Lenders or the Construction Consultant. SECTION 4. MISCELLANEOUS. Section 4.1. RATIFICATION OF AND REFERENCES TO THE AGREEMENT. This Amendment shall be deemed to be an amendment to the Agreements, and the Agreements, as amended by this Amendment, shall continue in full force and effect and are hereby ratified, approved and confirmed in each and every respect. All references to the Agreements in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Agreements, as amended by this Amendment. Section 4.2. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof. Section 4.3. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE. Section 4.4. CROSS-REFERENCES. References in this Amendment to any Section are, unless otherwise specified, to such Section of this Amendment. Section 4.5. OPERATIVE DOCUMENT. This Amendment is an Operative Document executed pursuant to the Facilities Agreement and shall (unless otherwise expressly indicated 4 therein) be construed, administered and applied in accordance with the terms and provisions of the Facilities Agreement. Section 4.6. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 4.7. COUNTERPARTS. This Amendment may be executed by the parties hereto in any number of counterparts and on separate counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. Section 4.8. RESERVATION OF RIGHTS. Aladdin Gaming agrees that neither this Amendment nor the making of any Funding and GE Capital and GMAC CMC's consent thereto either before or after the date hereof shall constitute (w) an approval of all or any portion of any request for Funding, (x) a waiver or forbearance by GE Capital and GMAC CMC under any of the Operative Documents, (y) the acceptance by GE Capital and GMAC CMC of any course of conduct by Aladdin Gaming, the Completion Guarantors or any other Person, or (z) an agreement by GE Capital and GMAC CMC to amend any of the Operative Documents or waive any of the provisions thereof without a corresponding amendment of the Senior Credit Agreement or waiver from the Administrative Agent on behalf of the Lenders, as the case may be. Aladdin Gaming further agrees that GE Capital and GMAC CMC reserve all rights, remedies and options under the Operative Documents to require Aladdin Gaming to satisfy in all respects the conditions relating to each Funding and perform all of its obligations under the Operative Documents which are then due and owing or are susceptible of performance, as the case may be. 5 IN WITNESS WHEREOF, this Agreement of Amendment No. 4 has been duly executed as of the date first above written. ALADDIN GAMING, LLC GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND AS AGENT FOR CERTAIN PARTICIPANTS By: By: ------------------------------- ------------------------------- Name: Thomas A. Lettero Name: Timothy S. Shanahan Title: Senior Vice President Title: Vice President and Chief Financial Officer GMAC COMMERCIAL MORTGAGE CORPORATION By: Name: John E. Hopkins Title: Vice President PURSUANT TO SECTION 5.1(c) OF THAT CERTAIN INTERCREDITOR AGREEMENT DATED AS OF JUNE 30, 1998, BY AND AMONG THE BANK OF NOVA SCOTIA, AS ADMINISTRATIVE AGENT, GENERAL ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND AS AGENT FOR CERTAIN PARTICIPANTS, AND ALADDIN GAMING, LLC, THE UNDERSIGNED CONSENTS TO THE EXECUTION OF THE FOREGOING AMENDMENT BY ALADDIN GAMING, LLC. THE BANK OF NOVA SCOTIA, as Administrative Agent By: ------------------------------- Name: Alan Pendergast Title: Managing Director 6 EX-21.01 6 a2041833zex-21_01.txt EXHIBIT 21.01 EXHIBIT 21.01 LIST OF SUBSIDIARIES ALADDIN GAMING ENTERPRISES, INC. ALADDIN GAMING ENTERPRISES, INC. Aladdin Gaming Holdings, LLC, a Nevada limited liability company ALADDIN GAMING HOLDINGS, LLC (direct and indirect subsidiaries) Aladdin Capital Corp., a Nevada corporation Aladdin Gaming, LLC, a Nevada limited liability company Aladdin Music Holdings, LLC, a Nevada limited liability company Aladdin Music, LLC, a Nevada limited liability company Magic Lamp Merchandising, LLC, a Nevada limited liability company Corbon, LLC, a Nevada limited liability company Aladdin Resort, LLC, a Nevada limited liability company EX-99.01 7 a2041833zex-99_01.txt EXHIBIT 99.01 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Report of Independent Public Accountants To the Board of Directors and Members of Aladdin Gaming Holdings, LLC: We have audited the accompanying consolidated balance sheets of Aladdin Gaming Holdings, LLC (a Nevada limited liability company) and subsidiaries (collectively the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of operations, members' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsiblity is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aladdin Gaming Holdings, LLC as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, cash on hand and projected internally generated funds will not be sufficient to fund principal and interest payments in fiscal 2001 on the Company's debt and the Company may not be in compliance with certain debt covenants in fiscal 2001 and future periods which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. ARTHUR ANDERSEN LLP Las Vegas, Nevada April 2, 2001 19 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 (IN THOUSANDS EXCEPT MEMBERSHIP INTEREST DATA)
DECEMBER 31, DECEMBER 31, 2000 1999 ------------ ------------ ASSETS Current assets: Cash and cash equivalents................................. $ 20,209 $ 1,669 Restricted cash and cash equivalents...................... 19,414 80,471 Interest receivable restricted cash....................... -- 222 Receivables, related parties.............................. 683 8 Accounts receivables, net of allowance for doubtful accounts of $6,483 and $0 as of December 31, 2000 and 1999, respectively...................................... 30,440 1 Inventory................................................. 4,227 59 Prepaid assets............................................ 7,443 320 Restricted land to be transferred......................... -- 6,842 -------- -------- Total current assets........................................ 82,416 89,592 -------- -------- Property plant and equipment, net........................... 657,470 346,337 -------- -------- Other assets: Other assets, net of accumulated amortization of $650 and $0 as of December 31, 2000 and 1999, respectively....... 1,371 2,067 Debt issuance costs, net of accumulated amortization of $11,212 and $6,442 as of December 31, 2000 and 1999, respectively............................................ 31,595 30,704 -------- -------- Total other assets.......................................... 32,966 32,771 -------- -------- Total Assets................................................ $772,852 $468,700 ======== ======== LIABILITIES AND MEMBERS' EQUITY Current liabilities: Current portion of long-term debt......................... $ 23,950 $ 4,700 Current portion of Energy Service Obligation.............. 578 -- Accounts payable--trade................................... 12,285 2,752 Construction payable...................................... 9,424 12,193 Obligation to transfer land............................... -- 6,842 Accrued payroll and related expenses...................... 9,865 921 Accrued interest.......................................... 8,298 2,183 Other accrued expenses.................................... 27,014 1,147 -------- -------- Total current liabilities................................... 91,414 30,738 -------- -------- Long-term debt, net of discount............................. 601,821 403,393 Energy service obligation................................... 36,127 -- Related party payables and other liabilities................ 11,467 7,330 Advances to purchase membership interests................... 2 3 -------- -------- Total long-term liabilities................................. 649,417 410,726 -------- -------- Total liabilities........................................... 740,831 441,464 Commitments and Contingencies Members' equity: Preferred membership interest............................. 158,642 75,044 Common membership interest, 10,000,000 membership interests authorized; 1,000,000 common membership interests issued and outstanding as of December 31, 2000 and 1999................................................ 58,608 28,608 Accumulated Deficit....................................... (185,229) (76,416) -------- -------- Total members' equity....................................... 32,021 27,236 -------- -------- Total Liabilities and Member's Equity....................... $772,852 $468,700 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 20 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------ 2000 1999 1998 -------- -------- -------- Revenues: Casino.................................................... $ 70,529 $ -- $ -- Hotel..................................................... 37,552 -- -- Food and beverage......................................... 25,071 -- -- Entertainment and other income............................ 3,807 -- -- -------- -------- -------- Gross revenues.............................................. 136,959 -- -- Less promotional allowances............................... (12,664) -- -- -------- -------- -------- Net revenues................................................ 124,295 -- -- Costs and Expenses: Casino.................................................... 46,006 -- -- Hotel..................................................... 9,292 -- -- Food and beverage......................................... 18,143 -- -- Other operating expenses.................................. 3,290 -- -- Selling, general and administrative....................... 36,547 -- -- Pre-opening expenses...................................... 28,924 $ 11,735 $ 24,737 Depreciation and amortization............................. 21,713 -- -- Write-off of project development costs.................... 2,644 -- -- -------- -------- -------- Total costs and expenses.................................... 166,559 11,735 24,737 Loss from Operations........................................ (42,264) (11,735) (24,737) Other income (expense): Interest income........................................... 2,379 8,280 12,472 Interest expense.......................................... (73,539) (52,202) (38,416) Capitalized interest...................................... 37,195 29,545 8,213 -------- -------- -------- Total other expenses, net................................... (33,965) (14,377) (17,731) -------- -------- -------- Net loss.................................................... $(76,229) $(26,112) $(42,468) ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 21 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
SOMMER ENTERPRISES, LLC ALADDIN GAMING ENTERPRISES, INC. ------------------------------------- ------------------------------------- COMMON PREFERRED COMMON PREFERRED MEMBERSHIP MEMBERSHIP ACCUMULATED MEMBERSHIP MEMBERSHIP ACCUMULATED INTEREST INTEREST DEFICIT INTEREST INTEREST DEFICIT ---------- ---------- ----------- ---------- ---------- ----------- Balance, January 1, 1998........ $ 1 $ -- $ -- $ -- $ -- $ -- Net loss for the period......... -- -- (19,960) -- -- (10,617) Member Contributions............ (47,317) -- -- 28,247 -- -- Members' equity costs........... (1,093) -- -- (581) -- -- -------- -------- -------- ------- ------ -------- Balance, December 31, 1998...... $(48,409) $ -- $(19,960) $27,666 $ -- $(10,617) Net loss for the period......... -- -- (12,273) -- -- (6,528) Member Contributions............ -- 34,613 -- -- -- -- Restatement of Preferred Interests..................... -- (30,280) -- -- -- -- Preferred Return................ -- 1,944 (2,637) -- -- (1,402) Restatement of Preferred Return........................ -- (1,069) (1,046) -- -- (557) -------- -------- -------- ------- ------ -------- Balance, December 31, 1999...... $(48,409) $ 5,208 $(35,916) $27,666 $ -- $(19,104) Net Loss for the Period......... -- -- (25,431) -- -- (19,057) Conversion of Series C Preferred..................... -- -- -- -- -- -- Member Contributions............ -- -- -- -- -- -- Preferred Return................ -- 1,674 (11,560) -- -- (8,146) -------- -------- -------- ------- ------ -------- Balance, December 31, 2000...... $(48,409) $ 6,882 $(72,907) $27,666 $ -- $(46,307) ======== ======== ======== ======= ====== ========
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 22 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
LONDON CLUBS NEVADA, INC. GAI, LLC ------------------------------------- ------------------------------------- COMMON PREFERRED COMMON PREFERRED MEMBERSHIP MEMBERSHIP ACCUMULATED MEMBERSHIP MEMBERSHIP ACCUMULATED INTEREST INTEREST DEFICIT INTEREST INTEREST DEFICIT ---------- ---------- ----------- ---------- ---------- ----------- Balance, January 1, 1998........ $ -- $ -- $ -- $ 2 $ -- $ -- Net loss for the period......... -- -- (10,617) -- -- (1,274) Member Contributions............ 50,000 -- -- -- -- -- Members' equity costs........... (581) -- -- (70) -- -- -------- -------- -------- ---- ------- ------- Balance, December 31, 1998...... $ 49,419 $ -- $(10,617) $(68) $ -- $(1,274) Net loss for the period......... -- -- (6,528) -- -- (783) Member Contributions............ -- 32,595 -- -- -- -- Restatement of Preferred Interests..................... -- 30,280 -- -- -- -- Preferred Return................ -- 3,665 (1,402) -- -- (168) Restatement of Preferred Return........................ -- 3,296 (557) -- -- (67) -------- -------- -------- ---- ------- ------- Balance, December 31, 1999...... $ 49,419 $ 69,836 $(19,104) $(68) $ -- $(2,292) Net Loss for the Period......... -- -- (29,452) -- -- (2,289) Conversion of Series C Preferred..................... 30,000 (30,000) -- -- -- -- Member Contributions............ -- 81,014 -- -- -- -- Preferred Return................ -- 30,910 (11,901) -- -- (977) -------- -------- -------- ---- ------- ------- Balance, December 31, 2000...... $ 79,419 $151,760 $(60,457) $(68) $ -- $(5,558) ======== ======== ======== ==== ======= =======
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 23 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
TOTAL ------------------------------------------------------ COMMON MEMBERSHIP PREFERRED MEMBERSHIP ACCUMULATED INTEREST INTEREST DEFICIT ----------------- -------------------- ----------- Balance, January 1, 1998.................... $ 3 $ -- $ -- Net loss for the period..................... -- -- (42,468) Member Contributions........................ 30,930 -- -- Members' equity costs....................... (2,325) -- -- ------- -------- --------- Balance, December 31, 1998.................. $28,608 $ -- $ (42,468) Net loss for the period..................... -- -- (26,112) Member Contributions........................ -- 67,208 -- Restatement of Preferred Interests.......... Preferred Return............................ -- 5,609 (5,609) Restatement of Preferred Return............. -- 2,227 (2,227) ------- -------- --------- Balance, December 31, 1999.................. $28,608 $ 75,044 $ (76,416) Net Loss for the Period..................... -- -- (76,229) Conversion of Series C Preferred............ 30,000 (30,000) -- Member Contributions........................ -- 81,014 -- Preferred Return............................ -- 32,584 (32,584) ------- -------- --------- Balance, December 31, 2000.................. $58,608 $158,642 $(185,229) ======= ======== =========
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 24 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
YEAR ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 --------- --------- --------- Cash flows from operating activities: Net loss.................................................. $ (76,229) $ (26,112) $ (42,468) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization............................. 21,713 159 17 Write-off of project development costs.................... 2,169 -- -- Amortization of debt costs................................ 4,770 3,611 2,831 Amortization of lease costs............................... 650 -- -- Amortization of original issue discount................... 23,103 19,740 14,306 Change in assets and liabilities: Interest receivable....................................... 222 637 (859) Inventory................................................. (4,168) 1 (60) Prepaid expense........................................... (7,123) (201) (118) Receivables, net.......................................... (31,114) 833 (842) Other assets.............................................. 45 (6) (2,061) Accounts payable.......................................... 9,533 1,747 3,394 Accrued payroll and related expenses...................... 8,944 -- -- Accrued expenses.......................................... 25,867 (434) 113 Accrued interest.......................................... 6,115 449 1,734 Related party payable..................................... 4,137 3,211 3,354 --------- --------- --------- Net cash provided by (used in) operating activities......... (11,366) 3,635 (20,659) --------- --------- --------- Cash flows from investing activities: Payments for construction in progress..................... (300,036) (187,711) (66,184) Payments for furniture and equipment...................... (548) (678) (272) Payments for capitalized interest......................... (37,200) (29,545) (8,213) (Increase) Decrease in restricted cash.................... 61,057 147,512 (227,983) --------- --------- --------- Net cash used in investing activities....................... (276,727) (70,422) (302,652) --------- --------- --------- Cash flows from financing activities: Proceeds from issuance of notes........................... -- -- 100,047 Proceeds from long-term debt.............................. 241,810 -- 274,000 Repayment of long-term debt............................... (10,530) -- (547) Debt issuance costs....................................... (5,661) -- (37,146) Members' contributions.................................... 81,014 67,208 65,000 Members' equity costs..................................... -- -- (2,325) Payment of debt on contributed land....................... -- -- (74,477) --------- --------- --------- Net cash provided by financing activities................... 306,633 67,208 324,552 --------- --------- --------- Net increase in cash........................................ 18,540 421 1,241 Cash at beginning of period................................. 1,669 1,248 7 --------- --------- --------- Cash at end of period....................................... $ 20,209 $ 1,669 $ 1,248 ========= ========= ========= Supplemental disclosures of cash flow information and non-cash investing and financing activities: Cash paid for interest, net of amount capitalized........... $ (4,601) $ (5,118) $ 11,332 Members' contributions--book value Land...................................................... $ -- $ -- $ 33,407 Construction in progress.................................. $ -- $ -- $ 7,000 Equipment acquired equal to assumption of debt.............. $ -- $ -- $ 547 Increase (decrease) in construction payables................ $ (2,769) $ 130 $ 12,063 Preferred dividends......................................... $ 32,584 $ 7,836 $ -- Transfer of restricted land................................. $ (6,842) $ -- $ --
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements. 25 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION Aladdin Gaming Holdings, LLC, a Nevada limited liability company ("Gaming Holdings" or the "Company") is a holding company, the material assets of which are 100% of the outstanding common membership interests and 100% of the outstanding Series A preferred interests of Aladdin Gaming, LLC ("Gaming"). Aladdin Capital Corp. ("Capital") is a wholly owned subsidiary of Gaming Holdings and was incorporated solely for the purpose of serving as a co-issuer of the Gaming Holdings 13 1/2% Senior Discount Notes ("Notes"). Capital does not have any material operations or assets and has no revenues. Aladdin Holdings, LLC, a Delaware limited liability company ("AHL"), indirectly holds a majority interest in Gaming Holdings. The members of AHL are the Trust Under Article Sixth u/w/o Sigmund Sommer ("Sommer Trust"), which holds a 95% interest in AHL, and GW Vegas, LLC, a Nevada limited liability company, a wholly owned subsidiary of the Trust Company of the West, which holds a 5% interest in AHL. As of December 31, 2000, Gaming Holdings common membership interests ("Holdings Common Membership Interests") were held 39.953125% by London Clubs Nevada, Inc. ("LCNI"), a subsidiary of London Clubs International plc ("London Clubs"); 31.859375% by Sommer Enterprises, LLC, a Nevada limited liability company ("Sommer Enterprises"), which is a subsidiary of AHL; 25.0% by Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Gaming Enterprises"), which is a subsidiary of Sommer Enterprises; 3.0% by GAI, LLC, a Nevada limited liability company, which is owned by Richard J. Goeglein, the President and Chief Executive Officer of Gaming Holdings; and 0.1875% by Jose Rueda, a former executive of Gaming Holdings. Except where the context otherwise requires, Gaming Holdings and its subsidiaries are collectively referred to herein as "Company." Until August 18, 2000, the operations of the Company were primarily limited to the design, development and construction of the new Aladdin Resort and Casino ("Aladdin"). The Aladdin, which commenced operations on August 18, 2000, is the centerpiece of an approximately 35-acre world-class resort, casino and entertainment complex ("Complex") located at the center of Las Vegas Boulevard. The Aladdin includes a luxury themed hotel of approximately 2,600 rooms, an approximately 116,000 square foot casino and six restaurants. The Complex is comprised of: (i) the Aladdin; (ii) a themed entertainment shopping mall with approximately 496,000 square feet of retail space ("Desert Passage"); (iii) the newly renovated 7,000 seat Theater of the Performing Arts ("Theater"); and (iv) an approximately 4,800 space car parking facility ("Carpark" and, together with the Desert Passage, hereinafter, "Mall Project"). The Mall Project is separately owned in part by an affiliate of the Sommer Trust. The consolidated financial statements include the accounts of Gaming Holdings and its wholly-owned subsidiaries. Significant inter-company accounts are eliminated in consolidation. CASINO REVENUES AND PROMOTIONAL ALLOWANCES The Company recognizes revenues in accordance with industry practice. Casino revenue is the net win from gaming activities (the difference between gaming wins and losses). Casino revenues are net of incentive discounts to casino patrons and accruals for anticipated payouts of progressive and certain other slot machine jackpots. Revenues include the retail value of rooms, food and beverage and other items that 26 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) are provided to customers on a complimentary basis. A corresponding amount is deducted as promotional allowances. The cost of such complimentaries included as casino expenses is as follows:
2000 1999 1998 -------- -------- -------- (IN THOUSANDS) Rooms.................................................. $2,015 $ -- $ -- Food and beverage...................................... 7,470 -- -- Other.................................................. 280 -- -- ------ ---- ---- Total cost of promotional allowances................... $9,765 $ -- $ -- ====== ==== ====
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH Cash and cash equivalents include cash on hand and in banks, interest-bearing deposits, money market funds and investments purchased with an original maturity of 90 days or less. As of December 31, 2000, restricted cash consisted of cash and cash equivalents held for construction payments and funds pledged for workers' compensation benefits. INVENTORIES Inventories, consisting primarily of food, beverage, and operating supplies are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Interest incurred during the construction of the Aladdin is capitalized at the Company's weighted average borrowing rate and amortized over the life of the related asset. Interest capitalized for the years ended December 31, 2000, 1999, and 1998 was $37.2 million, $29.5 million, and $8.2 million, respectively. Costs of improvements are capitalized. Costs of normal repairs and maintenance are charged to expense as incurred. Depreciation and amortization of property and equipment is computed using the straight-line method over the following estimated useful lives: Building and Leasehold Improvements......................... 39 years Furniture and Equipment..................................... 5 years Energy Service Asset........................................ 17-20 years
DEBT ISSUANCE COSTS Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense based on the related debt agreements using the effective interest method or a method which approximates the effective interest method. ADVERTISING COSTS Advertising costs are expensed as incurred and included in selling, general and administrative costs and expenses. Such expenses totaled $4,491,013 for the period August 18, 2000 through December 31, 2000. 27 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FAIR VALUE OF CERTAIN FINANCIAL INSTRUMENTS The carrying amount of cash equivalents, receivables and all current liabilities approximates fair value because of the short term maturity of these instruments. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. INTEREST RATE DERIVATIVES The Company uses interest rate swaps and collars to assist in managing interest variability on its long-term debt. The difference between amounts received and amounts paid under such agreements, as well as any costs or fees, is recorded as a reduction of, or addition to, interest expense as incurred over the life of the financial instruments. To the extent that swaps or collars are terminated prior to maturity, the amount paid or received to settle the swap or collar is amortized over the shorter of the remaining life of the debt or the original term of the swap or collar. PRE-OPENING COSTS The Company expenses pre-opening costs as incurred. These include, but are not limited to, salary related expenses for new employees and management opening team, travel and lodging expenses, training costs, advertising and marketing, organizational costs and all temporary facility costs (e.g. rent, insurance and utilities). INCOME TAXES The Company is a limited liability company and will be taxed as a partnership for federal income tax purposes. Accordingly, no provision for federal income taxes was recorded because the taxable income or loss is included in the income tax returns of the members. The net difference between the tax basis and the reported amounts of the Company's assets and liabilities at December 31, 2000, is approximately $61.2 million. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June, 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that entities record all derivatives as assets or liabilities measured at fair value, with the change in fair value recognized in earnings or in other comprehensive income, depending on the use of the derivative and whether it qualifies for hedge accounting. SFAS 133 amends or supercedes several current accounting statements. In July, 1999, the FASB issued SFAS No. 137 which delays the effective date of SFAS No. 133 from fiscal year 2000 to fiscal year 2001. In June 2000, the FASB issued SFAS 138 which amends certain sections of SFAS 133. At adoption (January 1, 2001), Gaming will record a liability of $10.7 million for the fair value of its interest rate collars at that date with a corresponding cumulative effect adjustment upon adoption of the new standard included in earnings. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 28 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECLASSIFICATIONS Certain reclassifications, having no effect on net losses, have been made to the prior year's consolidated financial statements to conform with current year presentation. 2. LIQUIDITY AND MANAGEMENT'S PLAN Absent an improvement in Gaming's operating results or cash equity contributions to Gaming pursuant to the Keep-Well Agreement, Gaming estimates that, based on its results year-to-date, it may not be in compliance with the quarter ended June 30, 2001, financial covenant levels contained in the Bank Credit Facility and the FF&E Facility, as amended, both as defined in Note 7 "Long-Term Debt" to the Consolidated Financial Statements. The Company estimates that cash on hand and projected internally generated funds will be sufficient to fund the Company's current operations, however, such amounts will not be sufficient to fund all the principal and interest payments on the Company's debt in fiscal 2001. In order for the Company to fund all of its principal and interest payments, the Company will continue to rely on payments from its sponsors, the Sommer Trust and London Clubs (collectively, with their respective affiliates, "Sponsors"), pursuant to the Keep-Well Agreement. Further, the Company and the Sponsors are seeking alternatives to improve the Company's current liquidity, which alternatives may include incurring additional indebtedness, to the extent permissible under the Company's various credit facilities, sale of an adjacent 5-acre parcel of undeveloped land, reaching an agreement with the Company's creditors reducing the Company's liquidity needs and/or equity infusions from either a third party and/or the Sponsors. 3. ACCOUNTS RECEIVABLE Accounts receivable at December 31, 2000 and 1999 are as follows:
2000 1999 -------- -------- (IN THOUSANDS) Casino accounts receivable.................................. $24,589 $ -- Less: Allowance for doubtful accounts....................... (6,106) -- ------- ---- 18,483 -- ------- ---- Hotel receivables........................................... 11,249 -- Less: allowance for doubtful accounts....................... (377) -- ------- ---- 10,872 -- ------- ---- Other receivables........................................... 1,085 1 ------- ---- $30,440 $ 1 ======= ====
4. PREPAID ASSETS Prepaid assets consists of the following as of December 31, 2000 and 1999:
2000 1999 -------- -------- (IN THOUSANDS) Prepaid gaming taxes........................................ $2,585 $ -- Prepaid property tax........................................ 2,745 -- Other prepaid assets........................................ 2,113 320 ------ ---- $7,443 $320 ====== ====
29 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. PROPERTY AND EQUIPMENT Property and equipment consist of the following as of December 31, 2000 and 1999:
2000 1999 -------- -------- (IN THOUSANDS) ------------------- Land...................................................... $ 37,983 $ 33,407 Building and improvements................................. 386,898 -- Furniture, fixtures and equipment......................... 217,418 950 Construction in process................................... -- 274,398 Capitalized Interest...................................... -- 37,758 Central Utility Plant..................................... 37,060 -- -------- -------- $679,359 $346,513 Less: Accumulated depreciation and amortization........... (21,889) (176) -------- -------- $657,470 $346,337 ======== ========
The Company has written-off $2.6 million of project development costs and expenses related to the originally contemplated second hotel casino project that was to be adjacent to the Complex that were previously classified as construction in process. Such costs and expenses were determined to be related to services that will be of little or no future value. The amount of write-off is classified as "write-off of project development costs" on the Consolidated Statement of Operations for the year ended December 31, 2000 and includes $.5 million relating to an executive severance payment. 6. OTHER ACCRUED EXPENSES Other accrued expenses consist of the following as of December 31, 2000 and 1999:
2000 1999 -------- -------- (IN THOUSANDS) Customer Deposits........................................... $ 4,525 $ -- Other Accrued Expenses...................................... 22,489 1,147 ------- ------ Total....................................................... $27,014 $1,147 ======= ======
7. LONG-TERM DEBT Long-term debt and current maturities of long-term debt are comprised of the following:
DECEMBER 31, DECEMBER 31, 2000 1999 -------------- -------------- (IN THOUSANDS) (IN THOUSANDS) Long-term debt: Senior Discount Notes (Net of unamortized discount of $64,304 at 12/31/00 and $87,407 at 12/31/99)............ $157,196 $134,093 -------- -------- Term A Loan............................................... $126,750 $ -- Term B Loan............................................... 113,400 114,000 Term C Loan............................................... 159,200 160,000 Term D Loan............................................... 49,875 -- GECC Term Loan............................................ 19,350 -- Energy Service Obligation................................. 36,705 -- -------- -------- $662,476 $408,093 Less current maturities of long-term debt................... (24,528) (4,700) -------- -------- Total long-term debt........................................ $637,948 $403,393 ======== ========
30 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LONG-TERM DEBT (CONTINUED) SENIOR DISCOUNT NOTES On February 26, 1998, Gaming Holdings, Capital and Gaming Enterprises consummated a private offering ("Offering") under Rule 144A of the Securities Act of 1933. The Offering consisted of 221,500 units ("Units"), each Unit consisting of: (i) $1,000 principal amount of maturity of 13 1/2% Senior Discount Notes due 2010 ("Notes") of Gaming Holdings and Capital; and (ii) 10 warrants ("Warrants") to purchase 10 shares of Class B non-voting common stock, no par value, of Gaming Enterprises. The Notes and the Warrants became separately transferable on July 23, 1998. The Warrants became exercisable on July 23, 1998, and will expire on March 1, 2010. On August 26, 1998, Gaming Holdings and Capital completed an exchange offer for 100% of the aggregate principal amount of the Notes pursuant to a registration statement dated July 23, 1998. The Notes were exchanged for notes with substantially the same terms issued in the private placement on February 26, 1998. The initial accreted value of the Notes was $519.40 per $1,000 principal amount at maturity of the Notes. The Notes will mature on March 1, 2010. The Notes will accrete at 13 1/2% (computed on a semi-annual bond equivalent basis) based on the initial accreted value, calculated from February 26, 1998. Cash interest on the Notes will not accrue prior to March 1, 2003. Thereafter, cash interest on the Notes will accrue at the rate of 13 1/2% per annum based on the accreted value at maturity (approximately $221.5 million) of the Notes and will be payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2003. The Notes are secured by a first priority pledge of all the issued and outstanding Series A Preferred Interests of Gaming held by Gaming Holdings. The Indenture relating to the Notes contains certain covenants that (subject to certain exceptions) restrict the ability of Gaming Holdings, Capital and certain of their subsidiaries to, among other things: (i) make restricted payments; (ii) incur additional indebtedness and issue preferred stock; (iii) incur liens; (iv) pay dividends or make other distributions; (v) enter into mergers or consolidations; (vi) enter into certain transactions with affiliates; or (vii) enter into new lines of business. Gaming Holdings' future interest and principal payments required under the Notes will be funded from distributions by Gaming to the extent available. Gaming has certain restrictions which limit its ability to distribute cash to Gaming Holdings (see the following discussion under "Term Loans"). There can be no assurance that Gaming's distributions will be sufficient to meet the required principal and interest payments of the Notes. TERM LOANS AND CURRENT MATURITIES OF LONG-TERM DEBT Gaming has a credit facility ("Bank Credit Facility") with various financial institutions and the Bank of Nova Scotia as the administrative agent for the lenders (collectively, "Lenders"). The Credit Agreement consists of four separate term loans. Term A Loan comprises a term loan of $134.75 million and matures approximately five and one-half years after the initial borrowing date. Term B Loan comprises a term loan of $114.0 million and matures eight and one-half years after the initial borrowing date. Term C Loan comprises a term loan of $160.0 million and matures ten years after the borrowing date. Term D Loan comprises a term loan of $50.0 million and matures 8.5 years after the Conversion Date. The Company pays interest on the term loans as follows: Term A Loan, at the London Interbank Offered Rate ("LIBOR") plus 300 basis points until the Aladdin commenced operations, then LIBOR plus an amount between 150 basis points and 275 basis points depending upon Gaming's earnings before interest, taxes, depreciation and amortization ("EBITDA"); Term B Loan, LIBOR plus 200 basis points while the funds are held in the cash collateral account and LIBOR plus 350 basis points once the funds are utilized for the 31 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LONG-TERM DEBT (CONTINUED) construction of the Aladdin; Term C Loan, LIBOR plus 200 basis points while the funds are held in the cash collateral account and LIBOR plus 400 basis points once the funds are utilized for the construction of the Aladdin; Term D Loan, LIBOR plus 350 basis points once the funds have been advanced. Interest on the term loans is due quarterly. The Company is required to make the following principal payments on its total debt, including the accreted value at maturity of the Notes:
PRINCIPAL PAYMENTS YEAR ENDED DECEMBER 31, (IN THOUSANDS) - ----------------------- ------------------ 2001........................................................ $ 24,528 2002........................................................ 30,722 2003........................................................ 37,190 2004........................................................ 43,616 2005........................................................ 64,951 Thereafter.................................................. 527,835 -------- TOTAL....................................................... $728,842 ========
In addition to the principal amortization schedules, the Company is required to make mandatory prepayments of principal, which shall be applied ratably among each of the term loans, beginning the first quarter following the commencement of operations of the Aladdin. The mandatory prepayments are based on a percentage of Gaming's excess cash flow as defined in the Credit Agreement. The mandatory prepayments are due quarterly and the percentages of excess cash flow are detailed below:
PERCENTAGE OF EXCESS CASH FLOW ---------------- Year 1 100% until the Sixth Amendment to the Bank Credit Facility Fee ("Sixth Amendment Fee") (approximately $2.29 million) is paid; thereafter 65% unless the Total Debt to EBITDA Ratio is greater than 3.50 to 1.0, in which case, then 100% Year 2 100% until the Sixth Amendment Fee is paid, thereafter 60% unless the Total Debt to EBITDA Ratio is greater than 3.50 to 1.0, in which case, then 100% Year 3 and thereafter 100% until the Sixth Amendment Fee is paid; thereafter, 55% unless the Total Debt to EBITDA Ratio is greater than 3.50 to 1.0, in which case, then 100%
As security for the Bank Credit Facility, the Company has entered into a deed of trust in favor of the Lenders securing the Notes and all obligations of the Company under the Bank Credit Facility, encumbering the Aladdin (including any and all leasehold interests) as a first priority lien. In addition, the Company has either assigned or entered into security agreements in favor of the Lenders for all present and future leases, accounts receivable, licenses and any other tangible or intangible assets owned or leased by the Company, subject to the rights of the FF&E Lenders under the FF&E Facility (see the following discussion under "Furniture, Fixtures and Equipment Financing ("FF&E Facility"). 32 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LONG-TERM DEBT (CONTINUED) As further security for the Bank Credit Facility and to the extent permissible, the owners of the Company have pledged their interests in the Company to the Lenders and Gaming Holdings has pledged its interest in Gaming to the Lenders other than the Series A Preferred Interests. The Bank Credit Facility contains covenants that (subject to certain exceptions) restrict the ability of Gaming and its subsidiaries to, among other things: (i) incur additional indebtedness, liens or other encumbrances; (ii) pay dividends or make similar distributions; (iii) sell assets or make investments; (iv) enter into mergers, consolidations, or acquisition transactions; or (v) enter into certain transactions with affiliates. On March 30, 2001, Gaming and the various lenders under the Bank Credit Facility amended the Bank Credit Facility. This amendment provided: (a) a waiver of Gaming's compliance with the Total Debt to EBITDA Ratio, the Interest Coverage Ratio and the EBITDA covenants required pursuant to the Bank Credit Facility for the fiscal quarters ending on or prior to March 31, 2001; (b) a waiver until August 18, 2001 of the requirement to fund the FF&E Reserve, provided that Gaming cannot make certain Restricted Payments until the FF&E Reserve is funded as otherwise required by the Bank Credit Facility; (c) a waiver of the default that otherwise would have occurred as a result of a "going concern" qualification to the Company's auditor's report in respect of the Company's financial statements for the fiscal year ended December 31, 2000; (d) amendments to Gaming's following financial covenants (i) Total Debt to EBITDA Ratio: Quarter ended March 31, 2001, 6.4:1.0; Quarter ended June 30, 2001, 6.0:1.0; Quarter ended September 30, 2001, 6.0:1.0; and Quarter ended December 31, 2001, 5.1:1.0; (ii) Interest Coverage Ratio: Quarter ended March 31, 2001, 1.6:1.0; Quarter ended June 30, 2001, 1.6:1.0; Quarter ended September 30, 2001, 1.6:1.0; and Quarter ended December 31, 2001, 1.7:1.0; (iii) EBITDA: Quarter ended March 31, 2001, $75 million; Quarter ended June 30, 2001, $80 million; Quarter ended September 30, 2001, $80 million; and Quarter ended December 31, 2001 $90 million; and (e) for certain other technical and/or definitional amendments to further the above waivers and amendments. The foregoing is qualified in its entirety by the "Sixth Amendment to Credit Agreement," dated March 30, 2001. There can be no assurances that Gaming can comply with the revised financial covenant levels. Absent an improvement in Gaming's operating results or cash equity contributions to Gaming pursuant to the Keep-Well Agreement, Gaming estimates that, based on its results year-to-date, it may not be in compliance with the revised financial covenant levels for the quarter ended June 30, 2001. See Note 2 "Liquidity and Management's Plan" to the Consolidated Financial Statements. Corresponding amendments and waivers have been made to the FF&E Facility. FURNITURE, FIXTURES AND EQUIPMENT FINANCING ("FF&E FACILITY") On June 30, 1998, the Company entered into a term loan facility of $20.0 million to obtain gaming equipment and other specified equipment. Repayment of principal and interest is due in quarterly installments upon the construction completion date of the Aladdin. The term of the term loan facility is five years. The interest rate from the funding date until the construction of the Aladdin is complete is either the 30-day LIBOR plus 478 basis points or the Prime Rate plus 275 basis points. After the construction completion date, the interest rate shall be the 90-day LIBOR plus 478 basis points. See the preceding paragraph regarding the amendments and waivers to the FF&E Facility. 33 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LONG-TERM DEBT (CONTINUED) ENERGY SERVICES AGREEMENT The Company entered into an energy services agreement that provided for hot and cold water and electricity that is purchased by the Company and the Mall Project (which includes the tenants of the mall) over initial terms of 20 years. The central utility plant was constructed by Northwind Aladdin, LLC ("Northwind") on land owned by the Company and leased to Northwind. The central utility plant and equipment of $40 million (collectively, "Costs") is owned by Northwind, which paid all costs in connection with the construction, purchase and installation. The charges payable under the energy services agreement include a fixed component applied to the costs paid by Northwind and reimbursement of operational-related costs. The Company's share of Costs under its energy services agreement is based on the total Costs less the amounts payable by the Mall Project. The Mall Project's share of Costs is approximately $2.9 million. The Company accounts for the energy services contract as a capitalized power purchase obligation. INTEREST RATE SWAPS Effective June 30, 1999, Gaming restructured its interest rate swap arrangements in an effort to reduce future expenditures for interest. Gaming has entered into these agreements to manage interest expense, which is subject to fluctuations due to the variable nature of the London Interbank Offered Rate ("LIBOR"). In exchange for entering into the transaction, Gaming received $500,000 from the counterparty in July, 1999. Effective July 20, 2000, Gaming restructured its interest rate derivative financial instruments. In July, 2000, Gaming received $1 million from the counterparty related to the termination of the previous interest rate ceilings and floor caps. Beginning June 30, 1999, Gaming had the following interest rate swaps, interest rate ceilings and floor caps, and related notional amounts in effect: (i) an interest rate swap with an original notional amount of $114 million increasing to a maximum of $222.5 million whereby interest is fixed at 5.50% through March 31, 2000. After March 31, 2000, an interest rate collar with a notional amount of $250 million, a maximum and minimum interest rate of 7.5% and 5.15%, respectively, will go into effect and mature on September 30, 2006; and (ii) an interest rate collar with a notional amount of $160 million, a maximum rate of 8.00%, a minimum rate of 5.15% and a maturity date of March 31, 2003. All rates noted above are LIBOR equivalents only and do not include the impact of the basis point additions to LIBOR that are used in calculating interest expense on Gaming's term loans. The LIBOR applicable to these agreements on December 31, 1999 was set at 6.16% as of December 31, 1999. Beginning July 20, 2000, Gaming has the following interest rate derivative financial instruments in effect: (i) an interest rate collar with an amortizing notional amount of $245.7 million ($237.1 million at December 31, 2000), a maximum and minimum interest rate of 8.00% and 6.25%, respectively, and a maturity date of June 30, 2005, (ii) an interest rate collar with an amortizing notional amount of $159.2 million ($158.4 million at December 31, 2000), a maximum rate of 8.00%, a minimum rate of 6.25% and a maturity date of June 30, 2005; (iii) an interest rate collar with a notional amount of $50 million, a maximum rate of 8.00%, a minimum rate of 6.25%, and a maturity of June 30, 2005. All rates noted above are the three-months LIBOR equivalents only and do not include the impact of the basis point additions to LIBOR that are used in calculating interest expense on Gaming's term loans. The fair market value of Gaming's interest rate derivative financial instruments as provided by the counterparty, is a net payable of approximately $10.7 million at December 31, 2000, which is not included in the Company's consolidated financial statements. 34 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LONG-TERM DEBT (CONTINUED) The notional amounts do not represent amounts exchanged by the parties, and thus are not a measure of exposure of the Company. The amounts exchanged are normally based on the notional amounts and other terms of the swaps. The variable rates are subject to change over time as LIBOR fluctuates. Neither the Company nor the counterparty, which is a prominent financial institution, is required to collateralize their respective obligations under these swaps. The Company is exposed to loss if the counterparty defaults. However, the Company considers the risk of non-performance to be minimal as the counterparty is a member of the bank credit facility. The Company does not hold or issue rate agreements for trading purposes. FAIR VALUE OF LONG-TERM DEBT The estimated fair value of the Company's long-term debt, current maturities of long-term debt and interest rate swaps have been determined using appropriate market information and valuation methodologies. Considerable judgment is required to determine the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
DECEMBER 31, 2000 --------------------- CARRYING AMOUNT FAIR VALUE -------- ---------- (IN THOUSANDS) Senior Discount Notes................................... $157,196 $ 95,245 Term A Loan............................................. 126,750 126,750 Term B Loan............................................. 113,400 113,400 Term C Loan............................................. 159,200 159,200 Term D Loan............................................. 49,875 49,875 GECC Term Loan.......................................... 19,350 19,350 Energy Service Obligation............................... 36,705 36,705 Interest Rate Swaps (Payable)........................... -- 10,709
The fair value of the Company's Senior Discount Notes is based on dealer quotes for those instruments. The fair values of the Company's Term A Loan, Term B Loan, Term C Loan and Term D Loan, GECC Term Loan and Energy Service Obligation are assumed to approximate carrying values as the interest rate on the loans fluctuate with changes in LIBOR (i.e., a variable rate loan). The fair market value of the Company's interest rate swaps is based on the estimated termination values at December 31, 2000 as provided by the counterparty to the swaps. 8. LEASES The Company leases certain real property, furniture and equipment. On June 30, 1998, the Company entered into a $60 million operating lease for non-gaming furniture, fixture and equipment. The term of the operating lease is 36 months with the Company having two, 1-year options to renew. At December 31, 35 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. LEASES (CONTINUED) 2000, aggregate minimum rental commitments under noncancelable operating leases with initial or remaining terms of one year or more consisted of the following:
OPERATING YEAR ENDING DECEMBER 31, LEASES - ------------------------ -------------- (IN THOUSANDS) 2001............................ $13,300 2002............................ 13,200 2003............................ 13,200 2004............................ 13,200 2005............................ 20,700 ------- Total Minimum Lease Payments.... $73,600 =======
Rental expense amounted to approximately $6.5 million, $0.7 million and $0.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. 9. MEMBERS' EQUITY Gaming Holdings was formed on December 1, 1997. Gaming Holdings initially was owned by: Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Gaming Enterprises") (25%); Sommer Enterprises, LLC, a Nevada limited liability company ("Sommer Enterprises") (72%); and GAI, LLC, a Nevada limited liability company ("GAI") (3%). On February 26, 1998, London Clubs, through its subsidiary LCNI, contributed $50 million for a 25% interest in Gaming Holdings common membership interests ("Holdings Common Membership Interests"). Sommer Enterprises contributed a portion of land for Holdings Common Membership Interests. Gaming Enterprises contributed a portion of land, $7 million of predevelopment costs and $15 million in cash for Holdings Common Membership Interests. After these additional contributions, Sommer Enterprises owned 47% of Gaming Holdings, Gaming Enterprises owned 25% of Gaming Holdings, LCNI owned 25% of Gaming Holdings, and GAI owned 3% of Gaming Holdings. On December 10, 1999, the members of Gaming Holdings agreed to restate the capital structure of Gaming Holdings, which restatement provided, in addition to other matters, that LCNI had an option to convert certain preferred membership interests of Gaming Holdings into 15% of Holdings Common Membership Interests and the creation of certain new classes of preferred membership interests. On April 25, 2000, LCNI converted its Series C Convertible Preferred Shares of Gaming Holdings for 15% of the Holdings Common Membership Interests. On August 18, 2000, 0.1875% of Holdings Common Membership Interest vested to Jose Rueda, a former executive of the Company, pursuant to his then-existing employment agreement. As of December 31, 2000, Holdings Common Membership Interests were held: 39.953125% by LCNI; 31.859375% by Sommer Enterprises; 25.0% by Gaming Enterprises; 3.0% by GAI; and 0.1875% by Jose Rueda. In addition to the Holdings Common Membership Interests, as of December 31, 2000, Gaming Holdings had issued the following Preferred Membership Interests, which have a liquidation preference over the Holdings Common Membership Interests, in connection with either London Club's and/or the Sommer Trust's contributions to Gaming Holdings pursuant to the Bank Completion Guaranty: (a) for 36 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. MEMBERS' EQUITY (CONTINUED) LCNI, approximately $128.5 million of Series A Preferred Membership Interests, approximately $3.5 million of Series CC Preferred Membership Interests and approximately $19.8 million of Series D Preferred Membership Interests; and (b) for Sommer Enterprises, approximately $6.9 million Series E Preferred Membership Interests. 10. RELATED PARTY TRANSACTIONS AND GUARANTEES LAND CONTRIBUTION AND RESTRICTED LAND Both Sommer Enterprises and Gaming Enterprises contributed land to the Company. The land was originally owned by AHL, a related party under common control, and therefore the land has been recorded at its carryover basis. In addition, the land was subject to certain indebtedness which was paid by the Company on the date of the contribution. The indebtedness exceeded the carryover basis of the land and therefore resulted in a negative contribution by Sommer Enterprises. The carryover basis of the land was approximately $40.25 million, but a portion of the land has been classified as restricted land due to a requirement to transfer the land to Aladdin Bazaar, LLC. Bazaar is owned effectively 35.36% by the Sommer Trust. Bazaar owns and operates a themed entertainment shopping mall and 4,800- space car parking facility (together known as the "Mall Project"). The Mall Project is an integrated part of the Aladdin entertainment complex. The carryover basis of the land was allocated to the Mall Project based on an appraisal of the entire land parcel. PURCHASE OF RESTRICTED MEMBERSHIP INTERESTS Mr. Goeglein, the Company's Chief Executive Officer, has purchased unvested restricted membership interests of 2.0% of the Company, subject to the Company granting further unvested restricted membership interests to certain senior executives or developing alternative economic arrangements. Mr. Goeglein's membership interests become fully vested at the earlier of July 1, 2002 or the date on which such interests become publicly traded, conditioned upon Mr. Goeglein's continued relationship with Gaming. Jose Rueda, a former executive of the Company, pursuant to his then-existing employment agreement, vested 0.1875% of Gaming Holdings Common Membership Interest upon the opening of the Aladdin. EMPLOYMENT AGREEMENTS The Company has entered into employment contracts with five members of its senior management. The terms of these agreements provide for an aggregate annual amount of approximately $1.93 million, plus any bonuses granted by the Board of Directors and based on relevant criteria and performance standards. The agreements have varying duration, but no agreement has a duration exceeding five years and six months. The agreements were entered into at varying times from 1997 to 2000. One agreement additionally provides for the individual to be retained as a consultant for $100,000 per year for 5 years after the initial term, and another agreement additionally provided for the individual to be retained as a consultant for $50,000 per year for 3 years after the initial term. GAI, LLC CONSULTING AGREEMENT Gaming has entered into a consulting agreement with GAI, LLC, a Nevada limited liability company, 100% beneficially owned by Gaming's Chief Executive Officer; however, an option has been granted to a 37 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. RELATED PARTY TRANSACTIONS AND GUARANTEES (CONTINUED) third party to acquire a 15% of GAI, LLC's interest in the Company. This agreement requires Gaming to pay to GAI, LLC a retainer of $12,500 per month until June 30, 2002, for remaining on call to provide services and expertise for such month. THE SALLE PRIVEE AGREEMENT Gaming, London Clubs and LCNI are parties to an agreement ("Salle Privee Agreement") which relates to the operations of The London Club at Aladdin, an approximately 15,000 square foot, luxurious gaming section located on a separate level of the Aladdin Casino. Under this agreement, London Clubs has agreed to guaranty the obligations of LCNI. In consideration for the services to be furnished by LCNI under the Salle Privee Agreement, Gaming will pay to LCNI a performance-based incentive fee. This fee will be calculated based on a range of percentages applied to certain thresholds of The London Club at Aladdin EBITDA (defined as gross revenue attributable to The London Club at Aladdin, less all costs and expenses directly attributable to The London Club at Aladdin). KEEP-WELL AGREEMENT AND COMPLETION GUARANTY AHL, Bazaar Holdings and London Clubs entered into the Keep-Well Agreement ("Keep-Well Agreement") in favor of the lenders under the Bank Credit Facility. The Sommer Trust joined and became a party to the Keep-Well Agreement in July, 2000, (collectively, AHL, Bazaar Holdings, London Clubs and the Sommer Trust, "Sponsors"). The Keep-Well Agreement is the joint and several agreement of the Sponsors to make certain quarterly cash equity contributions to Gaming if Gaming fails to comply with the Minimum Fixed Charge Coverage Ratio set forth in the Bank Credit Facility, but in no event shall the aggregate cash equity contributions required to be made in any fiscal year of Gaming exceed $30.0 million and such obligations continue until the satisfaction of certain conditions. Based on Gaming's EBITDA from August 18, 2000, to December 31, 2000, approximately $12 million was due from the Sponsors under the Keep-Well Agreement ("Fourth Quarter 2000 Keep-Well Payment"). In January, 2001, London Clubs made an advance payment of $5 million against the Fourth Quarter 2000 Keep-Well Payment. The Sommer Trust paid the balance of the Fourth Quarter 2000 Keep-Well Payment on March 30, 2001. There can be no assurance that the Sponsors will, or will be able to, make further cash equity contributions to Gaming if required pursuant to the Keep-Well Agreement. London Clubs, the Sommer Trust, and Aladdin Bazaar Holdings, LLC ("Bazaar Holdings"), which is indirectly owned 99% by the Sommer Trust, are guarantors under a completion guaranty ("Bank Completion Guaranty") for the benefit of the lenders under the Bank Credit Facility, under which they have agreed to guarantee, among other things, the completion of the Aladdin. In July, 2000, Jack Sommer, the Company's Chairman of the Board and his spouse, Laura Sommer, each individually have joined and became a party to the Bank Completion Guaranty. The Bank Completion Guaranty is not subject to any maximum dollar limitations. For payments made pursuant to the Bank Completion Guaranty, Gaming Holdings issues (i) Series A Preferred Shares in exchange for the contribution of such payments and (ii) Series D Preferred Shares representing a profits-only interest in Gaming Holdings. The holders of the Notes are not a party to the Bank Completion Guaranty, however, London Clubs, the Sommer Trust and Bazaar Holdings have entered into a limited completion guaranty for the benefit of the Noteholders ("Noteholder Completion Guaranty") under which they guarantee completion of the Aladdin, subject to certain important exceptions, limitations and qualifications. The Noteholder Completion Guaranty contains certain intercreditor provisions which significantly limit the rights of the Trustee under the Noteholder Completion Guaranty. There can be no assurance that the parties to either the Bank 38 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. RELATED PARTY TRANSACTIONS AND GUARANTEES (CONTINUED) Completion Guaranty or the Noteholder Completion Guaranty will be able to make such payments to the Company if required pursuant to these agreements. During 1998, London Clubs received a fee of $2.65 million for its obligations under the Keep-Well Agreement and in addition is entitled to an annual fee of 1.5%, payable in arrears, of the Company's annual average indebtedness with respect to a $265.0 million portion of the Bank Credit Facility, which is supported by the Keep-Well Agreement. Such fees accrue from the closing date of the Bank Credit Facility and are payable from available cash flow after the opening of the Aladdin. As of December 31, 2000, the Company had accrued approximately $11.3 million in Keep-Well fees to London Clubs, which is reported in the Balance Sheet as Related Party Payables. Additionally, the Company agreed to reimburse approximately $2.8 million to London Clubs for certain expenses incurred relating to the Aladdin; however, London Clubs has agreed to defer the payment of approximately $189,000 of this reimbursement. As of December 31, 2000, London Clubs received approximately $2.4 million of this $2.8 million reimbursement obligation. In consideration for certain expenses incurred by the Sommer Trust prior to February 26, 1998, relating to the management and coordination of the development of the Aladdin, the Company reimbursed $3.0 million to the Sommer Trust on February 26, 1998. In addition, Gaming will reimburse certain ongoing out-of-pocket expenses of the Sommer Trust relating to the development of the Aladdin, not to exceed $0.9 million. The Sommer Trust agreed to defer such reimbursement. As of December 31, 2000, the Sommer Trust had received approximately $3.3 million of the total $3.9 million reimbursement. PAYMENT OF MUSIC INDEBTEDNESS During 1998, the Sommer Trust paid approximately $260,000 to certain trade creditors on behalf of Aladdin Music and Mr. Sommer, the Company's Chairman of the Board, individually paid $500,000 to a trade creditor on behalf of Aladdin Music. Further, during the first quarter of 1999, the Sommer Trust paid approximately $747,000 to a trade creditor on behalf of Aladdin Music. To the extent permissible, Aladdin Music has agreed, if and when Aladdin Music secures a joint venture partner and financing for the hotel casino, a previously contemplated 1,000 room hotel casino to be integrated with the Complex, to reimburse the Sommer Trust and Mr. Sommer such advanced funds. FF&E DEPOSITS Since January 1, 2000, LCNI has funded approximately $870,880 of deposits relating to the payment for certain furniture, fixtures and equipment that is leased under Gaming's operating lease facility with General Electric Capital Corporation. The deposits will be directly refunded to LCNI by the lessors and, therefore, such amount has not been reflected in the accompanying financial statements. As of March 26, 2001, $466,602 has been refunded directly to LCNI. 11. EMPLOYEE BENEFIT PLAN The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its employees. The plan allows employees to defer, within prescribed limits, up to 15% of their income on a pre-tax basis through contributions to the plan. The Company currently matches, within prescribed limits, 50% of eligible employees' contributions up to 3% of their individual earnings. The Company recorded charges for matching contributions of $66,936 for the twelve months ended December 31, 2000. 39 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. COMMITMENTS AND CONTINGENCIES CONSTRUCTION AND PRE-OPENING COSTS The development of the Aladdin commenced during the first quarter of 1998 and the Aladdin opened to the public on August 18, 2000. The Company is currently auditing the various construction contracts and finalizing payments to the contractors. The total construction and pre-opening budget for the Aladdin was $1.02 billion. As of March 15, 2001, there were approximately 475 mechanic's liens recorded against the Complex totaling approximately $68.8 million of which amount approximately 400 mechanic's liens totaling approximately $35.8 million related to the Desert Passage. Pursuant to the agreements between Gaming and Bazaar, Bazaar indemnifies Gaming for such liens and has an obligation to cause such liens to be removed or released and discharged. The Company has put Bazaar on notice of these obligations. As to the liens related to the Aladdin, the Company and Fluor Daniel, the Design/Builder of the Aladdin, are finalizing payments to those contractors to which there is no dispute on the amount owed, which will result in a material reduction of the Aladdin-related liens. As to the Aladdin-related liens that will remain after such payments, the Company believes that these liens and claims are, in general, unsubstantiated, without merit, overstated and/or duplicative. LITIGATION In December, 2000, Bazaar initiated an arbitration against Gaming alleging various defaults by Gaming under the respective agreements between the parties and seeking damages in excess of $10 million. Gaming has responded to the allegations and asserted its own claims against Bazaar and seeks damages in an amount to be determined. Gaming will continue to vigorously pursue these matters and believes that the liability, if any, is minimal. There can be no assurances about the outcome of these matters or whether such outcome will have a material adverse effect on the financial condition or results of operations of the Company. In December, 2000, Korte-Bellew & Associates, the contractor who renovated the Theater ("KBA"), initiated in Nevada State District Court an action seeking foreclosure on its mechanic's lien and payment of approximately $7.5 million. The District Court action has been stayed pending arbitration as required by the contract between Gaming and KBA. While there can be no assurances, Gaming does not believe that it owes any remaining moneys to KBA and believes that Gaming has further causes of action challenging the validity of KBA's mechanic's lien. However, management cannot predict the outcome of this matter or whether it will have a material adverse effect on the financial condition or results of operations of the Company. Mr. Jack Sommer, the Chairman of the Gaming Holdings Board and the Gaming Board and a trustee of the Sommer Trust, and the other trustees of the Sommer Trust, were named co-defendants in a legal action relating to the then existing Aladdin hotel and casino. The suit was commenced by members of the Aronow family ("Aronow Plaintiffs") in May 1995 in the Supreme Court of the State of New York, County of New York. In their complaint, the Aronow Plaintiffs alleged that Mr. Sommer and the Aronow Plaintiffs were parties to a joint venture to acquire and develop the Aladdin hotel and casino and that Mr. Sommer breached such alleged agreement when the Sommer Trust acquired an interest in the Aladdin hotel and casino in December, 1994. The Aronow Plaintiffs sought (among other remedies) to impress a constructive trust upon the Sommer Trust's interest in the Aladdin hotel and casino, an accounting, compensatory damages of not less than $200 million and punitive damages of not less than $500 million. 40 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. COMMITMENTS AND CONTINGENCIES (CONTINUED) On January 27, 2000, each of the Aronow Plaintiffs' claims against the trustees was dismissed. On October 17, 2000, the Appellate Division, First Judicial District, affirmed the dismissal of the Aronow Plaintiffs' Complaint. On January 16, 2001, the New York Court of Appeals denied the Aronow Plaintiffs' Motion for Leave to Appeal to the Court of Appeals as against Jack Sommer as Trustee of the Sommer Trust and as against the other Trustees of the Sommer Trust. The Court of Appeals also dismissed the Aronow Plaintiffs' Motion for Leave to Appeal to the Court of Appeals as against Jack Sommer individually on the ground that the order sought to be appealed from did not finally determine an action within the meaning of the New York State constitution. It is not known at this time whether the Aronow Plaintiffs will attempt to reargue, or file a petition for certiorari in the United States Supreme Court, with respect to the Court of Appeals decision. It also is not known at this time whether the Aronow Plaintiffs will at some future date renew their motion for leave to appeal to the Court of Appeals as against Jack Sommer individually. As such, there is no way to evaluate the success of any appeal or motion for reargument. Any adverse decision could have a material and adverse effect on the Company. If the decision of the Appellate Division stands, there can be no liability as a result of the Aronow Plaintiffs' lawsuit. 13. SUBSEQUENT EVENTS In January, 2001, London Clubs made an advance Keep-Well payment of $5 million for the obligations arising under the Keep-Well Agreement for the fiscal period ended December 31, 2000. On March 30, 2001, the Sommer Trust paid $7 million to fully satisfy the obligations arising under the Keep-Well Agreement for the fiscal period ended December 31, 2000. 41 -----END PRIVACY-ENHANCED MESSAGE-----