-----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, KVi4eddTg70dpZylP5Qo6rxGesVI1ifYagfvXm2Puxn/CJcsYcs3FpOpSoEIxHII mMp8ET2sxQX3HmWC1Egebg== 0001047469-98-014253.txt : 19980410 0001047469-98-014253.hdr.sgml : 19980410 ACCESSION NUMBER: 0001047469-98-014253 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 36 FILED AS OF DATE: 19980409 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALADDIN GAMING ENTERPRISES INC CENTRAL INDEX KEY: 0001059128 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 880379607 STATE OF INCORPORATION: NV FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-49715 FILM NUMBER: 98590149 BUSINESS ADDRESS: STREET 1: P O BOX 94827 CITY: LAS VEGAS STATE: NV ZIP: 89193 BUSINESS PHONE: 702736 MAIL ADDRESS: STREET 1: P O BOX 94827 CITY: LAS VEGAS STATE: NV ZIP: 89193 S-1 1 S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1998 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ALADDIN GAMING ENTERPRISES, INC. (Exact name of Registrant as specified in its charter) NEVADA 6719 88-0379695 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of Classification Code Number) Identification incorporation or organization) Number)
------------------------------ 831 PILOT ROAD LAS VEGAS, NEVADA 89119 (702) 736-7114 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------------------------ RICHARD J. GOEGLEIN ALADDIN GAMING ENTERPRISES, INC. 831 PILOT ROAD LAS VEGAS, NEVADA 89119 (702) 736-7114 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ Copies to: WALLACE L. SCHWARTZ, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 THIRD AVENUE NEW YORK, NEW YORK 10022 (212) 735-3000 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to rule 434, please check the following box. / / ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED(1) PER WARRANT OFFERING PRICE FEE Warrants to purchase Class B Common Stock...................... 2,215,000 $6.77 $15,000,000 $4,425.00 Class B Common Stock(2)............. 2,215,000 $0.001 $2,215 $0.65 Total -- -- 15,002,215 $4,425.65
(1) Estimate solely for the purpose of computing the registration fee in accordance with Rules 457(g) and (i) of the Securities Act, based on the book value of the Warrants registered hereunder and the amount payable on exercise of such Warrants. (2) Such shares of Class B Common Stock are issuable upon exercise of the Warrants registered hereunder. This Registration Statement also covers such shares as may be issuable pursuant to anti-dilution adjustments. ------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION DATED APRIL 9, 1998 PROSPECTUS [LOGO] 2,215,000 WARRANTS TO PURCHASE SHARES OF CLASS B COMMON STOCK OF ALADDIN GAMING ENTERPRISES, INC. ------------ This Prospectus relates to the 2,215,000 warrants (the "Warrants") of Aladdin Gaming Enterprises, Inc., a Nevada corporation (the "Issuer") to purchase Class B non-voting common stock, no par value, (the "Common Stock") of the Issuer. The Warrants are exercisable at any time on or after the Separation Date (as defined herein) at an exercise price of $0.001 per Warrant Share (as defined herein), subject to adjustment, and, unless exercised, will expire on March 1, 2010. The Warrants were originally issued and sold on February 26, 1998 (the "Issue Date") to the Initial Purchasers (as defined herein) pursuant to an offering (the "Offering") by Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), Aladdin Capital Corp., a Nevada corporation ("Capital" and together with Holdings, the "Note Issuers") and the Issuer, (the Issuer, together with the Note Issuers, the "Aladdin Parties") of 221,500 Units (the "Units") each consisting of $1,000 principal amount at maturity of 13 1/2 Senior Discount Notes (the "Notes") due 2010 of the Note Issuers and 10 Warrants, and were simultaneously sold by the Initial Purchasers in transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") in the United States to persons reasonably believed to be qualified institutional buyers as defined in Rule 144A under the Securities Act. The number of shares of Common Stock purchasable upon the exercise of the Warrants and the Exercise Price (as defined herein) will be subject to adjustment on the occurrence of certain events (subject to certain exceptions) including (i) the payment by the Issuer of dividends (and other distributions) in shares of any class of the Issuer's capital stock ("Issuer Stock"), (ii) subdivisions, combinations and reclassifications of Issuer Stock, (iii) issuances to all holders of Issuer Stock of rights, options, or warrants entitling them to subscribe for Issuer Stock or of securities convertible into or exchangeable for Issuer Stock for a consideration per share of Issuer Stock which is less than the current market price per share of Issuer Stock and (iv) the distribution to all holders of Issuer Stock of any of the Issuer's assets, debt securities or any rights or warrants to purchase such securities (excluding those rights and warrants referred to in clause (iii) above and excluding cash dividends less than a specified amount). Following the Registration Statement (as defined herein) being declared effective by the Securities and Exchange Commission (the "Commission") the Warrants and Warrant Shares may be offered and sold from time to time by holders thereof or by their transferees, pledgees, donees, or successors (collectively the "Selling Holders") pursuant to this Prospectus. The Warrants and the Warrant Shares may be sold by the Selling Holders from time to time directly to purchasers or through agents, underwriters or dealers. See "Plan of Distribution". If required, the names of any such agents or underwriters involved in the sale of the Warrants and the Warrant Shares and the applicable agent's commission, dealer's purchase price or underwriters' discount, if any, will be set forth in an accompanying supplement to this Prospectus. The Selling Holders will receive all of the net proceeds from the sale of the Warrants and the Warrant Shares and will pay all underwriting discounts, selling commissions and transfer taxes, if any, applicable to any such sales. In accordance with the terms of the Warrant Registration Rights Agreement (as defined herein) the Issuer will pay other expenses incident to any such registration of the Warrants and the Warrant Shares. The Selling Holders and any broker dealers, agents or underwriters that participate in the distribution of the Warrants and the Warrant Shares may be deemed to be "underwriters" within the meaning of the Securities Act. See "Plan of Distribution" for a description of indemnification arrangements. SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE WARRANTS OR WARRANT SHARES. ----------------- THE WARRANTS AND THE WARRANT SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL BOARD HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ------------------ The date of this Prospectus is , 1998. AVAILABLE INFORMATION The Issuer has filed with the Commission a Registration Statement on Form S-1, including exhibits thereto, (collectively, the "Registration Statement") under the Securities Act, with respect to the Warrants and the Warrant Shares to which this Prospectus relates. This Prospectus does not contain all the information set forth in the Registration Statement to which reference is hereby made. Any statements made in this Prospectus concerning the provisions of certain documents are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement. The Registration Statement may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will be available for inspection and copying at the regional offices of the Commission located at 7 World Trade Center, New York, New York 10048 and at Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661. Copies of such material may also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Issuer is not currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon the Commission declaring the Registration Statement effective, the Issuer will become subject to such requirements, and in accordance therewith will file periodic reports and other information with the Commission. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants, such as the Issuer, that file electronically with the Commission and the address of such site is http://www.sec.gov. Each person receiving this Prospectus acknowledges that (i) such person has been afforded an opportunity to request from the Aladdin Parties and the Company, and to review and has received, all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein and (ii) except as provided pursuant to (i) above, no person has been authorized to give any information or to make any representation concerning the Warrants or the Warrant Shares other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorized by the Issuer. ------------------------ DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS This Prospectus contains certain statements that are "forward looking statements." Those statements include, among other things, the discussions of the business strategies of the Aladdin Parties and the Company (as defined herein) and expectations concerning future operations, margins, profitability and liquidity and capital resources. Forward looking statements are included in "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Prospectus. Although the Issuer believes that the expectations reflected in such forward looking statements are reasonable, the Issuer does not give any assurance that such expectations will prove to be correct. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies of the Aladdin Parties and the Company or financial projections involving anticipated revenues, expenses, earnings, levels of capital expenditures or other aspects of operating results. All phases of the operations of the Aladdin Parties and the Company are subject to a number of uncertainties, risks and other influences, many of which are outside the control of the Aladdin Parties and the Company and any one of which, or a combination of which, could materially affect the results of operations of the Aladdin Parties and the Company and whether the forward looking statements made herein ultimately prove to be accurate. Important factors that could cause actual results i to differ materially from the Issuer's expectations are disclosed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." ------------------------ CERTAIN DEFINITIONS REFERENCES IN THIS PROSPECTUS TO (I) "HOLDINGS" REFER TO ALADDIN GAMING HOLDINGS, LLC, A NEVADA LIMITED-LIABILITY COMPANY; (II) "CAPITAL" REFER TO ALADDIN CAPITAL CORP., A NEVADA CORPORATION WHOLLY-OWNED BY HOLDINGS; (III) "ISSUER" REFER TO ALADDIN GAMING ENTERPRISES, INC., A NEVADA CORPORATION, THE SOLE ASSET OF WHICH IS A 25% MEMBERSHIP INTEREST IN HOLDINGS; (IV) "NOTE ISSUERS" REFER TO HOLDINGS AND CAPITAL, COLLECTIVELY; (V) "ALADDIN PARTIES" REFER TO HOLDINGS, THE ISSUER AND CAPITAL, COLLECTIVELY; (VI) THE "COMPANY" REFER TO ALADDIN GAMING, LLC, A NEVADA LIMITED-LIABILITY COMPANY WHICH PLANS TO DEVELOP, CONSTRUCT AND OPERATE THE ALADDIN; (VII) "HOLDINGS GROUP" REFER TO EACH OF HOLDINGS AND ITS SUBSIDIARIES; (VIII) "LONDON CLUBS" REFER TO LONDON CLUBS INTERNATIONAL, PLC, A UNITED KINGDOM PUBLIC LIMITED COMPANY AND (IX) "LCNI" REFER TO LONDON CLUBS NEVADA INC., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF LONDON CLUBS. ALADDIN HOLDINGS, LLC ("AHL"), WHICH IS 95% OWNED BY THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER (THE "TRUST"), DIRECTLY OWNS 98.7% OF THE MEMBERSHIP INTERESTS OF SOMMER ENTERPRISES, LLC ("SOMMER ENTERPRISES"), A NEVADA LIMITED-LIABILITY COMPANY, AND INDIRECTLY OWNS APPROXIMATELY 71% OF THE MEMBERSHIP INTERESTS OF HOLDINGS PRIOR TO THE EXERCISE OF THE WARRANTS. ii PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION (INCLUDING FINANCIAL INFORMATION) APPEARING ELSEWHERE IN THIS PROSPECTUS. THE ISSUER The Issuer is an indirect subsidiary of AHL and was incorporated for the sole purpose of issuing the Warrants and Warrant Shares. The sole material asset of the Issuer is 25% of the Holdings Common Membership Interests (as defined herein). 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 the Company (the "Series A Preferred Interests"). The Warrants entitle the holders thereof to purchase an aggregate of 2,215,000 shares of Common Stock of the Issuer, representing a 40% economic interest in the Issuer, at an exercise price of $0.001 per Warrant Share, subject to adjustment, and representing an indirect interest of 10% of the outstanding Holdings Common Membership Interests on a fully-diluted basis as of the Issue Date, after giving effect to such issuance. The Warrants are exercisable at any time on or after the Separation Date and, unless exercised, will expire on March 1, 2010. THE COMPANY The Company plans to develop, construct and operate a new hotel and casino, the Aladdin Hotel and Casino (the "Aladdin") as the centerpiece of an approximately 35 acre world-class resort, casino and entertainment complex (the "Complex") located on the site of the existing Aladdin hotel and casino in Las Vegas, Nevada, a premier location at the center of Las Vegas Boulevard (the "Strip"). The Aladdin has been designed to include a luxury themed hotel of approximately 2,600 rooms (the "Hotel"), an approximately 116,000 square foot casino (the "Casino"), an approximately 1,400-seat production showroom and seven restaurants. The Casino's main gaming area will contain approximately 2,800 slot machines, 87 table games, keno and a race and sports book facility. Included on a separate level of the Casino will be a 15,000 square foot luxurious gaming section (the "Salle Privee") which is expected to contain an additional 20 to 30 high limit table games and approximately 100 high limit slot machines. The Salle Privee will cater to wealthy clientele and be operated and marketed in conjunction with London Clubs, a prestigious, multi-national casino operator which caters to international premium players. The Complex, which has been designed to promote Casino traffic and to provide customers with a wide variety of entertainment alternatives, will comprise (i) the Aladdin; (ii) a themed entertainment shopping mall with approximately 462,000 square feet of retail space (the "Desert Passage"); (iii) a second hotel and casino, with a music and entertainment theme (the "Music Project"); (iv) a newly renovated 7,000-seat Theater of the Performing Arts (the "Theater"); and (v) an approximately 4,800-space car parking facility (the "Carpark" and, together with the Desert Passage, the "Mall Project"). The Mall Project and the Music Project will be separately owned by affiliates of the Company. The Company's business and marketing strategies are expected to capitalize on the Complex's premier location, its superior designed, mixed-use, themed development, and strong strategic partnering with highly successful public companies. The grand opening date for the Aladdin and the Mall Project is currently anticipated to occur during the first four months of the year 2000, with the opening of the Music Project expected to occur within six months after the opening of the Aladdin. The Company's management team is led by Chief Executive Officer Richard J. Goeglein, the former President and Chief Executive Officer of Harrah's Hotels and Casinos and President and Chief Operating Officer of Holiday Corp., who during his term at Harrah's oversaw the expansion of the Harrah's brand, including the development of Harrah's Hotel and Casino in Atlantic City. Assisting Mr. Goeglein as Senior Vice President of the Company and President/Chief Operating Officer of the Aladdin Hotel and Casino is James H. McKennon, who as President and Chief Operating Officer of Caesars Tahoe was instrumental in its financial turnaround and as President of Caesars World International Marketing Corp. was responsible for the global marketing of the Caesars brand. 1 It is expected that approximately $75 million will be spent on theming in the Aladdin and the Desert Passage, of which approximately $35 million will be spent by the Company on the Aladdin. This theming will create an environment in the Aladdin that will be based upon the Legends of the 1001 Arabian Nights, including the intriguing tales of Aladdin, Ali Baba and the 40 Thieves, Sinbad and other legendary stories woven around ancient wealth and wonders. The Aladdin's exterior will be designed to include a highly articulated streetscape, a themed Casino exterior shaped like a Bedouin tent, fountains, walkways, sculptures and an outdoor restaurant. The sophisticated interior of the Aladdin will utilize rich colors, textures and design, enhancing the fantasy of a mystical romantic time and place. A significant feature of the Desert Passage will be the themed area to be known as the "Lost City." The "Lost City" is expected to contain a re-creation of an ancient mystical mountain city and will house a variety of specialty shops and restaurants underneath a 10-story high ceiling. The Company believes that the Aladdin, with its unique theme, together with the Desert Passage, will ensure its place as a "must-see" destination in one of the world's largest entertainment cities. The Company believes that upon completion, the Aladdin, the Mall Project and the Music Project together will constitute one of the largest and best-planned integrated, mixed-use entertainment resorts in the world. Aladdin Bazaar Holdings, LLC ("Bazaar Holdings"), a subsidiary of the Trust, and TH 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 Mall Project. TrizecHahn is the principal retail subsidiary of TrizecHahn Corporation, one of the largest publicly-traded real estate companies in North America. The Desert Passage is expected to include an array of high-fashion specialty stores, exotic boutiques, themed restaurants, cafes and other entertainment offerings. The Desert Passage will be directly connected to the Casino to maximize Casino traffic. Aladdin Music Holdings, LLC ("AMH"), a wholly owned subsidiary of the Company, and a subsidiary of Planet Hollywood International, Inc. ("Planet Hollywood") have entered into a binding memorandum of understanding (the "Music Project Memorandum of Understanding") to form Aladdin Music, LLC ("Aladdin Music"), which will own and develop the Music Project. The Music Project Memorandum of Understanding is subject to the finalization of financing commitments. Planet Hollywood is a creator and worldwide developer of themed restaurants and consumer brands, most notably "Planet Hollywood" and the "Official All Star Cafe." Planet Hollywood has announced that it intends to position a brand of music-themed entertainment venues as its third major brand. The Music Project, which will be managed by the Company, is expected to include an approximately 1,000 room hotel, a 50,000 square foot casino, four restaurants, including a music-themed restaurant which will feature its own 1,000-person nightclub, a health spa and an outdoor swimming pool. As part of the development of the Complex, the Company expects to indirectly contribute to Aladdin Music $21.3 million in cash and land having an appraised fair market value of $15.0 million in exchange for a preferred membership interest in Aladdin Music and to lease to Aladdin Music the existing 7,000-seat Theater for a nominal amount. It is anticipated that Aladdin Music will carry out an approximately $8 million renovation of the Theater, improving its decor, light and sound systems and other facilities. A further distinguishing feature of the Music Project is the anticipated active involvement of famous artists and celebrities, some of whom are expected to be stockholders of Planet Hollywood (or its affiliates), participate in the marketing of Planet Hollywood's music-themed brand and perform at the Theater or make other personal appearances at the Music Project. The Music Project, with its music and entertainment theme, will complement the Aladdin and it is expected that together the two hotels will offer an excitement and variety of entertainment alternatives that will further distinguish the Complex from other venues on the Strip. The development of the Aladdin commenced during the first quarter of 1998. The existing Aladdin hotel and casino closed for business on November 25, 1997 and the implosion of the existing facility is expected to occur during April 1998. The development of the Mall Project is expected to commence during the second quarter of 1998, followed thereafter by the expected commencement of the development of the Music Project in the second half of 1998. 2 STRENGTHS The Company believes that several important advantages will contribute significantly to the success of the Aladdin: PREMIER LOCATION. The Aladdin's 800 feet of Strip frontage is located on the section of the Strip between Flamingo Road at the north and Tropicana Boulevard at the south. Based upon independent research and assuming completion of certain other development projects, the average vehicular traffic that will pass the Complex each day is expected to be approximately 54,000. Another major feature of the Complex will be its easy access from Las Vegas' McCarran International Airport ("McCarran Airport"), only 2.5 miles away. According to the Las Vegas Convention and Visitors Authority (the "LVCVA"), the number of visitors to Las Vegas has increased at a steady and significant rate for the last 15 years, growing from approximately 10 million in 1980 to approximately 19 million in 1990 to over 30 million in 1996, with approximately 44% of these visitors in 1996 arriving by air through McCarran Airport. McCarran Airport, the tenth busiest airport in the United States, is currently in the process of expanding its capacity through the addition of 26 new gates, and it is expected that following completion thereof, the number and percentage of visitors arriving in Las Vegas by air will further increase, making easy access from McCarran Airport to Las Vegas' resorts even more crucial. MASTER-PLANNED, MIXED-USE DEVELOPMENT. The Aladdin has been carefully and strategically designed to promote Casino traffic. Each element of the Complex has been sited and planned in a manner that maximizes pedestrian and vehicular traffic so as to facilitate access to and from the Complex, as well as circulation between the different parts of the Complex, with the Casino being the nexus for the vast majority of pedestrian traffic. Significant portions of the Desert Passage and all of the Theater's entrances and exits will be accessed through, or be adjacent to, the Casino. The Casino will be located in front of the Hotel, and unlike many of the newer projects on the Strip, will provide easy access for pedestrians without requiring long walks into the Complex. Pedestrian visitors to the Aladdin entering from the Aladdin's 800 feet of Strip frontage will be able to enter the Hotel directly through the Casino or through the Desert Passage entrances. Through the use of a circular internal roadway, guests arriving by limousine, car service, taxi or private vehicle will be able to enter the Complex directly and easily from the Strip and Harmon Avenue. Furthermore, by the use of bridges and access ways, pedestrians will not be required to cross roadways while moving between different attractions on the Complex, thus facilitating ease of movement between the various parts of the Complex and the Strip. UNIQUE ENTERTAINMENT FACILITIES. The Aladdin is expected to benefit from the Casino traffic generated from the broad variety of entertainment facilities located throughout the Complex. The Aladdin will be adjacent to the existing Theater, which is expected to continue to be used to hold major concerts and theatrical performances and is one of the few venues of its size and type in Nevada. The Theater's approximately $8 million renovation is expected to transform it into a first-class venue and provide an additional source of visitor traffic to the Complex. The Aladdin will include a 1,400-seat showroom featuring a 1001 Arabian Nights-themed production show on its mezzanine level, with elegant, exotic costuming, music, lighting and choreography. In addition, the Desert Passage will be designed to engage the customer in a themed shopping, entertainment and dining experience. Of the approximately 462,000 square feet of retail space within the Desert Passage, it is anticipated that approximately 25% will be devoted to high pedestrian traffic generating food, beverage and entertainment experiences. Furthermore, the Music Project is expected to contain a 1,000-person nightclub featuring regular live performances. PRESTIGIOUS STRATEGIC PARTNERS. The Company and the Complex will benefit from important relationships with several prominent public companies, as follows: 3 - - LONDON CLUBS INVESTMENT. London Clubs, a prestigious multi-national casino operator, indirectly owns 25% of the outstanding common membership interests of Holdings ("Holdings Common Membership Interests"). London Clubs had an equity market capitalization of over $455 million on April 2, 1998. London Clubs has extensive experience in the international marketing of casinos to premium players and maintains a strong presence in the United Kingdom (where it controls the largest share of the London casino market), Europe, Asia and the Middle East. In addition to its 25% ownership of the outstanding Holdings Common Membership Interests, London Clubs, through LCNI, will direct the operations of, and act as marketing consultant to, the Salle Privee. The Company believes that the Salle Privee will be the first of its kind in the United States managed by a European operator and based on the European concept of full service gaming areas for premium players. The Salle Privee's primary business and marketing focus will be to access London Clubs' worldwide base of upscale casino clientele. - - JOINT VENTURE WITH PLANET HOLLYWOOD. Through a subsidiary, Planet Hollywood has agreed to be a 50% partner (on a fully diluted basis) in the Music Project. Planet Hollywood is a creator and worldwide developer of consumer brands, most notably "Planet Hollywood" and the "Official All Star Cafe," that capitalize on the universal appeal of the high energy environment of movies, sports and other entertainment-based themes. The Company believes that the exposure generated by the Music Project will enhance the Aladdin by providing immediate excitement and press coverage for the Complex. Planet Hollywood had an equity market capitalization of over $994 million on April 2, 1998. - - STRATEGIC RELATIONSHIP WITH TRIZECHAHN. The Mall Project will be owned, developed and operated by Bazaar, a joint venture between Bazaar Holdings and THB, a subsidiary of TrizecHahn. TrizecHahn is a wholly-owned subsidiary of TrizecHahn Corporation, one of the largest publicly traded real estate companies in North America. TrizecHahn Corporation had an equity market capitalization of over $3.4 billion on April 2, 1998. TrizecHahn was the developer of Horton Plaza in San Diego, Bridgewater Commons in New Jersey, Valley Fair in San Jose and Park Meadows in Denver. Investors should note that TrizecHahn has announced that it is considering selling its operating portfolio of regional shopping centers and on April 6, 1998 announced the sale of 20 regional shopping centers for over $2.5 billion. See "Risk Factors--Completion of the Mall Project and the Music Project." STRATEGY The Company's business and marketing strategies are expected to capitalize on the Complex's premier location, its superior designed, mixed-use themed development and strong strategic partnering with highly successful public companies. CREATE A "MUST-SEE" DESTINATION. The Company believes that the Aladdin, with its unique design, together with the Desert Passage and the Music Project will ensure its place as a "must-see" destination in one of the fastest growing entertainment cities in the world. The Aladdin theme will be supported by a sophisticated interior design enhancing the fantasy of a mystical and romantic time and place. The Aladdin's main Casino traffic will be driven not only by Hotel guests, but also by the customers directly attracted from the Strip. Visitor traffic to the Aladdin will also be enhanced by the Desert Passage and the adjoining Music Project. TARGETED MARKET POSITIONING. The Company intends to focus on three different market segments to attract customers to the Aladdin: - - UPSCALE CLIENTELE. The Hotel will be designed to appeal to an upscale clientele, providing the amenities and level of service such high-end guests expect. Each of the Hotel's approximately 2,600 guest rooms will have an area of not less than 450 square feet--exceeding that of the average Las Vegas hotel room of approximately 360 to 400 square feet--and 24% of the Hotel's guest rooms will have an area exceeding 620 square feet. The Hotel's room inventory for the upscale market is expected to include 624 "king parlors" and suites, ranging from 585 to 1,162 square feet. The Hotel will provide extensive recreational facilities and amenities for its guests, including a 20,000 square foot health spa with 4 steam, sauna and massage services and an outdoor swimming-pool complex surrounded by gardens and fountains. The Company intends to promote the Aladdin's many features to the upscale market through a variety of media, including high-end print publications, travel agents and events sponsorships. A targeted-relationship marketing program is expected to ensure clientele retention and repeat visitation. - - INTERNATIONAL PREMIUM PLAYER CLIENTELE. The focus of the Salle Privee's business will be the wealthy clientele that form the core of London Clubs' business in London and elsewhere. The Hotel will include 30 suites primarily for use by Salle Privee clientele, including 25 "Salle Privee suites" (ranging from 815 to 930 square feet) and five "mega-suites" (ranging from 2,125 to 3,500 square feet). The Company will maintain the Salle Privee's premium player atmosphere through more sophisticated dining options, higher table limits and more formal levels of service and dress. - - UPPER-MIDDLE MARKET CLIENTELE. The Hotel's variety of guest rooms, six of its seven restaurants and the 1,400-seat production showroom, combined with the heavily themed Casino, Theater and Desert Passage, are expected to appeal broadly to the upper-middle market guest. Additionally, cooperative advertising and promotion through various media, such as television, radio and print, will be used to promote the Complex to the upper-middle market. Furthermore, the Music Project is expected to attract younger, affluent customers to the Complex through, among other things, its music and entertainment-based theme. LEVERAGE FROM STRATEGIC RELATIONSHIPS. The Company and its affiliates have chosen as strategic partners an experienced team of retail, casino and themed entertainment developers and operators. The Company intends to utilize the unique expertise of its partners from the preliminary development stages of the Complex through its promotion and operation. - - DEVELOPMENT EXPERTISE. In establishing a strategic relationship with TrizecHahn, the Company has obtained the knowledge, skills and capital of a partner who has expertise in the coordination, construction and completion in a timely manner of large, high quality projects. - - MANAGEMENT AND OPERATING ABILITIES. The Complex is expected to benefit from the experience of TrizecHahn, London Clubs and Planet Hollywood in its operations. Through its management and ownership of shopping centers, TrizecHahn has demonstrated its ability to successfully design, configure and attract high quality tenants to its retail shopping projects. London Clubs has extensive experience in the international marketing and operation of casinos, in particular to premium players. In addition, Planet Hollywood has successfully grown its concepts to 87 company-owned and franchised Planet Hollywood and Official All Star Cafe units (as of December 31, 1997) since commencing business in 1991. - - CAPITALIZING ON BRAND NAMES. With access to some of the most well-known names in their respective markets, the Company expects to capitalize on the worldwide brand recognition of Planet Hollywood, London Clubs and TrizecHahn, creating unique opportunities for the Complex. - - ACCESSING NEW CLIENT BASE. London Clubs and Planet Hollywood are expected to provide the Complex with access to market segments which the Company believes have not been extensively penetrated by other hotel/casinos in Las Vegas. London Clubs provides the Aladdin with a substantial network of international premium players and superb promotional opportunities. Furthermore, it is expected that Planet Hollywood will introduce a younger, affluent clientele to the Complex through, among other things, celebrity involvement in the Music Project. CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS. The Company anticipates the total cost of developing, financing, constructing and opening the Aladdin to be approximately $790 million (excluding the Company's $21.3 million planned indirect cash contribution and $15.0 million appraised fair market value land contribution to Aladdin Music as part of the development funds for the Music Project). As part of the Company's strategy of carefully managing construction costs and risks, the Company has hired Tishman 5 Construction Corporation of Nevada ("Tishman"), to be the construction manager. Tishman is a subsidiary of Tishman Realty & Construction Co. Inc., a privately held company with extensive experience in building quality hotels and casinos. As construction manager, Tishman will advise with respect to scheduling, administration and reporting in connection with the construction activities of the Design/ Builder (as defined herein). In addition, the following arrangements have been made to ensure the full and timely completion of the Aladdin. - - BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY. The Trust, London Clubs and Bazaar Holdings have entered into a completion guaranty (the "Bank Completion Guaranty") for the benefit of the lenders under the Bank Credit Facility (the "Bank Lenders"), under which they have agreed to guarantee, among other things, the completion of the Aladdin. The Bank Completion Guaranty, is not subject to any maximum dollar limitations. The Trust, London Clubs and Bazaar Holdings have also entered into a limited completion guaranty for the benefit of the holders of the Notes (the "Noteholder Completion Guaranty"), under which they have guaranteed completion of the Aladdin, subject to certain important exceptions, limitations and qualifications. None of Holdings, the Issuer nor the holders of Warrants or Warrant Shares is a party to the Bank Completion Guaranty or the Noteholder Completion Guaranty. See "Risk Factors--Limitations Under Bank Completion Guaranty and Noteholder Completion Guaranty," "Description of Noteholder Completion Guaranty and Disbursement Agreement--Noteholder Completion Guaranty" and "Description of Certain Indebtedness and Other Obligations--Completion Guaranty." - - DESIGN/BUILD CONTRACT. Fluor Daniel, Inc. (the "Design/Builder") is the design/builder for the Aladdin. The Design/Builder has entered into a guaranteed maximum price design/build contract (subject to increases based on scope changes) with the Company to design and construct the Aladdin (the "Design/Build Contract"). The Design/Build Contract provides the Design/Builder with incentives for completing the Aladdin ahead of schedule and within budget and for payment of liquidated damages to the Company for certain delays. The Design/Build Contract is guaranteed by Fluor Corporation ("Fluor"), the parent of the Design/Builder, pursuant to the Fluor Guaranty (as defined herein). See "Certain Material Agreements--Design/Build Contract." - - MALL COMMITMENT LETTER AND MALL GUARANTY. Bazaar has obtained a commitment letter from Fleet National Bank, as administrative agent for the lenders to the Mall Project (the "Mall Lenders"), to fund the construction of the Mall Project (the "Mall Financing"). Furthermore, upon closing of the Mall Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL have agreed, pursuant to one or more agreements, to guarantee completion of the Mall Project and Bazaar's indebtedness to the Mall Lenders until certain earnings and loan to value targets have been met (collectively, the "Mall Guaranty"). See "Risk Factors--Completion of the Mall Project and the Music Project." MANAGEMENT AND DEVELOPMENT TEAM The Complex is being developed by a team with broad expertise in each of the elements of the Complex and which, collectively, have a proven track record in constructing, completing and operating significant hotel casino projects. MANAGEMENT TEAM. The management team of the Company, which will develop and operate the Aladdin and the Music Project, comprises a unique combination of executives with an average of more than 20 years' experience in the management of hotels, casinos, restaurants and large real estate projects. The team includes: - - Jack Sommer, Chairman of the Company, who has been a full-time resident of Las Vegas since 1988 and has more than 25 years of experience as a developer of real estate including luxury projects such as North Shore Towers, in Queens County, New York, The Sovereign at 425 East 58th Street in Manhattan and 280 Park Avenue, an 820,000 square foot office building in Manhattan formerly owned and currently partially occupied by the Bankers Trust Company. 6 - - Richard J. Goeglein, Chief Executive Officer, President and a director of the Company who has spent over 28 years in the hotel/casino and food service industries. Mr. Goeglein has served as President and Chief Executive Officer of Harrah's Hotels and Casinos and as President and Chief Operating Officer of Holiday Corp. (the parent company of Holiday Inns, Harrah's, Hampton Inns and Embassy Suites). Mr. Goeglein oversaw the acquisition of Harrah's and the development of some of Harrah's most successful projects, including Harrah's Hotel and Casino in Atlantic City, and its expansion into Southern Nevada. - - James H. McKennon, Senior Vice President of the Company and President/Chief Operating Officer of the Aladdin Hotel and Casino, whose career spans over 21 years in the hotel and casino industry in a variety of executive positions, including as President and Chief Operating Officer of Caesars World International Marketing Corp. Mr. McKennon was also President and Chief Operating Officer of Caesars Tahoe for 4 years and was instrumental in its financial turnaround. - - Cornelius T. Klerk, Senior Vice President/Chief Financial Officer of the Company, has over 19 years experience in the hotel and casino industry both at the corporate and property level, including as Vice President/Finance of the Hilton Hotels Gaming Division from 1993 to 1997. Mr. Klerk also served in a variety of senior financial management positions during the development and operation of Harrah's Hotel and Casino in Atlantic City and Harrah's Trump Plaza (now Trump Plaza) in Atlantic City. DEVELOPMENT TEAM. The Company and its affiliates have been involved in the design of the Complex for over 24 months and have assembled a development team with proven experience in the development of high quality resort projects. The team includes: - - Tishman, the construction manager for the Aladdin (and, at AHL's option, the Music Project, the Mall Project and the Theater). Tishman or its affiliates have developed or built over 30,000 hotel rooms nationwide, including the Golden Nugget and the Trump Castle Hotel and Casino in Atlantic City, the 400-room expansion of Harrah's Hotel and Casino in Atlantic City, the 2,300 room Walt Disney World Dolphin and Swan Hotel and Convention Complex and the 1,200 room Sheraton Chicago Hotel. - - The Design/Builder, a subsidiary of Fluor. The Design/Builder is recognized internationally as an industry leader in providing architectural, engineering and construction services, including resort projects such as the Guest Inn Timika in Indonesia, the Pan Pacific Hotel in Malaysia and the Hyatt Regency Greenville Hotel. - - ADP/FD of Nevada, Inc. ("ADP"), the Complex architect and an indirect subsidiary of Fluor. ADP is wholly owned by ADP Marshall, Inc. ("ADP Marshall"), which is well-known for its architecture work and mixed-use projects. Its architecture client list includes Princess Hotels, Inc. (Scottsdale and Acapulco) and Carefree Resorts (The Boulders, The Peaks, Carmel Valley Ranch). - - THB, a wholly-owned subsidiary of TrizecHahn and the joint venture partner of ABH in the Mall Project. Prior to its recently announced sale of 20 regional shopping centers, TrizecHahn owned and managed 27 regional shopping centers in major markets throughout the United States, comprising over 25 million square feet. - - Brennan Beer Gorman Monk/Interiors ("BBGM"), the interior designer for the Aladdin. BBGM specializes in hospitality design and has experience in casinos, restaurants, retail, spa/fitness centers and specialty theme projects, including the recently renovated and expanded Caesars Atlantic City hotel, Mohegan Sun Casino and TropWorld. BBGM's hotel projects have included the St. Regis, the Plaza and the Sheraton Hotel & Towers in New York City. 7 [LOGO] 8 USE OF PROCEEDS No proceeds will be received by the Issuer from the registration or sale of the Warrants or the Warrant Shares pursuant to the Registration Statement. The gross proceeds from the sale of the Units were $115.0 million. The net proceeds (net of discounts for Initial Purchasers (as defined herein) and estimated Offering expenses) together with the proceeds from the other Funding Transactions are being used to develop, construct, equip and open the Aladdin and to fund the Company's cash contribution to Aladdin Music with respect to the Music Project. Upon or prior to consummation of the Offering, (i) the proceeds from the sale of the Units were allocated between the Notes and the Warrants, (ii) Sommer Enterprises (a) contributed a portion of the Contributed Land (as defined herein) and $7.0 million consisting of the benefit of certain predevelopment costs incurred by AHL to the Issuer in exchange for Class A Common Stock in the Issuer and (b) contributed a portion of the Contributed Land to Holdings in exchange for Holdings Common Membership Interests, (iii) the Issuer contributed the portion of the Contributed Land, the benefit of the predevelopment costs received from Sommer Enterprises and the net proceeds allocable from the sale of the Warrants to Holdings in exchange for Holdings Common Membership Interests, (iv) Holdings contributed the Contributed Land appraised at $150.0 million, approximately $42 million in cash from the London Clubs Contribution (as defined herein) and the $7.0 million consisting of the benefit of certain predevelopment costs incurred by AHL to the Company in exchange for Common Membership Interests of the Company, and (v) Holdings contributed $115.0 million in cash, consisting of the net proceeds of the sale of the Units and approximately $8 million from the London Clubs Contribution, to the Company in exchange for Series A Preferred Interests of the Company ((iv) and (v) collectively, the "Equity and Series A Preferred Interest Financing"). The London Clubs Contribution, together with a portion of the net proceeds of the Offering, were expended on the Issue Date (as defined herein) to repay certain existing indebtedness assumed by the Company in connection with the Sommer Equity Financing (as defined herein) and to pay certain accrued expenses and certain fees and expenses incurred in connection with the Funding Transactions. The remaining net proceeds from the Offering (approximately $35 million) were deposited in a segregated escrow account ("the Note Construction Disbursement Account") which was pledged as collateral for the benefit of the holders of the Notes, pending disbursement of such funds pursuant to the Disbursement Agreement (as defined herein). The liquidation preference of the Series A Preferred Interests held by Holdings will at all times equal the Accreted Value (as defined herein) of the Notes. Prior to or contemporaneously with the Offering, the following other arrangements (together with the Offering, the "Funding Transactions") for the financing by the Company of the Aladdin were consummated: (i) the Sommer Equity Financing and the indirect equity contribution to Holdings by London Clubs of $50.0 million in cash (the "London Clubs Contribution") in exchange for Holdings Common Membership Interests; (ii) the closing of the $410.0 million Bank Credit Facility between the Company and the funding of the Term B Loan (as defined herein) and the Term C Loan (as defined herein) thereunder into the Cash Collateral Account (as defined herein) and (iii) execution and delivery of a commitment letter by the Company for one or more leases or loans in the aggregate amount of $80.0 million, covering the Specified Equipment and the Gaming Equipment (each as defined herein), to be used in the Aladdin (the "FF&E Financing"). See "Controlling Stockholders--Equity and Series A Preferred Interest Financing," "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility" and "--FF&E Financing." 9 SOURCES AND USES OF FUNDS The estimated sources and uses of funds raised for the development, construction, equipping and opening of the Aladdin are as follows (in millions):
SOURCES USES - --------------------------------------------------------- --------------------------------------------------------- Bank Credit Facility(1)....................... $ 410.0 Hotel and Casino(7)........................... $ 295.6 FF&E Financing(2)............................. 80.0 Off-Site Improvements(8)...................... 6.8 Senior Discount Notes due 2010(3)............. 115.0 Reimbursable Site Work Expenses(6)............ 14.2 Land Contribution(4).......................... 150.0 Furniture, Fixtures and Equipment and Cash Contribution(5).......................... 57.0 Gaming Equipment(9)........................... 107.5 Anticipated Site Work Land(10)...................................... 135.0 Reimbursement(6)............................ 14.2 Retire Existing Debt(11)...................... 74.5 Capitalized Interest, Net(12)................. 44.0 Pre-Opening Costs and Expenses................ 16.9 Reimbursement of Pre-development Costs(13).... 3.9 Working Capital(14)........................... 15.0 Construction and FF&E Contingency(15)......... 31.8 Land Investment in Music Project(16).......... 15.0 Cash Equity Investment in Music Project(17)... 21.3 Financing Fees and Expenses(18)............... 44.7 --------- --------- Total Sources................................. $ 826.2 Total Uses.................................... $ 826.2 --------- --------- --------- ---------
- ------------------------ (1) The Company entered into the Bank Credit Facility with the Bank Lenders. The Bank Credit Facility, which closed concurrently with the closing of the Offering, consists of: (a) a term loan of $136.0 million ("Term A Loan") which matures seven years after the initial borrowing date; (b) a term loan of $114.0 million ("Term B Loan") which matures eight and one-half years after the initial borrowing date; and (c) a term loan of $160.0 million ("Term C Loan", and collectively with the Term A Loan and the Term B Loan, the "Loans") which matures ten years after the initial borrowing date. The Term B Loan and Term C Loan were funded into the Cash Collateral Account on the Issue Date, and subject to satisfaction of the conditions in the Disbursement Agreement, are expected to be drawn down beginning in August 1998 (being approximately five months after the Issue Date). It is anticipated that the Company will begin to draw down the Term A Loan, subject to satisfaction of the conditions in the Disbursement Agreement, in December 1999 (being approximately 21 months after the Issue Date). See "Risk Factors--Conditions to Draw Down of Funds Under Funding Transactions." All of the Loans will convert from construction loans into amortizing loans on the Conversion Date (as defined herein), with substantial amounts due during the final six quarters of the Term B Loan and the Term C Loan. The Company has the option to pay interest at either LIBOR or the alternate base rate ("ABR") published by The Bank of Nova Scotia ("Scotiabank"), in each case plus certain margins. See "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility." (2) The Company has entered into a commitment letter with the FF&E Lender (as defined herein) for provision of the FF&E Financing. The FF&E Financing is expected to consist of $60.0 million of operating leases and $20.0 million in loans and is expected to be used by the Company to obtain the Gaming Equipment and Specified Equipment. See "Description of Certain Indebtedness and Other Obligations--FF&E Financing." (3) Represents the gross proceeds of the Offering, which, net of expenses of approximately $8 million, were contributed, together with approximately $8 million in cash received pursuant to the London Clubs Contribution, by Holdings to the Company in exchange for Series A Preferred Interests. (4) The land on which the Aladdin, the Music Project and the Plant (as defined herein) will be built, including adjacent land of approximately 0.8 acres, comprises a total of approximately 22.75 acres (the "Contributed Land") and was contributed to the Company by Holdings in exchange for Common Membership Interests. The Contributed Land has an appraised fair market value of $150.0 million (book value of $33.6 million as of December 31, 1997). Approximately 18 acres of the Contributed 10 Land, having an appraised fair market value of $135.0 million, have been retained by the Company and approximately 4.75 acres of the Contributed Land, having an appraised fair market value of $15.0 million, will be contributed to Aladdin Music for the Music Project. (5) Represents (i) a $50.0 million cash contribution by London Clubs in exchange for 25% of the Holdings Common Membership Interests and (ii) a $7.0 million deemed equity contribution by the Issuer in exchange for Holdings Common Membership Interests, consisting of certain pre-development costs incurred by AHL in 1996, 1997 and 1998. (6) Pursuant to the Site Work Agreement, the Company has agreed to complete the construction of, among other things, certain shared structural space (the "Mall Shared Space"), construction of which will commence prior to the initial funding of the Mall Financing. Bazaar has agreed to reimburse the Company for up to $14.2 million (including interest) of the costs associated with such construction upon the completion of the Mall Shared Space. See "Certain Material Agreements--Construction, Operation and Reciprocal Easement Agreement and Related Agreements." (7) Represents (i) the guaranteed maximum price of construction of the Aladdin pursuant to the Design/ Build Contract of $267.0 million, less the contingency allowance of $6.8 million and expected reimbursement from Bazaar of $13.6 million (net of approximately $0.6 million of interest) as set forth in note (6) above; (ii) approximately $35 million for theming the Aladdin; (iii) $11.7 million for professional fees and disbursements; and (iv) $2.3 million for permits and taxes. See "Risk Factors-- Completion of the Mall Project and the Music Project." The Design/Build Contract contains financial incentives for the Design/Builder to complete the Aladdin within the construction budget and in a timely manner, as well as liquidated damages payable to the Company for certain unexcused delays. See "Risk Factors--Risks of New Construction," "--Risks Under Design/Build Contract and Fluor Guaranty" and "Certain Material Agreements--Design/Build Contract." (8) Represents the cost of off-site improvements, including overhead pedestrian walkways and widening of certain streets, for those parts of the Project Site (as defined herein) on which the Aladdin will be built. (9) Includes $26.5 million of gaming equipment and $81.0 million of furniture, fixtures and other equipment (including the Specified Equipment consisting of new furniture and equipment other than gaming equipment). (10) Represents the appraised fair market value of the land on which the Aladdin and the Plant will be built, together with adjacent land of approximately 0.8 acres. (11) Represents the retirement on the Issue Date of $68.7 million of existing indebtedness on the Contributed Land (with an interest rate of LIBOR plus 650 bps) and $5.8 million of existing debt owed by the Trust to GW Vegas LLC ("GW Vegas"), assumed by the Company as part of Holdings' equity contribution to the Company. (12) Represents capitalized gross interest under the Bank Credit Facility of $57.4 million and capitalized gross interest of $2.4 million from leasing expenses in connection with the FF&E Financing, from the date of the Offering until the estimated completion of the Aladdin in the first four months of the year 2000, net of interest income anticipated to be earned upon the investment in cash equivalents of the funds (assumed to be at 5% per annum) from the proceeds of the Offering and the proceeds of the Term B Loan and Term C Loan. (13) Represents $3.0 million of certain predevelopment costs incurred by AHL and reimbursed on the Issue Date and up to $0.9 million of certain predevelopment costs expected to be incurred and reimbursed over the expected construction period. (14) Represents cash on hand, inventories, deposits and other cash balances required for the opening of the Aladdin. (15) Comprises (i) the $6.8 million contingency included in the guaranteed maximum price set forth in the Design/Build Contract and (ii) the $25.0 million general project contingency (collectively, the "Contingency"). (16) Represents the appraised fair market value of the approximately 4.75 acres of land on which the Music Project will be built, which land will be contributed by the Company to AMH in exchange for common membership interests in AMH. (17) Represents cash to be contributed by the Company to AMH in exchange for common membership interests in AMH. (18) Represents fees in connection with the organization of the Company and the financing of the Aladdin, including approximately $8 million in expenses incurred in connection with the Offering. 11 THE WARRANTS AND WARRANT SHARES The Warrants were originally issued by the Issuer in the Offering, pursuant to which 221,500 Units were issued and sold. Each Unit consists of $1,000 principal amount of Notes and 10 Warrants. The Notes and the Warrants will be separately transferable, in accordance with the Indenture (as defined herein), upon the filing of the Registration Statement at the option of the holders thereof. The Registration Statement applies solely to the Warrants and the Warrant Shares. The registration of the Warrants and the Warrant Shares is intended to satisfy certain obligations of the Issuer under a registration rights agreement with respect to the Warrants (the "Warrant Registration Rights Agreement") among the Issuer and Merrill Lynch, Pierce, Fenner and Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (the "Initial Purchasers"), dated the Issue Date. There will be no proceeds to the Issuer from the registration or subsequent sale of the Warrants or Warrant Shares. Issuer....................... Aladdin Gaming Enterprises, Inc. Number of Warrants........... The Warrants entitle the holders thereof to acquire an aggregate of 2,215,000 shares of Common Stock of the Issuer (40% of the economic interest in the Issuer) representing an indirect interest in 10% of the outstanding Holdings Common Membership Interests on a fully-diluted basis after giving effect to such issuance. Exercisability; Expiration... The Warrants are exercisable at any time on or after the Separation Date (as defined herein) and prior to March 1, 2010. Exercise Price............... Each Warrant entitles the holder thereof to purchase one share of Common Stock of the Issuer at an exercise price of $0.001 per share, subject to adjustment. Anti-Dilution Provisions..... The Warrants have customary anti-dilution provisions. Such anti-dilution provisions are also reflected in the documents pertaining to the Holdings Common Membership Interests. Warrant Shares............... The Warrants entitle the holders thereof to acquire non-voting Common Stock of the Issuer. Shares of Common Stock of the Issuer or any successor entity and any other securities or property issuable or deliverable upon exercise of the Warrants are collectively referred to herein as the "Warrant Shares." The Issuer is a corporation, the sole material asset of which is 25% of the outstanding Holdings Common Membership Interests. The Warrants represent an effective 10% interest in the outstanding Holdings Common Membership Interests, on a fully-diluted basis after giving effect to such issuance, and the Trust (through Sommer Enterprises) owns interests which represent an effective 58.5% interest in the outstanding Holdings Common Membership Interests on a fully-diluted basis, (44.5% held by a direct ownership and 14.0% held by an indirect equity ownership through the Issuer). Equity Participation The Issuer, the Warrant Agent for and on behalf of the Agreement.................. holders of the Warrants and Warrant Shares, the Trust, London Clubs and Holdings have entered into the Equity Participation Agreement (as defined herein) which provides (among other things) (a) for the grant of certain "tag-along" rights to the holders of Warrant Shares in respect of sales by Sommer Enterprises or LCNI, directly or indirectly, of Holdings Common Membership Interests; (b) for rights of holders of the Warrant Shares to participate in an initial public offering on the same terms and conditions as LCNI and Sommer Enterprises and (c) that the Warrant holders will have the right to convert their Warrant Shares into Common Membership Interests in the Company in the event that the Issuer takes certain actions, including certain mergers
12 or consolidations, disposition of all or substantially all of the Issuer's assets, transfers of the Issuer's Holdings Common Membership Interests, certain recapitalizations of the Issuer, voluntary dissolution or liquidation of the Issuer, repurchases of the Issuer's stock which is not pro-rata among the stockholders, and certain issuances of the Issuer's stock. See "Certain Material Agreements--Equity Participation Agreement." Tag Along.................... The Equity Participation Agreement provides, among other things, that upon certain sales by Sommer Enterprises or LCNI of Holdings Common Membership Interests, the holders of Warrant Shares will be permitted to sell a pro rata share of their Warrant Shares on the same terms and conditions as the sale by Sommer Enterprises, LCNI or Holdings, as the case may be. Holdings Common Membership Interests.................. The Holdings Operating Agreement (as defined herein) contains provisions mirroring the "tag-along" rights set forth in the Equity Participation Agreement and the anti-dilution provisions set forth in the Warrant Agreement. Holders of Warrant Shares do not have any voting rights through the Issuer's ownership of Holdings Common Membership Interests. Upon a default under the Keep-Well Agreement (as defined herein) a resulting decrease or increase in the percentage interest in Holdings indirectly held by the Trust or London Clubs will not affect the percentage of Holdings Common Membership Interests held by the Issuer. Qualified Public Offering.... A Qualified Public Offering is a public offering of common stock registered under the Securities Act and resulting in proceeds of at least $50.0 million. The Issuer, Holdings or another entity which controls the Company (each, an "IPO Entity") may effect a public offering of common stock registered under the Securities Act so long as prior to such public offering, London Clubs, the Trust, or the beneficiaries of the Trust (whether current or contingent) as of the date hereof which control AHL or Sommer Enterprises, and holders of the Warrants and Warrant Shares each hold, directly or indirectly, their respective equity interests in the IPO Entity. London Clubs, the Trust, or the beneficiaries of the Trust (whether current or contingent) as of the date hereof which control AHL or Sommer Enterprises, and the IPO Entity will use their reasonable best efforts to effect such public offering such that holders of the Warrants and Warrant Shares will not recognize income gain or loss for federal income tax purposes (other than as a result of a sale of their Warrant Shares in such public offering) and holders of the Warrants and the Warrant Shares will be subject to federal income tax in the same manner and at the same times as would have been the case if the Warrants were originally issued by the IPO Entity.
For additional information regarding the Warrants and Warrant Shares see "Description of the Warrants," "Description of Capital Stock" and "Certain United States Federal Income Tax Considerations." 13 RISK FACTORS PROSPECTIVE INVESTORS ARE STRONGLY CAUTIONED THAT AN INVESTMENT IN THE WARRANTS AND THE WARRANT SHARES INVOLVES A HIGH DEGREE OF RISK. THE ABILITY OF THE ALADDIN PARTIES TO CAUSE THE COMPLETION OF AND TO SUCCESSFULLY OPERATE THE ALADDIN IS SUBJECT TO AN UNUSUAL NUMBER OF MATERIAL RISKS AND UNCERTAINTIES. THE CONTINGENCIES AND OTHER RISKS DISCUSSED BELOW COULD AFFECT THE ALADDIN PARTIES IN WAYS NOT PRESENTLY ANTICIPATED AND THEREBY MATERIALLY AFFECT THE VALUE OF THE SECURITIES OFFERED HEREBY. A CAREFUL REVIEW AND UNDERSTANDING OF EACH OF THE RISK FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IS ESSENTIAL FOR AN INVESTOR SEEKING TO MAKE AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES. SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT The Issuer does not have any material assets other than its ownership of 25% of the Holdings Common Membership Interests. Holdings does not and may not in the future have any material assets other than its ownership of 100% of the Common Membership Interests in the Company and its ownership of 100% of the Series A Preferred Interests in the Company, and does not and may not in the future have any material operations or revenues (other than income derived from its interest in the Company). Accordingly, the ability of the Holdings Group to pay principal, interest, premium, if any, or any other payment obligations on its indebtedness will be completely dependent on the operations of the Company. The Holdings Group is, and upon completion of the Aladdin will be, highly leveraged with substantial fixed debt service obligations in addition to operating expenses, and is expected upon completion of the Aladdin to have approximately $583 million of outstanding indebtedness, including $410.0 million outstanding under the Bank Credit Facility, approximately $153 million outstanding under the Notes (representing the approximate Accreted Value (as defined in the Indenture) thereof on April 30, 2000) and an aggregate of $20.0 million outstanding under the loan portion of the FF&E Financing. The FF&E Financing will also consist of $60 million of operating leases. Upon the opening of the Aladdin, the Company is expected to have an aggregate of $10 million available under a working capital facility. In addition, the Indenture allows the Company to incur additional indebtedness under certain circumstances. See "Description of Certain Indebtedness and Other Obligations--Senior Discount Notes." The degree to which the Holdings Group is leveraged could have important consequences to the holders of the Warrants and Warrant Shares, including, but not limited to, the following: (i) increasing the Holdings Group's vulnerability to adverse general economic and industry conditions; (ii) affecting the proportion of the Holdings Group's operating cash flow required to pay principal, interest and other amounts on indebtedness, thereby reducing the funds available for operations and dividends or distributions to equity holders; and (iii) impairing the Holdings Group's ability to obtain additional financing for future working capital expenditures, acquisitions or other general corporate purposes. Pending the opening of the Aladdin, which is expected to occur in the first four months of the year 2000, it is currently anticipated that the Company will have no operations other than activities in connection with the development of the Aladdin. The ability of the Holdings Group to pay principal, interest and other amounts payable under its various debt facilities will be dependent upon the successful completion of the Aladdin and the Company's future operating performance which is dependent upon a number of factors, many of which are outside the Holdings Group's control, including the successful completion of the Mall Project, prevailing economic conditions and financial, business, regulatory and other factors affecting the Company's operations. If the Company is unable to complete the Aladdin within its construction budget or, once operating, is unable to generate sufficient cash flow, it could be required to adopt one or more alternatives, such as obtaining additional financing to the extent permitted by the Indenture and the Bank Credit Facility, reducing or delaying planned construction or capital expenditures, restructuring debt or obtaining additional equity capital. There can be no assurance that any of these alternatives could be effected on satisfactory terms, and the inability to acquire additional financing could materially and adversely affect the Holdings Group and the Issuer and so the value of the Warrants and the Warrant Shares. 14 Additionally, there can be no assurance that the Aladdin will be able to attract a sufficient number of patrons to achieve the level of activity necessary to permit the Holdings Group to meet its payment obligations in connection with the Funding Transactions and any other indebtedness or obligations of the Holdings Group. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Description of Certain Indebtedness and Other Obligations." CONDITIONS TO DRAW DOWN OF FUNDS UNDER FUNDING TRANSACTIONS Financing for the construction and development of the Aladdin and of the other components of the Complex has been provided by multiple parties, including, with respect to the Aladdin, the holders of the Notes, the Bank Lenders and the FF&E Lender, and with respect to the Mall Project, the Mall Lenders. Concurrent with the closing of the Offering, the Company and Holdings entered into the Disbursement Agreement with the Trustee (for the benefit of the holders of the Notes) and Scotiabank, as Administrative Agent under the Bank Credit Facility, Disbursement Agent on behalf of the Bank Lenders and the holders of the Notes, and as securities intermediary (the "Securities Intermediary") and U.S. Bank National Association as servicing agent (the "Servicing Agent"). Pursuant to the Disbursement Agreement, the proceeds from the Offering of the Notes that were not expended on the Issue Date (being approximately $35 million) were deposited in the Note Construction Disbursement Account, which was pledged to the Disbursement Agent for the benefit of the holders of the Notes and the proceeds of the Term B Loan and Term C Loan were deposited in the Cash Collateral Account, which was pledged to the Disbursement Agent for the benefit of the Bank Lenders. Disbursements from the Note Construction Disbursement Account and the Cash Collateral Account and advances of the Term A Loan are subject to the conditions established in the Disbursement Agreement. There are significant conditions on the Bank Lenders' obligations to fund or provide advances, including, among other things, that (i) all of the proceeds of the Offering have been disbursed, (ii) the absence of any material adverse change in the financial condition, business, property or prospects and the ability of the Company and the Project Parties (as defined herein) to perform in all material respects their respective obligations under the Operative Documents (as defined herein) to which they are a party, (iii) the absence of any default or an event of default with respect to material Operative Documents which would be reasonably likely to cause a material adverse effect on the financial condition, business, property or prospects of the Company or to the Company's knowledge, of the Project Parties and their ability to perform in all material respects their respective obligations under the Operative Documents to which they are a party, (iv) there being no failure on the part of the Company to keep the Bank Credit Facility In Balance (as defined herein), and (v) compliance by the Guarantors (as defined herein) under the Bank Completion Guaranty and London Clubs and AHL, as Sponsors (as defined herein), under the Keep-Well Agreement. See "Description of the Noteholder Completion Guaranty and Disbursement Agreement--Disbursement Agreement." The Company does not expect to draw down any funds under the Bank Credit Facility until August 1998 (approximately five months after the Issue Date). If the Company fails to satisfy the conditions to the draw down of funds under the Bank Credit Facility, alternative sources of funding will need to be obtained and/or the Trust, Bazaar Holdings and London Clubs will be required to make cash contributions to the Company pursuant to the Bank Completion Guaranty in order for the Company to complete the Aladdin. The failure of the Company to satisfy the conditions to the drawdown of funds under the Bank Credit Facility could have a material and adverse effect on the Company's ability to complete the Aladdin and so the value of the Warrants and Warrant Shares. General Electric Capital Corporation (the "FF&E Lender") has entered into a commitment letter to provide the $80.0 million of aggregate financing required to acquire the Specified Equipment and Gaming Equipment. The availability of the FF&E Financing is subject to certain conditions, including negotiation of definitive agreements and successful completion of due diligence. Prior to or upon completion of the Aladdin, the Company is expected to finalize arrangements for the FF&E Financing. However, if the Company is unable to finalize the FF&E Financing for any reason, the financial position and results of 15 operations of the Company, and so the Aladdin Parties and holders of Warrants or Warrant Shares, could be materially and adversely affected. There can be no assurance that each lender will perform its obligations or observe the limitations on the exercise of remedies as set forth under such agreements. Failure of any one or more of the lenders to perform under the Disbursement Agreement could materially and adversely affect the Company, the Aladdin Parties and holders of Warrants or Warrant Shares. In addition, financing by multiple lenders with security interests that are interrelated by use or location of the underlying collateral may result in increased complexity in a debt restructuring or other workout of the Company. LIMITATION ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE The Issuer does not have any material assets other than its ownership of 25% of the Holdings Common Membership Interests. Holdings is a holding company, and its ability to make distributions to the Issuer is dependent upon the receipt of distributions from its direct and indirect subsidiaries. Holdings does not have and may not in the future have any material assets other than its ownership of 100% of the Common Membership Interests and 100% of the Series A Preferred Interests of the Company. The Company is a party to the Bank Credit Facility which imposes substantial restrictions, including the satisfaction of certain financial conditions, on the Company's ability to make distributions to Holdings. Holdings is a party to the Indenture which imposes substantial restrictions, including the satisfaction of certain financial covenants, on Holdings' ability to make distributions to the Issuer. The ability of the Company to comply with such conditions in the Bank Credit Facility and of Holdings to comply with such conditions in the Indenture may be affected by events that are beyond the control of Holdings. If the maturity of loans under the Bank Credit Facility or the Notes were to be accelerated, all indebtedness outstanding thereunder would be required to be paid in full before the Company or Holdings, as applicable, would be permitted to distribute any assets or cash to its members. In addition, certain remedies available to the Bank Lenders under the Bank Credit Facility could constitute Events of Default under the Indenture and so cause acceleration of the Notes. In such circumstances there can be no assurance that the assets of the Company would be sufficient to repay all of such outstanding debt and then to make distributions to Holdings to enable Holdings to meet its obligations under the Indenture. Future borrowings by the Company can also be expected to contain restrictions or prohibitions on distributions by the Company to Holdings and by Holdings to the Issuer. The Holdings Operating Agreement and the Company Operating Agreement (as defined herein) also contain restrictions on distributions on the Holdings Common Membership Interests and the Common Membership Interests, respectively. In particular, no distributions, other than distributions to cover any tax liability in respect of any Holdings Interests (as defined herein) may be made on Holdings Common Membership Interests while any Holdings Series A Preferred Interests (as defined herein) or Holdings Series B Preferred Interests (as defined herein) are outstanding. Further, distributions by the Company (other than distributions to cover tax liability) on Common Membership Interests are also limited while Series A Preferred Interests are outstanding. Such restrictions could materially and adversely affect holders of Holdings Common Membership Interests such as the Issuer, and holders of Common Stock (such as the Warrant Shares) and the Warrants. In addition, the Indenture contains limitations on Holdings' ability to make distributions to its members. As a result, the amount of distributions made to the Issuer, and therefore dividends to the holders of Warrant Shares and other stockholders, will effectively be restricted by the terms of the Indenture. Such restrictions could materially and adversely affect returns available to holders of Warrant Shares and so the value of the Warrants and Warrant Shares. Any right of Holdings to receive assets of any of its subsidiaries upon such subsidiary's liquidation or reorganization will be effectively subordinated to the claims of that subsidiary's creditors, except to the extent, if any, that Holdings itself is recognized as a creditor of such subsidiary, in which case the claims of Holdings would still be subordinate to the claims of such creditors who hold security in the assets of such 16 subsidiary to the extent of such assets and to the claims of such creditors who hold indebtedness of such subsidiary senior to that held by Holdings. CONTROLLING STOCKHOLDERS; LACK OF VOTING POWER FOR WARRANT SHARES AHL owns 98.7% of the common membership interests of Sommer Enterprises, a Nevada limited-liability company. Sommer Enterprises owns 100% of the issued and outstanding Class A Common Stock (as defined herein) and the Common Stock of the Issuer, prior to the exercise of the Warrants, and the Issuer holds 25% of the Holdings Common Membership Interests. The remaining Holdings Common Membership Interests are held approximately 47.0% by Sommer Enterprises, 25.0% by LCNI and 3.0% by GAI, LLC ("GAI"), a Nevada limited-liability company 100% beneficially owned by Richard J. Goeglein, the Chief Executive Officer and a director of the Company. Accordingly, AHL, through Sommer Enterprises, indirectly owns 98.7% of the Issuer (prior to the exercise of the Warrants) and approximately 71.1% of the Holdings Common Membership Interests. London Clubs, through LCNI, owns 25% of the Holdings Common Membership Interests. Accordingly, AHL and London Clubs (the "Controlling Stockholders") control the business, policies and affairs of Holdings, and so the Company, including the election of directors and managers and major corporate transactions of the Company. If all of the Warrants are exercised, the holders of Warrant Shares will own 50% of the issued and outstanding Common Stock, representing an indirect economic interest in 10% of the outstanding Holdings Common Membership Interests. However, the holders of the Common Stock are not entitled to vote on any matter submitted to the Issuer's shareholders, including the election of directors of the Issuer, and will receive limited minority shareholder protections. Accordingly, holders of Class A Common Stock will be able, without the approval of the holders of the Common Stock, subject to applicable law, to (i) amend the Issuer's Articles of Incorporation and Bylaws; (ii) effect mergers and certain other major corporate transactions; (iii) elect the Issuer's directors and (iv) otherwise control the outcome of virtually all matters submitted to a general shareholder vote. Accordingly, even if all of the Warrants are exercised, the Trust, through AHL and Sommer Enterprises, will nevertheless continue to retain control of the Issuer and the Controlling Stockholders will nevertheless continue to retain control of Holdings, and so the Company, and the holders of Warrant Shares will be limited in their ability to exercise any degree of control whatsoever over the Issuer, and so Holdings and the Company. See "Certain Material Agreements--Equity Participation Agreement." Under the Holdings Operating Agreement, if the Trust fails to make its required 75% contribution for any amounts required to be made under the Bank Completion Guaranty, LCNI (rather than Sommer Enterprises through the Issuer) will have certain rights to control the Board of Managers of Holdings and LCNI and Sommer Enterprises will each have equal direct or indirect voting rights in deciding matters with respect to Holdings. Furthermore, if AHL fails to make its required 75% contributions for any amounts required to be made under the Keep-Well Agreement, LCNI (in addition to any rights London Clubs may have against AHL and Sommer Enterprises, which may include the ability of London Clubs to obtain ownership of Sommer Enterprises' equity interests in the Issuer) through the Issuer or otherwise will have the right to control the Board of Managers of Holdings and increase its Holdings Common Membership Interests up to a total of 72% of the Holdings Common Membership Interests, and Sommer Enterprises' Holdings Common Membership Interests will correspondingly decrease, subject to receipt of Gaming Approvals. For a description of certain relationships between the Company, AHL and LCNI, see "Controlling Stockholders" and "Certain Transactions." ABSENCE OF DIVIDENDS AND DISTRIBUTIONS None of the Issuer, Holdings or the Company has ever paid any dividends or distributions on its common stock or membership interests and (except for distributions to cover any tax liability in respect of Holdings Interests and distributions on the Series A Preferred Interests) none of the Issuer, Holdings or the Company has any plans to pay any dividends or distributions on its common stock or membership interests in the foreseeable future. Except as stated in the preceding sentence, the Company currently intends to retain all earnings for reinvestment in its business and repayment of indebtedness. The Bank 17 Credit Facility, the Indenture, the Company Operating Agreement and the Holdings Operating Agreement restrict the payment of distributions by the Company and Holdings. Such restrictions could materially and adversely affect the Issuer's ability to pay dividends on, and the value of, the Warrant Shares and so the value of the Warrants. See "Dividends and Distributions", "Certain Material Agreements--Holdings Operating Agreement" and "--Company Operating Agreement" and "Description of Certain Indebtedness and other Obligations--Bank Credit Facility" and "--Senior Discount Notes." RISKS OF NEW CONSTRUCTION Major construction projects (and particularly one of the anticipated size and scale of the Aladdin) entail significant risks, including shortages of materials or skilled labor, unforeseen engineering, environmental and/or geological problems, work stoppages, weather interference, unanticipated cost increases and unavailability of construction equipment. Construction, equipment or staffing problems or difficulties in obtaining any of the requisite licenses, permits, allocations or authorizations from regulatory authorities could increase the total cost, delay, or prevent the construction or opening of the Aladdin or the other components of the Complex or otherwise affect their respective design and features. The anticipated costs and opening dates for the Aladdin are based on budgets, conceptual design documents (not all of which will be finalized at the commencement of construction) and schedule estimates prepared by the Company with the assistance of the architects and contractors described herein. See "Business--Design and Construction Team." Under the terms of the Design/Build Contract, the Design/Builder is responsible for all construction costs covered by the Design/Build Contract that are in excess of the guaranteed maximum price set forth therein, subject to certain qualifications. Pursuant to the Fluor Guaranty, Fluor has made certain guarantees regarding the Design/Builder's performance under the Design/Build Contract. However, the Design/Build Contract provides that the guaranteed maximum price will be equitably adjusted on account of (i) changes in the design documents at the request of the Company; (ii) changes requested by the Company in the scope of the work to be performed pursuant to the Design/Build Contract; and (iii) natural disasters, casualties and certain other "force majeure" events beyond the reasonable control of the Design/Builder. If any such events occur, the construction costs which must be borne by the Company may increase. The Design/Build Contract requires that all subcontractors engaged by the Design/Builder to perform work and/or supply materials in connection with the construction of the Aladdin post bonds, at the discretion of the Company and the Design/Builder, guaranteeing timely completion of work and payment for all labor and materials. Nevertheless, there can be no assurance that the Aladdin will commence operations on schedule, that construction costs for the Aladdin will not exceed budgeted amounts or that the Design/Builder will not challenge aspects of the guaranteed maximum price. Failure to complete the Aladdin on budget or on schedule may have a material adverse effect on the Company, and so the Aladdin Parties. COMPLETION OF THE MALL PROJECT AND THE MUSIC PROJECT A principal part of the Complex will be the Mall Project, which is comprised of the Desert Passage and the Carpark, and the Music Project (including the Theater). The Company's business plan assumes that the Desert Passage and the Music Project will attract a substantial flow of pedestrian traffic to the Casino and that the Carpark will provide essential parking facilities for both overnight and casual guests at the Aladdin. However, the Company will neither develop nor own the Desert Passage, the Carpark or the Music Project and the completion of the Aladdin is not contingent on their completion. Failure of the Mall Project or the Music Project to be developed or to become operating in a timely manner will have a material adverse effect on the Company and the Aladdin Parties. The Mall Project will be developed and owned by Bazaar. Bazaar is 50%-owned by Bazaar Holdings, which is controlled by the Trust and therefore is an affiliate of the Issuer. Bazaar Holdings and THB have entered into an operating agreement (the "Bazaar LLC Operating Agreement") under which each party has agreed to cooperate in the development and operation of the Mall Project, and Bazaar Holdings and THB have provided certain undertakings to effect the development of the Mall Project in an agreed manner and time frame. Such agreements and undertakings are conditional on certain matters, including 18 that the members of Bazaar have closed on the Mall Financing and that the Trust has provided a form of credit enhancement with respect to a portion of its obligations under the Mall Guaranty. The Company is not a party to the Bazaar LLC Operating Agreement. See "Certain Material Agreements--Bazaar LLC Operating Agreement." Bazaar and the Mall Lenders have entered into a commitment letter for the Mall Financing. The Mall Financing is subject to certain conditions. If Bazaar fails to satisfy the conditions to the draw down of funds under the Mall Financing, alternative sources of funding will need to be obtained. Upon closing of the Mall Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL have agreed, pursuant to one or more agreements, to guarantee the completion of the Mall Project and Bazaar's indebtedness to the Mall Lenders pursuant to the Mall Guaranty. Neither the Company nor any of the Aladdin Parties is a party to the Bazaar LLC Operating Agreement, the Mall Guaranty or the commitment letter for the Mall Financing and so neither the Company nor any of the Aladdin Parties may enforce or prevent the amendment or cancellation of any of the rights or obligations thereunder. In addition, there can be no assurance that TrizecHahn, the Trust, Bazaar Holdings and AHL will be in a position to comply with their obligations under the Mall Guaranty. If the Mall Project is not completed, the Company believes that it may need to incur additional costs to complete the construction of the Aladdin, depending on the Aladdin's stage of construction. If the Mall Project is abandoned after the construction of certain shared structural space has begun, the Company believes that the costs of completing the shared structural space (which would be used as retail space) and demolition and construction expenses necessary to convert the site of the Mall Project into surface parking would be approximately $23 million (including the $14.2 million, including interest, no longer being reimbursed by Bazaar pursuant to the Site Work Agreement). The success of the Mall Project will depend significantly on the skills and experience of TrizecHahn in the management of entertainment shopping malls such as the Mall Project. However, under the Bazaar LLC Operating Agreement, THB is, in certain circumstances, entitled to dispose of its interests in the Mall Project on or after the fifth anniversary of the opening of the Mall Project. Accordingly, there can be no assurance that, after such date, TrizecHahn will continue to manage, or hold an equity interest in, the Mall Project. In addition, on March 5, 1998, TrizecHahn announced that it is considering the sale of its operating portfolio of regional shopping centers and on April 6, 1998 announced the sale of 20 regional shopping centers for over $2.5 billion. TrizecHahn has indicated that its planned sales will not include TrizecHahn's portfolio of development projects, including the Desert Passage. Although TrizecHahn has indicated that it will proceed with and have sufficient financial resources to complete the Desert Passage even if a sale of its entire operating portfolio were to be consummated, no assurance can be made that TrizecHahn will be in a position to satisfy its obligations under the Bazaar Operating Agreement. The Music Project is expected to be developed and owned by Aladdin Music. Pursuant to the London Clubs Purchase Agreement, London Clubs, through its wholly owned subsidiary LCNI, has agreed that so long as Aladdin Music obtains financing for the Music Project on terms satisfactory to LCNI and provided that certain other conditions are met, Aladdin Music may develop and own the Music Project in accordance with the terms described herein. If such conditions are not met, LCNI has the right to select the method in which it will participate in the Music Project, if at all. There can be no assurance that the conditions will be satisfied. If the conditions are not satisfied, there can be no assurance that the Music Project will proceed as described herein, or at all. As currently anticipated, the Company and Planet Hollywood intend to operate the Music Project in a manner conducive to the joint achievement of the Company's and Aladdin Music's business objectives. While the Company has signed the Music Project Memorandum of Understanding with Planet Hollywood in connection with the development, construction and operation of the Music Project, funding for the Music Project has not yet been finalized and certain significant matters, such as the appointment of a general contractor to construct the Music Project, remain incomplete. If the Mall Project is not completed, it may not be feasible to develop the Music Project. If the Music Project is not completed, the Company intends to apply a portion of the funds which it has allocated for its equity contribution to Aladdin Music to the renovation of the Theater. However, without the support of Planet Hollywood through the Music Project, the Company may not be able to attract the same quality of performers to the Theater as it may 19 otherwise have been able to attract. Further, even if the Music Project is completed, there can be no assurance that the Music Project will be operated in a manner conducive to the achievement of the Company's business objectives. In addition, the Music Project and its owners must receive all required Gaming Approvals (as defined herein) from the Nevada Gaming Authorities (as defined herein) in order to conduct gaming operations. There can be no assurance (i) that Bazaar or Aladdin Music will have or obtain sufficient funding to finance the development and operation of the Mall Project or the Music Project, respectively; (ii) that the Desert Passage or the Music Project will be completed; (iii) that if completed, the Desert Passage or the Music Project will attract the number and types of customers expected by the Company; or (iv) that if completed, the Music Project and its owners will obtain all required Gaming Approvals or that if obtained, they will be obtained on a timely basis. Failure of Bazaar or Aladdin Music to develop and operate the Mall Project or the Music Project, respectively, in the manner currently expected could materially and adversely affect the success of the Aladdin and the financial position and results of operations of the Company, and so the Aladdin Parties. COMPLETION OF ENERGY PLANT Energy will be provided to certain parts of the Complex by an energy plant to be developed and constructed pursuant to the Development Agreement (as defined herein). The Company has entered into the Development Agreement with the Energy Provider (as defined herein), pursuant to which the Energy Provider will develop and construct the Plant (as defined herein) to serve the energy requirements of certain parts of the Complex. See "Certain Material Agreements--Development Agreement." The design and construction of the Plant will be at the sole cost and expense of the Energy Provider, however, the Energy Provider shall not be responsible for costs in excess of $40.0 million unless agreed to by the Energy Provider. The obligations of the Energy Provider to complete the Plant in accordance with the Development Agreement and in a manner capable of delivering the energy requirements of such parts of the Complex in accordance with the Energy Service Agreement (as defined herein) are guaranteed by the Energy Provider's ultimate parent, Unicom Corporation ("Unicom"). Unicom has agreed that if for any reason the Energy Provider shall fail or be unable to punctually and fully perform or cause to be performed any of its obligations under the Development Agreement, Unicom shall perform or cause to be performed such obligations promptly upon demand. Unicom's obligations are limited to an amount equal to $30.0 million (or, under certain circumstances, an amount less than $30.0 million) and shall not be reduced until Substantial Completion (as defined herein) of the Plant. There can be no assurance that the Energy Provider will perform its obligations under the Development Agreement, or that Unicom will perform its obligations under the Unicom Guaranty (as defined herein). Failure of the Energy Provider or Unicom to perform its obligations under the Development Agreement and Unicom Guaranty or failure of the Energy Provider to perform its obligations under the Energy Service Agreement, will materially and adversely affect the Company, the Aladdin Parties and holders of the securities offered hereby. In addition, the Company may have to make alternative arrangements for the provision of energy for the Complex. There can be no assurance that such arrangements could be made, or if made, on terms favorable to the Company. RISKS OF NEW VENTURE The Issuer's sole material asset is its 25% interest in the Holdings Common Membership Interests. Holdings' material assets are its interests in the Company. Accordingly, the Issuer's sole material asset is its indirect ownership of 25% of the interests in the Company. The Company is a development stage company formed to develop and operate the Aladdin. The Company has no history of operations and has never been involved in developing, constructing or operating a hotel/casino project. Although certain members of the Company's management have experience developing and operating large scale hotels and casinos, none of these individuals has developed or operated a development of the anticipated size of the Aladdin, and only certain of these individuals have worked together with certain other members of the Company's 20 management team in developing or operating similar projects, none of such projects being the anticipated size of the Aladdin. See "Management." The operation of the Aladdin will be subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which will be beyond the control of the Company and the Aladdin Parties. No assurances can be given that the Company will be able to manage the Aladdin on a profitable basis or attract a sufficient number of guests, gaming customers and other visitors to the Aladdin to make its various operations profitable independently or as a whole or to enable the Note Issuers and the Company to pay the principal of and interest on the Notes and the Bank Credit Facility. The Company will need to recruit a substantial number of new employees prior to the opening of the Aladdin at a time when other major facilities may be approaching completion and also recruiting employees. There can be no assurance that the Company will be able to recruit a sufficient number of qualified employees. Furthermore, it is not known to what extent such employees will be covered by collective bargaining agreements, as that will be a determination ultimately made by such employees. See "Business--Employees." The opening and operation of the Aladdin will be contingent upon the receipt of all regulatory licenses, permits, approvals, registrations, findings of suitability, orders and authorizations from the Nevada Gaming Authorities (as defined herein) (collectively, "Gaming Approvals") by the Company, Holdings and its owners. The scope of the approvals required to construct and open the Aladdin is extensive, and the failure to obtain or maintain such approvals could prevent or delay the completion or opening of all or part of such facilities or otherwise affect the design and features of the Aladdin. In particular, the Company will be required to apply for and obtain approvals from the Nevada Gaming Authorities with respect to the construction, design and operational features of the Casino related to surveillance of gaming areas. In addition, the Company will need to apply for and obtain, prior to commencement of gaming activities at the Casino, a nonrestricted gaming license and Gaming Approvals from the Nevada Gaming Authorities with respect to the operation of the Casino and no assurances can be given that such Gaming Approvals will be obtained, or that if obtained, they will be obtained on a timely basis. Failure by the Company to obtain any such Gaming Approvals could materially and adversely affect the Company's financial position and results of operations. In connection with the Company's receipt of Gaming Approvals, its members and their owners and affiliates will also have to obtain applicable Gaming Approvals and no assurances can be given that such Gaming Approvals will be obtained or if obtained, that they will be obtained on a timely basis. See "--Government Regulation" and "Regulation and Licensing." Capital will also be subject to being called forward for a finding of suitability as a co-issuer of the Notes and the New Notes (as defined herein) in the discretion of the Nevada Gaming Authorities. LACK OF DIVERSIFICATION; DEPENDENCE ON SINGLE SITE The Issuer does not currently anticipate having material assets and operations other than its interest in Holdings and Holdings does not currently anticipate having material assets and operations other than its interests in the Company. In addition, the Company does not currently anticipate having material assets and operations other than the Aladdin and its membership interests in and advances to AMH, a wholly owned subsidiary of the Company which will own a 50% interest in the Music Project (on a fully diluted basis) through Aladdin Music. Accordingly, the Aladdin Parties and the Company will be subject to greater risks than a geographically diversified gaming operation, including, but not limited to, risks related to local economic and competitive conditions, changes in local and state governmental laws and regulations (including changes in laws and regulations affecting gaming operations and taxes) and natural and other disasters. The Company's, and so the Issuer's, principal sources of income following completion of the Complex will be the Aladdin, and, to a lesser extent, fees received from Aladdin Music for the provision of management services with respect to the Music Project. Accordingly, the ability of the Issuer to pay dividends to holders of Warrant Shares will be directly dependent on the success of the Aladdin and, to a lesser extent, the Music Project. 21 CERTAIN BANKRUPTCY CONSIDERATIONS SUBSTANTIVE CONSOLIDATION Under the Bankruptcy Code, it is possible that if AHL, the Company, the Issuer, London Clubs, the Trust, Holdings or Capital, or any of their affiliates (the "Affiliated Parties") becomes a debtor under applicable bankruptcy law, a bankruptcy court could order substantive consolidation of the assets and liabilities of any or all Affiliated Parties. Substantive consolidation is an equitable, fact-based remedy, not prescribed by statute, with respect to which the court has considerable discretion. While the separate legal existence of each Affiliated Party and its observance of certain formalities and operating procedures could effectively preclude, based on the present state of the case law (i) a finding that the assets of an Affiliated Party is property of the bankruptcy estates of any of the other Affiliated Parties and (ii) the substantive consolidation of the assets and liabilities of an Affiliated Party with those of any of the other Affiliated Parties, there can be no assurance that substantive consolidation would not occur. In addition, there can be no assurance that during litigation of such issues, delays will not occur in payments of indebtedness, even if the court ultimately rules against substantive consolidation, or that parties in interest might determine to settle such issues to avoid the expense and delay of litigation. If the court concludes there is substantive consolidation, however, payments of indebtedness could be delayed or reduced, which in turn could delay distributions (if any) to equity holders, including holders of Warrant Shares. LIMITED-LIABILITY COMPANIES Holdings and the Company are limited-liability companies organized under the laws of the State of Nevada. Limited-liability companies ("LLCs") are relatively recent creations not only under the laws of the State of Nevada but also under the laws of other jurisdictions. Generally stated, LLCs are intended to provide both the limited liability of the corporate form for their members and certain advantages of partnerships, including "pass-through" income tax treatment for members, and thus have attributes of both corporations and partnerships. Given their recent creation, LLCs and their members have been involved in relatively few bankruptcy cases as debtors, and there has been little reported judicial authority addressing bankruptcy issues as they pertain to LLCs. Moreover, the existing judicial authority on such issues in bankruptcies of analogous entities (e.g. partnerships) is not well settled. Consequently, a bankruptcy of Holdings or the Company, its members or any of their affiliates, may be litigated and decided in the absence of dispositive judicial precedent, and thus, no assurance can be made as to any particular outcome. RISKS UNDER DESIGN/BUILD CONTRACT AND FLUOR GUARANTY Certain obligations of the Design/Builder under the Design/Build Contract are guaranteed by Fluor (the "Fluor Guaranty"). A default by either the Design/Builder under the Design/Build Contract or Fluor under the Fluor Guaranty could result in the Aladdin not being completed on schedule and have a material adverse effect on the Company and the Aladdin Parties. If a bankruptcy case were to be commenced voluntarily by or involuntarily against Fluor, remedies available under the Fluor Guaranty would be limited or unavailable. The Fluor Guaranty does not cover cost increases caused by certain acts commonly referred to as "force majeure." CHANGE OF CONTROL Upon a Change of Control (as defined in the Indenture), each holder of the Notes will have the right, at such holder's option, to require the Note Issuers to purchase the Notes owned by such holder at a price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, and Liquidated Damages (as defined in the Indenture), if any, to the date of purchase. There can be no assurance that the Note Issuers will have sufficient funds to purchase the Notes after such a Change of Control. In addition, upon a change of control (as defined in the Bank Credit Facility) all amounts outstanding under the Bank Credit Facility will immediately become due and payable. There can be no assurance that the Company will have sufficient funds to repay the Bank Credit Facility or any other indebtedness that becomes due as a 22 result of such event. See "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility." OPERATING RESTRICTIONS The terms of the Indenture, the Bank Credit Facility and the other agreements governing the indebtedness of the Company impose significant operating and financial restrictions on the Company and the Aladdin Parties. Such restrictions significantly limit or prohibit, among other things, the incurrence of certain additional debt, distributions, transactions with affiliates of the Company and Holdings and the sale of certain assets. These restrictions, in combination with the degree to which the Company is leveraged, could limit the ability of the Company to respond to market conditions or meet extraordinary capital needs or could otherwise restrict corporate activities. There can be no assurances that such restrictions will not materially and adversely affect the ability of the Company to finance its future operations or capital needs and the operation of its business. See "Description of Certain Indebtedness and Other Obligations." POSSIBLE CONFLICTS OF INTEREST Potential for conflicts of interest exists between the Aladdin, on the one hand, and the other businesses to be operated on the Complex. The Trust is expected to hold significant interests in all of these businesses. Mr. Jack Sommer, who is Chairman and a director of the Company and Holdings and President of the Issuer, Mr. Ronald Dictrow, who is Executive Vice President/Secretary and a director of the Company and Holdings and a Secretary and director of the Issuer, are also directors of Bazaar. In addition, certain directors and executives of the Company and Holdings are currently and are likely to continue to be, directors and executives of Aladdin Music, which will develop and own the Music Project. Further, it is expected that in addition to managing the Aladdin, the Company, through its affiliate, will also manage the Music Project. The objectives for each of these businesses may at times differ and such differences may be material. In addition, all such businesses will share the use of certain facilities on the Complex, including vehicular and pedestrian traffic ways, the Carpark and certain utilities (such as the Plant, which will provide energy to the Complex). For these reasons, potential exists for conflicts of interest, including in relation to the division of management time between each of these businesses, splitting of costs of shared facilities and the sharing of future business opportunities arising in connection with the Complex. In addition, Planet Hollywood, which is a 50% shareholder in Aladdin Music (on a fully diluted basis) and the developer of the Music Project, is not contractually restricted or otherwise prevented from developing other music or entertainment theme hotel casinos in Las Vegas. The development of a competing Planet Hollywood-owned hotel in Las Vegas could give rise to conflicts of interest for Planet Hollywood and could materially and adversely affect the Music Project and so Aladdin Music, the Company and the Aladdin Parties. SHARED FACILITIES Because the Aladdin, the Mall Project and the Music Project will share certain operational facilities (the "Shared Facilities"), the construction of all such projects will include the construction of the Shared Facilities in sizes and/or capacities that will be sufficient for all such projects together, but are in excess of what is minimally required for the Aladdin. The Shared Facilities will include certain shared structural space, the Strip facade and related retail areas of the Complex. The Company will bear the full cost of constructing the Shared Facilities. However, Bazaar will be obligated to reimburse the Company for a portion of the construction costs related to the Shared Facilities if the Mall Project is completed. It is estimated that Bazaar's share of the cost of constructing the Shared Facilities will be $14.2 million, including interest. If Bazaar is unable to obtain financing for the Mall Project, it is unlikely that Bazaar will be able to reimburse the Company for its share of the construction costs related to the Shared Facilities pursuant to the Site Work Agreement. 23 LIMITATIONS UNDER BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY Pursuant to the Bank Completion Guaranty, the Trust, London Clubs and Bazaar Holdings have agreed among other things jointly and severally to guarantee the development, construction and equipping of the Aladdin for the benefit of the Bank Lenders. None of the holders of the Warrants, Warrant Shares, Holdings or the Issuer is a party to the Bank Completion Guaranty, however, the Trust, Bazaar Holdings and London Clubs have entered into the Noteholder Completion Guaranty for the benefit of the holders of the Notes, subject to certain important qualifications, limitations and exceptions. The Noteholder Completion Guaranty contains certain intercreditor provisions which significantly limit the rights of the State Street Bank and Trust Company, as trustee under the Indenture (the "Trustee") and the holders of the Notes, including certain standstill periods during which the Trustee and the holders of the Notes may not enforce the Noteholder Completion Guaranty or seek remedies thereunder, even if there is a default under the Bank Completion Guaranty and the Bank Lenders are no longer advancing funds. See "Description of Noteholder Completion Guaranty and Disbursement Agreement--Noteholder Completion Guaranty." The Bank Completion Guaranty entered into by the Trust, Bazaar Holdings and London Clubs requires that if the Company has insufficient funds available to complete the Aladdin, the Trust, Bazaar Holdings and London Clubs must contribute cash to the Company to enable such completion, subject to certain qualifications. None of the holders of Warrants or Warrant Shares, Holdings or the Issuer is party to the Bank Completion Guaranty and, accordingly, none of them may enforce any rights thereunder. In addition, none of the holders of Warrants or Warrant Shares, Holdings or the Issuer is party to the Noteholder Completion Guaranty and, accordingly, none of them may enforce any rights thereunder. The parties to the Bank Completion Guaranty have limited obligations under the Bank Completion Guaranty until and unless the proceeds of the Funding Transactions are, in the aggregate, insufficient to cover the construction cost increases covered by the Bank Completion Guaranty. The Bank Completion Guaranty terminates upon the indefeasible payment and performance of the Guaranteed Obligations (as defined herein). See "Description of Certain Indebtedness and Other Obligations--Bank Completion Guaranty." The Trust, Bazaar Holdings and London Clubs are considering entering into a completion guaranty in favor of a contingent guarantor pursuant to which the Trust, Bazaar Holdings and London Clubs will guaranty the completion of the Aladdin on substantially similar terms to the Bank Completion Guaranty under certain conditions, including if the Administrative Agent does not enforce the Bank Completion Guaranty and the Trustee does not enforce the Noteholder Completion Guaranty. Neither the Bank Completion Guaranty nor the Noteholder Completion Guaranty contain restrictions on the ability of the parties thereto to incur indebtedness junior in respect of right of payment to the Guaranteed Obligations (excluding certain types of indebtedness). While such parties have informed the Company that they believe they will be able to perform their respective obligations thereunder, no assurance can be given that they will have available the financial resources if they are called on under the Bank Completion Guaranty or the Noteholder Completion Guaranty. If the Trust and Bazaar Holdings fail to perform their obligations under the Bank Completion Guaranty or the Noteholder Completion Guaranty, London Clubs is, in certain circumstances, entitled (through its affiliates) to exercise equal voting power to the Trust and its affiliates in the affairs of Holdings. If the parties under the Bank Completion Guaranty or the Noteholder Completion Guaranty are unable to perform their respective obligations thereunder, it may be an Event of Default under the Indenture and the Bank Credit Facility and the Aladdin may not be completed. Certain historical financial information concerning London Clubs is included herein to assist investors in evaluating the ability of London Clubs to perform its obligations under the Bank Completion Guaranty and the Noteholder Completion Guaranty. Such information has been prepared in accordance with United Kingdom generally accepted accounting principles ("U.K. GAAP"), which principles are not consistent with, and materially differ from, United States generally accepted accounting principles ("U.S. GAAP"). With respect to the historical financial information of London Clubs included herein, such differences 24 relate (among other things) to depreciation and amortization, valuation of fixed assets, recognition of deferred taxes, accounting for employee stock options, and accounting for pension costs. In making their investment decision, investors should consider that if such financial information of London Clubs was restated in accordance with U.S. GAAP, there are likely to be material differences from such information as stated in accordance with U.K. GAAP. Such differences would have no material effect on London Clubs' cash flows or liabilities and, accordingly, also would have no material impact on its ability to meet its obligations. The U.K. Chancellor of the Exchequer has proposed to increase the highest marginal rate of gaming duty (tax on casino betting profits) from 33 1/3% to 40%. If the proposed tax increase were to be enacted into law, London Clubs could suffer a reduction of profits. The proposed tax increase is not certain to be enacted, or if enacted, in the form in which it has been proposed. RISK OF NON-PERFORMANCE UNDER KEEP-WELL AGREEMENT AHL, London Clubs and Bazaar Holdings have agreed pursuant to an agreement (the "Keep-Well Agreement") to contribute, if required, funds to the Company to ensure the Company's compliance with certain financial ratios and other requirements under the Bank Credit Facility, subject to certain conditions. Neither Holdings, the Issuer nor the holders of Warrants or Warrant Shares is a party to the Keep-Well Agreement. The Keep-Well Agreement does not constitute a guaranty of the obligations of the Company under the Bank Credit Facility, the Notes or otherwise. In particular, under the Keep-Well Agreement, the parties to the Keep-Well Agreement are not required to contribute an aggregate of more than $150.0 million to the Company ($30.0 million in any fiscal year), and are not required to contribute any amounts to the Company on or after the earlier of the date on which the Company, without the benefit of cash contributions from the Controlling Stockholders or their affiliates, complies with all of the financial covenants set forth in the Bank Credit Facility for six consecutive quarterly periods from and after the Conversion Date (as defined herein) or the date on which the aggregate outstanding principal amounts of the Bank Credit Facility are reduced below certain amounts and prior to certain dates. While the parties to the Keep-Well Agreement have informed the Company that they believe they will be able to perform their obligations under the Keep-Well Agreement, no assurance can be given that they will have available sufficient financial resources if they are called on to make payments under the Keep-Well Agreement. The obligations of London Clubs under the Keep-Well Agreement are subordinated to other obligations of London Clubs under certain of its pre-existing senior debt facilities. Furthermore, although the obligations of London Clubs under the Keep-Well Agreement are guaranteed by certain subsidiaries of London Clubs, such subsidiaries also currently guarantee senior existing indebtedness of London Clubs. In addition, there are certain restrictions on each of the parties' to the Keep-Well Agreement ability to incur indebtedness or sell or transfer assets. If a party defaults in its obligations under the Keep-Well Agreement, such party's (or its affiliate's) interest in Holdings could be subject to dilution, which dilution could affect that party's (or its affiliate's) ability to control or direct the policies of Holdings and so the Company. Failure of each of the parties to the Keep-Well Agreement to comply with their material obligations under the Keep-Well Agreement could have a material and adverse effect on the Company and the Aladdin Parties, and will constitute a default under the Indenture. The payments and issuance of additional securities will be subject to the prior approval of the Nevada Gaming Authorities. See "Controlling Stockholders--Keep-Well Agreement." Certain historical financial information concerning London Clubs is included herein to assist investors in evaluating the ability of London Clubs to perform its obligations under the Keep Well Agreement. Such information has been prepared in accordance with United Kingdom generally accepted accounting principles ("U.K. GAAP"), which principles are not consistent with, and materially differ from, United States generally accepted accounting principles ("U.S. GAAP"). With respect to the historical financial information of London Clubs included herein, such differences relate (among other things) to depreciation and amortization, valuation of fixed assets, recognition of deferred taxes, accounting for employee stock 25 options, and accounting for pension costs. In making their investment decision, investors should consider that if such financial information of London Clubs was restated in accordance with U.S. GAAP, there are likely to be material differences from such information as stated in accordance with U.K. GAAP. Such differences would have no material effect on London Clubs' cash flows or liabilities and, accordingly, also would have no material impact on its ability to meet its obligations. The U.K. Chancellor of the Exchequer has proposed to increase the highest marginal rate of gaming duty (tax on casino betting profits) from 33 1/3% to 40%. If the proposed tax increase were to be enacted into law, London Clubs could suffer a reduction of profits. The proposed tax increase is not certain to be enacted, or if enacted, in the form in which it has been proposed. DEPENDENCE UPON KEY MANAGEMENT AND LACK OF EXPERIENCED PERSONNEL The ability of the Company to maintain its competitive position is dependent to a large degree on its ability to retain the services of its senior management team, including Jack Sommer, Richard Goeglein and James McKennon. Although certain of the senior managers of the Company have employment agreements with the Company, there can be no assurance that such individuals will remain with the Company. The loss of the services of any of these individuals or an inability to attract and retain additional senior management personnel could have a material adverse effect on the operation of the Aladdin. There can be no assurance that the Company will be able to retain its existing senior management personnel or to attract additional qualified senior management personnel. See "Management." Until construction of the Aladdin is close to completion, the Company believes that it will not require extensive operational management and, accordingly, has kept and intends to keep its permanent staff at relatively minimal levels. However, the Company will be required to undertake a major recruiting and training program prior to the opening of the Aladdin at a time when other major new facilities may be approaching completion and also recruiting employees. While the Company believes that it will be able to attract and retain a sufficient number of qualified individuals to operate the Aladdin on acceptable terms, the pool of experienced gaming and other personnel is limited and competition to recruit and retain gaming and other personnel is likely to intensify as more casinos are opened. No assurance can be given that such employees will be available to the Company for use in managing the Aladdin. RISK OF OVERCAPACITY; COMPETITION AND PLANNED CONSTRUCTION IN LAS VEGAS The hotel/casino industry is highly competitive. Hotels located on or near the Strip ("Strip Hotels") compete with other Strip Hotels and with other major hotels in downtown Las Vegas. The Aladdin will also compete with a large number of other hotels and motels located in and near Las Vegas. According to the Las Vegas Convention and Visitors Authority (the "LVCVA"), as of December 31, 1996, there were more than 99,000 hotel and motel rooms in the Las Vegas area. Direct competitors of the Company will include theme-oriented mega-resorts on the Strip such as Caesars Palace Hotel, The Mirage, Treasure Island Hotel and Casino, New York-New York Hotel and Casino and the MGM Grand Hotel and Casino. Many competitors of the Company are subsidiaries or divisions of large public companies and may have greater financial and other resources than the Company. In addition, the construction of several new major resort projects that will compete with the Company and the expansion of several existing resorts have commenced construction or have recently been announced. These include the planned Bellagio, Paris Casino Resort, and Venetian Casino Resort, all currently under construction. Additionally, expansions have recently been completed at Caesars Palace Hotel and Harrah's Las Vegas. These projects and others are expected to add approximately 20,000 hotel rooms to the Las Vegas inventory by 1999. The future operating results of the Company, and so the Aladdin Parties, could be materially and adversely affected by such competitors and excess Las Vegas room and gaming capacity generally. The hotel/casino operations of the Company will also compete, to some extent, with other hotel/casino facilities in Nevada and in Atlantic City, with hotel/casino facilities elsewhere in the world and with state lotteries. In addition, certain states have recently legalized, and others may or are likely to legalize, casino 26 gaming in specific areas, and passage of the Indian Gaming Regulatory Act in 1988 has led to rapid increases in American Indian gaming operations. The Company expects many competitors to enter such new jurisdictions that authorize gaming, some of which competitors may have greater financial and other resources than the Company. Such proliferation of gaming activities could significantly and adversely affect the business of the Company, and so the Aladdin Parties. In particular, the legalization of casino gaming in or near any metropolitan area from which the Company intends to attract customers could have a material adverse effect on the business of the Company, and so the Aladdin Parties. See "Business--The Las Vegas Market." The Desert Passage will compete with retail malls in or near Las Vegas, including the Fashion Show Mall, the Forum Shops at Caesars Palace and retailers in theme-oriented mega resorts, all of which may attract consumers away from the Desert Passage and so the Complex. GOVERNMENT REGULATION The gaming operations and the ownership of securities of the Company and the Holdings Group will be subject to extensive regulation by the Nevada Gaming Authorities. The Nevada Gaming Authorities will have broad authority with respect to licensing and registration of entities and individuals involved with the Company and the Holdings Group. The Issuer may be required to disclose the identities of the holders of the Warrants and Warrant Shares to the Nevada Gaming Authorities upon request. The Nevada Commission (as defined herein) may, in its discretion, require the holder of any security of a Registered Company (as defined herein), such as the Warrants and the Warrant Shares, to file an application, be investigated and be found suitable to own the 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 (as defined herein), the Registered Company can be sanctioned, including the loss of its approvals if, without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form, or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. Each holder of the Warrants and the Warrant Shares shall be deemed to have agreed (to the extent permitted by law) that if the Nevada Gaming Authorities determine that a holder or beneficial owner of the Warrants and the Warrant Shares must be found suitable, and if such holder or beneficial owner either refuses to file an application or is found unsuitable, such holder shall, upon request of the Issuer, dispose of such holder's Warrants and the Warrant Shares within 30 days after receipt of such request or such earlier date as may be ordered by the Nevada Gaming Authorities. The Issuer will also have the right to call for the redemption of the Warrants and the Warrant Shares by any holder at any time to prevent the loss or impairment of a Gaming Approval or an application for a Gaming Approval, at a redemption price equal to the cost paid by such holder. The beneficial owners of the Warrants and Warrant Shares will be subject to the requirement of obtaining Gaming Approvals in the discretion of the Nevada Gaming Authorities. Any beneficial owner of more than 10% of the voting securities of the Issuer will be required to obtain a Gaming Approval. However, the Warrants are exercisable only into non-voting shares of common stock of the Issuer. The Nevada Gaming Authorities may also, among other things, revoke the license of any entity licensed by the Nevada Gaming Authorities (a "Company Licensee") or the registration of a Registered Company or any entity registered as an intermediary company or a holding company of a Company Licensee. In addition, the Nevada Gaming Authorities may revoke the license or finding of suitability of any officer, director, manager, member, controlling person, shareholder, noteholder or key employee of a licensed or registered entity. If Gaming Approvals of the Company or Holdings were revoked for any reason, the Nevada Gaming Authorities could require the closing of the Casino, which would result in a material adverse effect on the Company and the Aladdin Parties. The Company, and certain of its officers, 27 directors, manager, members and key employees, have applied for licensing with the Nevada Gaming Authorities. Also, the Company possesses or has applied for all necessary state and local government approvals, licenses and permits, other than Gaming Approvals, necessary to open and operate the facility. In addition, any future public offering of debt or equity securities by the Company, the Note Issuers or the Issuer, including the Exchange Offer (as defined herein), any Qualified Public Offering and the issuance of Common Stock of the Issuer upon the exercise of the Warrants, if the securities or the proceeds from the sale thereof are intended to be used to pay for construction of, or to acquire an interest in, any gaming facilities in Nevada, to finance the gaming operations of an affiliated company or to retire or extend obligations incurred for any such purpose, requires the prior approval of the Nevada Commission or, a ruling from the Chairman of the Nevada Board (as defined herein) that such approval is not required. See "Regulation and Licensing" and "Description of Indebtedness and Other Obligations--Senior Discount Notes." LACK OF PUBLIC MARKET FOR THE WARRANTS AND WARRANT SHARES The Warrants and Warrant Shares are each new issues of securities for which there is currently no trading market. There can be no assurance regarding the future development of a market for the Warrants or Warrant Shares, or the ability of the holders of the Warrants or Warrant Shares to sell such securities, or the price at which such holders may be able to sell such securities. If such a market were to develop, the Warrants and Warrant Shares could trade at prices that may be higher or lower than the price paid by selling holders of Warrants or Warrant Shares depending on many factors, including prevailing interest rates, the Aladdin Parties' operating results and the market for similar securities. Each of the Initial Purchasers has advised the Aladdin Parties that it currently intends to make a market in the Warrants and Warrant Shares. However, the Initial Purchasers are not obligated to do so and any market making in respect to such securities may be discontinued at any time without notice. Therefore, there can be no assurance as to the liquidity of any trading market for the Warrants and Warrant Shares or that an active trading market for such securities will develop. The Aladdin Parties do not intend to apply for listing or quotation of the Warrants and Warrant Shares, on any securities exchange or stock market. The Warrants and the Warrant Shares are currently eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. Following the Registration Statement being declared effective by the Commission, the Warrants and the Warrant Shares will not be eligible for PORTAL trading. 28 USE OF PROCEEDS No proceeds will be received by the Issuer from the registration or subsequent sale of the Warrants or Warrant Shares pursuant to the Registration Statement. The gross proceeds from the sale of the Units were estimated to be $115.0 million. The net proceeds (net of Initial Purchasers' discounts and estimated Offering expenses) together with the proceeds from the other Funding Transactions are being used to develop, construct, equip and open the Aladdin and to fund the Company's cash contribution to Aladdin Music with respect to the Music Project. Upon or prior to the consummation of the Offering (i) the proceeds from the sale of the Units were allocated between the Notes and the Warrants, (ii) Sommer Enterprises (a) contributed a portion of the Contributed Land and $7.0 million consisting of the benefit of certain predevelopment costs incurred by AHL to the Issuer in exchange for Class A Common Stock in the Issuer and (b) also contributed a portion of the Contributed Land to Holdings in exchange for Holdings Common Membership Interests, (iii) the Issuer contributed the portion of the Contributed Land and the benefit of the predevelopment costs received from Sommer Enterprises and the net proceeds allocable from the sale of the Warrants to Holdings in exchange for Holdings Common Membership Interests, (iv) Holdings contributed the Contributed Land appraised at $150.0 million, approximately $42 million in cash from the London Clubs Contribution and $7.0 million consisting of the benefit of certain predevelopment costs incurred by AHL to the Company in exchange for Common Membership Interests of the Company, and (v) Holdings contributed $115.0 million in cash, consisting of the net proceeds of the sale of the Units and approximately $8 million from the London Clubs Contribution, to the Company in exchange for Series A Preferred Interests of the Company. The London Clubs Contribution, together with a portion of the net proceeds of the Offering, were expended on the Issue Date to repay certain existing indebtedness assumed by the Company in connection with the Sommer Equity Financing and to pay certain accrued expenses and certain fees and expenses incurred in connection with the Funding Transactions. The remaining net proceeds from the Offering (approximately $35 million) were deposited in the Note Construction Disbursement Account. The liquidation preference of the Series A Preferred Interests held by Holdings will equal at all times the Accreted Value of the Notes. Prior to or contemporaneously with the Offering the following other Funding Transactions for the financing by the Company of the Aladdin were consummated: (i) the Sommer Equity Financing and an indirect equity contribution to Holdings by London Clubs of $50.0 million in cash in exchange for Holdings Common Membership Interests; (ii) the closing of the $410.0 million Bank Credit Facility and the funding of the Term B Loan and the Term C Loan thereunder into the Cash Collateral Account and (iii) execution and delivery of a commitment letter for the FF&E Financing, consisting of one or more leases or loans in the aggregate amount of $80.0 million, covering the Specified Equipment and the Gaming Equipment, to be used in the Aladdin. See "Controlling Stockholders--Equity and Series A Preferred Interest Financing," "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility" and "--FF&E Financing." SOURCES AND USES OF FUNDS The estimated sources and uses of funds for the development, construction, equipping and opening of the Aladdin are as follows (in millions):
SOURCES USES - ---------------------------------------------------------- ---------------------------------------------------------- Bank Credit Facility(1)........................ $ 410.0 Hotel and Casino(7)............................ $ 295.6 FF&E Financing(2).............................. 80.0 Off-Site Improvements(8)....................... 6.8 Senior Discount Notes due 2010(3).............. 115.0 Reimburseable Site Work Expenses(6)............ 14.2 Land Contribution(4)........................... 150.0 Furniture, Fixtures and Equipment and Cash Contribution(5)........................... 57.0 Gaming Equipment(9)............................ 107.5 Anticipated Site Work Reimbursement(6)......... 14.2 Land(10)....................................... 135.0 Retire Existing Debt(11)....................... 74.5 Capitalized Interest, Net(12).................. 44.0 Pre-Opening Costs and Expenses................. 16.9 Reimbursement of Predevelopment Costs(13)...... 3.9 Working Capital(14)............................ 15.0 Construction and FF&E Contingency(15).......... 31.8 Land Investment in Music Project(16)........... 15.0 Cash Equity Investment in the Music Project(17).................................. 21.3 Financing Fees and Expenses(18)................ 44.7 --------- --------- Total Sources.................................. $ 826.2 Total Uses..................................... $ 826.2 --------- --------- --------- ---------
29 (1) The Company entered into the Bank Credit Facility with the Bank Lenders. The Bank Credit Facility, which closed concurrently with the closing of the Offering, consists of three separate term loans. Term A Loan comprises a term loan of $136.0 million and matures seven 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 initial borrowing date. The Term B Loan and Term C Loan were funded on the Issue Date into the Cash Collateral Account, and subject to satisfaction of the conditions in the Disbursement Agreement, are expected to be drawn down beginning approximately five months after the Issue Date. It is anticipated that the Company will begin to draw down the Term A Loan, subject to satisfaction of the conditions in the Disbursement Agreement, approximately 21 months after the Issue Date. See "Risk Factors--Drawn Down of Funds Under Funding Transactions." All of the Loans will convert from construction loans into amortizing loans on the Conversion Date. The Company has the option to pay interest at either LIBOR or Scotiabank's ABR, in each case plus certain margins. See "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility." (2) The Company entered into a commitment letter with the FF&E Lender for provision of the FF&E Financing. The FF&E Financing consists of $60.0 million of operating leases and $20.0 million in loans and is expected to be used by the Company to obtain the Gaming Equipment and Specified Equipment. See "Description of Certain Indebtedness and Other Obligations-- FF&E Financing." (3) Represents the gross proceeds of the Offering, which, net of expenses of approximately $8 million, were contributed, together with approximately $8 million in cash received pursuant to the London Clubs Contribution, by Holdings to the Company in exchange for Series A Preferred Interests. (4) The land on which the Aladdin, the Music Project and the Plant will be built, including adjacent land of approximately 0.8 acres, comprises a total of approximately 22.75 acres (the "Contributed Land") and was contributed to the Company by Holdings in exchange for Common Membership Interests. The Contributed Land has an appraised fair market value of $150.0 million (book value of $33.6 million as of December 31, 1997). Approximately 18 acres of the Contributed Land, having an appraised fair market value of $135.0 million, will be retained by the Company and approximately 4.75 acres of the Contributed Land, having an appraised fair market value of $15.0 million, will be used for the Music Project. (5) Represents (i) a $50.0 million cash contribution by London Clubs in exchange for 25% of the Holdings Common Membership Interests and (ii) a $7.0 million deemed equity contribution by the Issuer in exchange for Holdings Common Membership Interests, consisting of certain pre-development costs incurred by AHL in 1996, 1997 and 1998. (6) Pursuant to the Site Work Agreement, the Company has agreed to complete the construction of, among other things, the Mall Shared Space, construction of which will commence prior to the initial funding of the Mall Financing. Bazaar has agreed to reimburse the Company for up to $14.2 million (including interest) of the costs associated with such construction upon the completion of the Mall Shared Space. See "Certain Material Agreements--Construction, Operation and Reciprocal Easement Agreement and Related Agreements." (7) Represents (i) the guaranteed maximum price of construction of the Aladdin pursuant to the Design/Build Contract of $267.0 million, less the contingency allowance of $6.8 million and expected reimbursement from Bazaar of $13.6 million (net of approximately $0.6 million of interest) as set forth in note (6) above; (ii) approximately $35 million for theming the Aladdin; (iii) $11.7 million for professional fees and disbursements; and (iv) $2.3 million for permits and taxes. See "Risk Factors-- Completion of the Mall Project and the Music Project." The Design/Build Contract contains financial incentives for the Design/ Builder to complete the Aladdin within the construction budget and in a timely manner, as well as liquidated damages payable to the Company for certain unexcused delays. See "Risk Factors--Risks of New Construction," "Risks Under Design/Build Contract and Fluor Guaranty" and "Certain Material Agreements--Design/Build Contract." (8) Represents the cost of off-site improvements, including overhead pedestrian walkways and widening of certain streets, for those parts of the Project Site on which the Aladdin will be built. (9) Includes $26.5 million of gaming equipment and $81.0 million of furniture, fixtures and other equipment consisting of new furniture and equipment other than gaming equipment). (10) Represents the appraised fair market value of the land on which the Aladdin and the Plant will be built, together with adjacent land of approximately 0.8 acres. (11) Represents the retirement on the Issue Date of $68.7 million of existing indebtedness on the Contributed Land with an interest rate of LIBOR plus 650 bps and $5.8 million of existing debt owed by the Trust to GW Vegas, assumed by the Company as part of Holdings' equity contribution to the Company. (12) Represents capitalized gross interest under the Bank Credit Facility of $57.4 million and capitalized gross interest of $2.4 million from leasing expenses in connection with the FF&E Financing, from the date of the Offering until the estimated completion of the Aladdin in the first four months of the year 2000, net of interest income anticipated to be earned upon the investment in cash equivalents of the funds (assumed to be at 5% per annum) from the proceeds of the Offering and the proceeds of the Term B Loan and Term C Loan. (13) Represents $3.0 million of certain predevelopment costs incurred by AHL and reimbursed at closing and up to $0.9 million of certain predevelopment costs expected to be incurred and reimbursed over the expected construction period. (14) Represents cash on hand, inventories, deposits and other cash balances required for the opening of the Aladdin. (15) Comprises (i) the $6.8 million contingency included in the guaranteed maximum price set forth in the Design/Build Contract and (ii) the $25.0 million general project contingency. (16) Represents the appraised fair market value of the approximately 4.75 acres of land on which the Music Project will be built, which land will be contributed by the Company to AMH in exchange for common membership interests in AMH. (17) Represents cash to be contributed by the Company to AMH for common membership interests in AMH. (18) Represents fees in connection with the organization of the Company and the financing of the Aladdin, including approximately $8 million for expenses incurred in connection with the Offering. 30 CAPITALIZATION THE ISSUER The following table sets forth the capitalization of the Issuer as of December 31, 1997 and as of the Issue Date. This table should be read in conjunction with the more detailed information and financial statements appearing elsewhere in this Prospectus. See "Use of Proceeds" and "Description of the Warrants and Warrant Shares."
AS OF AS OF DECEMBER 31, 1997 THE ISSUE DATE ------------------- --------------- (IN MILLIONS) Long-term debt: ............................................................... $-- $-- ------ ------ Members' Equity: Class A Common Stock(1)...................................................... -- 0.4 Class B Common Stock......................................................... -- -- Additional Paid-in Capital(2)................................................ -- 15.0 ------ ------ Total Members' Equity...................................................... -- 15.4 ------ ------ Total Capitalization........................................................... $-- $15.4 ------ ------ ------ ------
- -------------------------- (1) Represents: (i) the $6.3 million book value of the Contributed Land (such land having an appraised fair market value of $28.1 million), net of approximately $12.9 million of existing indebtedness repaid from the proceeds of the Offering, and (ii) a $7.0 million deemed equity contribution consisting of certain predevelopment costs incurred by AHL in 1996, 1997 and 1998. (2) Represents $15.0 million of the gross proceeds of the Offering allocated to the sale of the Warrants. 31 HOLDINGS AND SUBSIDIARIES The following table sets forth the consolidated capitalization of Holdings at December 31, 1997, as of the Issue Date after giving effect to the Offering and upon the consummation of the Funding Transactions (assuming all of the Funding Transactions occurred on the Issue Date). The Issuer's sole material asset is 25% of the Holdings Commmon Membership Interests. This table should be read in conjunction with the more detailed information and financial statements appearing elsewhere in this Prospectus. See "Use of Proceeds" and "Description of Certain Indebtedness and Other Obligations."
AS OF AS OF UPON CONSUMMATION DECEMBER 31, 1997 THE ISSUE DATE OF THE FUNDING TRANSACTIONS --------------------- --------------- --------------------------- (IN MILLIONS) Long-term debt: Company: Bank Credit Facility(1)........................... $ -- $ 274.0 $ 410.0 FF&E Financing(2)................................. -- -- 20.0 --- ------ ------ Total Long-term Debt............................ -- 274.0 430.0 --- ------ ------ Holdings: Senior Discount Notes due 2010(3)................. -- 100.0 100.0 Holdings and subsidiaries: Total Long-term Debt and Senior Discount Notes.... -- 374.0 530.0 Members' Equity(4)(5)............................... -- 30.8 30.8 --- ------ ------ Total Capitalization................................ $ -- $ 404.8 $ 560.8 --- ------ ------ --- ------ ------
- -------------------------- (1) The Company entered into the Bank Credit Facility with the Bank Lenders. The Bank Credit Facility, which closed concurrently with the closing of the Offering, consists of three separate term loans. Term A Loan comprises a term loan of $136.0 million and matures seven years after the initial borrowing date. It is anticipated that the Company will begin to draw down the Term A Loan, subject to satisfaction of the conditions in the Disbursement Agreement, approximately 21 months after the Issue 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 initial borrowing date. The Term B Loan and Term C Loan (comprising $274.0 million in aggregate) were funded on the Issue Date, and subject to satisfaction of the conditions in the Disbursement Agreement, are expected to be drawn down beginning in August 1998 (being approximately five months after the Issue Date). All of the Loans will convert from construction loans into amortizing loans on the Conversion Date, with substantial amounts due during the final six quarters of the Term B Loan and the Term C Loan. The Company has the option to pay interest at either LIBOR or Scotiabank's ABR, in each case plus a certain margin. See "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility." (2) The Company entered into a commitment letter with the FF&E Lender for provision of the FF&E Financing. The FF&E Financing consists of $20.0 million in loans and $60.0 million in operating leases and is expected to be used by the Company to obtain the Gaming Equipment and Specified Equipment. The FF&E Financing will begin to be funded six months prior to the opening of the Aladdin. See "Description of Certain Indebtedness and Other Obligations--FF&E Financing." (3) The Notes have an initial Accreted Value of $115.0 million which equals the gross proceeds of the Offering, such gross proceeds, net of expenses of approximately $8 million, were contributed, together with approximately $8 million in cash received pursuant to the London Clubs Contribution, by Holdings to the Company in exchange for Series A Preferred Interests. The Aladdin Parties have allocated $100.0 million of the gross proceeds of the Offering to the Notes and $15.0 million of such proceeds to the Warrants. See "Use of Proceeds" and "Certain United States Federal Income Tax Considerations." (4) Represents: (i) the $33.6 million book value of the Contributed Land (such land having an appraised fair market value of $150.0 million) and $15.0 million of the gross proceeds of the Offering allocated by the Aladdin Parties to the sale of the Warrants and contributed by the Issuer to Holdings for Holdings Common Membership Interests, net of approximately $69 million of indebtedness and $5.8 million of debt owed to GW Vegas and repaid from the proceeds of the Offering, (ii) a $50.0 million cash contribution to Holdings by London Clubs in exchange for 25% of the Holdings Common Membership Interests, and (iii) a $7.0 million deemed equity contribution by the Issuer, consisting of certain predevelopment costs incurred by AHL in 1996, 1997 and 1998. (5) Does not include any ascribed value for the Bank Completion Guaranty. 32 DIVIDENDS AND DISTRIBUTIONS The Issuer does not anticipate paying any dividends on any Issuer Stock (including the Warrant Shares) in the foreseeable future. The timing, amount and form of distributions, if any, will depend, among other things, on the Company's results of operations, financial condition, cash requirements and other factors deemed relevant by the Company Board. The Issuer's ability to make any future cash distributions or payments to holders of Issuer Stock, including the Warrant Shares, will depend on the Issuer's receipt of cash distributions on its Holdings Common Membership Interests, which in turn will depend on Holdings' receipt of cash distributions on its Common Membership Interests from the Company. The Company Operating Agreement and the Holdings Operating Agreement restrict the ability of the Company and Holdings to make cash distributions on the Common Membership Interests and Holdings Common Membership Interests, respectively, prior to payment of distributions on preferred membership interests, except for distributions to cover any tax liability in respect of Holdings Common Membership Interests. The Bank Credit Facility and the Indenture also contain significant restrictions on the ability of the Company and Holdings to make distributions to members. See "Certain Material Agreements--Company Operating Agreements," and "-- Holdings Operating Agreement" and "Description of Certain Indebtedness and Other Obligations -- Bank Credit Facility" and "-- Senior Discount Notes." 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DEVELOPMENT ACTIVITIES The Issuer is an indirect subsidiary of AHL and was incorporated in December 1997 for the sole purpose of issuing the Warrants and Warrant Shares. The sole material asset of the Issuer is 25% of the Holdings Common Membership Interests which represents an indirect interest to the Warrant holders of 10% of the outstanding Holdings Common Membership Interests on a fully diluted basis. 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 the Company. The Company was organized in January 1997. Since that time and until the Issue Date, the Company's activities have been carried on by AHL on the Company's behalf. To date, the Company's activities have principally been limited to arranging the design, construction and financing of the Aladdin (including the Funding Transactions) and applying for certain permits, licenses and approvals necessary for the development and operation of the Aladdin. The Company plans to develop, construct and operate the Aladdin as the centerpiece of an approximately 35 acre world-class resort, casino and entertainment complex located on the site of the existing Aladdin hotel and casino (the "Project Site"). The Aladdin will be situated at a premier location at the center of the Strip in Las Vegas, Nevada. The original Aladdin hotel and casino was built on the Project Site in 1966. The Theater was added in 1976. The Project Site was purchased by the Trust, through a predecessor-in-interest to AHL, in December 1994. To maintain certain tax attributes obtained in connection with the Trust's acquisition of the Project Site, the original hotel and casino continued to be leased by JMJ, Inc., the company which leased the Project Site from the former owners. In April, 1998, the original Aladdin hotel and casino will be demolished to clear the Project Site for the development of the Complex. The Aladdin is currently expected to open in the first four months of the year 2000. RESULTS OF OPERATIONS The Aladdin Parties and the Company have had no significant operations to date. Certain financial statements for the Issuer and Holdings (on a consolidated basis), Capital and the Company are included herein. Such historical operating results are not indicative of future operating results. Future operating results of the Company, which will be relevant to the ownership and operation of the Aladdin and so the Issuer, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and the Aladdin Parties. While the Company believes that the Aladdin will be able to attract a sufficient number of patrons and achieve the level of activity necessary to permit the Note Issuers and the Company to meet their payment obligations on their indebtedness and Holdings to make cash distributions on the Holdings Common Membership Interests, no assurances can be given that they will be able to do so. LIQUIDITY AND CAPITAL RESOURCES The approximately $790 million necessary to fund the development, financing, construction and opening of the Aladdin (excluding the Company's $21.3 million planned indirect cash contribution and $15.0 million appraised fair market value land contribution to Aladdin Music, as part of the development funds for the Music Project) will be derived from a combination of (i) borrowings of up to $410.0 million under the Bank Credit Facility; (ii) operating lease and loan obligations aggregating $80.0 million under the FF&E Financing; (iii) the Equity and Series A Preferred Interest Financing, comprising an equity contribution by London Clubs of $50.0 million in cash, $7.0 million in pre-development costs incurred by AHL in 1996 and 1997, $150.0 million appraised fair market value in land by Holdings and $115.0 million of gross proceeds from the Offering; and (iv) anticipated reimbursement pursuant to the Site Work Agreement of $14.2 million, including interest. See "Use of Proceeds." 34 On the Issue Date the Company entered into the Bank Credit Facility with the Bank Lenders. The Bank Credit Facility consists of three separate term loans. Term A Loan comprises a term loan of $136.0 million and matures seven 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 initial borrowing date. The Term B Loan and the Term C Loan were funded on the Issue Date into the Cash Collateral Account, and subject to satisfaction of the conditions in the Disbursement Agreement, are expected to be drawn down beginning in August 1998 (approximately five months after the Issue Date). It is anticipated that the Company will begin to draw down the Term A Loan, subject to satisfaction of the conditions in the Disbursement Agreement in December 1999 (approximately 21 months after the Issue Date). See "Risk Factors-- Conditions to Drawdown of Funds under Funding Transactions." All of the Loans will convert from construction loans into amortizing loans on the Conversion Date, with substantial amounts due during the final six quarters of the Term B Loan and the Term C Loan. The Company has the option to pay interest at either LIBOR or Scotiabank's ABR, in both cases plus certain margins. See "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility." On the Issue Date, the Note Issuers issued the Notes pursuant to the Offering. The Notes mature on March 1, 2010. The initial Accreted Value of the Notes was $519.40 per $1,000 principal amount at maturity of the Notes. The Notes accrete at 13 1/2% (computed on a semi-annual bond equivalent basis) based on the initial Accreted Value, calculated from the Issue Date. The Notes will accrete to an aggregate principal amount of $221.5 million by March 1, 2003. Cash interest will not accrue on the Notes prior to March 1, 2003. Commencing on September 1, 2003, cash interest on the Notes will be payable, at a rate of 13 1/2% per annum, semiannually in arrears on March 1 and September 1 of each year until maturity. See "Description of Certain Indebtedness and Other Obligations--Senior Discount Notes." The FF&E Financing provides for the operating lease financing of up to $60.0 million and loans of $20.0 million to obtain the Gaming Equipment and the Specified Equipment. Under the terms of the FF&E Financing, repayments of principal and interest are due in quarterly installments. The FF&E Financing is secured by all of the Gaming Equipment and Specified Equipment financed pursuant thereto. See "Description of Certain Indebtedness and Other Obligations--FF&E Financing." Pursuant to the Equity and Series A Preferred Interest Financing, Holdings contributed to the Company the following property: (a) approximately $107 million in cash (comprising net proceeds from the Offering), (b) an approximately 22.75 acre portion of the Project Site upon which the Aladdin, the Music Project and the Plant will be built (together with adjacent land of approximately 0.8 acres), which has an appraised fair market value of $150.0 million, (c) $7.0 million in the form of certain pre-development costs incurred by AHL in 1996 and 1997, and (d) the London Clubs Contribution, consisting of $50.0 million in cash. The Trust, Bazaar Holdings and London Clubs have entered into the Bank Completion Guaranty for the benefit of the Bank Lenders, and the Noteholder Completion Guaranty for the benefit of the holders of the Notes, pursuant to which the Trust, Bazaar Holdings and London Clubs are required, whenever there are certain construction cost increases in connection with the work to be performed pursuant to the Design/Build Contract, and subject to certain qualifications, to contribute cash to the Company to fund all such increases in construction costs. Neither the Issuer, holders of Issuer Stock (such as the Warrant Shares) nor holders of the Warrants is party to, or entitled to enforce the Bank Completion Guaranty or Noteholder Completion Guaranty. See "Risk Factors--Limitations Under Bank Completion Guaranty and Noteholder Completion Guaranty," "Description of Certain Indebtedness and Other Obligations--Bank Completion Guaranty" and "Description of Noteholder Completion Guaranty and Disbursement Agreement--Noteholder Completion Guaranty." AHL, London Clubs, and Bazaar Holdings have entered into the Keep-Well Agreement for the benefit of the Bank Lenders. Pursuant to the Keep-Well Agreement, AHL, London Clubs and Bazaar 35 Holdings have agreed to contribute funds to the Company to ensure the Company's compliance with certain financial ratios and other requirements under the Bank Credit Facility for the period up to the earlier of the date on which the Company complies with all the financial covenants set forth in the Bank Credit Facility for six consecutive quarterly periods from and after the Conversion Date or the date on which the aggregate outstanding principal amounts of the Bank Credit Facility are reduced below certain amounts and prior to certain dates, subject to certain conditions. See "Controlling Stockholders--Keep-Well Agreement." The funds provided by the Funding Transactions are expected to be sufficient to develop, complete and commence the operations of the Aladdin, assuming no delays or construction cost overruns which (i) are not covered by the $31.8 million Contingency or (ii) Fluor and/or the Design/Builder are not responsible for pursuant to the Fluor Guaranty and the Design/Build Contract, respectively. The Company does not expect that additional external funding will need to be obtained in order to develop and commence the operations of the Aladdin. Following the commencement of operations of the Aladdin, the Company expects to fund its operating and capital needs, as currently contemplated, with $15.0 million of working capital from the Funding Transactions and operating cash flows. In addition, upon the opening of the Aladdin, the Company is expected to have an aggregate of $10.0 million available under a working capital facility. Although no additional financing is contemplated, the Company will seek, if necessary and to the extent permitted under the Indenture and the terms of the Bank Credit Facility, additional financing through additional bank borrowings or debt or equity financings. There can be no assurance that additional financing, if needed, will be available to the Company, or that, if available, the financing will be on terms favorable to the Company. There can also be no assurance that estimates by the Company of its reasonably anticipated liquidity needs are accurate or that new business developments or other unforeseen events will not occur, resulting in the need to raise additional funds. 36 BUSINESS OVERVIEW OF THE COMPLEX The Company plans to develop, construct and operate the Aladdin as the centerpiece of an approximately 35 acre world-class resort, casino and entertainment complex located on the site of the existing Aladdin hotel and casino in Las Vegas, Nevada, a premier location at the center of the Strip. The Aladdin has been designed to include a luxury theme hotel of approximately 2,600 rooms, an approximately 116,000 square foot casino, an approximately 1,400-seat production showroom and seven restaurants. The Casino's main gaming area will contain approximately 2,800 slot machines, 87 table games, keno and a race and sports book facility. Included on a separate level of the Casino will be the 15,000 square foot luxurious Salle Privee, which is expected to contain an additional 20 to 30 high denomination table games and approximately 100 high denomination slot machines. The Salle Privee will cater to wealthy clientele and be operated and marketed in conjunction with London Clubs, a prestigious, multi-national casino operator which caters to international premium players. The Complex, which has been designed to promote Casino traffic and to provide customers with a wide variety of entertainment alternatives, will comprise (i) the Aladdin; (ii) the themed entertainment Desert Passage shopping mall with approximately 462,000 square feet of retail space; (iii) the Music Project, which will be a second hotel and casino with a music and entertainment theme; (iv) the newly renovated 7,000-seat Theater; and (v) the approximately 4,800-space Carpark. The Mall Project and the Music Project will be separately owned by affiliates of the Company. The Company's business and marketing strategies are expected to capitalize on the Complex's premier location, its superior designed, mixed-use, themed development, and strong strategic partnering with highly successful public companies. The grand opening date for the Aladdin and the Mall Project is currently anticipated to occur during the first four months of the year 2000, with the opening of the Music Project expected to occur within six months after the opening of the Aladdin. The Company's management team is led by Chief Executive Officer Richard J. Goeglein, the former President and Chief Executive Officer of Harrah's Hotels and Casinos and President and Chief Operating Officer of Holiday Corp., who during his term at Harrah's oversaw the expansion of the Harrah's brand, including the development of Harrah's Hotel and Casino in Atlantic City. Assisting Mr. Goeglein as Senior Vice President of the Company and President/Chief Operating Officer of the Aladdin Hotel and Casino is James H. McKennon, who as President and Chief Operating Officer of Caesars Tahoe was instrumental in its financial turnaround and as President of Caesars World International Marketing Corp. was responsible for the global marketing of the Caesars brand. It is expected that approximately $75 million will be spent on theming in the Aladdin and the Desert Passage, of which approximately $35 million will be spent by the Company on the Aladdin. This theming will create an environment in the Aladdin that will be based upon the Legends of the 1001 Arabian Nights, including the intriguing tales of Aladdin, Ali Baba and the 40 Thieves, Sinbad and other legendary stories woven around ancient wealth and wonders. The Aladdin theme will be carefully crafted through the interior and exterior architecture of the facility. The Aladdin's exterior will be designed to include a highly articulated streetscape, a themed Casino exterior shaped like a Bedouin tent, fountains, walkways, sculptures and an outdoor restaurant. The sophisticated interior of the Aladdin will utilize rich colors, textures and design, enhancing the fantasy of a mystical romantic time and place. A significant feature of the Desert Passage will be the themed area to be known as the "Lost City." The Lost City is expected to contain a re-creation of an ancient mystical mountain city and will house a variety of specialty shops and restaurants underneath a 10-story high ceiling. The Company believes that the Aladdin, with its unique theme, together with the Desert Passage and Music Project, will ensure its place as a "must-see" destination in one of the world's largest entertainment cities. The Company believes that upon completion, the Aladdin, the Mall Project and the Music Project together will constitute one of the largest and best-planned integrated, mixed-use entertainment resorts in 37 the world. Bazaar Holdings, a subsidiary of the Trust, and THB, a subsidiary of TrizecHahn, have entered into a joint venture agreement and formed Bazaar to develop, construct, own and operate the Mall Project. TrizecHahn is the principal retail subsidiary of TrizecHahn Corporation, one of the largest publicly-traded real estate companies in North America. The Desert Passage is expected to include an array of high-fashion specialty stores, exotic boutiques, theme restaurants, cafes and other entertainment offerings. The Desert Passage will be directly connected to the Casino to maximize Casino traffic. AMH and a subsidiary of Planet Hollywood have entered into the Music Project Memorandum of Understanding, relating to the ownership and development of the Music Project. The Music Project Memorandum of Understanding is subject to the finalization of financing commitments. Planet Hollywood is a creator and worldwide developer of themed restaurants and consumer brands, most notably "Planet Hollywood" and the "Official All Star Cafe." Planet Hollywood has announced that it intends to position a brand of music-oriented entertainment venues as its third major brand. The Music Project, which will be managed by the Company, is expected to include an approximately 1,000 room hotel, a 50,000 square foot casino, four restaurants, including a music-themed restaurant which will feature its own 1,000-person nightclub, a health spa and an outdoor swimming pool. As part of the development of the Complex, the Company expects to indirectly contribute to Aladdin Music $21.3 million in cash and land having an appraised fair market value of $15.0 million in exchange for a preferred membership interest and to lease the existing 7,000-seat Theater to Aladdin Music for a nominal amount. It is anticipated that Aladdin Music will carry out an approximately $8 million renovation of the Theater, improving its decor, light and sound systems and other facilities. A further distinguishing feature of the Music Project is the anticipated active involvement of famous artists and celebrities, some of whom are expected to be stockholders of Planet Hollywood (or an affiliate), participate in the marketing of the Music Project brand and perform at the Theater or make other personal appearances at the Music Project. The Music Project, with its music and entertainment theme, will complement the Aladdin and it is expected that together the two hotels will offer an excitement and variety of entertainment alternatives that will further distinguish the Complex from other venues on the Strip. The development of the Aladdin commenced during the first quarter of 1998. The existing Aladdin hotel and casino closed for business on November 25, 1997 and the implosion of the existing facility is expected to occur during April of 1998. The development of the Mall Project is expected to commence during the second quarter of 1998, followed thereafter by the expected commencement of the development of the Music Project in the second half of 1998. PREMIER LOCATION The Aladdin's 800 feet of Strip frontage is located on the section of the Strip between Flamingo Road at the north and Tropicana Boulevard at the south. Based upon independent research and assuming completion of certain other development projects, average vehicular traffic that will pass the Complex each day is expected to be approximately 54,000. AIRPORT ACCESS. Another major feature of the Complex will be its easy access from Las Vegas' McCarran Airport, only 2.5 miles away. According to the LVCVA, the number of visitors to Las Vegas has increased at a steady and significant rate for the last 15 years, growing from approximately 10 million in 1980 to approximately 19 million in 1990 to over 30 million in 1996, with approximately 44% of these visitors in 1996 arriving by air through McCarran Airport. McCarran Airport, the tenth busiest airport in the United States, is currently in the process of expanding its capacity through the addition of 26 new gates, and it is expected that following completion thereof, the number and percentage of visitors arriving in Las Vegas by air will further increase, making easy access from McCarran Airport to Las Vegas' resorts even more crucial. 38 VEHICLE ACCESS. The Complex will also offer easy access from other major Las Vegas attractions, including the Las Vegas Convention Center, Hughes Center office park, and the University of Nevada Las Vegas, the site of the Thomas & Mack arena, via the main vehicular access on Harmon Avenue. As part of the Complex, Harmon Avenue, which borders the Project Site, is expected to become a major east/west thoroughfare and be widened from its existing four lanes to six lanes. These improvements will allow visitors to access the Aladdin's approximately 5,000 car spaces (including the approximately 4,800-space Carpark) without having to traverse the traffic congestion on the Strip, but while still utilizing major freeways and roads. In addition, by the use of a circular internal roadway, guests arriving by limousine, car service or private vehicles will be able to enter the Complex directly and easily from the Strip, Audrie Lane and Harmon Avenue, further distinguishing the Hotel from many of its competitors. PEDESTRIAN ACCESS. The main entrance to the Aladdin will be located on the Strip. The Complex's 800 feet of Strip frontage will provide pedestrians with easy access to the Casino and the Desert Passage. A signaled crosswalk is expected to be installed on the Strip to provide pedestrians with easy access from the Bellagio. In addition, overhead pedestrian walkways have been designated for at least two segments of the Harmon Avenue/Strip intersection that will facilitate pedestrian traffic to the Aladdin. MASTER-PLANNED, MIXED-USE DEVELOPMENT The Aladdin has been carefully and strategically designed to promote Casino traffic by an experienced and dedicated team with extensive backgrounds in real estate development and construction; hotel, casino and restaurant operations; and retail development and management. Each element of the Complex has been sited and planned in a manner that maximizes pedestrian and vehicular traffic so as to facilitate access to and from the Complex, as well as circulation between the different parts of the Complex. The combination of the two distinct hotels and casinos (catering to different but complementary market segments), the Mall Project, the Theater and the Salle Privee will make the Complex a unique integration of high-end and upper-middle market uses that benefit each other and distinguish the Complex from other resorts on the Strip. The Casino will be located in front of the Hotel, and unlike many of the newer projects on the Strip, will provide easy access for pedestrians without requiring long walks into the Complex. The Casino will be the nexus for the vast majority of pedestrian traffic in the fully integrated Complex, including the Desert Passage, the Music Project, and the Theater. Significant portions of the Desert Passage and all of the Theater's entrances and exits will be accessed through, or be adjacent to, the Casino. The Complex's 800 feet of Strip frontage will provide pedestrians with easy access to the Casino and the Desert Passage from the Strip. Pedestrian visitors to the Aladdin entering from the Strip will be able to enter directly through the Casino or through the Desert Passage entrances. Another feature of the design of the Complex which will further distinguish the Aladdin from its competitors will be the ease of both vehicular and pedestrian traffic flow. Through the use of a circular internal roadway, guests arriving by limousine, car service or private vehicle will be able to enter the Complex directly and easily from the Strip and Harmon Avenue. Furthermore, by the use of bridges and access ways, pedestrians will not be required to cross roadways while moving between different attractions on the Complex, thus facilitating ease of movement between various parts of the Complex and the Strip. UNIQUE ENTERTAINMENT FACILITIES The Aladdin is expected to benefit from the Casino traffic generated from the broad variety of entertainment facilities located throughout the Complex. The Aladdin will be adjacent to the existing Theater, which will continue to be used to hold major concerts and theatrical performances, and is one of the few venues of its size and type in Nevada. The Company expects to lease the existing Theater for a nominal amount to Aladdin Music, which intends to carry out an approximately $8 million renovation of 39 the Theater, improving its decor, light and sound systems and other facilities. The Theater's renovation is expected to transform it into a first-class venue and provide an additional source of visitor traffic to the Complex. Under the Theater Lease (as defined herein), the Company will retain certain rights to use the Theater for Company-promoted events at agreed commercial rates. The Aladdin will also include a 1,400-seat showroom which will provide live nightly entertainment on its mezzanine level for the Hotel, Casino, Desert Passage and other guests. The showroom will feature a 1001 Arabian Nights-themed production show, including elegant, exotic costuming, music, lighting and choreography. Furthermore, the Music Project will contain a 1,000-person nightclub featuring regular live performances. The Desert Passage will be designed to engage the customer in a themed shopping, entertainment and dining experience. Of the approximately 462,000 square feet of retail space within the Desert Passage, it is anticipated that approximately 25% will be devoted to high pedestrian traffic-generating food, beverage and entertainment experiences. A significant feature of the Desert Passage will be the themed area to be known as the "Lost City." The "Lost City" is expected to contain a re-creation of an ancient mystical mountain city and will house a variety of specialty shops and restaurants underneath a 10-story high ceiling. PRESTIGIOUS STRATEGIC PARTNERS The Company has assembled a unique combination of partners for the development of the Complex - London Clubs, TrizecHahn, Planet Hollywood and Unicom Corporation. These partners bring a wealth of knowledge, capital, networks and experience to the Complex. LONDON CLUBS INVESTMENT. London Clubs, a prestigious multi-national casino operator, owns through LCNI 25% of the outstanding Holdings Common Membership Interests. London Clubs had an equity market capitalization of over $455 million on April 2, 1998. London Clubs has extensive experience in the international marketing of casinos to premium players and maintains a strong presence in the United Kingdom (where it controls the largest share of the London casino market), Europe, Asia and the Middle East. In addition to its 25% ownership of the outstanding Holdings Common Membership Interests, London Clubs, through LCNI, will direct the operations of, and act as marketing consultant to, the Salle Privee, the luxurious 15,000 square foot gaming area to be located on the mezzanine level of the Casino which will be designed to cater to the needs of the international premium-play guest. The Company believes that the Salle Privee will be the first of its kind in the United States managed by a European operator and based on the European concept of full service gaming areas for premium players. The Salle Privee's primary business and marketing focus will be to access London Clubs' worldwide member base of upscale casino clientele. Salle Privee Hotel guests will be escorted through a private entrance to a dedicated registration lobby and then taken via a private elevator to the Salle Privee's five private floors of suites at the apex of the Aladdin's main tower. Once there, the 24-hour butler and concierge will cater to the care and comfort of the Salle Privee guest. In the elegantly appointed Salle Privee casino, the customer may dine in the 100-seat exclusive restaurant, offering fine cuisine from around the world. London Clubs provides the Aladdin with an extensive international network of premium casino players, having 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, including horse racing and motor racing, which are well recognized in the United Kingdom, Cyprus, Hong Kong, Dubai and Malaysia, and its international print publications, which are distributed to members worldwide utilizing London Clubs' substantial database of premium clientele. 40 JOINT VENTURE WITH PLANET HOLLYWOOD. Through a subsidiary, Planet Hollywood has agreed to be a 50% partner (on a fully diluted basis) in the Music Project. Planet Hollywood is a creator and worldwide developer of consumer brands, most notably "Planet Hollywood" and the "Official All Star Cafe," that capitalize on the universal appeal of the high energy environment of movies, sports and other entertainment-based themes. As of December 31, 1997, there were 78 Planet Hollywood brand restaurants and nine Official All Star Cafe brand restaurants worldwide. Planet Hollywood has announced that it intends to position its brand of music-themed entertainment venues as its third major brand. A distinguishing feature of the Music Project is the anticipated active involvement of famous artists and celebrities, some of whom are expected to be stockholders of Planet Hollywood, participate in the marketing of Planet Hollywood's music-oriented brand and help generate significant media attention and publicity. Planet Hollywood plans to utilize its strategy of celebrity involvement with its music-themed brand. The Company believes this exposure will enhance the Aladdin by providing immediate excitement and press coverage for the Complex. Planet Hollywood had an equity market capitalization of over $994 million on April 2, 1998. STRATEGIC RELATIONSHIP WITH TRIZECHAHN. The Mall Project will be owned, developed and operated by Aladdin Bazaar, a joint venture between Bazaar Holdings and TBH, a wholly-owned subsidiary of TrizecHahn. TrizecHahn is a wholly-owned subsidiary of TrizecHahn Corporation, one of the largest publicly traded real estate companies in North America, with an equity market capitalization of over $3.4 billion on April 2, 1998. TrizecHahn was the developer of the Fashion Show Shopping Mall on the Strip and other major shopping malls including Horton Plaza in San Diego, Bridgewater Commons in New Jersey, Valley Fair in San Jose and Park Meadows in Denver. The Company believes that TrizecHahn's proven ability in designing well laid-out retail centers, attracting high quality tenants and successfully promoting and operating its retail projects will benefit the Aladdin by attracting a consistent stream of visitors to the Complex and its various attractions. Investors should be aware that TrizeHahn has announced that it is considering selling its operating portfolio of regional shopping centers and on April 6, 1998 announced the sale of 20 regional shopping centers for over $2.5 billion. See "Risk Factors--Completion of the Mall Project and the Music Project." ENERGY PLANT CONTRACT WITH ENERGY PROVIDER. Northwind Aladdin LLC (the "Energy Provider"), a subsidiary of UT Holdings, Inc. ("UTH"), will be the energy provider for certain parts of the Complex. The predecessor entity of UTH was founded in 1993 to develop district energy projects, and UTH has developed the largest district cooling system in the world, located in Chicago, Illinois. UTH is also a partner in energy ventures in Boston, Houston and Windsor, Ontario. The Energy Provider's obligations under the Development Agreement (as defined herein) up to $30.0 million will be guaranteed by its ultimate parent, Unicom. Unicom, which is listed on the New York Stock Exchange, had an equity market capitalization of over $7.5 billion on April 2, 1998. See "Risk Factors--Completion of the Energy Project." CLOSE RELATIONSHIP BETWEEN MANAGEMENT AND OWNERS. On completion, it is expected that the Complex will be one of only two independently constructed hotel, casino and retail major Strip projects in Las Vegas (the other being the Venetian Hotel and Casino). All other major competitors of the Aladdin are corporate projects, such as the Bellagio, owned by Mirage Resorts, Inc. and Paris Casino owned by Hilton. Management believes that the close relationship between the Company's members and management will be conducive to more efficient decision making and ultimately assist in the successful development and operation of the Complex. 41 STRATEGY The Company's business and marketing strategies are linked together by the Complex's premier location, its superior design, mixed-use theme development and strong strategic partnering with highly successful public companies. CREATE A "MUST-SEE" DESTINATION. The Company believes that the Aladdin, with its unique, well-executed design, together with the Desert Passage and the Music Project (including the newly renovated Theater), will ensure its place as a "must-see" destination in one of the fastest growing entertainment cities in the world. The Aladdin theme will be supported by a sophisticated interior design enhancing the fantasy of mystical and romantic time and place. The Aladdin's main Casino traffic will be driven not only by Hotel guests, but also by the customers directly attracted from the Strip. Visitor traffic to the Aladdin will also be enhanced by the attractiveness of the Desert Passage. With the addition of the Music Project, which will address a somewhat younger clientele, the Complex will have a combined room count of approximately 3,600 rooms and appeal to a broader customer demographic. MARKET POSITIONING. The Company intends to focus on three different market segments to attract customers to the Aladdin: - UPSCALE CLIENTELE. The Hotel will be designed to appeal to upscale clientele, providing the amenities and level of service such high-end guests expect. In particular, each of the Hotel's approximately 2,600 guest rooms and suites will have an area of not less than 450 square feet--exceeding that of the average Las Vegas hotel room of approximately 360 to 400 square feet--and 24% of the Hotel's guest rooms and suites will have an area exceeding 620 square feet. The Hotel's room inventory for the upscale market will include 400 "king parlors" (ranging from 620 to 680 square feet), 136 "tower end-cap suites" (ranging from 732 to 1,162 square feet) and 58 "center king suites" (585 square feet). Each of the rooms and suites will have a large four or five fixture bathroom with a separate shower, bathtub, up to two washbasins and an enclosed watercloset. A special feature of each of the rooms and suites will be the added width given to the interior design allowing for a more residential feel. The Hotel will provide extensive recreational facilities for its guests, including a 20,000 square foot health spa with steam, sauna and massage services and an outdoor swimming-pool complex located above the Desert Passage and surrounded by gardens and fountains. The Company intends to promote the Hotel's many features to the upscale market through a variety of media, including high-end print publications, travel agents and events sponsorships. A targeted relationship marketing program is expected to ensure clientele retention and repeat visitation. - INTERNATIONAL PREMIUM PLAYER CLIENTELE. The Company believes that the Salle Privee will be the first of its kind in the United States managed by a European operator and based on the European concept of full-service gaming areas for premium players. The focus of the Salle Privee's business will be the wealthy clientele that form the core of London Clubs' business in London and elsewhere. The Hotel will include 30 suites primarily for use by Salle Privee clientele, including 25 "Salle Privee" suites (ranging from 815 to 930 square feet) and five "mega-suites" (ranging from 2,125 to 3,500 square feet). The Company will maintain the Salle Privee's premium player atmosphere through more sophisticated dining options, higher table limits and more formal levels of service and dress. - UPPER-MIDDLE MARKET CLIENTELE. The Hotel's variety of guest rooms, six of its seven restaurants and the 1,400-seat production showroom, combined with the heavily-themed Casino, Theater and Desert Passage, are expected to appeal broadly to the upper-middle market guest. In addition, the Music Project is expected to appeal to the upper-middle market by attracting younger, affluent customers to the Complex through its music and entertainment-based theme. The Music Project is expected to include an approximately 1,000 room hotel, four restaurants, including a music-themed 42 restaurant which will feature its own 1,000-person nightclub, a health spa and outdoor swimming pool, together with a 50,000 square foot casino. The Theater, which will be a major feature of the Complex, will be central to the Company's promotional strategies for this market segment, with publicity expected to be gained through the booking of popular performers, many of which are expected to be broadcast live to Planet Hollywood's other music-themed entertainment venues. Cooperative advertising and promotion through various media, such as television, radio and print, will be used to promote the Complex to the upper-middle market. LEVERAGE FROM STRATEGIC RELATIONSHIPS. The Company and its affiliates have chosen as strategic partners an experienced team of retail, casino and themed entertainment developers and operators. The Company intends to utilize the unique expertise of its partners from the preliminary development stages of the Complex through its promotion and operation. - DEVELOPMENT EXPERTISE. In establishing a strategic relationship with TrizecHahn, the Company has obtained the knowledge, skills and capital of a partner who has expertise in the coordination, construction and completion in a timely manner of large, high quality projects. - MANAGEMENT AND OPERATING ABILITIES. The Complex will benefit from the experience of TrizecHahn, London Clubs and Planet Hollywood in its operations. Through its management and ownership of several shopping centers, TrizecHahn has demonstrated its ability to successfully design, configure and attract high quality tenants to its retail shopping projects. London Clubs has extensive experience in the international marketing and operation of casinos, in particular to premium players. In addition, Planet Hollywood has successfully grown its concepts to 87 company-owned and franchised Planet Hollywood and Official All Star Cafe units (as of December 31, 1997) since commencing business in 1991. - CAPITALIZING ON BRAND NAMES. With access to some of the most well-known names in the relevant markets, the Company expects to capitalize on the worldwide brand recognition of Planet Hollywood, London Clubs and TrizecHahn. - ACCESSING NEW CLIENT BASE. London Clubs and Planet Hollywood are expected to provide the Complex with access to market segments which the Company believes have not been extensively penetrated by other hotel/casinos in Las Vegas. London Clubs provides the Aladdin with one of the best networks of international premium players in the world and superb promotional opportunities. Furthermore, it is expected that Planet Hollywood will introduce a younger, affluent clientele to the Complex through, among other things, celebrity involvement in the Music Project. CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS. The Company anticipates the total cost of developing, financing, constructing and opening the Aladdin to be approximately $790 million (excluding the Company's $21.3 million planned indirect cash contribution and $15.0 million appraised fair market value land contribution to Aladdin Music as part of the development funds for the Music Project). As part of the Company's strategy of carefully managing construction costs and risks, the Company has hired Tishman, a privately held company with extensive experience in building quality hotels and casinos, to be the construction manager. As construction manager, Tishman will advise with respect to scheduling, administration and reporting in connection with the construction activities of the Design/Builder. In addition, the following arrangements have been made to ensure the full and timely completion of the Aladdin. BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY. The Trust, London Clubs and Bazaar Holdings have entered into the Bank Completion Guaranty for the benefit of the Bank Lenders, under which they have agreed, among other things, to guarantee the completion of the Aladdin. The Bank Completion Guaranty, which became effective as of the closing of the Offering, is not subject to any maximum dollar limitations. The Trust, London Clubs and Bazaar Holdings have entered into the 43 Noteholder Completion Guaranty for the benefit of the holders of the Notes, under which they guarantee completion of the Aladdin, subject to certain important exceptions, limitations and qualifications. Neither Holdings, the Issuer nor the holders of the Warrants or Warrant Shares are party to the Bank Completion Guaranty or Noteholder Completion Guaranty. See "Risk Factors--Limitations Under Bank Completion Guaranty and Noteholder Completion Guaranty," "Description of Certain Indebtedness and Other Obligations--Bank Completion Guaranty" and "Description of Noteholder Completion Guaranty and Disbursement Agreement--Noteholder Completion Guaranty." DESIGN/BUILD CONTRACT. Fluor Daniel, Inc. is the design/builder for the Aladdin. The Design/Builder has entered into a guaranteed maximum price design/build contract (subject to scope changes) with the Company to construct the Aladdin. The Design/Build Contract provides the Design/Builder with incentives for completing the Aladdin ahead of schedule and within budget and for payment of liquidated damages to the Company for certain delays. The Design/Build Contract is guaranteed by Fluor Corporation, the parent of the Design/Builder, pursuant to the Fluor Guaranty. See "Certain Material Agreements-- Design/Build Contract." MALL COMMITMENT LETTER AND MALL GUARANTY. Bazaar has obtained a commitment letter from the Mall Lenders to fund the construction of the Mall Project. Furthermore, upon closing of the Mall Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL have agreed, pursuant to one or more agreements, to guarantee completion of the Mall Project and Bazaar's indebtedness to the Mall Lenders until certain earnings and loan to value targets have been met. See "Risk Factors--Completion of the Mall Project and the Music Project" and "Certain Material Agreements--Mall Financing." THE ALADDIN OVERVIEW. The Aladdin will comprise the Hotel and the Casino and will be owned, developed and operated by the Company. The Aladdin will be constructed of high quality materials, including floors covered in stone, marble and granite set in intricate patterns; carpeting of wool axminster; and wall surfaces of covered architectural veneers, tiles of stone, ceramic and mosaic. The main ceiling treatment will combine actual tent drape with texture and design of a matching motif. THE ALADDIN HOTEL. The Hotel building is expected to comprise a 34-story, 400 foot main tower attached to two 17 story towers. The approximately 2,600-room Hotel room inventory will include standard rooms, 400 "king parlors" (ranging from 620 to 680 square feet), 136 "tower end-cap suites" (ranging from 732 to 1,162 square feet), 58 "center king suites" (585 square feet), 25 "Salle Privee Suites" (ranging from 815 to 930 square feet) and five "mega-suites", the largest of which will be approximately 3,500 square feet. The design and furnishings of the rooms will be spacious and luxurious, with appointments inspired by the Aladdin theme. All guest rooms will include such amenities as a dual line phone in the bathroom and two additional dual line speakerphones with modem hook-up. The king parlors, tower end-cap, center king and Salle Privee suites and the mega-suites will include a king-size or two queen-size beds, with over-sized bathrooms featuring a separate bathtub and shower, dual sinks, enclosed watercloset and, for the center king, Salle Privee and mega-suites, such amenities as a separate living area with a fully-stocked minibar and a work area with modem hook-up, fax machine/printer and video telephone technology. The suites will be designed to accommodate informal business meetings involving both business travelers and convention attendees. Approximately 93 of the suites will be of a larger size, allowing for the possibility of casually entertaining up to forty persons in the living area. The main tower will also house luxury suites designed for Salle Privee and other VIP guests, including premium casino players and convention and trade show attendees who require additional space for entertaining. 44 The Hotel is expected to provide extensive recreational facilities designed to pamper its guests, including a 20,000 square foot health spa with steam, sauna and massage services and an outdoor swim-ming-pool complex located above the Desert Passage and surrounded by gardens and fountains. The Aladdin is expected to include seven restaurants, with combined seating capacity for over 2,300 customers, offering a wide range of dining selections. Food service facilities at the Aladdin will include a buffet and food plaza seating 800 customers, a 24-hour casual dining facility seating 575 customers and a high-energy restaurant with indoor and outdoor seating which will overlook the Strip and be located on the Casino level. This "al fresco" dining experience, one of the first on the Strip, will further distinguish the Aladdin from its competitors and will provide a lively attraction for pedestrians traversing the Strip. The mezzanine level, which will offer a panoramic view of the main casino floor, will feature a themed restaurant of 150 seats and a steakhouse of 150 seats, both of which will offer indoor and outdoor terrace dining. A Sushi/Chinese noodle shop with 50 seats and a casual dining/coffee bar will complete the food offerings on the mezzanine. There will also be a poolside restaurant with capacity to seat 150 people. To ensure consistent, high quality service throughout the Aladdin, the Company will own and operate all food service facilities in the Aladdin (other than the exclusive Salle Privee restaurant, which will be operated by London Clubs). THE SHOWROOM. In keeping with the Aladdin's Arabian Nights theme, the Aladdin will include, on its mezzanine level, a 1,400-seat showroom which will provide nightly entertainment for Hotel, Casino and other guests. The showroom will feature a 1001 Arabian Nights-theme production show including elegant, exotic costuming, music, lighting and choreography. CONVENTION, MEETING AND RECEPTION FACILITIES. The Aladdin is expected to include on the mezzanine floor of the main building over 70,000 square feet of convention, conference, trade show and reception facilities, including a 28,500 square foot main ballroom, 25,600 square feet of pre-function space and 17,400 square feet of breakout space in 16 separate rooms. These facilities will be made available for business and other conventions, trade shows, private receptions and conferences throughout the year. The Company believes that convention, meetings and special events customers will represent an important market for the Aladdin, helping the Hotel obtain consistently high occupancy rates and levels. See "-- Guest Mix--Conventions, Meetings and Special Events Customers." GUEST MIX. The Hotel guest mix, in order of magnitude, is expected to include free and independent travelers, targeted casino customers (both complimentary and at casino rates), convention, meetings and special events customers, and tour and travel customers. Of these groups, all but one (convention, meeting and special events customers) generally have substantial leisure time to take advantage of the Complex's many attractions. According to the LVCVA, approximately 66% of the visitors to Las Vegas came to Las Vegas for vacation and pleasure in 1996. The planned guest mix by category is as follows:
SEGMENT MIX - ------------------------------------------------------------------------------------ ------------- Free and Independent Travelers...................................................... 30% Casino Customers.................................................................... 30% Convention/Meeting.................................................................. 20% Tour & Travel....................................................................... 20%
45 FREE AND INDEPENDENT TRAVELERS. Free and independent travelers will be the primary focus of the Complex with its array of resort services including luxurious rooms, swimming pool and spa, fine restaurants (both in the Hotel, Casino and the Desert Passage), extensive retail opportunities, and the multiple entertainment offerings of the Theater, the Aladdin/Arabian Nights production show and the Desert Passage. Free and independent travelers include persons who travel to Las Vegas from throughout the world who are not affiliated with a traveling group and make their reservations at the property of their choice. These travelers are characterized by travel budgets higher on average than the typical "tour group" traveler budget. They generally pay higher room rates, are predominantly weekend customers and have a relatively high non-gaming budget but still spend more money on gaming activities than the typical Las Vegas visitor. Management believes the Aladdin's emphasis on high-quality accommodation and an upscale integrated entertainment complex will broadly appeal to this market. CASINO CUSTOMERS. Casino customers will be drawn from the upscale, international premium and upper-middle segments of the market. Utilizing both the resources of London Clubs and those internal to the Company, the Casino marketing network will cover Europe, the Middle East, the Pacific Rim, Mexico and Latin America, as well as the United States. The Company believes that the Aladdin's high levels of service, distinctive and private accommodations and the Salle Privee and its amenities will help differentiate it from its competitors. Where appropriate, management will offer complementary suites to high quality, repeat casino players and other premium players. In addition, the Casino will offer a range of popular gaming alternatives, designed to attract the upper-middle market guest. CONVENTIONS, MEETINGS AND SPECIAL EVENTS CUSTOMERS. Conventions, meetings and special events customers are expected to fill the mid-week time periods when the demand by free and independent travelers is lower. Las Vegas is currently the largest trade show market and the fourth largest convention market in the United States, with Las Vegas hotels obtaining premium occupancy rates during large conventions. By utilizing the Aladdin's 70,000 square feet of convention and meeting space, the Aladdin will focus on groups that have both a good hotel and gaming revenue profile. Demand for convention and meeting room nights will be supplemented by convention guests being displaced from neighboring hotels. TOUR AND TRAVEL CUSTOMERS. The tour and travel market consists of customers who utilize "packages" to reduce the cost of travel, lodging and entertainment. According to the LVCVA, approximately 27% of Las Vegas' visitors utilized such tour packages in 1996. These "packages" are produced by wholesalers and travel agents and emphasize mid-week stays in Las Vegas. Management believes that it will be able to capture a significant portion of this market segment by offering the extensive facilities (including non-gaming attractions and amenities) of the Complex to tour and travel visitors during off-peak periods. The tour and travel market will be utilized to fill rooms mid-week with nominal room blocks on the weekends when demand by free and independent travelers is at its peak. With the upper-middle and upscale focus of the Hotel, the Aladdin will focus on the higher-end tour and travel guest from both domestic and international tour operators. THE CASINO. A highly-themed approximately 116,000 square foot casino will be at the center of the Complex. The Casino's main gaming area will contain approximately 2,800 slot machines, 87 table games, keno and a race and sports book facility. Included on a separate level of the Casino will be the luxurious 15,000 square foot Salle Privee, which is expected to contain an additional approximately 100 high limit slot machines and 20 to 30 high limit table games. The Salle Privee will cater to wealthy clientele and will be operated and marketed in conjunction with London Clubs, a prestigious, multi-national casino operator which caters to international premium players. The Casino will be located in front of the Hotel, and unlike many of the newer projects on the Strip, will provide easy access for pedestrians without requiring long walks into the Complex. The Casino will be the nexus for the vast majority of pedestrian traffic on the fully integrated Complex, including the Desert Passage, the Music Project and the Theater. The Casino's exterior will be designed in the style of a large Bedouin sheik's tent, helping to introduce the Aladdin theme to visitors even before they reach the Complex. On entering the Casino, patrons will be surrounded 46 by the Aladdin theme through sculptured surroundings, rich fabrics, strategic lighting and music, evoking the mystery and luxury of the Legends of the 1001 Arabian Nights. At the center of the Casino will be "Scheherazade's Palace," a series of themed architectural elements of domes, arches, and 65 foot polished stone columns. The main level of Scheherazade's Palace will have a bar and live entertainment lounge overlooking the Casino and across to the Mezzanine level. THE SALLE PRIVEE AND THE SALLE PRIVEE MANAGEMENT AGREEMENT. A distinctive feature of the Casino will be the Salle Privee, located on the mezzanine level which will be designed to cater to the needs of the international premium guest. The Salle Privee will contain 20 to 30 high limit table games including baccarat, double zero roulette, single zero roulette and blackjack, and approximately 100 high limit slot machines. The Company believes that the Aladdin's Salle Privee will be the first of its kind in the United States managed by a European operator and based on the European concept of a luxurious, full-service, gaming area for international and domestic premium players. The focus of the Salle Privee's business will be the wealthy clientele that form the core of London Clubs' business in London and elsewhere. The Company will maintain the Salle Privee's premium player atmosphere through more sophisticated dining options, higher table limits and more formal levels of service and dress. The Company believes that the Salle Privee will prove to be a significant attraction for premium players to stay at the Hotel and play at the Casino. In order to take full advantage of this potential, the Company has entered into a Consulting and Marketing Services Agreement (the "Salle Privee Management Agreement") with London Clubs, one of the Controlling Stockholders, under which London Clubs will promote the Salle Privee, marketing this aspect of the Aladdin through its international network of premium casino customers. See "Certain Material Agreements -- Salle Privee Management Agreement." With an equity market capitalization of over $455 million as of April 2, 1998, London Clubs has extensive experience in the international marketing of casinos to premium players. London Clubs operates seven casinos in London, one in Cannes, France, three in Egypt and one in Lebanon. Each of London Clubs' casinos offer their own individual style, but with comparable internationally recognized standards of service. In recent years, London Clubs has embarked upon a period of expansion, acquiring the Park Tower Casino in London's Knightsbridge in October 1995 and re-opening and managing the casino operations of the famous Casino du Liban in Lebanon in December 1996. London Clubs maintains a strong presence in the United Kingdom (where it controls a leading share of the London casino market), Europe, Asia and the Middle East. Its international sporting sponsorships, including horse racing and motor racing, are widely recognized, particularly in the United Kingdom, Cyprus, Hong Kong, Dubai and Malaysia. In addition, London Clubs produces a print publication for its clientele utilizing its substantial database of premium customers which is a valuable means of direct communication with its clientele worldwide. Each issue features developments in London Clubs' clubs, lifestyle articles, member profiles and a popular social diary. Under the Salle Privee Management Agreement, London Clubs will earn an incentive fee based on the operating performance of the Salle Privee. As a result of London Clubs' substantial network of casino players in the United Kingdom, Europe, Asia and the Middle East and management's own extensive network in North and South America and the Pacific Rim, the Company believes that the Salle Privee will provide the Aladdin with a significant competitive advantage over other hotels and casinos on the Las Vegas Strip in attracting customers from the profitable international premium player market. Through London Clubs' involvement in the promotion of the Salle Privee, its equity interest in Holdings and its commitment to the Aladdin (demonstrated in part by the Keep-Well Agreement and the Completion Guaranty), the Company also believes that the Aladdin's international profile and financial stability will be significantly strengthened. 47 THE MALL PROJECT OVERVIEW. Located on the Complex adjacent to the Aladdin will be the Desert Passage, a shopping mall with approximately 462,000 square feet of retail space, and the approximately 4,800-space Carpark, each of which will be developed, owned and operated by Bazaar, a joint venture between Bazaar Holdings and THB, a wholly-owned subsidiary of TrizecHahn. TrizecHahn has extensive experience in developing retail properties, and prior to its recently announced sale of 20 regional shopping centers, TrizecHahn owned and managed 27 regional centers throughout the United States, comprising over 25 million square feet. TrizecHahn is a wholly-owned subsidiary of TrizecHahn Corporation, one of the largest publicly traded real estate companies in North America, with an equity market capitalization of over $3.4 billion as of April 2, 1998. Investors should note that TrizecHahn has announced that it is considering selling its operating portfolio of regional shopping centers and on April 6, 1998 announced the sale of 20 regional shopping centers for over $2.5 billion. See "Risk Factors--Completion of the Mall Project and the Music Project." THE DESERT PASSAGE. The Desert Passage entertainment shopping mall will constitute a key aspect of the Complex, and, like the Aladdin, will be heavily themed on the Arabian Nights legends. With a strong presence and entrances on the Strip, the Desert Passage will wrap around the Casino and Hotel buildings and the Theater. The Desert Passage will consist of two stories of prime retail space in the area closest to the Strip, reducing to one-level in the areas near the rear of the Hotel, the Carpark and the Music Project. While the Desert Passage will be of a similar size to the successful Forum Shops at Caesars Palace, it will not be set back from the Strip, but will instead be located close to the Strip, allowing passing pedestrian traffic to gain easy access. Pedestrian visitors to the Aladdin entering from the Strip will be able to enter directly through the Casino or through the Desert Passage entrances and significant portions of the Desert Passage will flow directly into the Casino. It is expected that the Desert Passage will provide a steady source of pedestrians and Hotel guests to the Complex, many of whom it is expected will also want to visit the Casino or dine at the Hotel. The Desert Passage will be designed to engage the customer in a highly themed shopping, entertainment and dining experience. Of the approximately 462,000 square feet of retail space within the mall, it is anticipated that approximately 25% will be devoted to high pedestrian traffic-generating food, beverage and entertainment experiences. The food service facilities located in the Desert Passage will consist predominantly of establishments which complement the dining alternatives in the Aladdin. A significant feature of the Desert Passage will be the themed area to be known as the "Lost City." The "Lost City" is expected to contain a re-creation of an ancient mystical mountain city and will house a variety of specialty shops and restaurants underneath a 10-story high ceiling. CARPARK. As part of the Mall Project, Bazaar will develop an approximately 4,800-space carpark facility, to be located at the rear of the Complex, together with an additional approximately 350 surface level parking spaces. The Carpark will be accessible from Audrie Lane, the same street from which the Paris Casino public carpark will be accessed, and from the circular internal roadway on the Complex (accessible from Harmon Avenue and the Strip) which will provide direct vehicular access to the Hotel. The Carpark will be directly linked through the Desert Passage to the Hotel and Casino and the Music Project. Bazaar is considering retaining an independent management company to operate the Carpark. The Carpark and related surface level parking areas will include certain car parking spaces to be used principally for valet parking. In addition, in connection with the development of the Aladdin, parking facilities for approximately 500 vehicles will be developed beneath the Hotel. 48 THE MUSIC PROJECT THE MUSIC PROJECT HOTEL AND CASINO. The Music Project is the second stage of development to the Complex. The Music Project will involve the development of a second hotel and casino, with a music and entertainment theme, on the southeast edge of the Complex on the corner of Audrie Lane and Harmon Avenue. AMH and a subsidiary of Planet Hollywood have entered into the Music Project Memorandum of Understanding to own and operate the Music Project, subject to finalization of financing, with each joint venture partner holding a 50% interest (on a fully-diluted basis). See "Risk Factors--Completion of the Mall Project and the Music Project" and "Certain Material Agreements--Music Project Memorandum of Understanding." The Music Project is expected to include an approximately 1,000 room hotel, four restaurants, including a music-themed restaurant which will feature its own 1,000-person nightclub with regular live entertainment, a health spa and outdoor swimming pool, together with a 50,000 square foot casino. The Music Project will aim to expand the market by having a different theme and attracting a different market segment to the Aladdin. The Music Project is expected to appeal to the upper-middle market, attracting younger, affluent customers to the Complex through its music and entertainment-based theme. In order to enhance the Complex, the Music Project is intended to be integrated through walkways, bridges and the internal circular roadway with the Aladdin, the Desert Passage and the Carpark, providing yet another attraction on the Complex and contributing to its mixed-use nature. Through a subsidiary, Planet Hollywood will be a 50% partner (on a fully diluted basis) in the Music Project. Planet Hollywood is a creator and worldwide developer of consumer brands, most notably "Planet Hollywood" and the "Official All Star Cafe," that capitalize on the appeal of the high-energy environment of movies, sports and other entertainment-based themes. As of December 31, 1997, there were 78 Planet Hollywood brand restaurants and nine Official All Star Cafes brand restaurants worldwide. Planet Hollywood has announced that it intends to position a brand of music-themed hotels and entertainment venues as its third major brand. A distinguishing feature of the Music Project is the anticipated active involvement of famous artists and celebrities, some of whom are expected to be stockholders of Planet Hollywood, participate in the marketing of Planet Hollywood's music-themed brand, perform at the Theater or make other personal appearances at the Music Project, and help to generate significant media attention and publicity. Brand recognition is expected to be further enhanced through the high visibility of Planet Hollywood's music brand's merchandise, such as jackets, T-shirts, sweatshirts and hats. The Company believes this exposure will enhance the Aladdin by providing immediate excitement and press coverage for the Complex. It is currently anticipated that construction of the Music Project will commence during the second half of 1998. Neither the development of the Aladdin nor the Mall Project is contingent on the development of the Music Project. THEATER OF THE PERFORMING ARTS. The Aladdin and the Desert Passage will be adjacent to the Theater, a 7,000-seat entertainment facility that will be accessible through the Casino. The Theater is an entertain-ment auditorium with high-quality sight lines and acoustics and, with its 15,000 square foot stage, is one of the few venues of its size and type in Nevada. As part of the development of the Complex, the Company intends to enter into a 30-year lease of the existing Theater for a nominal amount with Aladdin Music, which expects to carry out an approximately $8 million renovation of the Theater, improving its decor, light and sound systems and other facilities. The renovation will also allow the Theater to be condensed into a smaller, approximately 2,000-seat auditorium for more intimate performances. The Company will retain certain rights to use the Theater for Company-promoted events at agreed commercial rates. In the past the Theater has hosted major concert artists, championship boxing matches and Broadway shows and it is expected that the Theater will continue to be used to hold major concerts and theatrical 49 performances. The renovation and integration of the Theater into the first class resort Complex is expected to provide another source of visitor traffic to the Complex. THE LAS VEGAS MARKET OVERVIEW. Las Vegas is one of the fastest growing entertainment markets in the country. Las Vegas hotel occupancy rates are among the highest of any major market in the United States. According to the LVCVA, the number of visitors traveling to Las Vegas has increased at a steady and significant rate for the last ten years from 16.2 million in 1987 to 29.6 million visitors in 1996, a compound annual growth rate of 7.0%. Aggregate expenditures by these visitors increased at a compound annual growth rate of 11.3% from $8.6 billion in 1986 to $22.5 billion in 1996. EXPANDING HOTEL AND GAMING MARKET. Las Vegas has one of the strongest and most resilient hotel markets in the country and is the largest gaming market in the world. The number of hotel and motel rooms in Las Vegas has increased by 61% from 61,394 in 1988 to 99,072 in 1996. Major properties on the Strip opening over this time period include the Mirage, Excalibur, MGM Grand, Treasure Island, the Luxor, Monte Carlo and New York New York. In addition, a number of existing properties on the Strip embarked on expansions including Harrah's Las Vegas, Caesars Palace, Circus Circus and the Luxor. Despite this significant increase in the supply of rooms in Las Vegas, hotel occupancy rates exceeded on average 90.4% for the years 1990 to 1996, averaged 93.4% in 1996 and averaged 91.4% in the first seven months of 1997. By the end of 1999, it is estimated that approximately 20,000 additional hotel rooms will be opened on the Strip, including the Bellagio, the Venetian and Paris resorts, all of which are currently under construction. [LOGO] Gaming has continued to be a strong and growing business in Las Vegas. According to the LVCVA, Clark County gaming revenues have increased at a compound annual rate of 8.4% from approximately $2.8 billion in 1986 to approximately $5.8 billion in 1996. As a result of the increased popularity of gaming, Las Vegas has sought to increase its popularity as an overall vacation resort destination. Management believes that the growth in the Las Vegas market has been enhanced as a result of a dedicated program by the LVCVA and major Las Vegas hotels to promote Las Vegas as a major vacation and convention site, the increased capacity of McCarran Airport and the introduction of large, themed destination resorts in Las Vegas. 50 GROWTH OF LAS VEGAS RETAIL SECTOR AND NON-GAMING REVENUE EXPENDITURES. The Las Vegas market continues to evolve from its historical gaming focus to a broader entertainment offering. In addition to the traditional attractiveness of gaming, the market is continuing to expand to include retail, sporting activities, major concerts and other entertainment facilities. This diversification has contributed to the growth of the market and broadened the universe of individuals who would consider Las Vegas as a vacation destination. The more diversified entertainment offerings present significant growth opportunities. An increasing number of destination resorts are developing non-gaming entertainment to complement their gaming activities in order to draw additional visitors. According to the LVCVA, while gaming revenues in Clark County have increased from approximately $2.8 billion in 1986 to approximately $5.8 billion in 1996, the percentage of an average tourist's budget spent on gaming has declined from 32.6% in 1986 to 25.8% in 1996 with non-gaming tourist revenues increasing from $5.8 billion in 1986 to $16.7 billion in 1996. The newer large theme destination resorts have been designed to capitalize on this development by providing better quality sleeping rooms at higher rates and by providing expanded shopping, dining and entertainment opportunities to their patrons in addition to gaming. LAS VEGAS AS A CONVENTION CENTER ATTRACTION. Las Vegas is one of the largest convention and trade show destinations in the country. In 1987, approximately 1.7 million persons attended conventions in Las Vegas providing approximately $1.2 billion in non-gaming convention revenue. In 1996, the number of convention attendees increased to more than 3.3 million, providing approximately $3.9 billion in non-gaming convention revenue. Las Vegas offers convention and trade shows unique infrastructure for handling the world's largest shows, including a concentration of high-end hotel rooms located on the Strip, two convention centers with a total of over 2.3 million square feet of convention and exhibition space and unparalleled entertainment options. The proposed expansion of the Las Vegas Convention Center ("LVCC") and the planned construction of the Congress Center will further increase convention and exhibit space. Management believes that Las Vegas will continue to evolve as one of the country's preferred convention destinations. MCCARRAN AIRPORT EXPANSION. During the past five years, the facilities of McCarran Airport, the tenth busiest airport in the United States, have been expanded to accommodate the increased number of airlines and passengers which it services. The number of passengers traveling through McCarran Airport has increased from approximately 15.6 million in 1987 to approximately 30.5 million in 1996, a compound annual growth rate of 7.8%. According to the LVCVA, in 1996 visitors to Las Vegas arrived by the following methods of transportation: 44% by air; 41% by auto; 7% by bus; and 8% by recreational vehicle. An approximately $500 million expansion project at McCarran Airport is scheduled for completion in 1998. Long-term expansion plans for McCarran Airport provide for additional runways, three new satellite concourses, 65 additional gates, improved public transportation, roads and other infrastructure leading from McCarran Airport to the Strip and other facilities which would allow McCarran Airport to significantly increase visitor capacity. To the extent that McCarran Airport is not expanded in accordance with its plans, the occupancy rates and average daily hotel room rates in Las Vegas could be adversely affected due to the planned construction of new hotel rooms. STATISTICS ON THE LAS VEGAS GAMING INDUSTRY. The following table sets forth certain information derived from published reports of the LVCVA and the Nevada State Gaming Control Board concerning Las Vegas Strip gaming revenues and visitor volume and hotel data for the years 1986 to 1996. As shown in the table, the Las Vegas market has achieved significant growth in visitor volume and tourist revenues and favorably absorbed significant additional room capacity despite the occurrence of a series of adverse economic, regulatory and competitive events during the past decade such as the recession of the early 1990s, the expansion of gaming into new jurisdictions, the modification of existing regulations in other jurisdictions and the expansion of Native American gaming. 51 HISTORICAL DATA FOR LAS VEGAS GAMING INDUSTRY(1)
1987 1988 1989 1990 1991 1992 1993 ----------- ------------ ------------ ------------ ------------ ------------ ------------ Las Vegas Visitor Volume.................... 16,216,102 17,199,808 18,129,684 20,954,420 21,315,116 21,886,865 23,522,593 Percentage Change........... 6.7% 6.1% 5.4% 15.6% 1.7% 2.7% 7.5% Total Visitor Expenditures(2)........... $ 8,602,966 $ 10,039,448 $ 11,912,941 $ 14,320,746 $ 14,326,554 $ 14,686,644 $ 15,127,267 Percentage Change........... 15.3% 16.7% 18.7% 20.2% 0.0% 2.5% 3.0% Las Vegas Convention Attendance................ 1,677,716 1,702,158 1,508,842 1,742,194 1,794,444 1,969,435 2,439,734 Percentage Change........... 10.4% 1.5% (11.4)% 15.5% 3.0% 9.8% 23.9% Las Vegas Hotel Occupancy Rate............ 87.0% 89.3% 89.8% 89.1% 85.2% 88.8% 92.6% Las Vegas Hotel/Motel Room Supply.................... 58,474 61,394 67,391 73,730 76,879 76,523 86,053 Percentage Change........... 3.5% 5.0% 9.8% 9.4% 4.3% (0.5)% 12.5% 1994 1995 1996 ------------ ----------- ----------- Las Vegas Visitor Volume.................... 28,214,362 29,002,122 29,636,631 Percentage Change........... 19.9% 2.8% 2.2% Total Visitor Expenditures(2)........... $ 19,163,212 20,686,800 22,533,258 Percentage Change........... 26.7% 8.0% 8.9% Las Vegas Convention Attendance................ 2,684,171 2,924,879 3,305,507 Percentage Change........... 10.0% 9.0% 13.0% Las Vegas Hotel Occupancy Rate............ 92.6% 91.4% 93.4% Las Vegas Hotel/Motel Room Supply.................... 88,560 90,046 99,072 Percentage Change........... 2.9% 1.7% 10.0%
- ------------------------ (1) Sources: LVCVA and Nevada State Gaming Control Board for the fiscal years ended December 31. (2) In thousands. 52 CONSTRUCTION SCHEDULE AND BUDGET The development of the Aladdin commenced during the first quarter of 1998. The existing Aladdin hotel and casino closed for business on November 25, 1997 and the implosion of the existing facility is expected to occur during April of 1998. The development of the Mall Project is expected to commence during the second quarter of 1998, followed soon thereafter by the commencement of the development of the Music Project in the second half of 1998. The Company anticipates the cost of developing, financing, constructing and opening the Aladdin to be approximately $790 million (excluding the Company's $21.3 million planned indirect cash contribution and $15.0 million appraised fair market value land contribution to Aladdin Music, as part of the development funds for the Music Project). Pursuant to the Design/Build Contract, the Design/Builder has committed itself to a 26 month work schedule to complete the Aladdin, subject to certain scope changes. An equitable adjustment in the Contract Date (as defined herein) and guaranteed maximum price will be made for changes that either increase or decrease the Design/Builders' time for performance and/or cost of construction. See "Certain Material Agreements--Design/Build Contract." The Company believes that the construction budget is reasonable and the Design/Build Contract sets forth a procedure designed to ensure the timely completion of the Aladdin. However, given the risks inherent in the construction process, it is possible that construction costs could be significantly higher than budget and that delays could occur. If construction costs do exceed the amounts set forth in the construction budget, it is expected the potential sources to pay such excess include (a) the $31.8 million Contingency; (b) the Trust, London Clubs and Bazaar Holdings pursuant to their obligations under the Bank Completion Guaranty; and (c) the Design/Builder, a subsidiary of Fluor, pursuant to its liability under the Design/Build Contract, which liability is guaranteed by Fluor pursuant to the Fluor Guaranty. See "Risk Factors--Risks of New Construction" and "--Risks Under Design/Build Contract and Fluor Guaranty" and "Certain Material Agreements." The Mall Project is not being developed by the Company, but is being developed by Bazaar. The Mall Project is budgeted to cost approximately $215.0 million, all of which amount will be paid by Bazaar. Upon completion of the Mall Financing, TrizecHahn, the Trust, Bazaar Holdings and AHL have agreed to guarantee completion of the Mall Project and Bazaar's indebtedness to the Mall Lenders until certain earnings and loan to value targets have been met. See "Risk Factors--Risk of New Construction" and "--Completion of the Mall Project and the Music Project," "Use of Proceeds" and "Certain Material Agreements--Bazaar LLC Operating Agreement." The Aladdin, together with the Mall Project, will be developed as the first phase of a planned two-phase redevelopment of the Complex. In the second phase, Aladdin Music will develop the Music Project which, like the Mall Project, will be financed independently and such financing will not be guaranteed by the Company. On commencement of construction of the Music Project, the Company is required to transfer ownership of the land parcel upon which the Music Project will be built to Aladdin Music. The opening of the Music Project is expected to occur within six months after the opening of the Aladdin. See "Risk Factors--Completion of the Mall Project and the Music Project," "--Possible Conflicts of Interest" and "Certain Material Agreements--The Music Project Memorandum of Understanding." The completion and full operation of the Aladdin is not contingent upon the subsequent financing or completion of the Mall Project or the Music Project. Investors should note that funding arrangements for the completion of the Mall Project and the Music Project have not yet been finalized, and there can be no assurance that such funding arrangements will be finalized at any time or that the Mall Project or Music Project will be completed. See "Risk Factors--Completion of the Mall Project and the Music Project." DESIGN AND CONSTRUCTION TEAM The Company has assembled what it believes to be a highly qualified team of specialists to design and construct the Aladdin. TISHMAN. Tishman has been appointed as the construction manager for the Aladdin and, at AHL's option, the Music Project, the Mall Project and the Theater. Tishman is a privately-held construction firm. Tishman or its affiliates have built or renovated over 30,000 hotel rooms nationwide, including the 53 500-room, one million square foot Golden Nugget hotel and casino in Atlantic City, the 635-room, two million square foot Trump Castle Hotel and Casino in Atlantic City, the 400-room expansion of Harrah's Hotel and Casino in Atlantic City, the 2,300-room Walt Disney World Dolphin and Swan Hotel and convention complex, the 1,200-room Sheraton Chicago Hotel & Towers, the 800-room Hilton in Walt Disney World Village and the 600-room Westin Rio Mar Beach Resort & Country Club. Entertainment projects built by Tishman include Caesars Magical Empire in Las Vegas, several Official All Star Cafes throughout the United States, the Goodwill Games '98 Aquatics Center, Pacific Park in California, restoration of the New Amsterdam Theater in New York and EPCOT Center in Orlando, Florida. FLUOR DANIEL. Fluor Daniel, Inc. is the design/builder for the Aladdin. The Design/Builder is a subsidiary of Fluor, a Fortune 500 Company offering architectural, engineering, construction management, construction and maintenance services to projects around the world. The Design/Builder has been ranked the number one engineering and construction company in the United States based on total revenue by Engineering News-Record for nine of the last ten years. In October 1997, the Design/Builder was recognized by Fortune as the most admired public engineering firm in the world. The Design/Builder has entered into a guaranteed maximum price Design/Build Contract (subject to scope changes) with the Company to design and construct the Aladdin. The Design/Build Contract provides the Design/Builder with incentives for completing the Aladdin ahead of schedule and within budget and for payment of liquidated damages to the Company for certain delays. The Design/Build Contract is guaranteed by Fluor, the parent of the Design/Builder, pursuant to the Fluor Guaranty. See "Certain Material Agreements-- Design/Build Contract." On April 2, 1998, Fluor had an equity market capitalization of over $4 billion. ADP/FD OF NEVADA, INC. ADP, an indirect subsidiary of Fluor, will be the Complex architect. ADP is wholly-owned by ADP Marshall, Inc. ("ADP Marshall"). ADP Marshall, which is based in Phoenix, Arizona, is well-known for its architecture work and mixed-use projects. Such projects include resorts, hotels, timeshare/vacation ownership, gaming, mixed-use/planning, recreational (golf clubs, spas, tennis centers, etc.) and specialty entertainment/retail/restaurant projects. Among ADP Marshall's many award-winning efforts are Five Star ranked properties. Its client list includes Princess Hotels, Inc. (Scottsdale and Acapulco), Carefree Resorts (The Boulders, The Peaks, Carmel Valley Ranch) and PGA Family Golf Center (Scottsdale). ADP's philosophy is that design and systems efficiency must support the operations of a project, especially where the client has a long-term involvement in the completed development. The firm aims to establish strong client relationships by thoroughly understanding its clients' needs, the intricacies of their operations and their development, financial and market specific goals. TRIZECHAHN. THB, a wholly-owned subsidiary of TrizecHahn, is the joint venture partner of Bazaar Holdings in the Mall Project. Prior to its recently announced sale of 20 regional shopping centers, TrizecHahn owned and managed 27 regional centers in major markets throughout the United States, comprising over 25 million square feet and was one of the largest owners, developers and managers of regional shopping centers in the United States. Investors should note that TrizecHahn has announced that it is considering selling its entire operating portfolio of regional shopping centers and on April 6, 1998 announced the sale of 20 regional shopping centers for over $2.5 billion. See "Risk Factors--Completion of the Mall Project and the Music Project." BBGM. The interior designer for the project, BBGM, specializes in hospitality design and has experience in casinos, restaurants, retail, spa/fitness centers and specialty/theme projects. BBGM's experience includes the recently renovated and expanded Caesars Atlantic City hotel, casino, restaurants and public space. Other projects have included the Mohegan Sun Casino in Connecticut and TropWorld in Atlantic City. BBGM's hotel projects have included the St. Regis, The Plaza and the Sheraton Hotel & Towers located in New York City. THE ENERGY PROVIDER. The Energy Provider, a wholly-owned subsidiary of UTH, will be the energy provider for certain parts of the Complex, including the Aladdin. The predecessor to UTH was founded in 54 July 1993 as a subsidiary of Unicom to develop district energy projects. Unicom, which is listed on the New York Stock Exchange, had an equity market capitalization of over $7.5 billion on April 2, 1998. Unicom is also the parent of Commonwealth Edison Company, one of the largest electric utilities in the United States. Since 1993, UTH has developed the largest district cooling system in the world, located in Chicago, Illinois, and is a partner in energy ventures in Boston, Houston and Windsor, Ontario. OPERATIONAL FACILITIES The Complex has been designed to include certain operational facilities and advantages which will assist the Company in providing a high level of service to guests. SERVICE FACILITIES. The north side of the Complex will border on a service road, which will include service elevators, loading docks, receiving and purchasing facilities and storage areas. These service facilities will be located near the majority of the Complex's restaurants and food service areas, which will be the principal users of such facilities. ELEVATOR BANKS. The Hotel will be designed so that elevator banks are located at strategic locations, enabling Hotel guests and employees to access the Hotel guest areas easily. Within the Hotel, special waiter elevators will provide waiters with direct access from Hotel kitchens to rooms and suites, allowing guests to receive full room service on a timely basis. ENERGY. The Complex, once fully constructed, will require substantial amounts of electricity, hot and cold water and heating and cooling. For this purpose, the Company has entered into certain agreements with the Energy Provider for the supply of electricity and heating and cooling to certain parts of the Complex. The Energy Provider has agreed to provide the Aladdin with all its electricity, heating and cooling needs, as specified by the Company, from the date of completion of the Aladdin. Pursuant to the Development Agreement, in order to supply the Aladdin's energy requirements, the Energy Provider has agreed to construct and operate, at its own cost, a thermal energy plant (the "Plant") on an approximately 0.64 acre portion of the Complex (the "Plant Site"). The Energy Provider's obligations under the Development Agreement are guaranteed up to $30.0 million by the Energy Provider's ultimate parent, Unicom, one of the largest electric utility companies in the United States. See "Certain Material Agreements--Development Agreement," "--Unicom Guaranty" and "--Energy Service Agreement." The Music Project will also use electricity, hot and cold water and heating and cooling supplied by the Energy Provider. TrizecHahn is currently considering whether to utilize the Plant or arrange for alternate energy sources for the provision of electricity, hot and cold water and heating and cooling for the Mall Project. SECURITY. The Aladdin will include state-of-the-art security systems, including internally operated camera surveillance systems for the Casino. The Company will employ extensive supervision and accounting procedures to control the handling of cash in the Casino. These measures will include security personnel, closed-circuit television for observation of critical areas of the casino, locked cash boxes, independent auditors and observers, strict sign-in and sign-out procedures which ensure, to the extent practicable, that gaming chips issued by and returned to the Casino cashiers' cages are accurately accounted for, and procedures for the regular observation of gaming employees. EMPLOYEES The Company anticipates that immediately prior to completion of the Aladdin, it will employ approximately 3,600 employees in connection with the Aladdin. The Company will be required to undertake a major recruiting and training program prior to the opening of the Aladdin at a time when other major new facilities may be approaching completion and also recruiting employees. The Company believes it will be able to attract and retain a sufficient number of qualified individuals to operate the Aladdin. However, there can be no assurance that it will be able to do so. Furthermore, the Company does not know whether or to what extent such employees will be covered by collective bargaining agreements, as that determination will be ultimately made by such employees. 55 SERVICE MARKS On the Issue Date, AHL transferred to the Company four federally registered service marks involving the word "Aladdin" and used in connection with the provision of casino and casino entertainment services and hotel and restaurant services (the "Marks"). Two of the Marks were registered on July 13, 1993, a third on July 29, 1993 and the fourth on August 24, 1993. A statement of continuing use with respect to each of the Marks must be filed with the United States Patent and Trademark Office (the "PTO") between the fifth and sixth anniversary of the date such Mark was registered in order to maintain the effectiveness of the registration with respect to such Mark. Although the Company will not be using the Marks during the period of the Aladdin's construction, the Company does not expect that this will adversely affect the registration of the Marks, provided that the reason for the non-use of the Marks is explained to the PTO at the time the statement of continuing use is filed. Each of the registrations for the Marks has a duration of ten years and, unless renewed, will expire on the tenth anniversary of such Mark's date of registration. The Company has recorded its ownership of the Marks with the PTO. A lien on the Marks was granted to the Bank Lenders on the Issue Date. See "Description of Certain Indebtedness and Other Obligations--Bank Credit Facility." INSURANCE Prior to the commencement of operation of the Aladdin, the Company intends to obtain the types and amounts of insurance coverage that it considers appropriate for a company in its business. While management intends to ensure that the Company's insurance coverage will be adequate, if the Company were held liable for amounts exceeding the limits of its insurance coverage or for claims outside of the scope of its insurance coverage, the Company's business and results of operations could be materially and adversely affected. With respect to the construction of the Aladdin, the Company and the Design/Builder have elected to implement a controlled insurance program (the "CIP") whereby the Design/Builder will provide General Liability, Workers' Compensation, Excess Liability, Contractual Liability, Builders Risk and Transit coverages for the Design/Builder and all subcontractors. The Company will pay the Design/Builder for all premiums and costs associated with the CIP. Where necessary, the Company will be named as a named insured or as an additional insured on each policy procured by the Design/Builder pursuant to the CIP. In addition, in lieu of procuring a liquidated damages insurance policy or a business interruption insurance policy to compensate for late completion of the Aladdin, the Company has paid the Design/Builder $2.0 million as a bonus advance. The Design/Builder may elect to purchase liquidated damages insurance or it may elect to self-insure. In either event, the Design/Builder is entitled to keep the bonus advance if the Aladdin is finished on or before the date set for Substantial Completion (as defined herein) (the "Contract Date"). As a further bonus, the Design/Builder will receive $100,000 for each day, up to but not to exceed 90 days, that the Aladdin is substantially completed in advance of the Contract Date. If the Aladdin is not substantially completed by the Contract Date, the Design/Builder must pay back the advance bonus plus $100,000 per day commencing on the first day following the Contract Date and continuing up to 90 days thereafter. See "Certain Material Agreements--Design/Build Contract." LITIGATION The Company and the Aladdin Parties are not currently party to any pending claim or legal action. However, Mr. Jack Sommer, who is the Chairman of the Holdings Board and the Company Board (each as defined herein), a director of Holdings, Capital, the Company and the Issuer, and a trustee of the Trust, and the other trustees of the Trust are currently co-defendants in a legal action relating to the existing Aladdin hotel and casino. See "Controlling Stockholders--Trust Litigation." 56 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, the "Nevada Act"); and (ii) various local regulations. The operation of the Casino by the Company will be subject to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and the Clark County Liquor and Gaming Licensing Board (the "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 the Company and so the Holdings Group. As operator and manager of the Aladdin, the Company will conduct nonrestricted gaming operations at the Casino and so will be required to be 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 will require the periodic payment of fees and will not be transferable. No person will be able to become a member of, or receive any percentage of the profits of, the Company without first obtaining Gaming Approvals. In connection with licensing of the Company, Holdings will be required to be registered and found suitable as a holding company of the Company and to be licensed as a member of the Company. In connection with the registration and licensing of Holdings as a holding company and a member, each direct and indirect owner of Holdings, including, but not limited to, the Issuer, London Clubs, LCNI, London Clubs Holdings Ltd. (a wholly owned subsidiary of London Clubs and the holding company for LCNI) AHL, the Trust, Sommer Enterprises, GAI and their respective owners (all such parties collectively, the "Aladdin Owners") will be required to obtain from the Nevada Gaming Authorities applicable Gaming Approvals. Capital will also be subject to being called forward for a finding of suitability as a co-issuer of the Notes and the New Notes in the discretion of the Nevada Gaming Authorities. Upon the effectiveness of the Exchange Offer, Holdings will be a "publicly traded corporation" as that term is defined in the Nevada Act. If the Company becomes an IPO Entity, it will also become a "publicly traded corporation" 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 (the "Exemption") in connection with its application for a gaming license. In connection with licensing and receipt of the Exemption, the Issuer Holdings, London Clubs and the Company will each also be required to be registered by the Nevada Commission as a publicly traded corporation (a "Registered Company"). The following regulatory requirements will be applicable to the Company, Holdings and the Aladdin Owners upon their receipt of all necessary Gaming Approvals from the Nevada Gaming Authorities. The Company, Holdings and the Aladdin Owners have not yet obtained from the Nevada Gaming Authorities the Gaming Approvals required in order for the Company to conduct gaming operations at the Aladdin 57 and there can be no assurances given that such Gaming Approvals will be obtained, or that they will be obtained on a timely basis. There can also be no assurances that the Company's officers, managers and key employees will obtain Gaming Approvals from the Nevada Gaming Authorities. As a Registered Company and Company Licensee, the Company will be 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, 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 Holdings must file applications with the Nevada Gaming Authorities and will be required to be licensed 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 applicant for licensing or a finding of suitability, or the gaming licensee by 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 Holdings unsuitable for licensing or to continue having a relationship with the Company or Holdings, the Company or 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 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 will be 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 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, 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 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 Aladdin Parties. 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 his 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. 58 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% 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 informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable in a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation. Any person who fails or refuses to apply for a finding of suitability or a license within 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, 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 holders of the Warrants and the Warrant Shares will be subject to being called forward for a finding of suitability in the discretion of the Nevada Commission. The Company will be required to maintain a current members' ledger in Nevada that may be examined by the Nevada Gaming Authorities at any time. The Nevada Commission has the power to require that their respective members' certificates bear a legend indicating that such securities are subject to the Nevada Act. It is unknown at this time whether the Nevada Commission will impose this requirement on the Company. After becoming a Registered Company, the Issuer, London Clubs, the Company and Holdings may not make a public offering of any securities (including, but not limited to, the Common Stock of the Issuer 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 59 the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful. The regulations of the Nevada Board and the Nevada Commission also provide that any entity which is not an "affiliated company," as such term is defined in the Nevada Act, or which is not otherwise subject to the provisions of the Nevada Act or such regulations, such as the Issuer, which plans to make a public offering of securities intending to use such securities, or the proceeds from the sale thereof for the construction or operation of gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes, may apply to the Nevada Commission for prior approval of such offering. The Nevada Commission may find an applicant unsuitable based solely on the fact that it did not submit such an application, unless upon a written request for a ruling, the Nevada Board Chairman has ruled that it is not necessary to submit an application. The sale of securities pursuant to the Warrant Shelf Registration Statement (the "Warrant Public Offering") will qualify as a public offering. The Issuer intends to file a written request (the "Ruling Request") with the Nevada Board Chairman for a ruling that it is not necessary to submit the Warrant Public Offering for prior approval. No assurance can be given that the Ruling Request will be granted or that it will be considered on a timely basis. If the Nevada Board Chairman rules that approval of the Warrant Public Offering is required, the Issuer will file an application for such approval. If the Ruling Request is not granted, the Warrant Public Offering could be significantly delayed while the Issuer seeks approval of the Nevada Board and the Nevada Commission for the Warrant Public Offering. No assurance can be given that approval of the Warrant Public Offering, if required, will be granted. If Holdings or the Company shall become an IPO Entity prior to receiving its Gaming Approvals, they intend to file a Ruling Request with the Nevada Board Chairman for a ruling that it is not necessary to submit the Qualified Public Offering for prior approval. No assurance can be given that such a Ruling Request will be granted or that it will be considered on a timely basis. If the Nevada Board Chairman rules that approval of the Qualified Public Offering is required, the Company or Holdings, as applicable, will file an application for such approval. If the Ruling Request is not granted, the Qualified Public Offering could be significantly delayed while the Company or Holdings seeks approval of the Nevada Board and the Nevada Commission for the Qualified Public Offering. No assurance can be given that approval of the Qualified Public Offering, if required, will be granted. Changes in control of a Registered Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered 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 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 60 made directly to the Registered Company's stockholders or interest holders for the purposes of acquiring of 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 also 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 that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a person in the foreign operation who has been denied a license or 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 have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material adverse effect on the financial position and results of operations of the Company and the Aladdin Parties. 61 MANAGEMENT The following table sets forth the executive officers and the directors of the Company, which will own, develop and operate the Aladdin, and of the Issuer, Holdings and Capital. A "director" of the Company or Holdings, as such term is used in this Prospectus, shall refer to a person who sits on the Board of Managers of the Company (the "Company Board") or Holdings (the "Holdings Board").
NAME AGE POSITION - --------------------------------------------- --- ------------------------------------------------------------ Jack Sommer.................................. 50 Chairman of the Company Board and the Holdings Board; Director of the Issuer and Capital; President of the Issuer Richard J. Goeglein.......................... 63 Chief Executive Officer and President of the Company, Holdings and Capital; Director of the Company, Holdings and Capital Ronald Dictrow............................... 54 Executive Vice President/Secretary and Director of the Company, Holdings and Capital; Director and Secretary of the Issuer Alan Goodenough.............................. 54 Director of the Company, Holdings and Capital G. Barry C. Hardy............................ 50 Director of the Company, Holdings and Capital James H. McKennon............................ 43 Senior Vice President of the Company, Holdings and Capital; President/Chief Operating Officer of the Aladdin Hotel and Casino Cornelius T. Klerk........................... 44 Senior Vice President/Chief Financial Officer of the Company, Holdings and Capital; Treasurer of the Issuer Lee A. Galati................................ 55 Senior Vice President/Human Resources of the Company, Holdings and Capital Jose A. Rueda................................ 60 Senior Vice President/Electronic Gaming of the Company, Holdings and Capital
JACK SOMMER is the Chairman of the Holdings Board and the Company Board, director of the Issuer and Capital and President of the Issuer. Mr. Sommer has been a full time resident of Las Vegas since 1988. 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. The Sommer family has been in the real estate development business for over 100 years, operating for part of that time as Sommer Properties ("Sommer Properties") founded by Mr. Sommer's father (who passed away in 1979), and which is controlled by Mr. Sommer and his mother, Mrs. Viola Sommer. Other well known developments of Sommer Properties have included 280 Park Avenue, Manhattan, an 820,000 square foot office building in Manhattan formerly owned and currently partially occupied by the Bankers Trust Company; 135 West 50th Street, Manhattan, an 800,000 square foot office building also known as the AMA Building; and 600 Third Avenue, Manhattan, a 500,000 square foot office building. Sommer Properties has also developed over 35,000 single family homes, primarily in New Jersey. RICHARD J. GOEGLEIN is Chief Executive Officer and a director of the Company, Holdings and Capital. Mr. Goeglein has spent over 28 years in the hotel/casino and food service industry. He was an Executive Vice President and a member of the Board of Directors of Holiday Inns and Holiday Corp. from 1978 through 1987 and led the management team that consummated the 1980 acquisition of Harrah's Hotels and Casinos ("Harrah's") for Holiday Inns. Mr. Goeglein subsequently served as President and Chief 62 Executive Officer of Harrah's from 1980 to the Fall of 1984 and as President and Chief Operating Officer of Holiday Corp. (the parent company of Holiday Inns, Harrah's, Hampton Inns and Embassy Suites) from October 1984 through 1987. From 1988 to 1992, Mr. Goeglein participated in several corporate turnarounds in the technology and consumer services fields. In 1992, Mr. Goeglein formed Gaming Associates, Inc. ("Gaming Associates") to take management control of Dunes Hotel and Casino in Las Vegas and to prepare a plan of closure for and carry out the closure of the property. He remains a principal of that company. Gaming Associates provided consulting services to the lodging and gaming industries. Mr. Goeglein recently 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 is also a director of two listed companies, Hollywood Park, Inc. and Platinum Software, Inc. RONALD DICTROW is Executive Vice President/Secretary and a director of the Company, Holdings and Capital and a director and Secretary of the Issuer. Mr. Dictrow spent the first 12 years of his professional career as a CPA with the New York accounting firm of David Berdon & Company and has a master's degree in accounting and taxation. In 1979, he was hired by Sigmund Sommer as Controller with financial responsibility for all of Mr. Sommer's properties. In 1984, Mr. Dictrow became Treasurer and Chief Financial Officer of the Trust with the additional responsibility for the operations and management of these properties. Mr. Dictrow is an advisor and consultant to Mrs. Viola Sommer and has been an officer and director of Sovereign Apartments, Inc., a New York City cooperative apartment building since 1979. Mr. Dictrow has had business dealings with the Sommer family for over 20 years. ALAN GOODENOUGH is a director of the Company, Holdings and Capital. Mr. Goodenough, who is chief executive officer of London Clubs, has over 30 years of experience in the leisure and gaming industry, having worked as a public company director and at other senior levels with several major public leisure and casino companies in the United Kingdom. In 1990 Mr. Goodenough founded Lyric Hotels Limited, a United Kingdom hotel company, raising over $40 million from United Kingdom-based institutions. He remains Chairman of the Lyric Group which currently operates three and four star hotels throughout England. As chief executive officer of London Clubs, Mr. Goodenough was instrumental in that company's initial public offering on the London Stock Exchange in June 1994. Mr. Goodenough is also presently a fellow of the United Kingdom Hotel and Catering Institute and a member of the Institute of Directors of England and Wales. G. BARRY C. HARDY is a director of the Company, Holdings and Capital. Mr. Hardy has served as Finance Director of London Clubs since 1989. Before joining London Clubs, Mr. Hardy had extensive business experience in the leisure and gaming industries. Such experience included executive level positions with Pleasurama, plc where he held the offices of Development Director, Group Finance Director and Company Secretary. In addition, Mr. Hardy was actively involved in the development of Pleasurama's leisure and casino interests. In 1988, after the acquisition of Pleasurama by Mecca Leisure Ltd., Mr. Hardy was appointed to Mecca's Board as Managing Director of its casino division. JAMES H. MCKENNON is Senior Vice President of the Company, Holdings and Capital and President/ Chief Operating Officer of the Aladdin Hotel and Casino. Mr. McKennon's career spans over 21 years in the hotel and casino industry in a variety of executive positions. He was President and Chief Operating Officer of Caesars World International Marketing (the casino marketing division of Caesars World) from 1994 to 1996 and served as the President and Chief Operating Officer of Caesars Tahoe from 1991 to 1994. Mr. McKennon first joined Caesars as the Senior Vice President-Hotel Operations for Caesars Palace in Las Vegas, a position he held until his promotion in 1991. From 1976 to 1988 he held a variety of managerial positions at both the property and corporate level for Westin Hotels. CORNELIUS T. KLERK is the Senior Vice President/Chief Financial Officer of the Company, Holdings and Capital and Treasurer of the Issuer. He has over 19 years of experience in the hotel and casino industry both at the corporate and property level. From 1993 to 1997 Mr. Klerk was Vice President--Finance for 63 Hilton Gaming Division (the gaming division of Hilton Hotels Corporation ("Hilton")). In that position he was responsible for the financial oversight of all gaming properties owned and operated by Hilton. He was employed by Harrah's from 1979 to 1985 and again from 1989 to 1993 in a variety of financial management positions ranging from Casino Controller for Harrah's Atlantic City to Vice President, Finance--Southern Nevada. From 1985 to 1987, Mr. Klerk was Vice President of Gilpin, Peyton and Pierce, a regional advertising agency and from 1987 to 1989, he was Corporate Controller for Forte Hotels International in San Diego, California. Mr. Klerk was previously a CPA with the accounting firm of Price Waterhouse. LEE A. GALATI is the Senior Vice President/Human Resources of the Company, Holdings and Capital. Mr. Galati has 22 years of human resources experience in a variety of industries in both the public and private sectors. He was most recently the Director of Human Resources for Sky Ute Casino in Durango, Colorado from 1996 to 1997. Mr. Galati served as the Director of Human Resources for La Plata County, Colorado from 1993 to 1995. From 1990 to 1993, Mr. Galati served as an adjunct professor in the School of Business at Fort Lewis College in Durango, Colorado. His experience also includes serving as Director of Operations Support Services and Human Resources for Northern Telecom in San Diego from 1984 to 1990 as well as Director of Human Resources for Beckman Instruments in Fullerton, California from 1980 to 1984. Mr. Galati earned a Masters in Human Resources and Organization Development from the University of San Francisco in 1984. JOSE A. RUEDA is the Senior Vice President of Electronic Gaming for the Company, Holdings and Capital. Mr. Rueda's 28 years experience in the gaming industry includes gaming operations as well as the sale and distribution of gaming equipment. He was the Vice President, North East Region of Mikohn Gaming Corporation from 1995 to 1997. Mikohn is a leading supplier of gaming equipment to the casino industry. Prior to joining Mikohn, Mr. Rueda was with Harrah's for 24 years in a variety of management positions that included Director of Slot Operations, Harrah's Atlantic City, from 1986 to 1994; Vice President of Gaming/Slots, Harrah's Corporate from 1984 to 1986; Vice President of Operations, Harrah's at Trump Plaza from 1983 to 1984 and Vice President of Gaming, Harrah's Corporate from 1980 to 1983. Mr. Rueda has extensive experience in property research and development along with creative product positioning. He holds a business management degree from the University of Nevada at Reno. COMMITTEES There are currently no committees of the board of directors of the Issuer (the "Issuer Board"). The Holdings Operating Agreement provides that there will be Executive Management Committees which will be responsible for the day to day management of Holdings and the Company. The Executive Management Committee of the Company includes the following persons: the President and Chief Executive Officer of the Company, the Chief Financial Officer of the Company, the President and Chief Operating Officer of the Aladdin, the President and Chief Operating Officer of the Music Project, the Senior Vice President of Human Resources of the Company, the Senior Vice President of Electronic Gaming of the Company and the Managing Director of the Salle Privee. See "Certain Material Agreements--Holdings Operating Agreement." The Holdings Board may also establish committees of the Holdings Board as it may deem necessary or advisable. Each of London Clubs and Sommer Enterprises is entitled to have one of its nominee Holdings Board members on each such committee. Presently, no committees of the Holdings Board have been established. 64 COMPENSATION The following table summarizes the compensation earned during 1997 by the Company's, Holdings' and Capital's Chief Executive Officer and the only other executive officer of the Company, Holdings, Capital or the Issuer who earned over $100,000 in 1997.
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION(1) --------------------------------- ------------------------------------------ NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED STOCK OCCUPATION(2)(3) SALARY COMPENSATION AWARDS OTHER - ------------------------------- ---------- --------------------- ------------------- --------------------- Richard J. Goeglein; Chief Executive Officer............ $ 650,000(4) --(5) $ 0(6) $16,343(7) James H. McKennon; Senior Vice President.................... $ 243,750(8) --(9) $ 0(10) $635(7)
- ------------------------------ (1) All of the executive officers of the Company, Holdings and Capital (other than Mr. Dictrow) are compensated by the Company. Mr. Dictrow is principally employed by the Trust and is compensated by the Trust. Compensation has been paid on the Company's behalf by AHL since the Company's inception in January 1997. (2) The executive officers of the Issuer received no compensation from the Issuer in 1997. (3) No other executive officer of the Company, Holdings or Capital received a total annual salary and bonus exceeding $100,000 in 1997 from the Company, Holdings or Capital. (4) Includes $150,000 paid to GAI in 1997 for consulting fees. (5) GAI purchased vested Holdings Common Membership Interests representing 3% of the outstanding Holdings Common Membership Interests for $1,800. The price paid by GAI for such interests was equal to the fair market value of such interests at the time of purchase. The aggregate amount of all perquisites and other personal benefits received by Mr. Goeglein in 1997 was less than $50,000. (6) Mr. Goeglein purchased unvested Holdings Common Membership Interests representing 2% of the outstanding Holdings Common Membership Interests for a purchase price of $1,200. Such interests had a fair market value of $1,200 on the date of purchase and vest on the earlier of (a) July 1, 2002 and (b) the date on which such interests become publicly traded. (7) Represents life insurance premiums paid on behalf of the executive in 1997. (8) Mr. McKennon's employment with the Company began mid-year 1997. Mr. McKennon's Employment Agreement provides for an annual salary of $325,000 per year, plus certain other benefits. See "--Employment Agreements." (9) The aggregate amount of all perquisites and other personal benefits received by Mr. McKennon were less than 10% of the salary and bonus he was paid in 1997. (10) Mr. McKennon purchased unvested Holdings Common Membership Interests representing approximately 1.0% of the outstanding Holdings Common Membership Interests for a purchase price of $600. Such interests had a fair market value of $600 on the date of purchase. Twenty-five percent of such interests vest on the date of the opening of the Aladdin and an additional 25% vests on each annual anniversary of such opening date. EMPLOYMENT AGREEMENTS Richard J. Goeglein, James H. McKennon, Cornelius T. Klerk, Lee A. Galati and Jose A. Rueda (the "Officers") each signed an employment agreement (each, an "Employment Agreement") with the Company during 1997. The terms of the Employment Agreements were amended on February 26, 1998, such that Holdings became a party and the Officers contributed their Restricted Membership Interests in the Company to Holdings in return for Restricted Membership Interests in Holdings. The initial term of Mr. Goeglein's Employment Agreement is five years and six months, and the remaining Officers' Employment Agreements have an initial duration of four years. 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 will devote their full time, efforts and attention to the business and affairs of the Company. The terms of the Employment Agreements provide for an annual base salary for Mr. Goeglein, Mr. McKennon, Mr. Klerk, Mr. Galati and Mr. Rueda of $500,000 ($600,000 after the opening of the Aladdin), $325,000, $200,000, $150,000 and $250,000, respectively, plus any bonus granted by the Board of Directors based on relevant criteria and performance standards. All of the Officers have been receiving and are expected to continue to receive their compensation from the Company, except that prior to the Issue Date, such amounts have been and will continue to be paid by AHL on the Company's behalf. Mr. Goeglein's Employment Agreement provides for annual bonuses based upon "on target" performances, ranging from 65 50% to 75% of his base salary, and is subject to certain tax provisions. The Company 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 the Company Board. The Employment Agreements provide that the Officers' salary cannot be reduced. After the initial term of Mr. Goeglein's Employment Agreement, the Company has agreed to retain Mr. Goeglein as a consultant to the Company for an additional five years at $100,000 per year. The Officers are entitled to receive other employee benefits from the Company, such as health, pension and retirement and reimbursement of certain expenses. Pursuant to the terms of the Employment Agreements, as amended, Mr. Goeglein, Mr. McKennon, Mr. Klerk, Mr. Galati and Mr. Rueda have purchased for a total purchase price of $1,200, $600, $450, $150 and $450, respectively, unvested Common Membership Interest which were contributed to Holdings on February 26, 1998 in return for unvested Holdings Common Membership Interests representing approximately 2.0%, 1.0%, .75%, .25% and .75% (subject to dilution upon exercise of the Warrants, whether vested or unvested at such time), respectively of the Holdings Common Membership Interests (the "Restricted Membership Interests"), subject to the receipt of applicable Gaming Approvals. Except with respect to Mr. Goeglein, during the terms of the Employment Agreements, 25% of each Officer's Restricted Membership Interests vest on the date of the opening of the Aladdin, and a further 25% vest on each annual anniversary of the opening of the Aladdin. If the Company continues to employ each Officer after the expiration of the term of each Officer's Employment Agreement, 25% of the Officer's Restricted Membership Interests will continue to vest on each anniversary of the opening date until such interests are fully vested. After the terms of the Employment Agreements, if the Company does not continue to employ the Officer other than for Cause, or if the Officer no longer continues his employment for Good Reason, only an additional 25% of the Officer's Restricted Membership Interests vests. Mr. Goeglein's Restricted Membership Interests are expected to become fully vested at the earlier of July 1, 2002 and the date on which such interests become publicly traded, conditioned upon Mr. Goeglein's continued relationship with the Company. If an Officer's employment with the Company and Holdings terminates, the Company and Holdings are expected to have the right to repurchase any unvested portion of the Officer's Restricted Membership Interest for an amount equal to the purchase price originally paid by the Officer for the Common Membership Interest. Under certain circumstances as set forth in the Employment Agreements, including if an initial public offering with respect to the Restricted Membership Interests has not occurred prior to the full vesting of such interests, the Officers have the right to sell their vested Restricted Membership Interests to Holdings at fair market value (subject to the receipt of applicable Gaming Approvals and to certain restrictions on restricted payments set forth in the Indenture and the Bank Credit Facility). If Holdings does not satisfy its obligation to purchase the Restricted Membership Interests within seven days, the Officers have the right to require the Company to purchase such interests at fair market value (subject to certain restrictions on Restricted Payments set forth in the Indenture). After the Company has satisfied its obligation to purchase the Restricted Membership Interests, Holdings has the right to call such interests from the Company for nominal consideration. If, prior to the date of an initial public offering with respect to the Restricted Membership Interests, an Officer is terminated for Cause, except with respect to Mr. Goeglein, the Company and Holdings have the right to purchase any vested Restricted Membership Interests from the Officers at two times the original price paid by the Officer for such interests, (in each case with corresponding rights in Holdings to purchase the Common Membership Interests which correspond to such Restricted Membership Interests for nominal consideration). The Employment Agreements may be terminated by the Company 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 he would have been entitled for the remainder of the four-year term or twelve months, whichever is longer (in 66 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 the Company 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 the Company. Each of the Employment Agreements provides that the Company shall indemnify and hold the Officers harmless to the fullest extent permitted by Nevada law against costs, expenses, liabilities and losses, including reasonable attorney's fees and disbursements of counsel, incurred or suffered by the Officer in connection with his services as an employee of the Company during the term of the respective Employment Agreement. Mr. Goeglein's Employment Agreement provides Mr. Goeglein with relocation expense reimbursement, an interest-free mortgage loan of up to $500,000, and certain excise tax gross-up provisions. GAI CONSULTING AGREEMENT The Company has entered into a consulting agreement (as amended, the "Consulting Agreement") with GAI, LLC ("GAI"), a Nevada limited-liability company 100% beneficially owned by Richard Goeglein, which was subsequently amended on February 26, 1998 to add Holdings as a party and pursuant to which amendment GAI contributed its Common Membership Interests in the Company to 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 Company Board until June 30, 2002. During the term of the Consulting Agreement, the Company 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 Interests in the Company which was contributed to Holdings on February 26, 1998 in return for a 3% Holdings Common Membership Interest (the "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 Warrants). In addition, (a) if Richard Goeglein is terminated from his employment with the Company other than for "Cause" or voluntarily terminates for "Good Reason" (as such terms are defined in Mr. Goeglein's Employment Agreement with the Company) 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 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 Indenture and the Bank Credit Facility). If Holdings does not satisfy its obligation to purchase the GAI Membership Interest within seven days, GAI has the right to require the Company to purchase such interests at fair market value. After the Company has satisfied its obligation to purchase the GAI Membership Interest, Holdings will have the right to call such interests from the Company 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. Holdings has agreed to indemnify GAI, its legal counsel and independent accountants against all expenses, claims, losses, damages 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 the Company and Holdings are indemnified. BONUS AND INCENTIVE PLANS The Company and Holdings currently do not have any bonus or incentive plans. However, the Company anticipates adopting such a plan at such time as it may deem appropriate (subject to supermajority approval by the Holdings Members (as defined herein), such approval not to be unreasonably withheld). It is expected that the terms of any such plan would be comparable to those customary in the industry. 67 CONTROLLING STOCKHOLDERS OVERVIEW AHL owns 98.7% of the common membership interests of Sommer Enterprises, a Nevada limited-liability company. Sommer Enterprises currently owns 100% of the Issuer Stock and, on a fully diluted basis assuming full exercise of the Warrants, will own 60% of the Issuer Stock (comprising 100% of the Issuer's Class A Common Stock, no par value, and 50% of the Common Stock). The Holdings Common Membership Interests are held, 25.0% by the Issuer, 47.0% by Sommer Enterprises, 25.0% by London Clubs, through LCNI, and the remaining 3.0% by GAI. Holdings owns all of the outstanding Common Membership Interests and Series A Preferred Interests of the Company. AHL, which indirectly owns approximately 71.1% of the Common Membership Interests and Series A Preferred Interests, is a 95%-owned subsidiary of the Trust, a private New York discretionary trust, the trustees of which are Mrs. Viola Sommer, Mr. Eugene Landsberg and Mr. Jack Sommer and the beneficiaries of which are certain members of the Sommer family. The Sommer family has been in the business of developing residential and commercial real estate, predominantly in the metropolitan areas of the States of New York and New Jersey, for over 100 years. The former Aladdin hotel and casino located on the Project Site was acquired by a predecessor-in-interest to AHL in December, 1994. Mr. Jack Sommer and the other trustees of the Trust are currently co-defendants in a legal action relating to the acquisition of the Project Site in December, 1994. See "--Trust Litigation". London Clubs (together with AHL, the "Controlling Stockholders") owns 25% of the Holdings Common Membership Interests through subsidiaries. On the opening date of the Aladdin, 0.5% of the Holdings Common Membership Interests will be transferred from London Clubs to Sommer Enterprises and, upon the vesting of certain employees' membership interests in Holdings, London Clubs' percentage of the Holdings Common Membership Interests, and Sommer Enterprises' percentage of the Holdings Common Membership Interests, will be further diluted proportionately to account for such vesting, subject to applicable Gaming Approvals. London Clubs is one of the world's leading casino operators, with seven casinos in London (including Les Ambassadors Club and the Ritz Club), one in Cannes, France, three in Egypt and one in Lebanon. Each of London Clubs' casinos offers its own individual style, but with the same internationally-recognized standards of service. In recent years, London Clubs has embarked upon a period of expansion, acquiring the Park Tower Casino in London's Knightsbridge in October 1996 and in December 1996 re-opening and managing the casino operations of the famous Casino du Liban in Lebanon. On April 2, 1998 London Clubs had an equity market capitalization of over $455 million. London Clubs is listed on the London Stock Exchange. See "Risk Factors--Controlling Stockholders" and "--Possible Conflicts of Interest." HOLDINGS OPERATING AGREEMENT The members of Holdings (the "Holdings Members") are parties to the Holdings Operating Agreement which sets forth their agreement as to the relationships between Holdings and the Holdings Members and among the Holdings Members themselves and as to the conduct of the business and internal affairs of Holdings and its subsidiaries. For a summary of certain key provisions of the Holdings Operating Agreement, see "Certain Material Agreements--Holdings Operating Agreement." EQUITY AND SERIES A PREFERRED INTEREST FINANCING Concurrent with or prior to the Offering, the following contributions were made in order to effect the equity and Series A Preferred Interest contribution to the Company by Holdings: (i) Sommer Enterprises (a) contributed a portion of the Contributed Land and $7.0 million consisting of the benefit of certain predevelopment costs incurred by AHL to the Issuer in exchange for Class A Common Stock in the Issuer and (b) contributed a portion of the Contributed Land to Holdings in exchange for Holdings Common 68 Membership Interests, (ii) the Issuer contributed the portion of the Contributed Land and the benefit of the $7.0 million of certain predevelopment costs received from Sommer Enterprises and the net proceeds allocable from the sale of the Warrants to Holdings in exchange for Holdings Common Membership Interests ((i) and (ii) collectively, the "Sommer Equity Financing"), (iii) Holdings contributed the Contributed Land appraised at $150.0 million, approximately $42 million from the London Clubs Contribution and the $7.0 million consisting of the benefit of certain predevelopment costs incurred by AHL to the Company in exchange for Common Membership Interests in the Company and (iv) Holdings contributed $115.0 million in cash, consisting of the net proceeds of the sale of the Units and approximately $8 million of the London Clubs Contribution, to the Company in exchange for Series A Preferred Interests of the Company. LAND APPRAISAL. The Project Site represents the Company's most material asset. The Bank of Nova Scotia, as arranger of the Bank Credit Facility retained HVS International, a division of Hotel Consulting, Inc., to prepare and deliver an appraisal of the Project Site and the Hotel/Casino (the "Appraisal"). The Appraisal was completed and delivered to the Bank of Nova Scotia and the Company on October 7, 1997. The Appraisal states that as of August 7, 1997, the "market value" of the Project Site was $180.0 million and of the site on which the Aladdin and the Plant will be built (as well as an adjacent approximately 0.8 acre portion of the Project Site) was $135.0 million. KEEP-WELL AGREEMENT AHL, Bazaar Holdings and London Clubs (collectively, the "Sponsors") have entered into the Keep-Well Agreement in favor of the Administrative Agent and the Bank Lenders. Neither the Issuer, Holdings nor holders of the Warrants or Warrant Shares are party to the Keep-Well Agreement. Capitalized terms used and not defined in this section have the meanings assigned to such terms in the Keep-Well Agreement. The Keep-Well Agreement is the joint and several agreement of the Sponsors to make certain quarterly Cash Equity Contributions (as defined below) to the Company from and after the Conversion Date if the Company fails to comply with the Minimum Fixed Charges Coverage Ratio set forth in the Bank Credit Facility. The Bank Credit Facility defines the Minimum Fixed Charges Coverage Ratio as the ratio of the Company's EBITDA for any period of four consecutive fiscal quarters to the Company's fixed charges for such period. For the Company's first three fiscal quarters after the Conversion Date, the Minimum Fixed Charges Coverage Ratio shall be calculated by annualizing the Company's Minimum Fixed Charges Coverage Ratio for such fiscal quarters. The Cash Equity Contributions to the Company shall be in an amount that, when added to the Company's EBITDA for the four quarter period ending on the last day of such fiscal quarter, would rectify such breach. In no event shall the aggregate Cash Equity Contributions required to be made by the Sponsors in any fiscal year of the Company exceed $30.0 million. The $30.0 million annual limitation on Cash Equity Contribution shall not apply to, or in any way limit, any obligation of the Sponsors to pay the Accelerated Payment Amount (as defined below). The Cash Equity Contributions are cash contributions by the Sponsors to the Company in exchange for Holdings Series A Preferred Interests or Holdings Series B Preferred Interests having terms and conditions satisfactory to the Bank Lenders (including, without limitation, no mandatory redemption provisions and no requirements for the distribution of cash). The Holdings Operating Agreement makes provision for adjustment of the proportion of Holdings Common Membership Interests held by Sommer Enterprises and London Clubs for circumstances where the portion of payment made by either Sponsor is in excess of 25% with respect to London Clubs and 75% with respect to Sommer Enterprises. The Cash Equity Contributions and the issuance of Holdings Common Membership Interests or the Holdings Series A Preferred Interests and Holdings Series B Preferred Interests will require the approval of the Nevada Gaming Authorities. 69 Cash Equity Contributions made under the Bank Completion Guaranty will not count for purposes of the Keep-Well Agreement, and vice-versa. The Keep-Well Agreement will terminate (the "Keep-Well Termination Date") on the date which is the earliest of (i) the day on which full and indefeasible payment of the Obligations of the Company under the Bank Credit Facility has been made to reduce the commitments of the Bank Lenders thereunder (the "Commitments") to $145.0 million or less, (ii) the last day of the period of six consecutive fiscal quarters from and after the Conversion Date during which the Company has satisfied each of the financial covenants set forth in the Bank Credit Facility (without giving effect to any payments to or investments by the Sponsors in or for the benefit of the Company), (iii) the date on which both of the following shall have been satisfied: (a) construction of the Aladdin and renovation of the Theater have been completed in accordance with the terms of the Bank Credit Facility and (b) the Commitments and the aggregate outstanding principal amount of the Obligations under the Bank Credit Facility shall have been reduced to an amount not in excess of a certain amount specified for such date pursuant to a schedule of the 20 quarters following the Conversion Date, (iv) the date on which the Sponsors shall have made full payment of the Accelerated Payment Amount (as defined below) or (v) in the case of London Clubs only, the date on which it shall have made full payment of the Accelerated Payment Amount in respect of certain London Clubs specified events. The Accelerated Payment Amount is, as of any date, an amount equal to the sum of (a) the product of (i) $7.5 million times (ii) the number of scheduled quarterly amortization payments remaining under the Bank Credit Facility (which have not been paid by or on behalf of the Company) plus (b) any accrued and unpaid amounts owed by the Sponsors under certain provisions of the Keep-Well Agreement; provided, however, that at no time shall the Accelerated Payment Amount exceed the lesser of (x) the outstanding Obligations of the Company under the Bank Credit Facility and (y) $150.0 million plus amounts due under clause (b) above, minus the product of (A) $7.5 million and (B) the number of complete calendar quarters that have elapsed since the Conversion date which is six calendar quarters after the Conversion Date. The maximum amount of the Accelerated Payment Amount will be $150.0 million plus any unpaid Cash Equity Contributions previously required to be made under the Keep-Well Agreement. The maximum amount of the Accelerated Payment Amount shall decrease by $7.5 million for each quarterly amortization payment which is paid or prepaid. Should certain specified exceptional events under the Keep-Well Agreement occur, London Clubs is obligated to pay the Accelerated Payment Amount. The specified exceptional events will include breaches by London Clubs of various financial covenants and a covenant limiting the amount of secured debt which London Clubs can incur, as well as certain events which will be triggered if other indebtedness of London Clubs is accelerated or if London Clubs becomes insolvent. Any such payments by London Clubs shall be used to repay bank indebtedness under the Bank Credit Facility. The obligations of London Clubs under the Keep-Well Agreement are subordinated to other obligations of London Clubs under certain of its pre-existing senior debt facilities. In addition, obligations of London Clubs under the Keep-Well Agreement are guaranteed by certain subsidiaries of London Clubs, which subsidiaries currently guarantee other indebtedness of London Clubs. Pursuant to the Salle Privee Management Agreement, London Clubs will receive certain fees in consideration for its obligations under the Keep-Well Agreement. See "Certain Transactions--Other Payments to Controlling Stockholders." The Keep-Well Agreement contains representations and warranties, covenants and events of default that are customary for the type of transaction. 70 TRUST LITIGATION Mr. Jack Sommer, who is a trustee of the Trust, and the other trustees of the Trust, are co-defendants in a legal action relating to the existing Aladdin hotel and casino commenced by members of the Aronow family (the "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 allege that Mr. Jack Sommer and the Aronow Plaintiffs were parties to a joint venture to acquire and develop the existing Aladdin hotel and casino and that Mr. Sommer breached such alleged agreement when the Trust acquired an interest in the Aladdin hotel and casino in December, 1994. The Aronow Plaintiffs are seeking (among other remedies) to impress a constructive trust upon the Trust's interest in the Aladdin hotel and casino, an accounting, compensatory damages of not less than $200.0 million and punitive damages of not less than $500.0 million. Mr. Sommer and the trustees of the Trust have informed the Company that they believe the Aronow Plaintiffs' claims lack merit and that they intend to vigorously defend such action. However, in the event that the action is successful, the Trust might be required to pay substantial damages and/or the Aronow Plaintiffs might be entitled to part of the Trust's interest in the Aladdin hotel and casino. An adverse decision could have a material and adverse effect on the Company and the Aladdin Parties. Mr. Sommer and the other trustees of the Trust were also co-defendants in a legal action commenced by Edward Kanbar, Romano Tio and Adina Winston (the "Kanbar Plaintiffs" and together with the Aronow Plaintiffs, the "Plaintiffs") in January 1997 in the Supreme Court of the State of New York, County of New York. In their complaint, the Kanbar Plaintiffs alleged that they were partners in an alleged partnership with Joseph Aronow, which partnership was formed to seek and develop business opportunities with Mr. Sommer. The Kanbar Plaintiffs were seeking (among other remedies) to impress a constructive trust upon the Trust's interest in the Aladdin hotel and casino, compensatory damages of not less than $20.0 million and punitive damages of not less than $50.0 million. On January 15, 1998, the court granted the trustees of the Trust's motion to dismiss this action in its entirety. In 1988, the Trust and two related entities commenced an action in the Southern District of New York against certain entities owned and controlled by Bronfman family interests (the "Bronfman Defendants") alleging, among other things, that the Bronfman Defendants committed violations of Rule 10b-5 under the Securities Exchange Act of 1934, as amended, as well as multiple breaches of fiduciary duties as general partner of a partnership in which the Trust owns limited partnership interests. Relief requested includes an accounting, imposition of a constructive trust and damages in excess of $100.0 million. The Bronfman Defendants have asserted counterclaims against plaintiffs and certain Sommer family members individually alleging causes of action for breach of contract, fraud and various related torts. The Bronfman Defendants claim damages in excess of $100.0 million. The trustees of the Trust have informed the Company that they believe the Bronfman Defendants' counterclaims to be without merit and they intend vigorously to defend the counterclaim. However, in the event the Bronfman Defendants are successful, the Trust might be required to pay substantial damages. An adverse decision could have a material and adverse effect on the Trust. 71 CERTAIN TRANSACTIONS SALLE PRIVEE MANAGEMENT AGREEMENT The Company, London Clubs and LCNI are parties to the Salle Privee Management Agreement which relates to the Salle Privee. Under the Salle Privee Management Agreement, London Clubs has agreed to guaranty the obligations of LCNI. In consideration for the services to be furnished by London Clubs under the Salle Privee Management Agreement, the Company will pay to London Clubs a performance-based incentive fee (the "Incentive Marketing and Consulting Fee") calculated as follows: (i) 10% of the Salle Privee EBITDA (defined in the Salle Privee Management Agreement to mean gross revenue attributable to the Salle Privee, less all costs and expenses directly attributable to the Salle Privee), up to and including $15.0 million of EBITDA; plus (ii) 12.5% of the Salle Privee EBITDA, in excess of $15.0 million, up to and including $17.0 million; plus (iii) 25% of the Salle Privee EBITDA, in excess of $17.0 million, up to and including $20.0 million; plus (iv) 50% of the Salle Privee EBITDA, in excess of $20.0 million. The foregoing thresholds will be adjusted in accordance with consumer price index changes every five years. See "Certain Material Agreements--Salle Privee Management Agreement." OTHER PAYMENTS TO CONTROLLING STOCKHOLDERS In consideration for certain expenses incurred by the Trust prior to the Issue Date relating to the management and coordination of the development of the Aladdin, the Company reimbursed $3.0 million to the Trust on the Issue Date. In addition, the Company will reimburse certain ongoing out-of-pocket expenses of the Trust relating to the development of the Aladdin, not to exceed $0.9 million. 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 the Company'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 (such fee was paid on the Issue Date) and (b) 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 and enhanced by the Keep-Well Agreement for each relevant twelve month period ending on an anniversary of the closing date of the Bank 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 (such fees accrue from the closing date of the Bank Credit Facility, and shall be paid from available proceeds after the opening date of the Aladdin). KEEP-WELL AGREEMENT On the Issue Date, the Sponsors entered into the Keep-Well Agreement in favor of the Administrative Agent and the Bank Lenders. The Keep-Well Agreement is the joint and several agreement of the Sponsors to make certain quarterly Cash Equity Contributions to the Company from and after the Conversion Date if the Company fails to comply with certain financial ratios set forth in the Bank Credit Facility. See "Controlling Stockholders--Keep-Well Agreement." BANK COMPLETION GUARANTY AND NOTEHOLDER COMPLETION GUARANTY On the Issue Date, the Trust, London Clubs and Bazaar Holdings entered into the Bank Completion Guaranty in favor of the Bank Lenders. Pursuant to the Bank Completion Guaranty, the parties guaranteed, among other things, the timely completion of the Aladdin. The Bank Completion Guaranty is not subject to any maximum dollar limitations. On the Issue Date, the Trust, London Clubs and Bazaar Holdings also entered into the Noteholder Completion Guaranty for the benefit of the holders of the Notes. Neither Holdings, the Issuer nor holders of the Warrants or the Warrant Shares are party to the Bank Completion Guaranty or Noteholders Completion Guaranty. See "Risk Factors--Limitations Under 72 Bank Completion Guaranty and Noteholder Completion Guaranty," "Description of Noteholder Completion Guaranty and Disbursement Agreement--Noteholder Completion Guaranty" and "Description of Certain Indebtedness and Other Obligations--Bank Completion Guaranty." ARRANGEMENTS WITH RICHARD GOEGLEIN AND GAI The Company 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 the Company until June 30, 2002. During the term of the Consulting Agreement, the Company 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 the Company (which were contributed to Holdings on February 26, 1998 for a 3% interest in Holdings) for $1,800. Such membership interest is fully vested, subject to certain anti-dilution provisions, put rights and certain "piggyback" registration rights. See "Management--GAI Consulting Agreement." In addition, Mr. Goeglein's Employment Agreement provides Mr. Goeglein with relocation expense reimbursement, an interest free mortgage loan of up to $500,000 and certain excise tax gross-up provisions. MUSIC PROJECT MANAGEMENT AGREEMENT AND DEVELOPMENT AGREEMENT It is anticipated that Aladdin Music will contract with the Company for the construction, development and day-to-day management and operations of the Music Project and the Theater and certain promotional development and the services, pursuant to a development agreement (the "Music Project Development Agreement") and a management agreement (the "Music Project Management Agreement"), each in form and substance satisfactory to Aladdin Music and the Company. The terms of the Music Project Management Agreement are expected to be at least as favorable to the Company as those which are available from an independent third party vendor. See "Certain Material Agreements--Music Project Memorandum of Understanding." 73 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following tables set forth certain information with respect to the beneficial ownership of and the capital stock of the Issuer and the membership interests of Holdings by (i) each person who, to the knowledge of the Aladdin Parties, beneficially owns more than 5% of the outstanding capital stock or membership interests (as the case may be); (ii) the directors of the Issuer and Holdings; (iii) all executive officers of the Issuer and Holdings named in "Management"; and (iv) all directors and executive officers of the Issuer and Holdings, respectively, as a group. Neither the capital stock of the Issuer is, nor the membership interests of Holdings are, presently listed or traded on any securities exchange or securities market.
ALADDIN GAMING ENTERPRISES, INC. ---------------------------------------------------------------------------------- COMMON STOCK ---------------------------------------------------------------------------------- PRIOR TO EXERCISE ASSUMING FULL EXERCISE PRIOR TO EXERCISE OF THE OF THE WARRANTS--CLASS A OF THE WARRANTS--CLASS A WARRANTS-CLASS B COMMON COMMON STOCK(6) COMMON STOCK(6)(7) STOCK -------------------------- -------------------------- -------------------------- NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF SHARES CLASS SHARES CLASS SHARES CLASS NAME OF BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIAL OWNER OWNED OWNED OWNED OWNED OWNED OWNED - -------------------------------------- ----------- ------------- ----------- ------------- ----------- ------------- Viola Sommer, Jack Sommer and Eugene Landsberg, as trustees of the Trust(1)(2)......................... 1,093,103 98.7% 1,093,103 98.7% 2,186,205 98.7% Jack Sommer(1)(2)..................... 1,093,103 98.7% 1,093,103 98.7% 2,186,205 98.7% Ronald Dictrow(3)..................... 14,398 1.3% 14,398 1.3% 28,795 1.3% Cornelius T. Klerk(4)................. 0 0.0% 0 0.0% 0 0.0% All Directors and Executive Officers as a group(5).............. 1,107,500 100.0% 1,107,500 100.0% 2,215,000 100.0% ASSUMING FULL EXERCISE OF THE WARRANTS--CLASS B COMMON STOCK(6)(7) ---------------------------- NUMBER OF PERCENTAGE OF SHARES CLASS NAME OF BENEFICIALLY BENEFICIALLY BENEFICIAL OWNER OWNED OWNED - -------------------------------------- ----------- --------------- Viola Sommer, Jack Sommer and Eugene Landsberg, as trustees of the Trust(1)(2)......................... 2,186,205 49.4% Jack Sommer(1)(2)..................... 2,186,205 49.4% Ronald Dictrow(3)..................... 28,795 * Cornelius T. Klerk(4)................. 0 0.0% All Directors and Executive Officers as a group(5).............. 2,215,000 50.0%
- ------------------------ * Represents less than one percent of the outstanding shares of Class B Common Stock. (1) The 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 Trust is 280 Park Avenue, New York, New York. (2) Mr. Jack Sommer, who is Chairman and a director of the Company and Holdings and a director of Capital and the Issuer, is a trustee and contingent beneficiary of the Trust. Mrs. Sommer, Mr. Sommer and Mr. Landsberg are each deemed to beneficially own the same interest as the Trust owns in the Issuer because each of them is a trustee of the Trust. (3) Mr. Ronald Dictrow is the Secretary and a director of the Issuer. Mr. Dictrow's address is 280 Park Avenue, New York, New York. (4) Mr. Cornelius Klerk is the Treasurer of the Issuer. Mr. Klerk's address is 831 Pilot Road, Las Vegas, Nevada. (5) The directors of the Issuer are Messrs. Sommer and Dictrow. The executive officers of the Issuer are Messrs. Sommer, Dictrow and Klerk. (6) The Class A Common Stock and Class B Common Stock in the Issuer held by Sommer Enterprises were on the closing date pledged to the Bank Lenders. (7) Upon the exercise of the Warrants, holders of the Warrant Shares will own 50.0% of the outstanding Class B Common Stock and 0.0% of the outstanding Class A Common Stock of the Issuer. 74
ALADDIN GAMING HOLDINGS, LLC ------------------------------------------------------------------------ PERCENTAGE OWNERSHIP OF HOLDINGS PERCENTAGE OWNERSHIP OF HOLDINGS COMMON MEMBERSHIP INTERESTS COMMON MEMBERSHIP INTERESTS NAME OF BENEFICIALLY OWNED PRIOR TO BENEFICIALLY OWNED ASSUMING FULL BENEFICIAL OWNER EXERCISE OF THE WARRANTS(9) EXERCISE OF THE WARRANTS(10) - ------------------------------------------ ----------------------------------- ----------------------------------- Viola Sommer, Jack Sommer and Eugene Landsberg, as trustees of the Trust(1)(2)............................. 71.1% 61.6% Jack Sommer(2)............................ 71.1% 61.6% London Clubs(3)........................... 25.0% 25.0% Alan Goodenough(3)........................ 0.0% 0.0% G. Barry.................................. 0.0% 0.0% C. Hardy(3)............................... 0.0% 0.0% Ronald Dictrow(4)......................... * * Richard J. Goeglein(5)(7)................. 3.0% 2.6% James H. McKennon(6)(7)................... 0.0% 0.0% Cornelius T. Klerk(6)(7).................. 0.0% 0.0% Jose A. Rueda(6)(7)....................... 0.0% 0.0% Lee A. Galati(6)(7)....................... 0.0% 0.0% All Directors and Executive Officers as a group (eight persons)(8)................ 75.0% 65.0%
- ------------------------------ * Represents less than one percent of the outstanding Holdings Common Membership Interests. (1) The 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 Trust is 280 Park Avenue, New York, New York. (2) Mr. Jack Sommer, who is Chairman and a director of the Company and Holdings and a director of Capital and the Issuer, is a trustee and contingent beneficiary of the Trust. Mrs. Sommer, Mr. Sommer and Mr. Landsberg are each deemed to beneficially own the same interest as the Trust owns in Holdings because each of them is a trustee of the Trust. (3) Mr. Alan Goodenough is Chief Executive Officer of London Clubs and a director of the Company and Holdings. As of March 16, 1998, Mr. Goodenough held approximately 202,000 ordinary shares (representing less than one percent of the share capital) of London Clubs. Mr. Barry Hardy is Finance Director of London Clubs and a director of the Company and Holdings. As of March 16, 1998, Mr. Hardy held approximately 901,000 ordinary shares (representing less than one percent of the share capital) of London Clubs. As of March 16, 1998, Mr. Hardy also held options to purchase 516,395 ordinary shares (options to purchase 512,400 ordinary shares presently exercisable) of London Clubs. The address of London Clubs is 10 Brick Street, London, W1Y, 8HQ, United Kingdom. (4) Mr. Ronald Dictrow is a director of the Issuer and the Executive Vice President/Secretary and a director of the Company, Holdings and Capital. Mr. Dictrow's address is 280 Park Avenue, New York, New York. (5) Mr. Richard J. Goeglein, who is Chief Executive Officer, President and a director of the Company, Holdings and Capital, beneficially owns 100% of GAI, which holds 3% of the Holdings' Common Membership Interests. Mr. Goeglein's address is 831 Pilot Road, Las Vegas, Nevada. (6) The address of Messrs. McKennon, Klerk, Rueda and Galati is 831 Pilot Road, Las Vegas, Nevada. (7) Messrs. Goeglein, McKennon, Klerk, Rueda and Galati have rights to acquire beneficial ownership of Holdings Common Membership Interests representing an aggregate of 4.75% of such interests (prior to exercise of the Warrants) and 4.12% of such interests (assuming full exercise of the Warrants), which rights do not vest within 60 days. See "Management--Employment Agreements." (8) The directors of Holdings are Messrs. Sommer, Goodenough, Dictrow, and Goeglein. The executive officers of Holdings are Messrs. Goeglein, Dictrow, McKennon, Klerk, Rueda and Galati. (9) Holdings owns 100% of the Common Membership Interests and Series A Preferred Interests of the Company. The Common Membership Interests were, on closing of the Bank Credit Facility, pledged to the Bank Lenders. The Series A Preferred Interests were, on the closing of the Offering, pledged to the Trustee for the benefit of the Holders. (10) The Issuer owns 25% of the Holdings Common Membership Interests. Upon full exercise of the Warrants, holders of the Warrant Shares will indirectly own 10% of the outstanding Holdings Common Membership Interests. 75 [LOGO] 76 DESCRIPTION OF CAPITAL STOCK The Issuer's Articles of Incorporation, as amended, authorize the issuance of 10,000,000 shares of Issuer Stock without par value, of which 2,000,000 shares are designated as Class A Voting Common Stock (the "Class A Common Stock") and 8,000,000 shares are designated as the Common Stock, which is the Class B Non-Voting Common Stock. As of the date hereof, the Issuer had 1,107,500 shares of Class A Common Stock issued and outstanding and 2,215,000 shares of Common Stock issued and outstanding. THE CLASS A COMMON STOCK Each holder of Class A Common Stock is entitled to one vote per share owned of record on all matters that are voted on by stockholders. All stockholder action requires the affirmative vote of a majority of the voting power of the issued and outstanding Class A Common Stock except for the removal of a director from office which requires a vote of not less than two-thirds of the voting power of the issued and outstanding Class A Common Stock. The Class A Common Stock bears no preemptive rights and is not subject to redemption. Once the subscription price of any share of Class A Common Stock has been paid, such share becomes non-assessable. Holders of Class A Common Stock are entitled to receive dividends if, as and when declared by the Issuer's Board of Directors and such dividends may be paid in cash, property, shares of corporate stock, or any other medium. THE COMMON STOCK Except as may otherwise be provided by Nevada law, the holders of Common Stock have no right to vote on any matters that are voted on by Issuer's stockholders including, without limitation, any election or removal of directors. However, holders of Warrants and Warrant Shares are entitled to certain minority protections pursuant to the Equity Participation Agreement. See "Certain Material Agreements--Equity Participation Agreement." In all other matters, holders of Common Stock and Class A Common Stock have the same rights, privileges and restrictions and rank equally, share ratably and are identical in all respects as to all matters, including rights to dividends, rights in liquidation and the non-assessability of shares. THE WARRANTS On February 26, 1998, the Issuer issued 2,215,000 Warrants which entitle the holders thereof to purchase an aggregate of 2,215,000 shares of Common Stock at an exercise price of $0.001 per share, subject to certain adjustments (the "Exercise Price"). The Warrants become exercisable at any time on or after the Separation Date and, unless exercised, the Warrants will automatically expire on March 1, 2010 (the "Expiration Date"). The holders of Warrants have no right to receive dividends and are not entitled to share in the assets of the Issuer in the event of liquidation, dissolution or winding up of the Issuer's affairs. The Issuer has authorized for issuance such number of shares of Common Stock as shall be issuable upon the due exercise of all outstanding Warrants. RESTRICTIONS ON INTERESTED TRANSACTIONS Pursuant to Nevada law, each director is subject to restrictions relating to the misappropriation of corporate opportunities by such director or such director's affiliates. Nevada law requires that a transaction with the Issuer in which a director or officer of the Issuer has a direct or indirect interest is not voidable by the Issuer solely because of the director's or officer's interest in the transaction if (i) the material facts of the transaction and the director's or officer's interest therein are disclosed to or known by the directors or a committee noted in the minutes, and the transaction is approved, authorized, or ratified by the disinterested directors, (ii) the material facts of the transaction and the director's or officer's interest therein are disclosed to or known by the stockholders entitled to vote and the transaction is approved or ratified by the stockholders, (iii) the material facts are not disclosed or known to the director or officer at 77 the time the transaction is brought before the directors for action, or (iv) the transaction is established to have been fair to the Issuer at the time it was authorized or approved. NEVADA ANTI-TAKEOVER LEGISLATION Nevada's Combinations with Interested Stockholders statute (NRS SectionSection78.411-78.444), which applies to Nevada corporations having at least 200 stockholders, prevents an "interested stockholder" and an applicable Nevada corporation from entering into a "combination" unless certain conditions are met. A "combination" means any merger or consolidation with an "interested stockholder," or any sale, lease exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, with an "interested stockholder" having: (i) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (ii) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, or (iii) 10% or more of the earning power or net income of the corporation. An "interested stockholder" means a person who, together with affiliates and associates, beneficially owns (or within the prior three years, did beneficially own) 10% or more of the voting power of the corporation. A corporation to which this statute applies may not engage in a "combination" within the three years after the interested stockholder acquired its shares unless the combination or purchase is approved by the board of directors before the interested stockholder acquired such shares. If this approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated with the approval of the board of directors or a majority of the voting power held by disinterested stockholders, or if the consideration to be paid by the interested stockholder is at least equal to the highest of: (i) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (ii) the market value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (iii) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher. Nevada's Acquisition of Controlling Interest statute (NRS SectionSection78.378-78.3793) applies only to Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada. As of the date of this Prospectus, the Issuer does not have 100 stockholders of record who are residents of Nevada, although there can be no assurance that in the future the Acquisition of Controlling Interest statute will not apply to the Issuer. The Acquisition of Controlling Interest statute prohibits an acquiror, under certain circumstances, from voting its shares of a target corporation's stock after crossing certain ownership threshold percentages, unless the acquiror obtains approval of the target corporation's disinterested stockholders. The statute specifies three thresholds: one-fifth or more by less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Once an acquiror crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become "Control Shares" and such Control Shares are deprived of the right to vote until disinterested stockholders restore the right. The Acquisition of Controlling Interest statute also provides that in the event Control Shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the Control Shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters' rights. 78 DESCRIPTION OF THE WARRANTS The Warrants were issued pursuant to a Warrant Agreement (the "Warrant Agreement") between the Issuer and State Street Bank and Trust Company, as warrant agent (the "Warrant Agent"). The following summary of certain provisions of the Warrant Agreement and the Warrants does not purport to be complete and is qualified in its entirety by reference to the Warrant Agreement and the Warrants, including the definitions therein of certain terms. GENERAL The Warrants entitle the holders thereof to purchase an aggregate of 2,215,000 shares of Common Stock at the Exercise Price, subject to adjustment. The Warrants are exercisable at any time on or after the Separation Date prior to March 1, 2010. Unless exercised, the Warrants will automatically expire on the Expiration Date. The Warrants entitle the holders thereof to purchase in the aggregate 40% of the outstanding Common Stock of the Issuer, representing an indirect interest in 10% of the outstanding Holdings Common Membership Interests on a fully diluted basis as of the date of issuance after giving effect to such issuance. The Warrants may be exercised at any time on or after the Separation Date by surrendering to the Issuer at the office of the Warrant Agent the Warrant certificates evidencing such Warrants with the accompanying form of election to purchase properly completed and executed, together with payment of the Exercise Price. Payment of the Exercise Price may be made in the form of cash or a certified or official bank check payable to the order of the Issuer. Upon surrender of the Warrant certificate and payment of the Exercise Price, the Warrant Agent will deliver or cause to be delivered, to or upon the written order of such holder, a stock certificate representing the number of whole Warrant Shares or other securities or property to which such holder is entitled under the Warrant Agreement and the Warrants, including, without limitation, any cash payment to adjust for fractional interests in Warrant Shares issuable upon such exercise in accordance with the Warrant Agreement. If less than all of the Warrants evidenced by a Warrant certificate are to be exercised, a new Warrant certificate will be issued for the remaining number of Warrants. No fractional Warrant Share will be issued upon exercise of the Warrants. If any fraction of a Warrant Share would, except for the foregoing provision, be issuable on the exercise of any Warrants (or a specified portion thereof), the Issuer shall pay an amount in cash equal to the current market price per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole U.S. cent. Certificates for Warrants have been and will be issued in registered form only, and no service charge will be made for registration of transfer or exchange upon surrender of any Warrant certificate at the office of the Warrant Agent maintained for that purpose. The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration, transfer or exchange of Warrant certificates. The holders of the Warrants have no right to receive dividends. The holders of the Warrants are not entitled to share in the assets of the Issuer in the event of liquidation, dissolution or winding up of the Issuer's affairs. In the event of taxable distribution to holders of Issuer Stock which results in an adjustment to the number of Warrant Shares or other consideration for which a Warrant may be exercised, the holders of the Warrants may, in certain circumstances, be deemed to have received a distribution subject to United States federal income tax as a dividend. See "Certain United States Federal Income Tax Considerations." 79 SEPARATION Each Warrant was originally issued as part of a Unit consisting of: (i) $1,000 principal amount at maturity of Notes of the Note Issuers; and (ii) 10 Warrants to purchase 10 shares of Common Stock. Pursuant to the terms of the Indenture and the Warrant Agreement, the Notes and the Warrants were to become separately transferable on the "Separation Date," being the earliest of: (i) September 1, 1998; (ii) the date on which a registration statement with respect to the Notes or a registration statement with respect to the Warrants and the Warrant Shares was filed with the Commission under the Securities Act; (iii) the occurrence of a Change of Control (as defined in the Indenture) or a sale or recapitalization of the Issuer, Holdings or the Company occurs (a "Triggering Event"); (iv) 30 days after a Qualified Public Offering; (v) the occurrence of an Event of Default (as defined in the Indenture); or (vi) such earlier date as determined by Merrill Lynch & Co. in its sole discretion. The Separation Date occurred on filing of the Registration Statement. NO VOTING RIGHTS Neither the holders of the Warrants nor, prior to a Qualified Public Offering, the holders of the Warrant Shares will have any right to vote on any matter submitted to shareholders, including any right to vote for the election of directors of the Issuer. Upon the consummation of a Qualified Public Offering, holders of the Warrant Shares will have full voting rights as shareholders of the IPO Entity. Prior to the Issue Date, the Trust, Sommer Enterprises, London Clubs, LCNI, the Issuer and the Warrant Agent on behalf of the holders of Warrants and Warrant Shares entered into the Equity Participation Agreement under which the parties agreed that they would not effect a Qualified Public Offering unless the Trust and London Clubs (directly or indirectly) and the holders of the Warrants and the Warrant Shares each hold their respective equity interests in the IPO Entity. ADJUSTMENTS The number of shares of Common Stock purchasable upon the exercise of the Warrants and the Exercise Price both will be subject to adjustment in certain events (subject to certain exceptions) including (i) the payment by the Issuer of dividends (and other distributions) on Issuer Stock payable in Issuer Stock, (ii) subdivisions, combinations and reclassifications of Issuer Stock, (iii) the issuance to all holders of Issuer Stock of rights, options or warrants entitling them to subscribe for Issuer Stock or of securities convertible into or exchangeable for Issuer Stock, for a consideration per share of Issuer Stock which is less than the current market price per share of such Issuer Stock and (iv) the distribution to all holders of Issuer Stock of any of the the Issuer's assets, debt securities or any rights or warrants to purchase securities (excluding those rights and warrants referred to in clause (iii) above and excluding cash dividends less than a specified amount). In addition, the Exercise Price may be reduced in the event of purchases of Issuer Stock pursuant to a tender or exchange offer made by the Issuer or any subsidiary thereof at a price greater than the sale price of such Issuer Stock at the time such tender or exchange offer expires. No adjustment in the Exercise Price will be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; PROVIDED, HOWEVER, that any adjustment which is not made will be carried forward and taken into account in any subsequent adjustment. In the case of certain consolidations or mergers of the Issuer, or the sale of all or substantially all of the assets of the Issuer to another corporation, each Warrant shall thereafter be exercisable for the right to receive the kind and amount of shares of stock or other securities or property to which such holder would have been entitled as a result of such consolidation, merger or sale had the Warrants been exercised immediately prior thereto. 80 AUTHORIZED SHARES The Issuer has authorized for issuance such number of shares of Common Stock as shall be issuable upon the due exercise of all outstanding Warrants. Such shares of Common Stock, when paid for and issued, will be duly and validly issued, fully paid and non-assessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof (other than any such tax, lien, charge or security interest imposed upon or granted by the holder of the Common Stock). AMENDMENT From time to time, the Issuer and the Warrant Agent, without the consent of the holders of the Warrants, may amend or supplement the Warrant Agreement for certain purposes, including curing defects or inconsistencies or making changes that do not materially adversely affect the rights of any holder. Any amendment or supplement to the Warrant Agreement that has a material adverse effect on the interests of the holders of the Warrants shall require the written consent of the holders of a majority of the then outstanding Warrants (excluding Warrants held by the Issuer or any of its affiliates). The consent of each holder of the Warrants affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares purchasable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided in the Warrant Agreement). GOVERNING LAW The Warrant Agreement and the Warrants are governed by, and construed in accordance with, the laws of the State of New York without regard to the principles of conflicts of law thereof. ADDITIONAL INFORMATION Any holder of Warrants or prospective investor may obtain a copy of the Warrant Agreement and the Warrant Registration Rights Agreement without charge by writing to Aladdin Gaming Enterprises, Inc., c/o Aladdin Gaming, LLC, 831 Pilot Road, Las Vegas, Nevada 89119; Attention: Corporate Secretary. REPORTS Whether or not the Issuer is subject to the reporting requirements of the Exchange Act, the Issuer shall cause copies of (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuer was required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Holdings Group, and, with respect to the annual information only, a report therein by the Issuer's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Issuer was required to file such reports, in each case within the time periods specified in the Commissions's rules and regulations, to be filed with the Commission (to the extent permitted) and the Warrant Agent and mailed to the holders of the Warrants at their addresses appearing in the registrar of Warrants maintained by the Warrant Agent to the same extent as such reports are furnished to the holders of the Notes in accordance with the Indenture. 81 DESCRIPTION OF NOTEHOLDER COMPLETION GUARANTY AND DISBURSEMENT AGREEMENT NOTEHOLDER COMPLETION GUARANTY The Trust, London Clubs and Bazaar Holdings (collectively, the "Guarantors") have entered into a guaranty of performance and completion (the "Noteholder Completion Guaranty") in favor of the Trustee (for the benefit of the Noteholders). The Noteholder Completion Guaranty provides that the Guarantors jointly and severally guarantee, among other things, to the Trustee (for the benefit of the Noteholders) and covenant and agree to make any and all payments to or on behalf of the Company as may be necessary in order to permit and assure that: (i) the Company will promptly carry out the work required for the construction of the Aladdin with due diligence and continuity, in an expeditious and first-class workmanlike manner in accordance with the Approved Plans and Specifications (as defined below) in all material respects and will correct as soon as possible any material defect in such work or material deviation from the Approved Plans and Specifications; (ii) the Company will punctually pay all costs, expenses and liabilities incurred by the Company in connection with the construction of the Aladdin in accordance with the Approved Plans and Specifications, and all claims and demands for labor, material and services incurred by the Company prior to completion of the work and in connection with cost overruns of any type and all amounts which the Company may be required to pay from time to time in order to keep the project "In Balance" as such term is defined in the Noteholder Completion Guaranty; (iii) the Company will complete the construction of the required Minimum Aladdin Facilities on schedule and in accordance with the Approved Plans and Specifications lien-free other than Permitted Liens; (iv) the Company will provide the expertise necessary to supervise such work at no cost to the Trustee; (v) in the event the Guarantors fail to pay and/or perform their respective obligations under the Noteholder Completion Guaranty, the Trustee (in addition to any other rights and remedies afforded by applicable law) may pay and perform the Guaranteed Obligations on behalf of the Guarantors, in which case the Guarantors, upon demand, must reimburse the Trustee for all costs, expenses and liabilities incurred in connection therewith; and (vi) the Guarantors shall pay the Trustee all reasonable out-of-pocket costs and expenses of the Trustee in connection with the enforcement of the Noteholders' rights and remedies under the Noteholder Completion Guaranty. The obligations of the Guarantors under the Noteholder Completion Guaranty are subject to certain important qualifications. In particular, the Trustee may not exercise any rights or declare any default under the Noteholder Completion Guaranty and shall not pursue any remedies thereunder including, but not limited to demanding payment or performance during any period that the Bank Completion Guaranty is in effect and the Guarantors thereunder have not been released in writing by the Bank Lenders. Notwithstanding the foregoing, however, the Trustee shall be permitted to exercise any and all rights, declare a default, commence enforcement proceedings and pursue any and all remedies under the Noteholder Completion Guaranty: (i) at any time prior to the date that any funds have been advanced or disbursed to the Company pursuant to the Bank Credit Facility; 82 (ii) at any time prior to Completion and from after the date on which all indebtedness evidenced and secured by the Bank Credit Facility has been indefeasibly paid in full and the Bank Lenders have released the Guarantors in writing from their obligations under the Bank Completion Guaranty; and (iii) at any time after which all of the following events have occurred and are continuing: (a) an event of default under the Bank Completion Guaranty has occurred and is continuing and such event of default has remained uncured for the number of applicable Trigger Days (as defined herein); (b) a Funding Cessation (as defined herein) has occurred and is continuing for the aggregate number of applicable Trigger Days; PROVIDED, HOWEVER, in no event shall aggregate Funding Cessations exceed 180 days in the aggregate (which shall be extended for the number of days during which a Force Majeure Event (as defined below) or Insolvency Proceeding of the Company which impairs the Bank Lenders directly or indirectly from enforcing the Bank Completion Guaranty has occurred and is continuing which such extension shall terminate upon the filing by the Bank Lenders of an action against the Guarantors under the Bank Completion Guaranty to enforce the obligations of the Guarantors thereunder which are susceptible of performance notwithstanding the Insolvency Proceeding of the Company) in any consecutive 365 day period; and (c) the construction work which has been substantially completed in accordance with the Approved Plans and Specifications (as certified by the Construction Consultant) on the date in question has not progressed to the stage of completion set forth for such date (subject to any extensions based upon Force Majeure Events or an Insolvency Proceeding of the Company which impairs the Bank Lenders, directly or indirectly, from enforcing the Bank Completion Guaranty has occurred and is continuing, which such extension shall terminate upon the filing by the Bank Lenders of an action against the Guarantors under the Bank Completion Guaranty to enforce the obligations of the Guarantors thereunder which are susceptible of performance notwithstanding the Insolvency Proceeding of the Company) in the Construction Benchmark Schedule (as defined in the Noteholder Completion Guaranty). The Noteholder Completion Guaranty also provides that performance in all material respects of the obligations of the Guarantors under the Bank Completion Guaranty (as in effect on the Issue Date, or as may be amended from time to time so long as in connection with each such amendment the Construction Consultant certifies to the Trustee that, after giving effect to such amendment, (i) the Minimum Aladdin Facilities are still capable of being completed by the Operating Deadline, and (ii) the Guarantors have consented to such amendment) shall be deemed to be performance of the corresponding obligations under the Noteholder Completion Guaranty and performance in all material respects of the obligations of the Guarantors under the Noteholder Completion Guaranty shall be deemed to be performance of the corresponding obligations under the Bank Completion Guaranty. Under the Noteholder Completion Guaranty, the Trustee covenants and agrees that (i) the right of the Trustee to demand payment and/or performance of the obligations under the Noteholder Completion Guaranty, to exercise any rights, remedies and options and/or to commence enforcement proceedings under the Noteholder Completion Guaranty shall be subject to the delivery by the Trustee of a written notice to the Administrative Agent no later than 10 business days prior to the making of such demand for payment and/or performance, exercise of rights remedies and options, or commencement of enforcement proceedings, as applicable, (ii) the Bank Lenders shall have all rights at law and equity including, without limitation, the right to seek an injunction or other extraordinary remedy to prevent or prohibit the making of any demand for payment and/or performance, exercise of rights remedies and options, or commencement of enforcement proceedings by the Trustee which is in contravention of the "standstill" provisions of 83 the Noteholder Completion Guaranty described above, and (iii) the Noteholder Completion Guaranty shall not have been amended, modified, and/or amended and restated without the prior written consent of the Administrative Agent in its sole discretion; provided that the consent of the Administrative Agent shall not be required in connection with to corrective amendments required to be made to the Noteholder Completion Guaranty as and when corresponding amendments are made to the Bank Completion Guaranty. In addition, the Trustee on its own behalf and on behalf of the Noteholders has covenanted and agreed that the rights, remedies and options of the Trustee under the Noteholder Completion Guaranty in no way restrict the rights and remedies of the Administrative Agent and the Bank Lenders under the Bank Credit Facility or any security therefor including, without limitation, the right to commence and prosecute to completion enforcement of the Bank Credit Facility and any documents evidencing or securing the obligations under the Bank Credit Facility. The Trustee agreed on its own behalf and on behalf of the Noteholders that no Person shall have any right whatsoever to interpose a right of offset, defense, claim or counterclaim with respect to any enforcement of the Bank Credit Facility documents based upon a claim that the Trustee has the right to performance of the guaranteed obligations before such enforcement can be commenced or prosecuted or judgment thereon can be executed by or on behalf of the Bank Lenders. "Approved Plans and Specifications" shall mean all plans, specifications, design documents, schematic drawings and related items for the design, architecture and construction of the Aladdin, as delivered to the Trustee on the Issue Date, as the same may be (x) finalized in a manner that reflects a natural evolution of their status on the date hereof and in a manner consistent with the standards set forth in the Credit Agreement with respect to the Bank Credit Facility (the "Bank Credit Agreement") and (y) amended in accordance with the Bank Credit Agreement. "Construction Benchmark Schedule" shall have the meaning set forth in the Noteholder Completion Guaranty and the Bank Credit Agreement. A "Funding Cessation" shall occur at any time that funds are unavailable to the Company (from any source whatsoever) to fund draws under the Bank Credit Facility in an amount equal to 75% of the draw request in question or the Construction Consultant fails to deliver the On Schedule Certificate as contemplated by the Engagement Letter among Rider Hunt (NV) L.L.C., the Administrative Agent, the Disbursement Agent, the Trustee, and others. "Force Majeure Event" shall mean any event which is defined as a "Force Majeure" in the Design/ Build Contract and/or that causes a delay in the construction of the Aladdin and is outside the Company's control but only to the extent (a) such event does not arise out of (i) the negligence, willful misconduct or inefficiencies of the Company, (ii) late performance by the Design/Builder or ADP, (iii) any cause or circumstances resulting in delays, stoppage or any other interference with the construction of the Aladdin caused by the insolvency, bankruptcy or any lack of funds by the Company, any of the other Project Parties (as defined herein), the Energy Provider, Unicom, and/or ADP, or (iv) delays, stoppage or other interference with the construction of the Aladdin caused by the insolvency, bankruptcy or any lack of funds by Bazaar, Aladdin Music and/or the construction contractors and project architects with respect to the Mall Project, the Music Project and/or the Energy Project, and (b) such event consists of an Act of God (such as tornado, flood, hurricane, etc.), fires and other casualties; strikes, lockouts or other labor disturbances (except to the extent taking place at the Project Site only); riots, insurrections or civil commotions; embargoes, shortages or unavailability of materials, supplies, labor, equipment and systems that first arise after the Issue Date, but only to the extent caused by another act, event or condition covered by this clause (b); sabotage; vandalism; the requirements of law, statutes, regulations and other legal requirements enacted after the Issue Date (unless the Company should, in the exercise of due diligence and prudent judgment, have anticipated such enactment); orders or judgments; or any similar types of events, provided, that (x) the Company has sought to mitigate the impact of the delay, (y) any delay resulting from the foregoing shall not exceed 365 days, and (z) the period during which a Force Majeure 84 Event exists shall commence on the date that the Company has given the Trustee and the Administrative Agent written notice describing in reasonable detail the event which constitutes a Force Majeure Event and the Trustee and the Administrative Agent have confirmed the existence of such Force Majeure Event on the date of such notice and shall end on the date that such Force Majeure Event no longer exists, whether or not notice is given to the Trustee and the Administrative Agent, as determined by the Construction Consultant. "Trigger Days" shall be defined as follows: (i) an aggregate of 60 calendar days during any period in which the Bank Lenders have disbursed more than $1 and up to and including $35.0 million of the Bank Credit Facility to the Company; (ii) an aggregate of 90 calendar days during any period in which the Bank Lenders have disbursed more than $35.0 million and up to and including $70.0 million of the Bank Credit Facility to the Company; (iii) an aggregate of 120 calendar days during any period in which the Bank Lenders have disbursed more than $70.0 million and up to and including $110.0 million of the Bank Credit Facility to the Company; and (iv) an aggregate of 180 calendar days during any period in which the Bank Lenders have disbursed more than $110.0 million of the Bank Credit Facility to the Company. DISBURSEMENT AGREEMENT The Company, Holdings, Scotiabank, as the Administrative Agent under the Bank Credit Facility, the Trustee, Scotiabank, as the Disbursement Agent on behalf of the Bank Lenders and the Trustee (the "Disbursement Agent"), and as Securities Intermediary and the Servicing Agent entered into the Disbursement Agreement concurrently with the closing of the Offering. The following summary of the material provisions of the Disbursement Agreement does not purport to be complete and is qualified in its entirety by reference to the Disbursement Agreement, including the definitions therein of certain terms used below. Capitalized terms that are used hereunder but not otherwise defined in this Prospectus have the meanings assigned to them in the Disbursement Agreement. Pursuant to the Disbursement Agreement, on the Issue Date approximately $35 million of the net proceeds of the Offering were deposited into the Note Construction Disbursement Account, which is subject to the sole dominion and control of the Disbursement Agent on behalf of the Trustee (for the benefit of the Noteholders) and the proceeds from the Term B Loan and the Term C Loan were advanced to the Company and thereafter deposited by the Company into the Cash Collateral Account, which will be subject to the sole dominion and control of the Disbursement Agent on behalf of the Bank Lenders who have made the Term B Loans and the Term C Loans. All funds in the Note Construction Disbursement Account are pledged to the Disbursement Agent for the benefit of the Trustee to secure repayment of the Notes and all funds in the Cash Collateral Account are pledged to the Disbursement Agent to secure repayment of the Term B Loans and Term C Loans. The Disbursement Agreement establishes the conditions to, and the sequencing of, the making of disbursements of the proceeds of the Offering, the funds from the Term B Loan and Term C Loan and the advances of the Term A Loan and from other sources. Pursuant to the Disbursement Agreement, (i) all of the proceeds from the Offering must be expended before any proceeds from the Term B Loan and Term C Loan may be disbursed; (ii) the proceeds from the Term B Loan and the Term C Loan will be disbursed pro rata; and (iii) advances under the Term A Loan will only be made after all of the proceeds of the Term B Loan and Term C Loan are expended (other than to fund draws under Letters of Credit which are issued as part of the Bank Credit Facility). The drawdown of funds under the FF&E Financing will not be subject to the provisions of the Disbursement Agreement. 85 The Disbursement Agreement authorizes disbursement from the Note Construction Disbursement Account and the Cash Collateral Account only upon the satisfaction of various conditions precedent set forth in the Disbursement Agreement. These conditions include, among other things: (i) delivery by the Company of a disbursement request and certificate certifying as to, among other things, (a) the application of funds to be disbursed, (b) the substantial conformity of construction undertaken to date with the Approved Plans and Specifications, as amended from time to time, in accordance herewith, (c) the expectation that the Aladdin will be completed by the Operating Deadline, (d) the accuracy of the budget for the construction of the Aladdin, as amended from time to time in accordance with the Bank Credit Agreement, (e) the sufficiency of remaining funds to complete the Aladdin by the Operating Deadline, (f) compliance with line item budget allocations, taking into account allocations for contingencies; (g) the accuracy of the representations and warranties contained in the Disbursement Agreement, the other Loan Documents, the Bank Completion Guaranty, the Noteholder Completion Guaranty, and the other material project documents (collectively, the "Operative Documents"), as if made on such date (except those that relate to a different date) unless the failure of the foregoing to be the case would not have a material adverse effect on the financial condition, business, property, prospects or the ability of the Company, and to the Company's knowledge each of AHL, Holdings, London Clubs, LCNI, Design/Builder and Fluor (collectively, the "Project Parties") to perform in all material respects their respective obligations under the Operative Documents to which they are a party; (h) the Operative Documents continue to be in full force and effect and (i) the absence of an event of default with respect to certain material covenants in the Operative Documents which would be reasonably likely to cause a material adverse effect on the financial condition, business, property, prospects or the ability of the Company or (to the Company's knowledge) any of the Project Parties to perform their respective obligations under the Operative Documents to which they are a party; (ii) the absence of any default or an event of default (each as defined in the Bank Credit Agreement) with respect to the Operative Documents which would be reasonably likely to cause a material adverse effect on the financial condition, business, property or prospects of the Company, or to the Company's knowledge of the Project Parties and their ability to perform in all material respects their respective obligations under the Operative Documents to which they are a party; (iii) delivery by the Construction Manager, the Construction Consultant and the Project Architect of certificates corroborating various matters set forth in the Company's disbursement request and certificate; (iv) compliance by the Guarantors under the Bank Completion Guaranty and London Clubs and AHL, as Sponsors, of their respective obligations under the Keep-Well Agreement; (v) receipt by the Company of the governmental approvals required to be in effect at such time; (vi) delivery by the Company to the Disbursement Agent of the acknowledgment of payment and lien releases required under the Disbursement Agreement; (vii) the procurement of all insurance policies required under the Disbursement Agreement, including required endorsements, (viii) the absence of pending material litigation which materially and adversely affects the financial condition, business, property, prospects or ability of the Company or the Project Parties to perform in all material respects their respective obligations under the Operative Documents to which they are a party; (ix) all of the documents evidencing the Disbursement Agent's security interest in the proceeds, if any, in the Note Construction Disbursement Account (for the sole and exclusive benefit of the 86 Trustee and the Noteholders) and in the Series A Preferred Interests, and the Bank Lenders' security interest in the collateral pledged as security under the Bank Credit Facility being in full force and effect; (x) the absence of any material adverse change in the financial condition, business, property, prospects or the ability of the Company and the Project Parties to perform in all material respects their respective obligations under the Operative Documents to which they are a party; (xi) delivery of title insurance endorsements which increase the amount of title insurance coverage by the amount of such advances and which insure the first priority of the Deed of Trust; (xii) payment of all applicable fees and expenses; and (xiii) delivery of amounts required in order for the Project Budget and all contingencies and reserves to be In Balance. The Disbursement Agreement establishes procedures for the approval by the Bank Lenders of amendments to the Approved Plans and Specifications. Pursuant to the Disbursement Agreement, the Approved Plans and Specifications may be amended by the Company, the Guarantors and the Bank Lenders at any time so long as in connection with each such amendment, the Construction Consultant certifies to the Trustee that (i) after giving effect to the amendment, the Approved Plans and Specifications (as so amended) continue to call for the construction of the Aladdin Minimum Facilities; (ii) after giving effect to the amendment, the Approved Plans and Specifications (as so amended), will continue to permit the Aladdin Minimum Facilities to be completed on or prior to the Operating Deadline, and (iii) the Guarantors have consented in writing to such amendment. Pursuant to the Disbursement Agreement, with the approval of each disbursement, the Construction Consultant (to the extent that the circumstances factually permit the Construction Consultant to do so in good faith) has agreed to provide the Lenders and the Trustee with a certificate which provides in substance that as of such date the Minimum Aladdin Facilities continue to be capable of being completed in accordance with the Approved Plans and Specifications on or before the Operating Deadline (the "On Schedule Certificates"). In addition, the Administrative Agent has agreed to send to the Trustee a copy of each written notice of any default or event of default under the Bank Credit Agreement which the Administrative Agent sends to the Company. 87 DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER OBLIGATIONS The following discussion summarizes the material terms of certain material financing agreements which are either in place or are currently being negotiated between the Company (and/or the Controlling Stockholders) and various other parties. This summary does not purport to be complete and is qualified in its entirety by reference to the full agreements described herein once finalized and executed. Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the agreement being described (unless otherwise indicated). BANK CREDIT FACILITY GENERAL DESCRIPTION OF THE BANK CREDIT FACILITY. The Company has entered into the Bank Credit Facility with a syndicate of lenders (the "Bank Lenders"), Scotiabank, as Administrative Agent, CIBC Oppenheimer Corp., as the documentation agent ("Documentation Agent"), and Merrill Lynch Capital Corporation ("Merrill"), as the syndication agent ("Syndication Agent"). The Bank Credit Facility, which comprises senior secured construction/term loan facilities, consists of three construction/term loans: (i) the $136.0 million Term A Loan that has a stated maturity date of seven years from the closing date of the Bank Credit Facility (the "Bank Closing Date"), (ii) the $114.0 million Term B Loan that has a stated maturity date of eight and one half years from the Bank Closing Date, and (iii) the $160.0 million Term C Loan that has a stated maturity date of ten years from the Bank Closing Date (each term loan, a "Loan"). The Loans will convert from construction loans into amortizing term loans on a date (the "Conversion Date") which is the earlier of (x) the issuance of a permanent certificate of occupancy for the Aladdin (which must include appropriate parking facilities) and operating permits for the Plant or (y) the completion of the Aladdin and the Plant as determined by the Administrative Agent and the Construction Consultant. The proceeds of the Bank Credit Facility shall be used by the Company to finance a portion of the main Project Costs. The maximum amount of the Bank Credit Facility is $410.0 million plus, subject to certain conditions, certain additional amounts as described under "Description of the Notes--Certain Covenants." On the date on which the initial Advance was made, the Bank Lenders that had committed to make the Term B Loan and the Term C Loan, advanced their respective committed amounts thereof to an account (the "Cash Collateral Account") over which the Disbursement Agent has dominion and control over, and a perfected first security interest for the benefit of the Bank Lenders which have advanced the Term B Loan and the Term C Loan. The proceeds of the Term B Loan and the Term C Loan will not be disbursed from the Cash Collateral Account until all of the proceeds of the Offering have been expended, and the proceeds of the Term B Loan and the Term C Loan shall be fully disbursed from the Cash Collateral Account prior to any advance of the Term A Loan (other than advances of the Term A Loan which are made to reimburse Scotiabank (in such capacity, the "LC Issuer") for disbursements made in respect of Letters of Credit which have been drawn upon). Disbursements from the Cash Collateral Account (with respect to the Term B Loan and the Term C Loan) and advances of the Term A Loan shall be made in accordance with the Disbursement Agreement but no advances under the Bank Credit Facility shall be made on or after the Conversion Date. LETTERS OF CREDIT. The Bank Credit Facility provides that the Company may from time to time (prior to a certain period preceding the Conversion Date) request that one or more letters of credit (the "Letters of Credit") be issued or extended if required as a deposit by suppliers and/or contractors providing materials to the Aladdin; PROVIDED, HOWEVER, no Letter of Credit shall be issued for the Gaming Equipment and Specified Equipment which is covered by the FF&E Financing. The aggregate amount of such Letters of Credit shall not exceed $20.0 million. MATURITY DATE OF THE BANK CREDIT FACILITY. The entire outstanding principal balance of the Loans, together with all unpaid interest thereon and other amounts due to the respective Bank Lenders under the 88 documents pursuant to which the Loans were made (the "Loan Documents") is due and payable in immediately available funds on the stated maturity date of each Loan. The maturity dates of the Loans shall be the earlier of (a) the date upon which the Loans become immediately due and payable by reason of the occurrence of an event of default under the Loan Documents (beyond the expiration of applicable grace, notice and cure periods) and (b) the above mentioned stated maturity date for each Loan. INTEREST RATE. At the Company's option, the Loans will bear interest at either Scotiabank's (i) alternate base rate (the "Alternate Base Rate" or "ABR") or (ii) reserve adjusted LIBOR plus, in each case, the applicable following margins. (a) In the case of the Term A Loan and prior to the date on which is 6 months after the Conversion Date, the following margin applies: Alternate Base Rate +200 bps and reserve adjusted LIBOR +300 bps. (b) As regards the Term A Loan, from and after the date which is six months after the Conversion Date, the applicable margin set forth in the currently effective compliance certificate applies:
ALTERNATE BASE TOTAL DEBT TO EBITDA RATE LIBOR - ----------------------------------------------------------- ------------------ ------------ greater than or equal to 4.0x.............................. +175 bps +275 bps less than 4.0x and greater than or equal to 3.5x........... +150 bps +250 bps less than 3.5x and greater than or equal to 3.0x........... +100 bps +200 bps less than 3.0x and greater than or equal to 2.5x........... +75 bps +175 bps less than 2.5x............................................. +50 bps +150 bps
(c) With respect to the proceeds of the Term B Loan and the Term C Loan which are being held in the Cash Collateral Account, the Alternate Base Rate margin shall be +100 bps and the reserve adjusted LIBOR margin is +200 bps. (d) With respect to all portions of the Term B Loan and the Term C Loan which have been disbursed from the Cash Collateral Account, the Term B Loan and Term C Loan will bear interest based at either LIBOR or the Alternate Base Rate, in both cases, plus a certain margin. OPTIONAL PREPAYMENTS. The Bank Credit Facility allows the Company to prepay, at its option, certain of the Loans under certain conditions. SCHEDULED AMORTIZATION. From and after the Conversion Date, the principal amount of the Bank Credit Facility will be amortized (the "Scheduled Amortization") on certain scheduled quarterly dates (ranging from 20 scheduled quarters for the Term A Loan, 26 scheduled quarters for the Term B Loans and 32 scheduled quarters for the Term C Loan) and in certain amounts (ranging from $4.0 million to $10.0 million per quarter for the Term A Loan, $300,000 to $20.0 million per quarter for the Term B Loan, and $400,000 to $25.5 million per quarter for the Term C Loan). MANDATORY PREPAYMENTS. From and after the Conversion Date, the Company shall make mandatory prepayments of principal (the "Mandatory Prepayments") in addition to the Scheduled Amortization on certain scheduled quarterly dates and in certain amounts based on a percentage of the Excess Cash Flow from the Aladdin. In addition to the foregoing payments and the Scheduled Amortization, the entire outstanding principal balance of the Bank Credit Facility shall become immediately due and payable (and any outstanding Letters of Credit shall be cash collateralized) and the obligation of any Bank Lender which has committed to make a Term A Loan or participate in the Letters of Credit shall automatically terminate (a) upon a sale, transfer or conveyance of or borrowing against (whether or not secured by) the Aladdin not otherwise permitted by the Loan Documents, (b) a change in control (as defined in the Bank Credit Facility) or (c) if no disbursement of any proceeds of the Term B Loan or the Term C Loan is made 89 from the Cash Collateral Account within twelve months after the Bank Closing Date (subject to Force Majeure Events). Subject to certain Bank Lenders' rights to elect not to receive a Mandatory Prepayment, Mandatory Prepayments of the Bank Credit Facility will be applied in the inverse order against the Scheduled Amortization PRO RATA among the Term A Loan, the Term B Loan and the Term C Loan. The Loan Documents provide, in relevant part, that the amount of any Mandatory Prepayment of the Term B Loan and the Term C Loan which is due from the Company with respect to a change of control of the Company or the interests of the Sponsors (excluding a transfer of the Sponsor interests resulting from the exercise of warrants issued in connection with the Notes) shall be 101% of the principal amount of the Term B Loan and the Term C Loan. COMMITMENT FEE. From and after the Bank Closing Date and until the Conversion Date, a non-refundable fee (the "Term A Loan Commitment Fee") in the amount of 0.5% per annum of the unfunded portion of the Term A Loan shall accrue on the daily average unfunded portion of the Term A Loan. The Term A Loan Commitment Fee shall be payable to the Bank Lenders which have made a commitment to make the Term A Loan on the last business day of each calendar quarter in arrears in proportion to their respective unfunded commitments of the Term A Loan. SECURITY. As security for the Bank Credit Facility, the Company has entered into a deed of trust in favor of the Bank Lenders securing the Notes and all obligations of the Company under the Loan Documents, encumbering the Aladdin (including any and all leasehold interests) as a first priority lien, subject only to those title exceptions approved by the Administrative Agent. The Company has also assigned all present and future of leases, rents, issues and profits in favor of the Bank Lenders, assigning to the Bank Lenders such leases pertaining to the Aladdin, including the Ground Leases and the Theater Lease and, to the extent they are assignable, the contracts, agreements, proposals, permits, approvals, plans and specifications pertaining to the Aladdin. In addition, the Company has entered into security agreements granting to the Bank Lenders a continuing first priority security interest in all accounts, accounts receivable, all reserves, all licenses (other than liquor licenses and those granted pursuant to Gaming Approvals to the extent they cannot be assigned), Specified Equipment and Gaming Equipment installed in, affixed to, placed upon and used in connection with the Aladdin which are owned or leased by the Company (subject to the rights of the FF&E Lender under the FF&E Financing), the Marks and all other tangible or intangible personal property owned by the Company. As further security for the Bank Credit Facility, (a) AHL has entered into a pledge and security agreement pledging all of its interest in Sommer Enterprises to the Bank Lenders; (b) Sommer Enterprises has entered into a pledge and security agreement pledging all of its interests in the Issuer and Holdings to the Bank Lenders; (c) the Issuer has entered into a pledge and security agreement pledging all of its interests in Holdings (other than the interests relating to the Warrants which have been issued by the Issuer in connection with the Offering) to the Bank Lenders; (d) Holdings has entered into a pledge and security agreement pledging all of its interest in the Company to the Bank Lenders other than the Series A Preferred Interests; (e) the Company has entered into a pledge and security agreement pledging all of its interest in AMH to the Bank Lenders; and (f) AMH has entered into a pledge and security agreement pledging all of its interest in Aladdin Music to the Bank Lenders; (g) LCNI has entered into a pledge and security agreement pledging all of its interest in Holdings to the Bank Lenders; and (h) Holdings has entered into a pledge and security agreement pledging all of its interest in Capital to the Bank Lenders. The pledges of the equity securities of those entities registered as holding companies or licensed by the Nevada Commission will require the approval of the Nevada Commission in order to remain effective. In addition, if such companies are registered and licensed (as applicable), separate approvals will be required to foreclose on the pledges and such approvals will require the licensing of the Bank Lenders unless such requirement is waived by the Nevada Gaming Authorities upon application by the Bank Lenders. Furthermore, if the Company is licensed by the Nevada Gaming Authorities at any time during the term of 90 the Bank Credit Facility, the Bank Lenders will be subject to being called forward by the Nevada Gaming Authorities, in their descretion, for licensing or a finding of suitablility as lenders to a Company Licensee. IN BALANCE REQUIREMENTS. The Bank Credit Facility and the Disbursement Agreement include loan balancing provisions requiring the Company to deposit additional monies into the Cash Collateral Account if the Administrative Agent and the Bank Lender's Consultant reasonably determine that the Bank Credit Facility is not "In Balance." The Bank Credit Facility will be considered "In Balance" when undisbursed portions of the Bank Credit Facility allocated to each line item category in the Budget equals or exceeds such line item category, contingency requirements have been satisfied and the guaranteed maximum price is in effect. AFFIRMATIVE COVENANTS. The Bank Credit Facility contains customary affirmative covenants for the type of transaction proposed, including, without limitation, the following: (a) the Company will construct the Aladdin and perform all the work required under the other Loan Documents, (b) the Company will operate the Aladdin as a first-class casino hotel, (c) the Company will maintain adequate reserves and (d) the Company will provide the Administrative Agent with certain financial information. NEGATIVE COVENANTS. The Bank Credit Facility contains customary negative covenants for the type of transaction proposed, including, without limitation, the following: (a) restrictions on the incurrence of debt, sale leasebacks and contingent liabilities; (b) restrictions on making dividends or similar distributions; (c) restrictions on the incurrence of liens or other encumbrances; (d) restrictions on the sale of assets or other similar transfers; (e) restrictions on investments or acquisitions; (f) restrictions on mergers, consolidations and similar combinations; (g) restrictions on transactions with affiliates; (h) limitations on capital expenditures; (i) restrictions on adjustments or reallocations against line items in the Budget; and (j) restrictions on any amendment or modification of certain material agreements. Any restrictions on the transfer of and agreements not to encumber the equity securities of any registered holding company of the Company will require the approval of the Nevada Commission in order to remain effective. FINANCIAL COVENANTS. The Bank Credit Facility contains certain financial covenants, including, without limitation, the following: minimum fixed charge coverage; minimum interest coverage; maximum debt to EBITDA; minimum EBITDA and minimum net worth. EVENTS OF DEFAULT. The Bank Credit Facility contains events of default customary for the type of transaction proposed including, without limitation, a cross-default to other indebtedness or agreements of the Company, London Clubs, the other Sponsors and the Guarantors under the Bank Completion Guaranty. SENIOR DISCOUNT NOTES GENERAL DESCRIPTION OF THE NOTES. Pursuant to an Indenture dated as of February 26, 1998 (the "Indenture"), the Note Issuers issued 221,500 $1,000 principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 (the "Notes"). The Notes were issued as part of 221,500 Units, each Unit consisting of one Note and 10 Warrants. Pursuant to their terms the Notes and Warrants became separately transferrable on the Separation Date, which date occurred upon filing of the Registration Statement and the registration statement with respect to the New Notes (the "Exchange Offer Registration Statement") with the Commission. MATURITY. The Notes mature on March 1, 2010. ACCRETED VALUE AND INTEREST. The initial Accreted Value of the Notes was $519.40 per $1,000 principal amount at maturity of the Notes. The Notes accrete at 13 1/2% (computed on a semi-annual bond equivalent basis) based on the initial Accreted Value, calculated from February 26, 1998 (the "Issue Date"). The Notes will accrete to an aggregate principal amount of $221.5 million by March 1, 2003. Cash interest will not accrue on the Notes prior to March 1, 2003. Commencing on September 1, 2003, cash 91 interest on the Notes will be payable, at a rate of 13 1/2% per annum, semiannually in arrears on March 1 and September 1 of each year until maturity. SECURITY. The Notes are secured by a first priority pledge of the proceeds deposited in the Note Construction Disbursement Account and by a first priority pledge of all of the issued and outstanding Series A Preferred Interests. SERIES A PREFERRED INTERESTS. On the Issue Date, the Series A Preferred Interests had a liquidation preference of $115.0 million. The liquidation preference of the Series A Preferred Interests accretes on a semi-annual bond equivalent basis using a 360 day year comprised of twelve 30-day months. On March 1, 2003, the liquidation preference of the Series A Preferred Interests will be $221.5 million. All Series A Preferred Interests are held by Holdings and pledged to the Trustee for the benefit of the holders of the Notes. From and after September 1, 2003, distributions on the Series A Preferred Interests will be payable in cash. Holdings is obligated under the Indenture to utilize such cash distributions to make payments on the Notes. The Series A Preferred Interests are mandatorily redeemable on March 1, 2010. After March 1, 2003, the Series A Preferred Interests are redeemable at the option of the Company, so long as the proceeds thereof are used by Holdings to make a redemption of the Notes or an offer to purchase Notes, in each case, in accordance with the terms of the Indenture. See "--Optional Redemption" and "--Gaming Redemption." Except for the pledge to the Trustee for the benefit of the holders of the Notes, the exercise of remedies in respect of such pledge or any transfer after foreclosure under such pledge, the Series A Preferred Interests are nontransferable. OPTIONAL REDEMPTION. The Notes are redeemable at the option of the Note Issuers, in whole or in part, on or after March 1, 2003, at a declining premium to their Accreted Value, plus accrued and unpaid interest and Liquidated Damages (as defined in the Indenture), if any, to the date of redemption. Notwithstanding the foregoing, on or prior to March 1, 2001, the Note Issuers may redeem up to an aggregate of 35% of the Accreted Value of the Notes at a redemption price of 113 1/2% of the Accreted Value thereof, plus Liquidated Damages, if any, thereon to the redemption date, with the proceeds of a Qualified Public Offering resulting in aggregate net proceeds of at least $50.0 million. GAMING REDEMPTION. The Notes are subject to mandatory disposition and redemption requirements following certain determinations by any Gaming Authority. CHANGE OF CONTROL. Upon the occurrence of a Change of Control (as defined in the Indenture) of Holdings, the holders of the Notes have the right to require the Note Issuers to purchase their Notes at a price equal to 101% of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase. COVENANTS. The Indenture contains certain covenants that (subject to certain exceptions) restrict the ability of the Note Issuers and certain of their subsidiaries to, among other things: (i) make restricted payments; (ii) incur additional Indebtedness (as defined in the Indenture) and issue preferred stock; (iii) incur Liens (as defined in the Indenture); (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. See "Risk Factors." EVENTS OF DEFAULT. The Indenture provides for customary events of default, including: (i) default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to, the Notes; (ii) default in payment when due of the Accreted Value of or premium, if any, on the Notes; (iii) failure by the Note Issuers to comply with certain covenants; (iv) default under certain other indebtedness of Holdings or its restricted subsidiaries (subject to certain grace periods and minimum thresholds); (v) failure by Holdings or any of its restricted subsidiaries to pay certain final judgments; (vi) certain events of bankruptcy or insolvency with respect to Holdings or any of its significant subsidiaries; (vii) certain defaults 92 under the Keep-Well Agreement which remain uncured for 180 days, or in the performance of the Noteholder Completion Guaranty; (viii) certain breaches by Holdings of the pledge agreements securing the Notes; (ix) the termination or unavailability of the Bank Credit Facility in certain circumstances prior to the date the Aladdin is Operating; (x) (a) failure of the Desert Passage to be Operating on or prior to 90 days after the date the Aladdin becomes Operating and (b) at any time thereafter and prior to the date on which the Desert Passage becomes Operating, the Company's fixed charge coverage ratio for its most recently ended four full fiscal quarters is not at least 1.75 to 1.0; (xi) after the Aladdin becomes Operating, revocation, termination, suspension or other cessation or suspension of gaming operations for a period of more than 90 days at the Aladdin; (xii) the failure of the Aladdin to be Operating by the Operating Deadline; (xiii) the transfer of the Aladdin Site as a result of the exercise of remedies by the Bank Lenders or the acceptance by the Bank Lenders of a deed in lieu of foreclosure; and (xiv) the transfer of the Common Membership Interests as a result of the exercise of remedies by the Bank Lenders in respect of the pledge of such Common Membership Interests pursuant to Bank the Lender's security documents. REGISTRATION RIGHTS. Pursuant to a registration rights agreement (the "Note Registration Rights Agreement") dated as of February 26, 1998 between the Note Issuers and the Initial Purchasers, the Note Issuers agreed to (a) file within 45 days after the Issue Date with the Commission the Exchange Offer Registration Statement with respect to an offer to exchange the Notes (the "Exchange Offer") for new notes of the Note Issuers with terms substantially identical to the Notes (the "New Notes") (except that the New Notes generally will not contain terms with respect to restrictions on the resale or transfer thereof) and (b) use their reasonable best efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 150 days after the Issue Date. In the event that applicable law or interpretations of the staff of the Commission do not permit the Note Issuers to effect the Exchange Offer, or if certain holders of the Notes (having a reasonable basis to do so) notify the Note Issuers that they are not permitted to participate in, or would not receive freely traceable New Notes pursuant to, the Exchange Offer, the Note Issuers will use their reasonable best efforts to cause to become effective a registration statement (the "Shelf Registration Statement") with respect to the resale of the Notes. The Note Issuers, under certain circumstances, will be required to pay certain liquidated damages if the Note Issuers are not in compliance with certain of their obligations under the Note Registration Rights Agreement. Contemporaneously with the filing of the Registration Statement with the Commission, the Note Issuers filed the Exchange Offer Registration Statement with the Commission relating to the Exchange Offer. The Note Issuers expect to complete the Exchange Offer in August, 1998. For purposes of the Notes, "Accreted Value" means, (i) as of any date of determination prior to March 1, 2003, with respect to any Note, the sum of (a) the initial offering price (which shall be calculated by discounting the aggregate principal amount at maturity of such Note at a rate of 13 1/2% per annum, compounded semi-annually on each March 1 and September 1 from March 1, 2003 to the date of issuance) of such Note and (b) the portion of the excess of the principal amount of such Note over such initial offering price which shall have been accreted thereon through such date, such amount to be so accreted on a daily basis at a rate of 13 1/2% per annum of the initial offering price of such Note, compounded semi-annually on each March 1 and September 1 from the date of issuance of the Notes through the date of determination, computed on the basis of a 360-day year of twelve 30-day months and (ii) as of any date of determination on or after March 1, 2003, with respect to any Note, $1,000. FF&E FINANCING LEASE FACILITY. The Company has entered into a commitment letter for a synthetic lease facility (the "Lease Facility") with the FF&E Lender for the purpose of acquiring approximately $60 million of new furniture and equipment (other than gaming equipment) for the Aladdin. The Lease Facility is expected to contain provisions as described herein and is structured as a lease intended for security (the "Lease"). The Company will be considered the owner of the Specified Equipment (as defined herein) for tax purposes and the lease will be treated as an operating lease for accounting purposes. The lease will commence on 93 the date on which the Aladdin will be completed (the "Construction Completion Date" or the "Basic Lease Term Commencement Date") and will terminate three years from the Basic Lease Term Commencement Date (the "Basic Lease Term"), however, the Lease may be renewed up to two one-year renewals from the end of the Basic Lease Term (the "Renewal Lease Term"). Payments will be made quarterly, in arrears, calculated such that there will be 80% amortization of principal at the end of the Basic Lease Term and the maximum two Renewal Lease Terms. The remaining balloon payment will be twenty percent of the principal. A lease rental factor (the "Lease Rental Factor") will be calculated to be 5.6639% of 100% of the Company's acquisition cost of the Specified Equipment up to $60.0 million (the "Lease Funding Amount") per quarter. The Lease Rental Factor was calculated at an interest rate of 10.1875% which represents a spread of 425 bps over the reserve adjusted 90-day LIBOR (the "Base Index") (5.9375%). Five days prior to the Basic Lease Term Commencement Date, the Lease Rental Factor will be adjusted and calculated on the basis of the floating rate Base Index plus the higher of (a) 425 bps, or (b) the weighted average spread used to calculate the interest rate on the Bank Credit Facility plus 125 bps, and such spread shall be maintained throughout the Basic Lease Term and any available Renewal Lease Terms. The Lease Rental Factor will be adjusted quarterly based on changes to the Base Index. Subject to the satisfaction of the conditions precedent and to there being no default, the FF&E Lender will commence funding of deliveries of the Specified Equipment and/or the Gaming Equipment (as defined herein) up to six months prior to the Construction Completion Date (the "Interim Funding Date"). An interim lease funding amount (the "Interim Lease Funding Amount") of up to $60.0 million will be available, subject to no default then having occurred and continuing under the Company's financing, construction or other material agreements, and satisfaction of all conditions precedent to funding. Advances of the Interim Lease Funding Amount shall be made once per month during the Interim Funding Period. Any Interim Lease Funding Amount advanced under the Lease Facility shall be made under an interim schedule, which shall be converted to a final schedule under the Lease on the Basic Lease Term Commencement Date. The interim lease repayment terms (the "Interim Lease Repayment Terms") will be floating rate interest-only payments due monthly in arrears during the period from the Interim Funding Date through the Construction Completion Date (the "Interim Funding Period") based on the Interim Lease Funding Amount. At the Company's option, interest will be calculated at either (a) the reserve adjusted 30-day LIBOR on the date of determination ("30-day LIBOR") plus the higher of (i) 425 bps, or (ii) the weighted average spread used to calculate the interest rate of the Bank Credit Facility plus 125 bps, or (b) the prime rate published in the Wall Street Journal on the date of the determination (the "Prime Rate") plus 275 bps, and such spread shall be fixed throughout the Interim Funding Period, and 30-day LIBOR or the Prime Rate will be adjusted monthly based on changes thereto. Subject to certain provisions, at the end of the Basic Lease Term or any Renewal Lease term, the Company may (i) purchase all, but not less than all, of the Specified Equipment at a fixed purchase price, estimated to represent the Specified Equipment's then fair value, (ii) renew the Lease for all, but not less than all, of the Specified Equipment for up to two additional one-year terms, or (iii) return all, but not less than all, of the Specified Equipment to the FF&E Lender subject to certain return conditions, including payment of a contingent rental amount. Upon termination of the Lease at the end of the Basic Lease Term or any Renewal Lease term, should the Specified Equipment be returned to the FF&E Lender by the Company, the FF&E Lender will calculate a contingent rental for the full lease term, on a quarterly basis, based on certain factors. TERM LOAN FACILITY. The Company has entered into a commitment letter for an approximately $20 million five year term loan facility (the "Term Loan Facility") with the FF&E Lender for the purposes 94 of purchasing new gaming equipment for the Aladdin. The Term Loan Facility is expected to contain terms as described herein. The term loan commencement date is the Construction Completion Date (the "Term Loan Commencement Date"). Payments shall be made quarterly, in arrears, calculated such that principal will be amortized as follows:
QUARTER PERCENT AMORTIZATION - --------- --------------------- 1-4 3.25 5-8 3.5 9-12 4.0 13-16 4.5 17-19 4.75 20 24.75
The interest rate (the "Interest Rate") will be calculated five days prior to the Term Loan Commencement Date on the basis of the floating rate Base Index plus the higher of (a) 425 bps, or (b) the weighted average spread used to calculate the interest rate on the Bank Credit Facility on such date plus 125 bps, and such spread shall be maintained throughout the five year term. The Interest Rate will be adjusted quarterly, based on changes to the Base Index, if applicable. An interim term loan funding amount (the "Interim Term Loan Funding Amount") of up to $20.0 million will be available, subject to no default then having occurred and continuing under the Company's financing, construction or other material agreements and satisfaction of all conditions precedent to funding. Advances of the Interim Term Loan Funding Amount shall be made once per month during the Interim Funding Period. An Interim Term Loan Funding Amount advanced under the Term Loan Facility shall be evidenced by an interim promissory note, which shall be converted to a final promissory note on the Term Loan Commencement Date. The interim term loan repayment terms (the "Interim Term Loan Repayment Terms") will be floating rate interest-only payments due monthly in arrears during the Interim Funding Period based on the Interim Term Loan Funding Amount. At the Company's option, interest will be calculated at either (a) the 30-day LIBOR plus the higher of (i) 425 bps, or (ii) the weighted average spread used to calculate the interest rate of the Bank Credit Facility plus 125 bps, or (b) the Prime Rate plus 275 bps, and such spread shall be fixed throughout the Interim Funding Period and 30-Day LIBOR or the Prime Rate will be adjusted monthly based on changes thereto. SECURITY. The security interests granted by the Company will be a first priority security interest in a pool of new furniture and equipment (other than gaming equipment) (the "Specified Equipment"), and specified new gaming equipment including gaming devices such as slot machines, cashless wagering systems and associated equipment (the "Gaming Equipment"), and assignment of all improvements and/or additions to the Specified Equipment and the Gaming Equipment hereafter acquired. The Specified Equipment and the Gaming Equipment will be required to be free of all junior liens or encumbrances. Any and all existing and to be issued obligations of the Company shall acknowledge that the Term Loan Facility and the Lease Facility have a first priority lien on the Gaming Equipment and the Specified Equipment. During the Interim Funding Period, the Company shall assign to the FF&E Lender its rights under the purchase contracts for the Specified Equipment. CONDITIONS PRECEDENT. The FF&E Financing is subject to customary conditions precedent. COVENANTS AND EVENTS OF DEFAULT. Except for covenants related to the Specified Equipment or the Gaming Equipment, the covenants and events of default in the FF&E Financing will be similar to those in the Bank Credit Facility. The disposition of collateral consisting of Gaming Equipment is subject to the 95 requirements of the Nevada Act, including the approval of the Nevada Board or the licensing of the Lenders before foreclosure, taking possession or other disposition of such Gaming Equipment. BANK COMPLETION GUARANTY The Trust, London Clubs and Bazaar Holdings (collectively, the "Guarantors") have entered into a guaranty of performance and completion (the "Bank Completion Guaranty") in favor of each of the Administrative Agent and the Bank Lenders. The Bank Completion Guaranty provides that the Guarantors jointly and severally guarantee to the Bank Lenders under the Bank Credit Facility, among other things (the "Guaranteed Obligations"), that: (i) the Company will promptly carry out the work required for the redevelopment of the Aladdin in accordance with the approved plans and specifications and to correct as soon as possible any material defect in such work or material deviation from the approved plans and specifications; (ii) the Company will punctually pay all costs, expenses and liabilities in connection with the redevelopment of the Aladdin, including all construction period interest incurred on the Bank Credit Facility, prior to completion of the work and in connection with cost overruns of any type; (iii) the Company will complete the redevelopment lien-free and on schedule; (iv) the Company will provide the expertise necessary to supervise the redevelopment of the Aladdin at no cost to the Bank Lenders; (v) in the event the Guarantors fail to pay their respective obligations under the Bank Completion Guaranty, the Bank Lenders may pay and perform the Guaranteed Obligations on behalf of the Guarantors, in which case the Guarantors, upon demand, must reimburse the Bank Lenders all cost, expenses and liabilities in connection with the completion of the redevelopment of the Aladdin; and (vi) the Guarantors shall pay the Bank Lenders all reasonable out-of-pocket costs and expenses of the Bank Lenders in connection with the enforcement of the Bank Lenders' rights and remedies under the Bank Completion Guaranty. The Bank Completion Guaranty has (i) negative covenants which, among other things, prohibit the Guarantor from incurring certain liens and certain types of indebtedness and (ii) affirmative covenants which, among other things, require that each of the Guarantors provide certain financial information and maintain the corporate existence of each Guarantor and its subsidiaries. Should certain London Clubs specified exceptional events (a "Specified Event") under the Bank Completion Guaranty occur, at the option of the required lenders, such Specified Event shall constitute an event of default under the Bank Completion Guaranty and consequently under the Bank Credit Facility, and the Bank Lenders, without any further notice to a Guarantor, shall be entitled to exercise all rights and remedies available under the Bank Completion Guaranty and any other Loan Documents. Specified Events include, but are not limited to, breaches by London Clubs of various financial covenants (including borrowing ratios), and a covenant limiting the amount of indebtedness which London Clubs can incur, as well as certain events which will be triggered if other indebtedness of London Clubs is accelerated or if London Clubs becomes insolvent. 96 CERTAIN MATERIAL AGREEMENTS The following discussion summarizes the material terms of certain material agreements which have been entered into or are currently being negotiated between the Company (and/or the Controlling Stockholders) and various other parties. This summary does not purport to be complete and is qualified in its entirety by reference to the full agreements described herein once finalized and executed. Capitalized terms used but not otherwise defined in this Prospectus shall have the meaning ascribed to such terms in the agreement being described (unless otherwise indicated). AGREEMENTS WITH RESPECT TO THE ALADDIN HOLDINGS OPERATING AGREEMENT The Holdings Members have entered into an operating agreement (the "Holdings Operating Agreement") setting forth their agreement as to the relationships between Holdings and the Holdings Members and among the Holdings Members themselves and as to the conduct of the business and internal affairs of Holdings. The following is a summary of certain key provisions of the Holdings Operating Agreement. PURPOSE. Holdings was organized for the purposes of developing, constructing, financing, owning and operating hotels and casinos and related businesses and to engage in such other lawful enterprises as may be incidental or appurtenant thereto. CLASSES OF INTERESTS. Holdings is capitalized with three classes of shares (which represent units of membership interests in Holdings): Common Shares (the "Holdings Common Membership Interests"), Series A Preferred Shares (the "Holdings Series A Preferred Interests") and Series B Preferred Shares (the "Holdings Series B Preferred Interests" and together with the Holdings Common Membership Interests and the Holdings Series A Preferred Interests, the "Holdings Interests"). Holdings' authorized capital stock consists of 10,000,000 Holdings Common Membership Interests, 1,500,000 Holdings Series A Preferred Interests and 1,500,000 Holdings Series B Preferred Interests. Holdings will periodically distribute cash, to the extent available, to the holders of Holdings Common Membership Interests (or, if any such holder is a pass-through entity, its equity interest holders) to the extent of the increase in their cumulative United States federal, state or local income tax liability in respect of their interests in Holdings for such period and make any additional distributions of cash to Holdings Members that may be necessary to cover United States federal, state or local income taxes arising from the ownership of an interest in Holdings. No other distributions shall be made to any Holdings Interests until all distributions to cover tax liability in respect of any Holdings Interests for such period have been made. The Holdings Series A Preferred Interests will be issued to LCNI or Sommer Enterprises in consideration for any payment required pursuant to the Bank Completion Guaranty, the Noteholder Completion Guaranty or the Keep-Well Agreement (or a payment to the Company to cover any EBITDA shortfall under the Bank Credit Facility) which is made by Sommer Enterprises, LCNI or their respective affiliates to the Company where such payment is not required to be made to pay down the Company's bank debt pursuant to Section 13 of the Keep-Well Agreement. Except for distributions to cover any tax liability in respect of any Holdings Interests, the Holdings Series A Preferred Interests will have a distribution, redemption and liquidation preference over all Holdings Common Membership Interests and Holdings Series B Preferred Interests. To the extent of any net profits left to be allocated after special allocations, the capital account in respect of the Holdings Series A Preferred Interests will cumulate and compound semi-annually at the rate of 12% per annum on the capital account balance in respect thereof at the time of compounding and, subject to the limitations on Restricted Payments set forth in the Indenture, will be paid when a supermajority of the Holdings Board determines that there is sufficient cash available to do so. Holdings Series A Preferred Interests will be automatically redeemed when distributions have been made to the extent of the capital account balance in respect thereof. Should Holdings liquidate at any time prior to the redemption of the Holdings Series A Preferred Interests, the Holdings Series A Preferred Interests will be entitled to a distribution of cash, to the extent available, before any distributions are made 97 to the Holdings Series B Preferred Interests or Holdings Common Membership Interests, in an amount equal to the capital account of the Holdings Series A Preferred Interests. The Holdings Series B Preferred Interests will be issued to LCNI in the event of and in exchange for a payment required by London Clubs to pay down the Company's bank debt pursuant to Section 13 of the Keep-Well Agreement. Except for distributions to cover any tax liability in respect of any Holdings Interests, the Holdings Series B Preferred Interests will have a distribution, redemption and liquidation preference over all Holdings Common Membership Interests. To the extent of any net profits left to be allocated after special allocations and allocations to Holdings Series A Preferred Interests, the capital account in respect of Holdings Series B Preferred Interests will cumulate and compound quarterly at a rate equal to the rate on the bank debt of the Company which was paid down by the payment required pursuant to the Keep-Well Agreement, such rate to be applied to the capital account balance in respect of the Holdings Series B Preferred Interests at the time of compounding and, subject to the limitations on Restricted Payments set forth in the Indenture, will be paid when a supermajority of the Holdings Board determines that there is sufficient cash available to do so after all Holdings Series A Preferred Interests have been redeemed. Holdings Series B Preferred Interests will be automatically redeemed when distributions have been made to the extent of the capital account balance in respect thereof. Should Holdings liquidate at any time prior to the redemption of the Holdings Series B Preferred Interests, the Holdings Series B Preferred Interests will be entitled to a distribution of cash, to the extent available, before any distributions are made to the Holdings Common Membership Interests, in an amount equal to the capital account of the Holdings Series B Preferred Interests. Other than distributions to cover any tax liability in respect of any Holdings Interests, the Holdings Common Membership Interests will be entitled to distributions only after all discretionary and mandatory distributions have been made to all other interests in Holdings. The Indenture contains restrictions on the payment of distributions to the Holdings Interests. Distributions to all Holdings Interests are payable only out of the assets of Holdings at the time of such distribution, and in no event shall any holder of an interest in Holdings be obligated to make a contribution to Holdings for the payment of distributions. Except for matters affecting rights of the holders of Holdings Series A Preferred Interests and Holdings Series B Preferred Interests to distributions, including upon redemption, (which may not be diminished or affected without the vote of the holders of at least two-thirds of the issued and outstanding shares of the affected class) and matters affecting the anti-dilution protections, rights to move their investment directly into Holdings in certain circumstances and tag-along participation rights of the holders of the Warrants and the Warrant Shares (which may not be amended without the consent of the Issuer), all management and voting rights are vested in the Holdings Common Membership Interests. ADJUSTMENTS IN INTERESTS. Subject to the receipt of applicable Gaming Approvals, the percentages of the Holdings Common Membership Interests held directly by each Holdings Member (each, a "Holdings Percentage Interest") will be adjusted by the issuance of additional Holdings Common Membership Interests and/or cancellation of issued and outstanding Holdings Common Membership Interests in the following circumstances: (i) on the opening date of the Aladdin (the "Opening Date") LCNI's Holdings Percentage Interest shall be decreased by 0.5% and Sommer Enterprises' Holdings Percentage Interest shall be increased by 0.5%; (ii) in the event of defaults in payment of a Holdings Member's or its Affiliates' share of payments required pursuant to the Keep-Well Agreement (or payments to the Company to cover any EBITDA shortfall under the Bank Credit Facility), the defaulting Holdings Member's Holdings Percentage Interest shall be reduced and the non-defaulting Holdings Member's Holdings Percentage Interest shall be increased by 1, 1.5 or 2 times (depending on whether the defaulting Holdings 98 Member is in default for 30 days, 45 days or 60 days from the date of such default) multiplied by a dilution fraction, the numerator of which is the delinquent contribution and the denominator of which is $200 million; (iii) upon the exercise of any Warrants, the relative Holdings Percentage Interests of all Holdings Members other than LCNI and the Issuer will be adjusted so that all such Holdings Members share proportionately the dilutive effect of such exercise on their directly and indirectly held Holdings Percentage Interests (unvested Holdings Common Membership Interests will also be adjusted thereupon); (iv) upon any adjustment of the Issuer's Holdings Percentage Interest pursuant to the Warrant Agreement (which may occur in the event of: dividends or distributions by Holdings; subdivisions or combinations of Holdings Common Membership Interests; issuance of Holdings Common Membership Interests or any rights to purchase Holdings Common Membership Interests for less than fair value; and similar events that typically trigger anti-dilution protection adjustments for holders of warrants), the Holdings Percentage Interest of the Holdings Members other than the Issuer will be correspondingly adjusted to accommodate such adjustment in the Issuer's Holdings Percentage Interest, so that all such Holdings Members share proportionately the effect of such adjustment on their directly and indirectly held Holdings Percentage Interest (unless such Holdings Members agree to some other arrangement for sharing such effect); and (v) Upon vesting of any Restricted Membership Interests, the Percentage Interests of LCNI and Sommer Enterprises shall be reduced so that LCNI bears 25% of the dilutive effect thereof (assuming that no adjustments of the type described in (iii) above have occurred) and Sommer Enterprises bears all the remaining dilutive effect thereof, and their capital amounts shall be correspondingly reduced to accommodate the capital account of the new member. In certain circumstances provided in the Equity Participation Agreement, the holders of Warrants and Warrant Shares will have the right to move their investment directly into Holdings, in which event the Percentage Interest of the Issuer will be reduced to accommodate such interest. SPECIAL CAPITAL ACCOUNT ADJUSTMENT. Upon the redemption of any Notes by Holdings, upon receipt of applicable Gaming Approvals, Sommer Enterprises' capital account in Holdings in respect of its Holdings Common Membership Interests will be reduced by the product of LCNI's Holdings Percentage Interest at the time of such redemption multiplied by the Accreted Value on the Issue Date of the Notes being redeemed and LCNI's capital account shall be increased by the same amount. SUPERMAJORITY APPROVALS. The following actions by Holdings or the Company will require approval of the holders of at least 80% of the Holdings Common Membership Interests: (i) the admission of a new Holdings Member, the acceptance of any capital contributions not provided for in the Holdings Operating Agreement, the Bank Completion Guaranty, the Noteholder Completion Guaranty, the Keep-Well Agreement or the Contribution Agreement (as defined in the Holdings Operating Agreement), or the issuance of additional shares or securities of Holdings convertible into or exchangeable for shares or the granting of any options or other rights to acquire from Holdings, or other obligation of Holdings to issue, any shares or securities convertible into or exchangeable for shares (other than in respect of the matters referred to in item (xvi), below); (ii) other than distributions by subsidiaries of Holdings or Priority Distributions to Holdings Common Membership Interests or distributions to cover any tax liability in respect of any Holdings Interests, any declaration, setting aside or payment of any distribution; (iii) any voluntary dissolution or liquidation of Holdings or the Company or the sale of all or substantially all of the assets of Holdings and the Company; (iv) any merger or consolidation of Holdings with any person; (v) any amendment to the articles of Holdings or the Holdings Operating Agreement; (vi) (A) during the period that the Keep-Well Agreement is in force, the creation, incurrence, assumption or guarantee of any indebtedness (excluding obligations under leases made in the ordinary course of business) and (B) after the 99 Keep-Well Agreement is no longer in force, the creation, incurrence, assumption or guarantee of any indebtedness (excluding obligations under leases made in the ordinary course of business) in excess of $10 million in any individual transaction (such threshold limit to be increased at the end of each fiscal year by an amount determined by the Holdings Board to correspond to increases in consumer prices in the United States for such fiscal year); (vii) the creation of any lien, pledge or other security interest in assets of Holdings or any subsidiary of Holdings securing indebtedness of any third party which is not for the benefit of any business carried on by Holdings or the Company; (viii) the commencement of a voluntary case under Title 11 of the United States Code entitled "Bankruptcy" (the "Bankruptcy Code") or any other voluntary proceeding under any debtor relief laws or any voluntary general assignment for the benefit of creditors; (ix) any material transactions (other than transactions provided for in Sections 6.7(a) or 6.9 of the London Clubs Purchase Agreement) between Holdings or the Company, on the one hand, and any Holdings Member or any affiliate of any Holdings Member, on the other hand; (x) any entry into any new business opportunity unrelated to the Aladdin; (xi) the appointment or removal of Holdings' independent auditors; (xii) any material amendment to, or any material waiver under, the Bazaar Lease (such consent not to be unreasonably withheld); (xiii) any material amendment to, or any material waiver under, the Reciprocal Easement Agreement (such consent not to be unreasonably withheld); (xiv) any arrangement or agreement for Holdings to pay a salary to any Holdings Member or any affiliate of any Holdings Member (other than pursuant to the Consulting and Employment Agreements and other than in respect of the matters referred to in (xvi), below); (xv) the employment of any member of an Executive Management Committee (as defined herein) of Holdings or the Company or any material amendment to the terms of employment of any such person; (xvi) the adoption of, or any material amendment to, any employee benefit, profit sharing, incentive, bonus, pension, retirement or employee stock option plans (such consent not to be unreasonably withheld in the context of industry practice); (xvii) any license of the Aladdin trademark to any person other than a subsidiary of Holdings or in connection with the Complex and the operations in respect thereof (such consent not to be unreasonably withheld); (xviii) any contract (including leases) outside the ordinary course of business or for capital expenditure not included in Holdings' annual budgets (such consent not to be unreasonably withheld); and (xix) the initiation or settlement of any material litigation outside the ordinary course of business and the selection of counsel therefor (such consent not to be unreasonably withheld). Unless London Clubs has appointed a majority of the Holdings Board, the above supermajority approval rights will cease in the event that London Clubs is bankrupt or responsible for an event of default under the Keep-Well Agreement, the Bank Completion Guaranty or the Noteholder Completion Guaranty. London Clubs will also have broad approval and consultation rights in respect of material contracts and decisions relating to the Redevelopment (as defined in the Holdings Operating Agreement), including relating to certain aspects of the construction phase of the Aladdin, the Mall Project and the Music Project. MANAGEMENT. The business and affairs of Holdings are managed by the Holdings Board, which holds Board meetings at least quarterly. Holdings' Board consists of three nominees of the Issuer and two nominees of London Clubs, each of which shall serve for a 3 year term unless they resign, are removed or are otherwise disqualified to serve at an earlier time. The initial members of the Holdings Board (the "Holdings Board Members") are Jack Sommer, Ronald B. Dictrow and Richard J. Goeglein as appointees of the Issuer and Alan L. Goodenough and G. Barry C. Hardy as appointees of London Clubs. Jack Sommer is Chairman of the Holdings Board. A Holdings Board Member appointed by London Clubs and a Holdings Board Member appointed by the Issuer will have the right to be on each committee of the Board. The Holdings Board Members may be removed at any time by their appointing Holdings Member. In the event of a vacancy on the Holdings Board, the Holdings Member who appointed the previous Holdings Board Member shall appoint the new Holdings Board Member. 100 In certain circumstances related to (i) a failure to make its share of payments under the Bank Completion Guaranty and the Keep-Well Agreement, or (ii) the requirement to make a certain level of payments under the Keep-Well Agreement (other than payments caused by certain losses of the Salle Privee), whether or not London Clubs and Sommer Enterprises each pay their share of such payments, Sommer Enterprises shall cause the Issuer to change the composition of Holdings' Board by the appointment of new Holdings Board Members designated by the non-defaulting Holdings Member and/or the removal of Holdings Board Members appointed by the defaulting Holdings Member and/or the appointment of a new independent Board Member designated by the non-defaulting Holdings Member. If a Holdings Member holding a majority of Holdings Common Membership Interests has defaulted in its payment obligations under the Keep-Well Agreement, the Bank Completion Guaranty or the Noteholder Completion Guaranty, London Clubs and Sommer Enterprises also will be required to vote all Holdings Common Membership Interests owned or controlled by them so that they have equal voting power as Holdings Members. The Holdings Members will agree to take all necessary action to ensure that each Holdings Member shall have identical rights to those they have in respect of Holdings with respect to the board of management (or comparable bodies) and management of the Company. TRANSFERS OF SHARES. Except for transfers pursuant to the Loan Documents, transfers of Holdings Common Membership Interests are only permitted: (i) to affiliates of the transferring Holdings Member or persons approved by all Holdings Members holding Holdings Common Membership Interests; (ii) to persons other than certain prohibited transferees after giving other Holdings Members holding Holdings Common Membership Interests a right of first refusal and the right to tag-along ratably; and (iii) in some circumstances related to estate planning by Holdings Members. Certain transfers in ownership interests in Holdings Members holding Holdings Common Membership Interests and in any entity owning a majority of a Holdings Member (other than London Clubs) holding Holdings Common Membership Interests are also prohibited without first affording the other Holdings Members holding Holdings Common Membership Interests a right of first refusal over such Holdings Member's Holdings Common Membership Interests. The exercise and transfer of Warrants or the transfer of Warrant Shares will not be restricted by this provision. Holdings or its nominee have the right to call a Holdings Member's Holdings Common Membership Interests (but not the Holdings Common Membership Interests held by Enterprises) at seventy-five percent of the fair market value of such Holdings Common Membership Interests if there is (i) a change in control of such Holdings Member, other than a permitted transfer of an ownership interest in a Holdings Member as described above or a change in control of London Clubs, (ii) a transfer of Holdings Common Membership Interests by such Holdings Member in breach of the Holdings Operating Agreement or (iii) a breach by such Holdings Member of the non-compete covenants described below. INITIAL PUBLIC OFFERING. The Holdings Operating Agreement provides that the Holdings Members anticipate executing an initial public offering ("IPO") as soon as it is commercially reasonable to do so after the Opening Date. Sommer Enterprises and LCNI have rights to demand an IPO if one has not occurred within 3 years of the Opening Date, although Sommer Enterprises may defer such a demand by LCNI for up to a year. The members or stockholders of the IPO entity immediately prior to the IPO will enter into a Stockholders and Registration Rights Agreement substantially in the form scheduled to the Holdings Operating Agreement providing for arrangements between such members or stockholders as to certain management matters, transfer restrictions, tag along rights and registration rights. If permitted by law and market requirements, LCNI and Sommer Enterprises have rights to acquire additional Holdings Common Membership Interests (or their equivalents in an IPO Entity) as part of or prior to an IPO at a price based on the IPO price discounted to reflect the absence of underwriting fees and costs. LCNI also has rights to effect purchases from Holdings or Sommer Enterprises to maintain a Percentage Interest of 20% or more. 101 LIABILITY, EXCULPATION AND INDEMNIFICATION. The Holdings Operating Agreement contains provisions relieving members, officers, employees and the Holdings Board Members and those of Holdings' subsidiaries from certain liability, fiduciary duties and conflicts and will also provide for various indemnities to such persons, payment of expenses and provision of errors and omissions insurance. GAMING MATTERS. Admission of new Holdings Members, transfers of Holdings Interests and payment of distributions by Holdings will be subject to receipt of Nevada Gaming Approvals. Holdings Members and their affiliates, directors and employees will cooperate to obtain applicable Gaming Approvals from the Nevada Gaming Authorities, as necessary. If Nevada gaming problems arise prior to a finding of unsuitability by the Nevada Gaming Authorities, a Holdings Member causing such problem (or whose director, officer or affiliate caused such problem) shall cooperate to remedy it, and, if not remedied, may be forced to sell its Holdings Common Membership Interests to Holdings or its nominee at fair market value. NON-COMPETE. LCNI and Sommer Enterprises have agreed that they and their affiliates will refrain from certain competitive activities (with appropriate geographic and temporal limitations and exceptions for certain existing activities of their affiliates), unless Holdings (without the participation of the Holdings Member affected or its nominee Holdings Board Members) has first refused to pursue such activities. TERM. Holdings shall continue until December 1, 2097, or such other time as agreed in writing by all Holdings Members. In the event of the death or bankruptcy of a Holdings Member, Holdings and the other Holdings Members will have certain rights to purchase such bankrupt or deceased member's Holdings Common Membership Interests. COMPANY OPERATING AGREEMENT Holdings and the Company have entered into an operating agreement (the "Company Operating Agreement") which sets forth provisions governing the conduct of the business and internal affairs of the Company. The following is a summary of certain key provisions of the Company Operating Agreement. PURPOSE. The Company was organized for the purposes of developing, constructing, financing, owning and operating hotels and casinos and related businesses and to engage in such other lawful enterprises as may be incidental or appurtenant thereto. CLASSES OF INTERESTS. The Company is capitalized with two classes of shares (which represent units of membership interests in the Company): Common Membership Interests and Series A Preferred Interests. The Company's authorized capital stock will consist of 10,000,000 Common Membership Interests and 1,150,000 Series A Preferred Interests. The Series A Preferred Interests have a distribution, redemption and liquidation preference over the Common Membership Interests. Beginning in the sixth year after the initial issuance of the Series A Preferred Interests, periodic distributions of cash, to the extent available, will be made by the Company first to the Series A Preferred Interests in an amount equal to the interest payable on the Notes for such period and, prior to the end of the twelfth year after the issuance of the Series A Preferred Interests, the Company will distribute cash, to the extent available, in redemption of the Series A Preferred Interests in an amount equal to their redemption preference. The redemption preference of the Series A Preferred Interests will accrete so that such preference will, at all times, equal the Accreted Value of the Notes (plus any premium payable to the holders of the Notes). In addition, should the Company liquidate at any time prior to the redemption of the Series A Preferred Interests or should all or any part of the Series A Preferred Interests be redeemed prior to the end of the twelfth year after their issuance as a result of the Change of Control Payment, the Series A Preferred Interests shall be entitled to a distribution of cash, to the extent available, before any distributions are made to any other classes of Interests, in an amount equal to their liquidation preference which will accrete so that such preference at all times equals the Accreted Value of the Notes (plus any premium payable to the holders of the Notes) at such time. 102 After all discretionary or required distributions of cash are made to the Series A Preferred Interests for any period, the Company will distribute cash, to the extent available, to the holders of Common Membership Interests to the extent of the increase in the cumulative United States federal, state or local income tax liability of such holders of Common Membership Interests (or, if any such holder is a pass-through entity, its equity interest holders) in respect of their interests in the Company for such period and make any additional distributions of cash to Members that may be necessary to cover United States federal, state or local income taxes arising from ownership of an interest in the Company ("Company Tax Distributions"). After distributions to the Series A Preferred Interests and Company Tax Distributions, the Board will make a priority distribution of cash, to the extent available, on the Common Membership Interests to permit Holdings to satisfy any additional obligations it may have to make payments on the Notes ("Priority Distributions to Common Interests"). MANAGEMENT. The business and affairs of the Company are managed by the Company's Board. Pursuant to the Holdings Operating Agreement, the Holdings Members will have identical rights with respect to the Company's Board and management as they have in respect of the Holdings Board and management. The Company's Board is responsible for establishing and overseeing all policies and procedures in connection with the operation of the Company's business, but shall delegate the day-to-day management responsibility to an executive management committee (the "Executive Management Committee"). The Executive Management Committee includes the following persons: the President and Chief Executive Officer of the Company, the Chief Financial Officer of the Company, the Senior Vice President of the Company who is the President and Chief Operating Officer of the Aladdin, the Senior Vice President of the Company who is the President and Chief Operating Officer of the Music Project and Casino, the Senior Vice president Human Resources of the Company, the Senior Vice President Electronic Gaming of the Company and the Managing Director of the Salle Privee. LIABILITY, EXCULPATION AND INDEMNIFICATION. The Company Operating Agreement contains provisions relieving members, officers, employees and the members of the Company's Board ("Company Board Members") and those of the Company's subsidiaries from certain liability, fiduciary duties and conflicts and will also provide for various indemnities to such persons, payment of expenses and provision of errors and omissions insurance. TERM. The Company shall continue until January 24, 2097, or such other time as agreed in writing by all Company Members. EQUITY PARTICIPATION AGREEMENT The Issuer, Sommer Enterprises, LCNI and the Warrant Agent, for and on behalf of the holders of the Warrants and the Warrant Shares, have entered into an agreement (the "Equity Participation Agreement") under which (a) the parties agreed that they will not effect a public offering of common stock of any IPO Entity unless LCNI, Sommer Enterprises and the holders of the Warrants and Warrant Shares each are given the right to hold their respective equity interests in the IPO Entity; (b) the Issuer agreed that prior to any such public offering (or if the Issuer is the IPO Entity, at all times), it will not become an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended) required to register under that Act (c) the parties granted the holders of the Warrant Shares certain rights to participate in the tag along arrangements under the Holdings Operating Agreement and agree to effect certain adjustments to the percentage ownership of Holdings Common Membership Interests and certain redemptions of Warrant Shares to give effect to such tag along rights, as described below and (d) the Warrant holders will have the right to convert their Warrant Shares into Common Membership Interests in the Company in the event that the Issuer takes certain actions, including certain mergers or consolidations, disposition of all or substantially all of the Issuer's assets, transfers of Issuer's Holdings Common 103 Membership Interests, certain recapitalizations of Issuer, voluntary dissolution or liquidation of Issuer, repurchases of Issuer's stock which is not pro-rata among the stockholders, and certain issuances of Issuer's stock. Pursuant to the Equity Participation Agreement, holders of Warrant Shares are entitled to cause the Issuer to partially exercise its rights to participate in certain sales by Holdings Members of Holdings Common Membership Interests to a non-affiliated party. The proceeds of any such sale of Holdings Common Membership Interests by the Issuer will be used to redeem the Common Stock in the Issuer of such holders who elected to exercise such rights. Holders of Warrants and Warrants Shares should note, however, that under the Indenture certain sales of Holdings Common Membership Interests could constitute a change of control under the Indenture. In that event, Holdings would be required to redeem the Notes at a redemption price equal to 101% of their Accreted Value. SALLE PRIVEE MANAGEMENT AGREEMENT The Company, London Clubs and a subsidiary of London Clubs, LCNI, are parties to the Salle Privee Management Agreement in respect of the Salle Privee. Under such agreement, LCNI will (a) provide advice and consulting services regarding the development and fitting out of the Salle Privee, (b) provide certain worldwide marketing and promotional services in relation to the Salle Privee and (c) direct the operations of the Salle Privee in accordance with certain policies and procedures developed by LCNI in consultation with the Company, and in accordance with the Company's budgets and marketing plans. Under such agreement, London Clubs has agreed to guaranty the obligations of LCNI. OPERATIONS AND MANAGEMENT. Under the Salle Privee Management Agreement, LCNI will direct the operations of the Salle Privee in consultation with the Executive Management Committee of the Company. LCNI will also provide worldwide marketing and promotional services targeted at its international clientele, including a plan for cross-marketing the Salle Privee with London Clubs' and its affiliates' other gaming facilities throughout the world. CREDIT MANAGEMENT/GAMING LIMITS. The Salle Privee will be subject to the Company's financial control facilities and credit management will be administered by the Company's central credit oversight committee, in consultation with LCNI. Basic risk management policies regarding gaming limits and credit facilities for the Salle Privee will be established by the Company's Board based upon the input and recommendations of LCNI. LCNI will have the right to permit certain clientele from time to time to exceed the normal wagering limits. In consideration for such flexibility, LCNI has agreed to reimburse the Company for any net losses suffered by the Company in connection with such above-limit wagering. LONDON CLUBS FEE. In consideration for the services to be furnished by London Clubs under the Salle Privee Management Agreement, the Company will pay to London Clubs an Incentive Marketing and Consulting Fee calculated as follows: (i) 10% of the Salle Privee EBITDA (defined in the Salle Privee Management Agreement as gross revenues attributable to the Salle Privee, less all costs and expenses directly attributable to the Salle Privee), up to and including $15.0 million in Salle Privee EBITDA; plus (ii) 12.5% of the Salle Privee EBITDA, in excess of $15.0 million, up to and including $17.0 million; plus (iii) 25% of the Salle Privee EBITDA, in excess of $17.0 million, up to and including $20.0 million; plus (iv) 50% of the Salle Privee EBITDA, in excess of $20.0 million. The foregoing thresholds will be adjusted in accordance with consumer price index changes every five years. TERM. The term of the Salle Privee Management Agreement is sixty-nine (69) years unless terminated earlier by either party after the other's default, in connection with Nevada or United Kingdom gaming problems, by mutual agreement, by a party upon London Clubs, LCNI's or the Company's bankruptcy or upon LCNI no longer having an equity interest in Holdings. 104 LONDON CLUBS PURCHASE AGREEMENT Pursuant to an Amended and Restated Purchase Agreement dated as of February 26, 1996 by and among London Clubs, LCNI, AHL, Sommer Enterprises, the Trust and the Company (the "London Clubs Purchase Agreement") LCNI acquired 25.0% (subject to adjustment pursuant to the Holdings Operating Agreement as described above) of the Holdings Common Membership Interests for a purchase price of $50.0 million. The Music Project is expected to be developed and owned by Aladdin Music. Pursuant to the London Clubs Purchase Agreement, London Clubs, through its wholly owned subsidiary LCNI, has agreed that so long as Aladdin Music obtains financing for the Music Project on terms satisfactory to LCNI, and provided that certain other conditions are met, Aladdin Music may develop and own the Music Project in accordance with the terms described herein. If such conditions are not met, LCNI has the right to select the method in which it will participate in the Music Project, if at all. See "Risk Factors--Completion of the Mall Project and the Music Project." Pursuant to the London Clubs Purchase Agreement, the Company has reimbursed the Trust on the Issue Date $3 million for certain costs relating to the development of the Aladdin incurred by the Trust during 1996 and 1997 and has agreed to reimburse the Trust for out of pocket expenses of the Trust related to the development of the Aladdin after the Issue Date not to exceed $900,000. In consideration for its obligations under the Keep-Well Agreement and related arrangements, under the London Clubs Purchase Agreement, the parties have agreed that London Clubs will receive (a) an initial fee of 1.0% of a $265.0 million portion of the Company's bank debt which is supported and enhanced by the Keep-Well Agreement (such fee to be payable on the closing date of the Bank Credit Facility), and (b) 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 Company's bank debt which is supported and enhanced by the Keep-Well Agreement for each relevant twelve month period ending on an anniversary of the Bank Closing Date, which amount shall reflect the extent, if any, by which the obligations under the Keep-Well Agreement are reduced or eliminated over time (such fees shall accrue from the closing date of the Bank Credit Facility and shall be paid from available proceeds after the opening date of the Aladdin). DESIGN/BUILD CONTRACT OVERVIEW. The Company and the Design/Builder have entered into the Design/Build Contract for the design and construction of the Aladdin, the strip facade and related retail space of the Mall Project (the "Work") for a guaranteed maximum price ("GMP"). The GMP is guaranteed by the Design/Builder to be a maximum of $267.0 million. The GMP includes the Design/Builder's Fee (as defined in the Design/Build Contract), the cost of the Design/Builder's Controlled Insurance Program ("CIP") and the Design/ Builder's costs necessarily incurred by Design/Builder in the proper performance of its design/build obligations under the Design/Build Contract (such costs collectively, the "Costs"). The Design/Builder's Fee shall be the lesser of (a) the lump sum fixed amount of $13.6 million and (b) 6.5% of the aggregate of all trade subcontracts plus the price of any trade work performed by the Design/Builder. The Design/ Builder's General Conditions Costs shall not exceed the total sum of $22.0 million. Any costs incurred in excess of $22.0 million are nonreimbursable and will be paid by the Design/Builder. The Costs shall not be higher than prices and rates approved in advance by the Company, unless the Design/Builder has received the Company's prior written consent to incur premium expenses. The Costs include only: (i) labor costs for the Design/Builder in connection with the Work; (ii) trade subcontract costs; (iii) costs of materials and equipment incorporated in the completed construction; (iv) costs of other materials and equipment, temporary facilities and related items; (v) miscellaneous costs, such as premiums for insurance not covered by the CIP, but required by the Design/Build Contract, sales, use or similar taxes, fees and assessments associated with permits, licenses and inspections that are the responsibility of the Design/Builder; (vi) other costs incurred in the performance of the Work and to the extent approved in advance in writing 105 by the Company; and (vii) costs associated with emergency repairs to damaged, defective or nonconforming Work. As an incentive to control costs, the Company has agreed to pay the Design/Builder 60% of the aggregate net savings made by the Design/Builder in incurring costs below the trade budget of $230.0 million with respect to labor, equipment and materials from the various subcontractors and vendors performing work under the Design/Build Contract. The Design/Builder will be liable for any costs exceeding the GMP, unless the Company changes the scope of the Work. If the Company requests certain changes to the scope of the Work, then pursuant to the Bank Completion Guaranty, the Trust, Bazaar Holdings and London Clubs have jointly and severally agreed, whenever there is a construction cost increase caused by any such change, and subject to certain qualifications, to contribute cash to the Company to fund such increases. COMPENSATION FOR EARLY/LATE COMPLETION. In lieu of the Company procuring, at the Design/Builder's cost, a liquidated damages insurance policy or a business interruption insurance policy to compensate the Company for late completion of the Work, the Company has paid the Design/Builder $2.0 million as a bonus advance (the "Bonus Advance"). The Design/Builder may use the Bonus Advance to buy liquidated damages insurance or it may choose to self-insure. In either event, the Design/Builder can keep the Bonus Advance if the project is finished on or before the date set for Substantial Completion. The Substantial Completion Date (as defined in the Design/Build Contract) is 790 calendar days from either January 12, 1998 or the date notice to proceed is received from the Company, whichever is later. Said period is referred to in the Design/Build Contract as the "Contract Time" and may only be adjusted in accordance with the Design/Build Contract. As a further bonus, the Design/Builder shall be entitled to receive $100,000 for each day, up to but not to exceed 90 days, that the Work is substantially completed in advance of the date of Substantial Completion. If the Design/Builder fails to achieve Substantial Completion of the Work within the Contract Time, the Design/Builder must pay back the $2.0 million Bonus Advance to the Company. Furthermore, the Design/Builder must pay the Company, as liquidated damages, $100,000 per day starting on the first day after the Substantial Completion date and continuing up to, but not exceeding, 90 days thereafter. PAYMENT. The Design/Builder must make an itemized application for payment, on or about the 25th day of each month, based on an approved schedule of values certified by the Design/Builder and ADP and supported by such data to substantiate the Design/Builder's right to payment. Simultaneously with each payment the Design/Builder must and must cause all subcontractors and vendors to waive their mechanics lien rights for the labor, equipment and materials covered by the payments made to the Design/Builder. The Design/Builder agrees to pay when due all bills for labor, materials, equipment or services connected with the Work. If a person or entity who provided any service, labor, equipment or materials to the Design/ Builder in connection with the Complex files a lien against the Company's property, the Design/Builder shall promptly bond the lien with a legally sufficient undertaking. The Company may also deduct the amount of the lien from any payments due to the Design/Builder until such lien is bonded or otherwise discharged. The Company is entitled to retain 10% of all monies due to the Design/Builder under the monthly applications for payment (excluding the Design/Builder's fee and General Conditions) until the Work is 50% complete. The Design/Builder may, at its sole cost and expense, substitute an irrevocable letter of credit for any retainage held by the Company or on the Company's behalf. WARRANTIES AND GUARANTEES. The Design/Builder's construction warranties and/or guarantees extend for one year after the Substantial Completion date. The Design/Builder guarantees that its construction workmanship shall conform to good construction practices applicable to projects of this type and that the Work shall comply with the Design/Build Contract requirements, all applicable laws, codes and regulations. The Design/Builder also guarantees that all materials, equipment and supplies incorporated into the Work will be new, of the best quality of the kind specified in accordance with industry standards, and shall be fit for its intended purpose. Furthermore, the Design/Builder warrants that: (i) the Design/Builder and 106 its subcontractors are experienced, qualified and, where required by law, licensed to perform their respective portions of the Work; and (ii) the design of the Work will be in accordance with all agreed upon requirements, and all applicable federal, state and local codes, rules, ordinances and regulations. The Design/Builder agrees to prosecute the enforcement of all subcontractor and vendor warranties at its sole costs and expense during the one year period after the Substantial Completion Date. The Design/Builder shall assign to the Company all subcontractor or vendor warranties and/or guarantees still surviving and in effect more than one year after the Substantial Completion Date. The Design/Builder's warranties and/or guarantees exclude damages or defects caused by modifications to the Work directed by the Company and not performed by the Design/Builder or its subcontractors, if the modifications to the Work were performed without the knowledge and written consent of the Design/Builder. The Design/Builder's warranty shall not apply to damages or defects caused by ordinary wear and tear, insufficient maintenance, improper operation or improper use by the Company. INSURANCE. The Company and the Design/Builder have elected to implement the CIP whereby the Company shall pay the Design/Builder for all associated premiums to provide the following insurances: General Liability, Workers' Compensation, Excess Liability, Contractual Liability and All Risk Builder's Risk for the Company, the Design/Builder and all subcontractors of every tier. The Design/Builder agreed that, where necessary or requested, each policy it procures will identify the Company as either a Named Insured or an Additional Insured and must contain full waivers of subrogation. The following is a synopsis of the coverage for each of the required policies: - - WORKERS' COMPENSATION. The Workers' Compensation policy covers liability imposed by the workers' compensation and/or occupational disease statute of the State of Nevada and any other state or governmental authority having jurisdiction or related to the Work being performed. Employers' liability is limited to $1.0 million bodily injury per accident per employee, $1.0 million bodily injury per disease per employee and $1.0 million policy limit by disease. The extensions of coverage include other states, voluntary compensation and employer's liability coverage, 60 day notice of cancellation except 10 days for non-payment, Borrower/Servant coverage as necessary, designated work place endorsement, alternate employer endorsement and amendment of Notice of Occurrence. - - COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial General Liability Insurance shall be provided with a combined single limit for bodily injury and property damage of not less than $2.0 million per occurrence with a $2.0 million annual aggregate. Coverage includes, but is not limited to, personal injury liability, blanket contractual liability covering contractual liability assumed under the Design/ Build Contract, employees included as additional insureds, broad form property damage liability, cross liability, incidental medical malpractice coverage, excavation, collapse and underground hazard. Extensions of coverage includes blanket waiver of subrogation, fellow employee amendment-supervisor and above, unintentional errors and omissions, stop gap liability for monopolistic fund states, cancellation and non-renewal-60 days, except 10 days for non-payment, amendment of notice of occurrence, contingent loading and unloading of vehicles-excess, limitation of coverage to designated premises of project and absolute asbestos exclusion. - - EXCESS INSURANCE. Design/Builder shall provide excess insurance on a following form basis with limits for bodily injury and property damage of not less than $100.0 million per occurrence and annual aggregate. This insurance policy or policies will contain three years extended coverage on products and completed operations after that portion of the Complex is put to its intended use or a notice of final completion of the Work has been issued by the Company, whichever occurs last. - - RISK OF LOSS. The Design/Builder shall insure for all risk of loss to property of the Company, the Design/Builder or any subcontractor on a "completed value basis." The Design/Builder's risk of loss under the Design/Build Contract is limited to all work in place, and all materials and equipment not in place but stored on or off the work site and intended for permanent use therein. Furthermore, the Design/Builder agrees to insure or self-insure all inland or ocean transit damage losses (in excess of 107 carrier liability) to the property of the Company and to the property purchased for the account of the Company for incorporation in the Work. ADDITIONAL INSURANCE. Additionally, the Design/Builder has agreed to procure and maintain the following, which is not included in the CIP: (i) Automobile Liability Insurance, with limits of not less than $1.0 million combined single limit for bodily injury and property damage; (ii) "all risk" coverage the Design/Builder may deem necessary for protection against loss of owned or rented capital equipment and tools, including any tools owned by mechanics, and any tools, equipment, scaffolding, staging, towers and forms owned or rented by it or its subcontractors; (iii) "Off-Site Work," including Workers' Compensation and Commercial General Liability Insurance; (iv) umbrella liability in excess of Employer's Liability, General Liability and Automobile Liability (no more restrictive than the underlying insurance) with limits of $5.0 million; and (v) a project-specific insurance policy for errors and omissions in the amount of $5.0 million from ADP. The policy referred to in (v) is subject to the Company's review and approval and covers all aspects of the design of those parts of the Complex covered by the Work. TERMINATION OF CIP. In the event of non-enrollment or termination of the CIP, the Design/Builder and/or its subcontractors agree to provide, pay for, and maintain in effect the following types of coverage with insurance companies satisfactory to the Company: Commercial General Liability Insurance, Workers' Compensation, Automobile Liability Insurance, Tools and Equipment Floater Policy, Insurance for "Off-Site Work," and Umbrella Liability. For all of these policies the Design/Builder must obtain a waiver of subrogation against the Company and all other named insureds and their agents and employees. INDEMNIFICATION. The Design/Builder agrees and will cause each of its subcontractors and vendors to agree in writing to defend, indemnify and hold harmless to the fullest extent permitted by law the Company from and against all liability incurred by the Company in the defense, settlement or satisfaction of any claim of third parties which arise or are alleged to arise out of any negligence, act or omission by the Design/Builder, subcontractor, or vendor or their employees or agents or which arise or are alleged to arise from the performance of the Work or any warranty and/or guarantee work pursuant to the Design/Build Contract or any subcontract or purchase order with any subcontractor or vendor. Neither the Design/ Builder nor any of its subcontractors or vendors agree to indemnify the Company to the extent harm results from the Company's gross negligence or willful misconduct, or where indemnity is precluded pursuant to the applicable provisions of the laws of the State of Nevada. FORCE MAJEURE. Any delays in or failure of performance by either the Company or the Design/Builder arising from a "Force Majeure" occurrence, which includes, but is not limited to, labor disputes, civil disturbances, riots, fire, weather which is both severe and unusual, governmental actions, acts of war, or acts of God, shall not constitute a default under the Design/Build Contract. A Force Majeure occurrence shall not constitute a waiver of either party's obligations under the Design/Build Contract; however, time adjustments shall be made to the Contract Time. CANCELLATION OF DESIGN/BUILD CONTRACT. The Design/Build Contract may be canceled for convenience by the Company in whole or in part, at any time, and due to any circumstances by written notice. After such cancellation, the Design/Builder shall do only such work as may be necessary to preserve and protect the Work already in progress. The Design/Builder shall make every reasonable effort to process cancellation, upon terms least costly to the Company, of all existing orders to vendors and subcontractors. Upon such cancellation, the Design/Builder agrees to waive any claims for delays, acceleration, disruptions, or consequential damages, direct or indirect, including, but not limited to, loss of anticipated income or profits and unabsorbed or unrealized overhead for home office or field office on account thereof, and agrees that the sole remedy is to receive payment of: (i) the contract sum earned for work completed and accepted, equivalent to the portion of the Work partially completed, based on the percentage of the Work performed using the approved schedule of values for the Design/Builder's monthly payment requisition, (ii) the actual reasonable cost incurred by the Design/Builder in securing and protecting the Work in progress against loss, damage or deterioration, (iii) reasonable demobilization costs, (iv) standby costs, 108 (v) reasonable cancellation or deferment charges of suppliers, (vi) the actual cost to the Design/Builder of materials, and equipment in possession of the Company not sold or disposed of, and left at the Project Site, (vii) all actual costs associated with relocation of key personnel, who were specially transferred by the Design/Builder to Las Vegas specifically for the Work, and (viii) other special reasonable costs and fees for terminating or suspending the Work, preserving the Work accomplished, and turning such Work product over to the Company. CLAIMS AND DISPUTES. All claims arising under the Design/Build Contract shall be directed by the Design/Builder in the first instance to the entity that is the on-site representative of the Company promptly after the claim arises. The decision of the Company's on-site representative may be appealed by notice in writing directly to the Company. If the Company has not made a decision in writing within 10 days thereafter, either party may invoke arbitration. Any controversy, claim, or dispute arising out of or in connection with the Design/Build Contract shall, upon the written request of either party, be settled by arbitration in accordance with the Construction Industry Rules and the Supplementary Procedures for Large, Complex Disputes of the American Arbitration Association then in effect. The judgment of the award may be entered in any court having jurisdiction thereof. All arbitration hearings shall be held in Las Vegas, Nevada and will be administered by the Nevada Regional Office of the American Arbitration Association. FLUOR GUARANTY In lieu of performance and payment bonds, Fluor has entered into the Fluor Guaranty. Fluor has made certain guarantees regarding the performance by the Design/Builder of all the Design/Builder's obligations under the Design/Build Contract. The Fluor Guaranty is absolute, irrevocable and continuing. If Design/Builder fails to perform any of its obligations under the Design/Build Contract, or commits any breach, Fluor shall immediately take such steps as may be necessary to have the Design/Builder perform the Design/Builder's obligations under the Design/Build Contract, or remedy any breach or take such steps as may be necessary itself, or through a third party other than the Design/Builder, to perform all of the Design/Builder's obligations under the Design/Build Contract, or to remedy any breach. The Company is not required to proceed first or at all against the Design/Builder or any other person before enforcing the terms of the Fluor Guaranty. ENERGY AGREEMENTS Pursuant to a development agreement (the "Development Agreement"), the Energy Provider will design, engineer, procure and construct a facility (the "Plant") capable of serving the Company's specified electricity requirements, chilled water requirements and hot water requirements (collectively, the "Services") of certain parts of the Complex. Pursuant to an energy services agreement (the "ESA"), the Energy Provider will own and operate the Plant to distribute the Services to the Aladdin and the Music Project for an initial twenty year term. TrizecHahn is currently considering whether to utilize the Plant or arrange for alternate energy sources for the provision of electricity, hot and cold water and heating and cooling for the Mall Project. DEVELOPMENT AGREEMENT The Company has entered into a Development Agreement with the Energy Provider, pursuant to which the Energy Provider will develop and construct the Plant to serve the energy requirements of certain parts of the Complex. Once developed and constructed in accordance with the Development Agreement, the Plant will supply the Services to such parts of the Complex pursuant to the Energy Service Agreement, described below. The design and construction of the Plant will be at the sole cost and expense of the Energy Provider; provided, however, the Energy Provider shall not be responsible for costs in excess of $40 million unless agreed to by the Energy Provider. Specifically, the Energy Provider will be responsible, at its sole cost and expense, for, among other things: (i) designing, engineering, procuring, constructing, 109 start-up, and performance testing of the Plant; (ii) compliance with applicable Laws and Government Approvals; (iii) safeguards for the protection of the Plant; (iv) obtaining all necessary construction materials, equipment and supplies; (v) providing all necessary labor and personnel; (vi) developing and complying with a Quality Control and Inspection Program; and (vii) completing the Plant in accordance with the schedule set forth in the Development Agreement. As discussed below, payments to the Energy Provider for the Capacity Charge (as defined herein) under the Energy Service Agreement will be based, in part, on the costs incurred by the Energy Provider for the design and construction of the Plant. The Energy Provider will appoint a Project Manager who will be responsible for daily supervision of all activities relating to the design and construction of the Plant. The Project Manager will serve as a single point of contact for the Company with the Energy Provider. The Energy Provider also will develop a Project Plan, which will be comprised of a schedule for the development and construction of the Plant. The Project Plan will include a definition of the work to be completed as well as a schedule of milestones and Critical Path Activities. In consultation with the Company, the Energy Provider will prepare a request for proposals for an Engineering, Procurement and Construction Contractor ("EPC Contractor"), and will solicit bids from at least three qualified contractors. From the bids that are received that are acceptable to the Company, the Energy Provider will retain an EPC Contractor. The EPC Contractor will provide a guaranteed maximum price for the design and construction of the Plant. The Energy Provider and the EPC Contractor will then prepare design development plans and specifications for the Plant. The Plant will be constructed in accordance with such plans and specifications. The Company has the right to inspect all of the work performed and to comment on all aspects of the design and construction of the Plant. In the event the Energy Provider has failed to achieve Critical Path Activities when and as set forth in the Project Plan, and the Company reasonably and in good faith believes that such failure is reasonably likely to prevent the Energy Provider from achieving Substantial Completion by the Substantial Completion Deadline and Final Completion by the Final Completion Deadline, the Company may so inform the Energy Provider. If the Energy Provider does not improve performance to the Company's satisfaction, the Company may require an increase in the Energy Provider's labor force, number of shifts, overtime operations, days of work per week and/or equipment, all costs of which shall be borne by the Energy Provider. The Energy Provider also will have a Contingency Plan in place which provides for the rental by the Energy Provider of transportable boiler and chiller plants to ensure delivery of hot water and chilled water in accordance with the terms of the Energy Service Agreement in the event completion of the Plant is delayed for any reason. Unless the delay is due to a Force Majeure Event or the fault of the Company, the Contingency Plan will be implemented at the Energy Provider's sole cost and expense. If the Energy Provider is in default of its obligations pursuant to the Development Agreement and the Energy Provider either fails to cure such default within ten days or fails to satisfy the Company that the default can be cured within a time period reasonably satisfactory to the Company and promptly commences and pursues remedial action, the Company may terminate the Development Agreement. As explained below, Unicom, the Energy Provider's ultimate parent, has guaranteed completion of the Plant in accordance with the Development Agreement up to a maximum liability of $30.0 million. See "--Unicom Guaranty." Upon the Company's termination of the Development Agreement, Unicom Corporation either will complete the Plant in accordance with the terms of the Development Agreement or will pay up to $30.0 million to have the Plant so completed. In the event the performance of the Company or the Energy Provider is delayed or prevented due to a Force Majeure Event (as defined in the Energy Service Agreement) and such delay or prevention could not reasonably be avoided or mitigated, the party claiming such delay or prevention will be excused from performing its obligations under the Development Agreement for the period of delay or interruption caused by the Force Majeure Event. Within 72 hours after a party does become or should become aware of a Force Majeure Event, such party will notify the other. Within seven days of such notice, the party claiming the Force Majeure Event will deliver a notice to the other describing the anticipated impact of the Force Majeure Event and within 10 days of the end of the Force Majeure Event will provide a notice of 110 extension of its obligations. If the parties disagree as to the latter notice and are unable to resolve their dispute, the dispute will be resolved in accordance with the dispute resolution provisions of the Development Agreement, described below. The Company will not be responsible for the Work or for the Energy Provider's failure to perform the Work in accordance with the terms of the Development Agreement. Nor will the Company be responsible for the acts or omissions of the Energy Provider or its agents, contractors or employees. The Company assumes no responsibility for injury or claims resulting from failure of the Work to comply with applicable Laws or Government Approvals or from Defects or Deficiencies. The Company and the Energy Provider agree to cooperate and to communicate with each other concerning the terms of the Development Agreement and other matters relating to the Plant. If a dispute arises between the Company and the Energy Provider, the parties jointly may request that the dispute be resolved by arbitration in accordance with the provisions of the Commercial Arbitration Rules of the American Arbitration Association. If the parties do not agree to submit the dispute to arbitration, either party may bring the dispute to any court of competent jurisdiction for resolution. The Development Agreement will be governed by and construed in accordance with the laws of the State of Nevada. Neither the Company nor the Energy Provider may assign its interest or delegate its duties under the Development Agreement without the prior written consent of the other (not to be unreasonably withheld), except that either party may assign its interest in the Development Agreement if a concurrent assignment of its interests in the ESA has been made pursuant to the ESA to the same entity. LEASE Pursuant to a lease (the "Lease"), the Company has leased the Plant Site to the Energy Provider for a fixed monthly base rent of $1.00. The Lease, which has a 20-year term and provides for 5-year renewal terms, is a "net" lease, pursuant to which the Energy Provider will pay all Impositions. The Energy Provider may not use the Plant Site to provide services other than the Services without the prior consent of the Company. In the event the Company gives such consent, the fixed monthly base rent will be adjusted and other reasonable modifications will be made to the Lease. UNICOM GUARANTY The obligations of the Energy Provider to complete the Plant in accordance with the Development Agreement and in a manner capable of delivering the energy requirements in accordance with the Energy Service Agreement are guaranteed by the Energy Provider's ultimate parent, Unicom ("the Unicom Guaranty"). Unicom agrees that the Unicom Guaranty shall be a continuing guaranty and that the Company shall not be required to prosecute enforcement or other remedies against the Energy Provider or any other guarantor of the Energy Provider's obligations before calling on Unicom for performance. Unicom agrees that if for any reason the Energy Provider shall fail or be unable to punctually and fully perform or cause to be performed any of its obligations under the Development Agreement, Unicom shall perform or cause to be performed such obligations promptly upon demand. Unicom's obligations are limited to an amount equal to $30.0 million dollars (or, under certain circumstances, an amount less than $30.0 million) and shall not be reduced until Substantial Completion of the Plant. Upon Substantial Completion, the Unicom Guaranty shall be reduced by the amount invested by the Energy Provider, except that ten percent shall be retained to provide assurance that Final Completion shall occur in accordance with the milestone schedule under the Development Agreement. 111 ENERGY SERVICE AGREEMENT The Company and the Energy Provider have agreed to the form of an energy service agreement (the "ESA"), which is currently attached as an exhibit to the Development Agreement. The ESA is expected to contain provisions as described herein. The ESA sets forth the rights and obligations of the Company and the Energy Provider relating to, among other things, the development, testing, commissioning, operation and maintenance of the Plant; the making of Capacity and Consumption Payments; risk allocation in the event of a force majeure; events of default; rights of early termination and the consequences thereof; liability and indemnity obligations; and assignment and transfer of interests thereunder. The initial term of the ESA is twenty years from the Commencement Date, with three five-year renewal terms. CONDITIONS PRECEDENT. The obligations of the Company and the Energy Provider under the ESA are subject to the satisfaction of various conditions precedent, a number of which have already been satisfied. The Company expects that all remaining conditions precedent will be timely satisfied in the ordinary course of business. OPERATION, MAINTENANCE AND REPAIR. The ESA requires that the operation, maintenance and repair of the Plant be conducted in accordance with applicable laws and regulations and the Project Scope, as defined in the ESA. The Energy Provider will be required to have its personnel on duty at the Plant twenty-four hours per day, seven days per week. The ESA sets forth a scheduling procedure for scheduled maintenance. Inspection, testing, preventive and corrective maintenance, repairs, replacements and improvements of the Plant will be carried out during such scheduled maintenance periods. PAYMENTS. The ESA provides for a two-part price structure consisting of a capital component (the "Capacity Charge") to be paid monthly whether Services are taken or not by the Complex and an energy component (the "Consumption Charge") to be paid monthly for Services actually taken by the Complex. The capital component will be paid in advance. The energy component will be paid in arrears. The Capacity Charge and the Consumption Charge are expected to be adjusted annually by reference to the Consumer Price Index or a similar index. FORCE MAJEURE. Each party will be excused from performance of its respective obligations under the ESA if performance of such obligations is materially and adversely affected by a Force Majeure Event, although each party is obligated to take reasonable steps to restore its ability to perform. Force Majeure Events are circumstances that, by the exercise of reasonable diligence, the party is unable to overcome or prevent. Force Majeure Events include, but are not limited to, acts of God, war, civil commotion, embargoes, epidemics, fires, cyclones, droughts and emergencies other than those caused by the negligence or wilful misconduct of the party claiming a Force Majeure Event. DEFAULTS. The ESA divides events of default into Energy Provider events of default and Complex events of default. A party receiving notice of certain defaults has thirty days to cure such default. If not cured within such time period, an uncured default may lead to the termination of the ESA. ENERGY PROVIDER DEFAULTS. If at any time after the Commencement Date the Energy Provider fails to provide Services in accordance with the ESA (a "Performance Failure"), the Energy Provider is required to: (i) provide immediate notice to the Complex and provide the Complex with a corrective action plan consistent with a contingency plan to be developed prior to the Commencement Date; (ii) use best efforts to correct or cure such Performance Failure; and (iii) provide immediate access to the Complex and work together with the Complex to identify the source of the Performance Failure. After a Performance Failure has existed for thirty two (32) consecutive hours, or thirty two (32) hours of any forty eight hour (48) period, the Complex will: (i) be entitled to assume control of the Plant and maintain such control until such Performance Failure has been cured or corrected and take any action reasonably intended to cure or correct such failure at the Energy Provider's expense; (ii) be entitled to an abatement of the Capacity Charge for the affected Service; (iii) have the right to hire, at the Energy Provider's expense, an 112 independent consultant to review the circumstances surrounding the Performance Failure and make written recommendations as to a corrective action to be implemented at the Energy Provider's sole expense; and (iv) in the event the Energy Provider fails to promptly implement the consultant's recommendations, be entitled to terminate the ESA and purchase the Plant from the Energy Provider. In the event the ESA is terminated pursuant to an Energy Supplier Default, the purchase price for the Plant shall be equal to the Energy Provider's depreciated basis calculated on a twenty year straight line method in the Plant, less any costs incurred for required repair and/or maintenance. OPTION TO PURCHASE. The Company shall possess a continuing option to purchase the Plant at any time prior to the termination of the ESA, exercisable by written notice given to the Energy Provider not less than one year prior to the date upon which such purchase shall close as specified in the notice. It is a condition to the Energy Provider's obligation to consummate the sale that the Company shall assume, indemnify and hold the Energy Provider harmless from all obligations of the Energy Provider accruing after the closing under all contracts and agreements with respect to the Plant under which any performance obligations will continue following such sale. At the closing, the Energy Provider will assign and the Company will be obligated to assume all such contracts and agreements. ASSIGNMENT AND TRANSFER. Neither the Company nor the Energy Provider shall be permitted under the ESA to assign or transfer its rights under the ESA without the prior written consent of the other. Notwithstanding this, the ESA provides that the Company may assign its rights to any affiliate and that both the Company and the Energy Provider may assign their respective rights under the ESA to lenders to whom either party provides a security interest in their respective properties in connection with financing each of the properties. In addition, the Energy Provider is prohibited from effecting changes in its ownership, except that it may issue ownership interests to certain specified entities which are public utilities or affiliates thereof. DISPUTE RESOLUTION. In the event of a dispute under the ESA, either party may at any time refer the dispute to be settled by binding arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association. CONSTRUCTION, OPERATION AND RECIPROCAL EASEMENT AGREEMENT AND RELATED AGREEMENTS The Company, Bazaar, AMH and the Energy Provider (collectively, the "REA Parties") have entered into (except with respect to the Energy Provider, who is not a signatory but is bound by) the Construction, Operation and Reciprocal Easement Agreement (the "REA"). AMH is expected to assign its rights and obligations under the REA to Aladdin Music, and Aladdin Music is expected to assume such rights and obligations, upon execution of the Aladdin Music Operating Agreement. The REA sets forth agreements among the REA Parties regarding, among other things, easements, construction standards and requirements, encroachments, use and operating covenants, maintenance requirements, insurance requirements, casualty and condemnation and the sharing of certain facilities and costs relating thereto. The REA has been recorded in the Official Records of Clark County, Nevada and the agreements therein will run with the land, affecting subsequent owners and lessees thereof. The Site Work Development and Construction Agreement (the "Site Work Agreement") entered into among the Company, AHL and Bazaar provides, among other things, that the Company and AHL will, at their cost and expense, perform certain demolition work and certain site work including certain infrastructure improvements and the construction of the initial building shell for the Aladdin Improvements (as defined herein) and the Bazaar Improvements (as defined herein). The Site Work Agreement also provides that Bazaar will contribute approximately $14.2 million (including interest) (the "Bazaar Site Work Contribution") to the cost of the site work. The Site Work Agreement further provides that the Company will construct the Aladdin Improvements and Bazaar will construct the Bazaar Improvements in accordance with a certain construction schedule and pursuant to good and workmanlike standards and with first-class materials. 113 The Site Work Agreement and the REA provide that the Company will: (i) construct a first-class hotel and casino facility (the "Aladdin Improvements") on the Gaming Site (as defined in the REA); (ii) lease the Bazaar Site (as defined in the REA) to Bazaar, which covenants to construct and operate a first-class Retail Facility (as defined in the REA) and related improvements (the "Bazaar Improvements"); (iii) lease the Aladdin Music Site (as defined in the REA) to AMH, which covenants to construct and operate a first-class hotel and casino facility (i.e., the Music Project hotel and casino); and (iv) lease the Utility Site (as defined in the REA) to the Energy Provider, which covenants to construct and operate a central utility plant (the "Central Utility Plant"). The Bazaar Improvements include the Carpark and additional surface-level parking facilities beneath and adjacent to the Retail Facility for approximately 350 motor vehicles (the "Common Parking Area"). The REA also provides that Bazaar grants, as to its ownership or leasehold interest in its tract, to the other REA Parties, as to their ownership or leasehold interests in their tracts, a non-exclusive easement for automobile parking in and on the Common Parking Area. The use and operation of the Common Parking Area is also subject to the Common Parking Area Use Agreement (the "Parking Agreement") entered into between the Company and Bazaar, pursuant to which Bazaar covenants to maintain and operate the Common Parking Area for the non-exclusive use of all the REA Parties. The Parking Agreement provides, among other things, that the Company (i) will pay a fee of $3.2 million per year, payable monthly and adjusted annually pursuant to a consumer price index-based formula, for usage of the Common Parking Area, (ii) will pay its proportionate share of the operating costs attributable to the Common Parking Area, and (iii) has the right to assign a portion of its usage rights and obligations to Aladdin Music, although such assignment may not relieve the Company of any of its obligations in connection therewith. If and when Planet Hollywood's subsidiary becomes a member of Aladdin Music, the Parking Agreement, by its terms, shall be amended and restated to add Aladdin Music as a party, and the Company's proportionate share of the operating costs attributable to the Common Parking Area shall be reduced. The REA contains agreements pursuant to which the REA Parties, as to their ownership or leasehold interests in their respective tracts, grant to the other REA Parties, as to their ownership or leasehold interests in their respective tracts, easements for, among other things, (i) vehicular and pedestrian access, (ii) installation and operation of utilities, (iii) construction, (iv) common structural support, (v) installation and maintenance of exterior lights to highlight grantees' buildings, (vi) truck loading, (vii) encroachments and the maintenance thereof, (viii) roof space for the installation and operation of certain telecommunication and ventilation equipment, (ix) setbacks, (x) maintenance and construction of grantees' buildings, (xi) construction and operation of a proposed monorail and (xii) signage. The REA sets forth covenants among the REA Parties to, among other things, (i) perform the construction of the Redeveloped Aladdin (as defined in the REA) in accordance with first-class standards, (ii) cooperate with one another and with each REA Party's architects, engineers and contractors and (iii) exchange certain plans and specifications and other information. Certain modifications of any REA Party's plans or specifications will be subject to certain approval rights of certain other affected REA Parties. The REA also provides that the Company may construct certain optional improvements, including an office tower and/or time-share facilities. Pursuant to the terms of the REA, the Company has covenanted that it shall complete (subject to force majeure) the Aladdin Improvements, and Bazaar has covenanted that it shall complete (subject to force majeure) the Bazaar Improvements, on or before the First Scheduled Opening Date (as defined in the Site Work Agreement). Similarly, AMH has covenanted that it shall complete the Music Project hotel and casino on or before the Second Scheduled Opening Date (which is currently anticipated to be six (6) months after the First Scheduled Opening Date). The REA provides that, subject to certain operational requirements of the other REA Parties, each REA Party will operate the improvements on its tract in a first-class manner, as more particularly set forth in the REA. 114 The REA contains agreements among the REA Parties to maintain their improvements in good order and in first-class condition, reasonable wear and tear excepted. The REA also allocates responsibility among the REA Parties to maintain the Common Area (as defined in the REA) of the Site (as defined in the REA). Responsibility for the payment of the costs for such Common Area maintenance is allocated proportionately; and the Company has the right to assign a portion of its payment obligation to AMH, although such assignment may not relieve the Company of any of its obligations in connection therewith. The REA contains provisions requiring that in the event of any casualty or condemnation, each REA Party shall, at its cost and expense, restore the improvements located on its respective tract or tracts, including the Common Area thereon, regardless of the availability of insurance proceeds or condemnation awards; provided, however, that (a) with respect to damage or condemnation affecting the Common Parking Area, the costs and expenses in excess of available insurance proceeds or condemnation awards shall be shared by each REA Party in accordance with its respective tract's proportionate share of parking spaces required in accordance with local law, and (b) certain restoration obligations expire 25 years (or such longer period approved by the REA Parties) after the Second Scheduled Opening Date. The REA contains provisions establishing self-help remedies for REA Parties affected by an REA Party's failure to meet its maintenance or restoration obligations set forth in the REA. Certain disputes between the REA Parties that arise under the REA are, pursuant to the REA, to be decided pursuant to binding arbitration, as more particularly set forth in the REA. The REA Parties' maximum liability to one another under the REA is limited to such REA Parties' interests in the Redeveloped Aladdin, as more particularly set forth in the REA. AGREEMENTS RELATING TO THE MALL PROJECT OR THE MUSIC PROJECT BAZAAR LLC OPERATING AGREEMENT TH Bazaar Centers Inc. ("THB"), a wholly owned subsidiary of TrizecHahn, and Bazaar Holdings (collectively, the "Bazaar Members") are parties to an operating agreement (the "Bazaar LLC Operating Agreement") setting forth their agreement as to the relationship between Bazaar and the Bazaar Members and among the Bazaar Members themselves as to the conduct of the business and internal affairs of Bazaar. The Bazaar Operating Agreement may be amended or terminated by the Bazaar Members without the consent of any of the Aladdin Parties, London Clubs, the Company, or the holders of the Notes or the Warrants. MANAGEMENT. Pursuant to the Bazaar LLC Operating Agreement, the business and affairs of Bazaar shall be managed by a board of managers (the "Bazaar Board"), consisting of four members (each, a "Bazaar Board Member"). Each Bazaar Member has designated two Bazaar Board Members and may, from time to time, change its designated representatives on the Bazaar Board. The number of representatives on the Bazaar Board may be increased by the Bazaar Board so long as each Bazaar Member maintains an equal number of representatives. Notwithstanding the foregoing, if any Bazaar Member acquires or obtains a greater than 50% interest in Bazaar, then such controlling Bazaar Member shall have the right to designate a majority of the representatives on the Bazaar Board, and the number of representatives selected by the minority Bazaar Member shall be reduced proportionately. MALL GUARANTY. Subject to certain conditions, THB's parent, TrizecHahn, Bazaar Holdings, AHL and the Trust have agreed to jointly and severally assume recourse liability and enter into the Mall Guaranty in favor of the Mall Lender upon completion of the Mall Financing, until certain earnings and loan to value targets have been met. CONDITIONS PRECEDENT. The Bazaar LLC Operating Agreement contains certain conditions precedent to the construction of the Mall Project, including that the Bazaar Members have closed on the Mall Financing and that the Trust shall provide a form of credit enhancement with respect to a portion of its 115 obligations under the Mall Guaranty. See "Risk Factors--Completion of the Mall Project and the Music Project." TRANSFER RESTRICTIONS. The Bazaar LLC Operating Agreement contains customary restrictions on the transfer of interests by Bazaar Members. In particular, no Bazaar Member may transfer its interests to a Prohibited Transferee without the prior consent of the other Bazaar Members. The term "Prohibited Transferee" includes: (a) any owner, operator or manager of any resort hotel located in Clark County, Nevada, (b) any shopping center owner, manager and/or developer if THB will continue to be a Bazaar Member following the transfer, (c) any person or entity primarily engaged in the business of owning or operating a casino or other similar type of gambling facility, (d) any person who has been found unsuitable or has withdrawn an application to be found suitable by the Nevada Gaming Authorities, or (e) FOCUS 2000, Inc., a Nevada corporation, or the then current owner or lessee of the real property located at the northeast corner of the Strip and Harmon Avenue, in Las Vegas, Nevada. MARKETING AND SALE OF THE MALL PROJECT. Commencing on the fifth anniversary of the opening of the Mall Project and continuing for five years, any Bazaar Member (the "Selling Member") holding a 50% or greater interest in Bazaar may cause Bazaar to offer the Mall Project for sale on the open market by delivering written notice to the other Bazaar Member (the "Non-Selling Member"). If any offer is received that the Selling Member desires to accept, the Selling Member must give written notice specifying all terms of the proposed sale to the Non-Selling Member, who shall have 30 days to elect to purchase the entire interest at the terms specified in the notice. TERM. Bazaar will continue to operate as a limited liability company until December 31, 2099, unless earlier dissolved or extended by unanimous agreement of the Bazaar Members. MALL FINANCING Bazaar has entered into a commitment letter with a syndicate of financial institutions (the "Mall Lenders") and Fleet National Bank, as Administrative Agent ("Mall Agent") for a credit facility (the "Mall Financing"), whereby the Mall Lenders will agree to lend up to $194.0 million to Bazaar to finance the Mall Project. The proceeds from the Mall Financing will be used for the construction of the themed Desert Passage, expected to contain approximately 462,000 square feet of retail space, and the approximately 4,800-space Carpark. The Mall Project is expected to open in the first quarter of the year 2000, as such date may be extended for force majeure events. TERM. The Commitment Letter provides that the Mall Financing shall mature five years from its closing. Bazaar shall have two one-year extension options if certain conditions are satisfied and at the end of the initial five year term, any unfunded commitment amount will be automatically cancelled. AMORTIZATION AND PREPAYMENT. The Commitment Letter provides that the Mall Financing will be interest-only during the initial term. During the extension terms, Bazaar will be required to amortize principal based on 25-year (during the first extension term) and 24-year (during the second extension term) mortgage-style amortization and an interest rate derived based on the then prevailing 10 year Treasury rate plus 150 bps. FEES. Bazaar will be required to pay a fee of 10 bps per annum on the unfunded loan amount. Such fee shall be computed on an actual/360-day basis and shall be payable quarterly in arrears from and after the closing. SECURITY. The loan will be secured by a deed of trust, assignment of leases and rents and security agreement which shall be a first lien on Bazaar's interest in the premises on which the Mall Project is built and the Mall Project itself. 116 COVENANTS. The Mall Financing will contain a project financial covenant based on loan to value and customary affirmative and negative covenants typical for this type of transaction. EVENTS OF DEFAULT. The Commitment Letter provides that all customary events of default for similar loan transactions, consistent with the following, shall constitute events of default under the loan documents, including: (i) (a) insolvency or bankruptcy of the Borrower or TrizecHahn, (b) breach of TrizecHahn guarantor covenants or (c) judgements against TrizecHahn in excess of $25.0 million individually or in the aggregate (which are not discharged or appealed within 60 days) and (ii) failure to pay debt service within five days after due. CONDITIONS PRECEDENT. The Commitment Letter provides that the Mall Agent's obligation to make the initial advance of the Mall Financing is subject to the satisfaction of certain conditions, including the following: (i) a minimum of 25% of total project costs shall be contributed as up-front equity prior to funding of the loan. Equity must include a minimum of $30.0 million in the form of cash invested in the Mall Project; (ii) the Mall Guaranty to be provided by TrizecHahn, Bazaar Holdings, AHL and the Trust shall be in full force and effect; (iii) the proceeds of the cash equity contribution from London Clubs and Holdings shall have been expended and the land contributions shall have been made; (iv) construction financing in the amount of approximately $410.0 million for the Aladdin shall have closed and funding thereof shall have commenced; and (v) the Bank Lenders shall have approved the commitment for FF&E Financing for the Aladdin of approximately $80.0 million. MUSIC PROJECT MEMORANDUM OF UNDERSTANDING The Company and Planet Hollywood have entered into a Memorandum of Understanding and Letter of Intent, dated as of September 2, 1997, as amended by a letter agreement dated as of October 15, 1997 (as so amended, the "Music Project Memorandum of Understanding") in connection with the formation of a joint venture between subsidiaries of the Company and Planet Hollywood to own, develop and operate the Music Project. The Music Project Memorandum of Understanding is intended to be a binding agreement (subject to certain limited conditions) with respect to certain matters regarding the formation and operation of Aladdin Music, however the parties have agreed to use their best efforts promptly to complete and execute all agreements and other documents that may be reasonably necessary to carry out the provisions of the Music Project Memorandum of Understanding. The Company anticipates that such agreements will include the following-described agreements, although the terms described below are subject to further revision and may be modified by the Company and Planet Hollywood prior to the execution of definitive documentation. ALADDIN MUSIC OPERATING AGREEMENT. It is expected that AMH and a subsidiary of Planet Hollywood (the "Music Project Members") will enter into an operating agreement (the "Aladdin Music Operating Agreement") to govern the operations of Aladdin Music. The Company has formed AMH, which it anticipates will hold (on a fully diluted basis through shares and warrants) a 50% member interest in Aladdin Music. Prior to the exercise of its warrants (the "Music Project Warrants"), AMH will own a 49% preferred membership interest ("Music Preferred Shares") and a 49% common membership interest ("Music Common Shares") in Aladdin Music, however, exercise of the Music Project Warrants will increase AMH's percentage interest in Aladdin Music to 50%. Planet Hollywood, through a subsidiary (the "Planet Hollywood Member"), will initially hold the remaining interests in Aladdin Music. CAPITAL CONTRIBUTIONS. Through AMH, the Company is expected to contribute to Aladdin Music (i) a ground lease, at nominal rent, of the approximately 4.75 acre parcel of land for the Music Project (including a right to acquire the fee interest in such land upon the receipt by the Company of necessary permits and subdivision approvals) and (ii) approximately $21.25 million in cash. The contribution value of the ground lease will be approximately $20.0 million. The Planet Hollywood Member will contribute cash to Aladdin Music in the amount of approximately $41.25 million. The contributions of the Music Project Members will be made immediately prior to, or concurrently with, the closing of construction financing 117 with respect to the Music Project, however certain pre-development costs of Aladdin Music incurred with respect to the Music Project will be contributed to Aladdin Music prior to such date. These predevelopment costs include design, architecture and organization costs. SHARES. Aladdin Music is expected to have two classes of shares (which represent units of membership interests in Aladdin Music): Music Common Shares and Music Preferred Shares (collectively, "Music Project Shares"). The above-described contributions of the Music Project Members will be deemed contributions in respect of Music Preferred Shares. Except with respect to distributions to cover tax liability of Music Project Members (or, if any Music Project Member is a pass-through entity, its equity interest holders) arising from their interest in Music, the Music Preferred Shares will have distribution, redemption and liquidation preferences over all Music Common Shares. Rights to allocations to the capital account and distributions in respect of the Music Preferred Shares will cumulate (but not compound) quarterly at the rate of 12% per annum on the capital account balance in respect thereof. Preferred distributions to the Planet Hollywood Member will have priority of payment over preferred distributions to AMH. In addition, to the extent that there is insufficient cash available for distribution to make such preferred distributions, the amounts which are not distributed will accrue (but not compound) for the benefit of the party entitled thereto. Distributions of such accrued amounts to the Planet Hollywood Member will have priority over distributions to AMH. MANAGEMENT AND DAY-TO-DAY OPERATIONS. Management of Aladdin Music will be the responsibility of a board of managers (the "Music Project Board"), comprised initially of four members designated by the Planet Hollywood Member and three members designated by AMH, until AMH exercises its warrants for the acquisition of additional Music Project Shares, at which time the Music Project Board will be comprised of four representatives each of AMH and the Planet Hollywood Member. Major decisions of the Music Project Board will require the vote of a supermajority of the board members. All decisions other than such major decisions will be delegated to an operating committee comprised of two representatives each of AMH and the Planet Hollywood Member (the "Operating Committee"). The development of the Music Project and renovation of the Theater will be delegated to the Company under the Music Project Development Agreement. Day-to-day management and operation of the Music Project and the Theater will be delegated to the Company under the Music Project Management Agreement. TRANSFERS OF SHARES. Transfers of Music Project Shares will only be permitted: (i) to affiliates of Music Project Members or persons approved by a majority of the interests held by Music Project Members; and (ii) to persons other than certain prohibited transferees after giving other Music Project Members a right of first negotiation for the acquisition of such Shares. LIABILITY, EXCULPATION AND INDEMNIFICATION. The Aladdin Music Operating Agreement will contain provisions relieving the Music Project Members, officers, employees and Music ProjectBoard Members and Operating Committee members from certain liability, fiduciary duties and conflicts and will also provide for various indemnities to such persons in respect of payment of expenses and errors and omissions insurance. GAMING MATTERS. Capital contributions, admission of new Music Project Members, transfers of shares and payment of distributions by Aladdin Music will be subject to receipt of Nevada Gaming Approvals. Music Project Members and their affiliates, directors and employees will cooperate to obtain Gaming Approvals from the Nevada Gaming Authorities, as necessary. If Nevada gaming problems arise prior to a finding of unsuitability by the Nevada Gaming Authorities, the Music Project Member causing such problem (or whose director, officer or affiliate caused such problem) shall cooperate to remedy it and, if not remedied, may be forced to sell its Music Project Shares to Aladdin Music or its designee at fair market value. 118 TERM. Aladdin Music shall continue until January 24, 2097, or such other time as agreed in writing by all Members. THE MUSIC PROJECT DEVELOPMENT AGREEMENT. Aladdin Music shall contract with the Company for the development of the Music Project and the Theater renovation pursuant to a development agreement (the "Music Project Development Agreement") on terms, and in form and substance, satisfactory to Aladdin Music and the Company. Pursuant to the Music Project Development Agreement, the Company will agree to provide services with respect to such development and renovation, including (a) the selection of contractors, subcontractors and the professional team including architects, engineers, surveyors, designers, decorators and other technical and professional consultants; (b) the negotiation on behalf of Aladdin Music of the agreements under which the contractors, subcontractors and the professional team are to be retained by Aladdin Music; (c) the supervision of the preparation of preliminary and final plans, including landscaping, interior design and graphics; and (d) the preparation of preliminary cost estimates and projections of cash flow requirements covering the development costs during the Development Period, and the preparation and updating from time to time of the development budget for approval by Aladdin Music. COMPENSATION UNDER MUSIC PROJECT DEVELOPMENT AGREEMENT. The Company will be reimbursed for its costs and expenses in connection with its activities under the Music Project Development Agreement. TERMINATION. Each of the Company and Aladdin Music are anticipated to have certain limited termination rights with respect to the Music Project Development Agreement. Any termination of the Music Project Development Agreement will entitle the Company to terminate the Music Project Management Agreement. INDEMNIFICATION. Aladdin Music shall indemnify and hold the Company harmless from claims arising out of the performance by Company of services under the Music Project Development Agreement. The Company shall indemnify and hold Aladdin Music harmless from and against any and all claims arising from or in connection with the Company's gross negligence or willful misconduct. MUSIC PROJECT MANAGEMENT AGREEMENT. Aladdin Music intends to contract with the Company for the day-to-day management and operations of the Music Project and the Theater and certain promotional services, pursuant to a management agreement in form and substance satisfactory to Aladdin Music and the Company (the "Music Project Management Agreement"). The terms of the Music Project Management Agreement are expected to be on terms at least as favorable as those which would be available from an independent third party vendor. COMPENSATION UNDER MUSIC PROJECT MANAGEMENT AGREEMENT. The Music Project Management Agreement will provide for the provision of management services by the Company for the Music Project and the Theater in exchange for a base management fee (the "Base Management Fee"), payable quarterly, equal to 1.50% of the net revenue from the Music Project and the Theater and for an additional management fee (the "Incentive Management Fee"), payable quarterly, equal to 6% of the Management Excess Net Revenue (which is the amount obtained by dividing (i) the amount of quarterly Adjusted Music EBITDA in excess of the Adjusted Management EBITDA Threshold by (ii) Profit Margin). "Adjusted Music EBITDA" means for any period Aladdin Music's earnings before (i) deductions for interest, taxes, depreciation and amortization, (ii) payment of the Incentive Management Fee, the Incentive Marketing Fee, and (iii) payment of leases for furniture, fixtures or equipment. "Profit Margin" means for any quarter, quarterly Adjusted EBITDA divided by quarterly Net Revenue. "Incentive Marketing Fee" means an additional marketing fee, payable quarterly from Aladdin Music to Planet Hollywood pursuant to the Marketing and Consulting Agreement (as defined herein) between Aladdin Music and Planet Hollywood, equal to 6% of the Marketing and Consulting Excess Net Revenue. "Marketing and Consulting Excess Net Revenue" means the amount obtained by dividing (i) the amount of quarterly Adjusted EBITDA in excess of the Adjusted Marketing EBITDA Threshold by (ii) the Profit Margin. The "Adjusted Management EBITDA Threshold" means quarterly Adjusted EBITDA of $10.0 million. The "Adjusted Marketing 119 EBITDA Threshold" means quarterly Adjusted EBITDA of $8.75 million. The Incentive Management Fee shall at all times (including, without limitation, if the Adjusted Management EBITDA Threshold is met or if there is sufficient cash available for distribution) be subordinate to debt service. To the extent that the Adjusted Management EBITDA Threshold is met but there is insufficient cash available for distribution for the payment of any or all of such Incentive Management Fee and the payment of the Incentive Marketing Fee, or if Aladdin Music is otherwise restricted by a lender from paying such fees, the Incentive Management Fee shall be subordinate to the payment of the Incentive Marketing Fee. Incentive Management Fees which are due but not paid shall accrue (together with interest thereon) for the benefit of the Company. The Incentive Management Fee shall not be payable to the Company for any quarter in which the Adjusted Management EBITDA Threshold is not achieved. In addition, pursuant to the Music Project Management Agreement, the Company shall provide certain services to the Music Project and the Theater, including, without limitation, accounting and financial services, MIS, general management and investor relation services, promotional services and other agreed upon services in the ordinary course of business by the Company for the Music Project and the Theater in exchange for reimbursement of the fully allocated cost of such services. TERM. The term of the Music Project Management Agreement shall be thirty (30) years, subject to an option on the part of the Company to extend the term for three successive ten year periods. TERMINATION FEE. In the event that the Music Project Management Agreement is terminated by Aladdin Music prior to the expiration of its term (including extension options) and prior to the time that the Music Project Warrants may be exercised, then (except under certain circumstances) the Company shall be paid a termination fee of $50.0 million and AMH shall have the right to put its investments in Aladdin Music to Planet Hollywood for an amount equal to such investment's fair market value. Once AMH is able to exercise the Music Project Warrant, all provisions relating to the termination fee and fair market purchase option shall terminate. THE MARKETING AND CONSULTING AGREEMENT. Aladdin Music is expected to contract with Planet Hollywood and an affiliate of Planet Hollywood for the provision of certain marketing and consulting services to be provided to the Music Project and for the license to the Aladdin Music of all rights to the trademarks, tradenames and related agreements which are necessary or desirable to operate and maintain a "music-themed" hotel and restaurant on the Music Project land, pursuant to a marketing and consulting agreement in form and substance satisfactory to Planet Hollywood and Aladdin Music (the "Marketing and Consulting Agreement"). The Marketing and Consulting Agreement is expected to provide for the provision of marketing and consulting services by Planet Hollywood (and/or its affiliates) for the Music Project in exchange for a base fee (the "Base Marketing Fee"), payable quarterly, equal to 2.00% of the Music Project's quarterly Net Revenue and for an additional marketing fee (the "Incentive Marketing Fee"), payable quarterly, equal to 6% of the Marketing and Consulting Excess Net Revenue. The Incentive Marketing Fee shall not be payable for any quarter in which the Adjusted Marketing EBITDA Threshold is not achieved. In addition, to the extent that the Adjusted Marketing EBITDA Threshold is met but there is insufficient cash available for distribution for the payment of any or all of such fees, or if Aladdin Music is otherwise restricted by a lender from paying the Incentive Marketing Fee, the Incentive Marketing Fee shall accrue (together with interest thereon) for the benefit of Planet Hollywood. In addition to the Base Marketing Fee and the Incentive Marketing Fee, the Marketing and Consulting Agreement shall provide that Planet Hollywood shall be reimbursed, on a quarterly basis, for its costs and expenses under the Marketing and Consulting Agreement in an amount equal to 0.5% of quarterly Net Revenue, without supporting documentation as well as for certain other approved expenses. The Marketing and Consulting Agreement is further expected to provide that Planet Hollywood shall be restricted from allowing the use or operation of similar "music concept" themed restaurants at any location in Clark County, Nevada, other than at the Music Project. 120 THE GROUND LEASE. The Company is expected to assign its ground lease (the "Music Project Lease") of the site designated for the Music Project to AMH and AMH shall assign the Music Project Lease to Aladdin Music. The Music Project Lease shall be for nominal rent and shall include the right of Aladdin Music to acquire fee title to the Music Project land upon completion of the division of the Project Site into separate legal parcels. Pursuant to the Music Project Lease, Aladdin Music shall be required to cooperate with such division and to fund its pro rata share of the costs thereof, based upon the ratio that the acreage of the Music Project land bears to the total acreage of the Project Site. THE THEATER LEASE. The Company is expected to enter into a lease agreement (the "Theater Lease") with respect to the Theater pursuant to which, among other matters, (i) Aladdin Music shall lease the Theater from the Company for a period of at least thirty (30) years on a "triple-net" basis, for nominal rent, (ii) the Company shall have certain rights with respect to the lease-back of the Theater, (iii) certain provisions shall be made relating to the promotional and security services for the Theater, (iv) Aladdin Music shall agree to renovate the Theater prior to the opening of the Aladdin and to maintain the Theater in a "first class" condition during the term of the Theater Lease. MUSIC PROJECT FINANCING Prior to the commencement of the development of the Music Project, Aladdin Music is expected to enter into a commitment letter for a credit facility with a syndicate of lenders whereby the lenders will agree to finance the construction of the Music Project. Currently, Aladdin Music is considering several proposals for such financing. 121 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following discussion is a summary of certain material federal income tax considerations relevant to the acquisition, ownership and disposition of the Warrants by a U.S. Holder. A "U.S. Holder" means a holder of a Warrant which is (i) an individual who is a citizen or resident of the United States for federal income tax purposes, (ii) a corporation or partnership created or organized in the United States or under the laws of the United States or any state thereof (including the District of Columbia), (iii) an estate (other than a foreign estate) or (iv) any trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. This summary is based upon current laws, regulations, rulings and judicial decisions some of which are not clear and all of which are subject to change, possibly with retroactive effect. Any such change could affect the continuing validity of this discussion. In addition, the validity of the conclusions contained in this summary depends upon the accuracy of representations made by officers of Holdings and projections prepared by the financial advisors to Holdings in connection with the Offering. This summary does not purport to consider all the possible federal income tax consequences of the purchase, ownership or disposition of the Warrants and is not intended to reflect the particular tax position of any beneficial owner. It addresses only U.S. Holders who hold the Warrants as capital assets and does not address beneficial owners that may be subject to special tax rules, such as foreign holders, banks, insurance companies, dealers in securities or currencies, purchasers that hold the Warrants as a hedge against currency risks or as part of a straddle with other investments or as part of a "synthetic security" or other integrated investment (including a "conversion transaction") comprised of a Warrant and one or more other investments, or purchasers that have a "functional currency" other than the U.S. dollar. In addition, the discussion does not address any aspect of state, local or foreign taxation. HOLDERS OF THE WARRANTS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF THE WARRANTS AS WELL AS THE APPLICATION OF STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX LAWS. ISSUE PRICE On the Issue Date the issue price of the Unit was allocated between the Notes and the Warrants based on their relative fair market values. Holders who purchased a Unit at original issue for its issue price have an initial tax basis for the Warrants equal to the Warrants' issue price. With respect to the $519.40 issue price per Unit, Holdings has allocated $67.72 to the Warrants, which represents their issue price. This allocation reflects Holdings' judgement as to the relative value of the Note and Warrants at the time of issuance. The allocation is binding on a U.S. Holder unless such U.S. Holder explicitly discloses a different allocation on an attachment to its tax return for the taxable year that includes the acquisition date of the Unit. The allocation is not, however, binding on the IRS and there can be no assurance that the IRS would not challenge this allocation or that such a challenge, if made, would not be upheld in court. TAXATION OF WARRANTS CHARACTERIZATION OF THE WARRANTS. Although the matter is not free from doubt, and the form of the Warrants may be respected for federal income tax purposes, it is possible that the Warrants would be treated for federal income tax purposes as the shares of Common Stock of the Issuer which such Warrants entitle the holder to purchase due to, among other things, their minimal Exercise Price and lack of any meaningful contingency. Although it is thus unclear whether the Warrants will be treated as warrants or 122 stock for federal income tax purposes, the following discussion assumes that the Warrants would be properly characterized as warrants and describes, as appropriate, any differing federal income tax treatment that would result if the Warrants are treated as stock. EXERCISE. A holder of a Warrant generally will not recognize gain or loss upon exercise of the Warrant. The holder's federal income tax basis in the stock received will be equal to the holder's federal income tax basis in the Warrant immediately prior to exercise (i.e., in the case of an initial purchaser in the Offering, the portion of the cost of the Unit allocable to the Warrant), plus the amount of cash paid upon exercise. The holding period of the stock acquired upon exercise of the Warrant will begin on the day after the date of exercise of the Warrant and will not include the period during which the Warrant was held. If the Warrants are treated as stock from the date of issuance, the holder would not recognize any gain or loss on the exercise of the Warrants, and the holding period of the stock received would include the entire period during which the Warrant was held. ADJUSTMENTS. An adjustment to the exercise price of the Warrants made pursuant to the anti-dilution provisions of the Warrants may, in certain circumstances, result in constructive distributions to the holders of the Warrants which could be taxable as dividends to the holders under Section 305 of the Code. A holder's federal income tax basis in the Warrants generally would be increased by the amount of any such dividend. The consequences of such an adjustment generally should not differ if the Warrants are recharacterized as stock on the date of issuance. DISPOSITION. Upon a sale, exchange or other taxable disposition of a Warrant or Warrant Shares, a holder generally will recognize gain or loss for federal income tax purposes in an amount equal to the difference between (i) the sum of the amount of cash and fair market value of any property received upon such sale, exchange or other disposition and (ii) the holder's adjusted tax basis in the Warrant or Warrant Shares being sold. Any gain or loss recognized upon a sale, exchange or disposition of Warrants or Warrant Shares would be long-term capital gain or loss if the Warrant or stock was held by the holder for more than one year at the time of sale or exchange. In the case of an individual holder of a Warrant or Warrant Shares, the maximum federal income tax rate applicable to net long-term capital gains is twenty-eight percent (28%) if the Warrant or Warrant Shares were held for greater than one year but less than eighteen months and twenty percent (20%) if the Warrant or Warrant Shares were held for more than eighteen months. The consequences of a sale or disposition to the holder should not differ (except potentially as to holding periods--See Taxation of Warrants--Exercise above) if the Warrants are recharacterized as stock on the day they are issued. LAPSE. Upon the lapse of a Warrant, a holder will recognize a capital loss equal to such holder's adjusted tax basis in the Warrant. If the Warrant was treated as stock on the date of issuance, and the Warrant was never exercised, the treatment of such Warrant generally should not differ. 123 PLAN OF DISTRIBUTION The Warrants and the Warrant Shares may be sold from time to time to purchasers directly by the Selling Holders. Alternatively, the Selling Holders may from time to time offer the Warrants or the Warrant Shares to or through underwriters, broker/dealers or agents, who may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Holders or the purchasers of such securities for whom they may act as agents. The Selling Holders and any underwriters, broker/dealers or agents that participate in the distribution of Warrants or the Warrant Shares may be deemed to be "underwriters" within the meaning of the Securities Act and any profit on the sale of such securities and any discounts, commissions, concessions or other compensation received by any such underwriter, broker/ dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act. The Warrants and the Warrant Shares may be sold from time to time in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. The sale of the Warrants and the Warrant Shares may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which such securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or in the over-the-counter market or (iv) through the writing of options. At the time a particular offering of the Warrants or the Warrant Shares is made, a supplement to this Prospectus (a "Prospectus Supplement"), if required, will be distributed which will set forth the aggregate amount of Warrants or Warrant Shares being offered and the terms of the offering, including the name or names of any underwriters, broker/dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Holders and any discounts, commissions or concessions allowed or reallowed or paid to broker/dealers. Each broker/dealer that receives the Warrants or Warrant Shares for its own account pursuant to this Prospectus must acknowledge that it will deliver the Prospectus and any Prospectus Supplement in connection with any sale of such Warrants or Warrant Shares. To comply with the securities laws of certain jurisdictions, if applicable, the Warrants and Warrant Shares will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain jurisdictions the Warrants and Warrant Shares may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or any exemption from registration or qualification is available and is complied with. The Selling Holders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, which provisions may limit the timing of purchases and sales of any of the Warrants or Warrant Shares by the Selling Holders. The foregoing may affect the marketability of such securities. Pursuant to the Warrant Registration Rights Agreement, certain expenses of the registration of the Warrants and Warrant Shares hereunder will be paid by the Company, including, without limitation, Commission filing fees and expenses of compliance with state securities or "blue sky" laws; provided, however, that the Selling Holders will pay all underwriting discounts, selling commissions and transfer taxes, if any applicable to any sales pursuant to the Registration Statement. The Issuer has agreed to indemnify the Selling Holders against certain civil liabilities, including certain liabilities under the Securities Act, and the Selling Holders will be entitled to contribution in connection with any such registration and any sales pursuant thereto. The Company will be indemnified by the Selling Holders severally against certain civil liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection with any such registration and any sales pursuant to the Registration Statement. 124 LEGAL MATTERS Certain legal matters in connection with the registration of Warrants and Warrant Shares pursuant to this Prospectus will be passed upon for the Issuer by Schreck Morris, Las Vegas, Nevada. Certain matters with respect to tax issues will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP. EXPERTS The balance sheets of the Issuer, Holdings, Capital and the Company as of December 31, 1997 and the statements of changes in equity and cash flows of each such entity for the period from their inception to December 31, 1997, together with the notes thereto, appearing in this Prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as set forth in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements of London Clubs as of March 30, 1997 and March 24, 1996 and for the 53 week period ended March 30, 1997, and the 52 week period ended March 24, 1996 included in this Prospectus have been so included in reliance on the report of Price Waterhouse, independent accountants, given on the authority of said firm as experts in accounting and auditing. With respect to the unaudited consolidated financial information of London Clubs for the 26 week periods ended September 28, 1997 and September 22, 1996 included in this Prospectus, Price Waterhouse reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated December 5, 1997 states that they did not audit and they do not express an opinion on that unaudited consolidated financial information. Price Waterhouse has not carried out any significant or additional audit tests beyond those which would have been necessary if their report had not been included. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited consolidated financial information because that report is not a "report" or a "part" of the registration statement prepared or certified by Price Waterhouse within the meaning of Sections 7 and 11 of the Act. 125 INDEX TO HISTORICAL FINANCIAL INFORMATION OF THE ALADDIN PARTIES AND THE COMPANY Set forth below is certain historical financial information concerning the Company and the Aladdin Parties. Potential investors should note that the Aladdin Parties and the Company are development stage companies and the attached financial information is not indicative of future results of operations.
Aladdin Gaming Holdings, LLC Report of Independent Public Accountants................................................................. F-4 Consolidated Balance Sheet............................................................................... F-5 Consolidated Statement of Members' Equity................................................................ F-6 Consolidated Statement of Cash Flows..................................................................... F-7 Notes to Consolidated Financial Statements............................................................... F-8 Aladdin Capital Corp. Report of Independent Public Accountants................................................................. F-12 Balance Sheet............................................................................................ F-13 Statement of Stockholders' Equity........................................................................ F-14 Statements of Cash Flows................................................................................. F-15 Notes to Financial Statements............................................................................ F-16 Aladdin Gaming, LLC Report of Independent Public Accountants................................................................. F-19 Balance Sheet............................................................................................ F-20 Statement of Members' Equity............................................................................. F-21 Statement of Cash Flows.................................................................................. F-22 Notes to Financial Statements............................................................................ F-23 Aladdin Gaming Enterprises, Inc. Report of Independent Public Accountants................................................................. F-26 Balance Sheet............................................................................................ F-27 Statement of Stockholders' Equity........................................................................ F-28 Statement of Cash Flows.................................................................................. F-29 Notes to Financial Statements............................................................................ F-30
F-1 (This page intentionally left blank.) F-2 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 F-3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Members of Aladdin Gaming Holdings, LLC and subsidiaries: We have audited the accompanying consolidated balance sheet of ALADDIN GAMING HOLDINGS, LLC (a Nevada Limited-Liability Company) and SUBSIDIARIES, as of December 31, 1997, and the related consolidated statements of members' equity and cash flows for the period from inception (December 1, 1997) through December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aladdin Gaming Holdings, LLC and subsidiaries, as of December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Las Vegas, Nevada January 15, 1998, except for Note 6, as to which the date is February 26, 1998 F-4 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 ASSETS Cash................................................................................ $ 6,895 --------- Total Assets.................................................................... $ 6,895 --------- --------- LIABILITIES AND MEMBERS' EQUITY Due to Sommer Trust................................................................. $ 1,245 Advances to purchase membership interests........................................... 2,850 Members' equity..................................................................... 2,800 --------- Total Liabilities and Members' Equity........................................... $ 6,895 --------- ---------
The accompanying notes are an integral part of this consolidated financial statement. F-5 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF MEMBERS' EQUITY FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997) THROUGH DECEMBER 31, 1997 BALANCE, December 1, 1997........................................................... $ -- Members' contribution............................................................... 2,800 --------- BALANCE, December 31, 1997.......................................................... $ 2,800 --------- ---------
The accompanying notes are an integral part of this consolidated financial statement. F-6 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997) THROUGH DECEMBER 31, 1997 CASH FLOWS FROM FINANCING ACTIVITIES: Due to Sommer Trust............................................................... $ 1,245 Members' contributions............................................................ 2,800 Advances to purchase membership interests......................................... 2,850 --------- INCREASE IN CASH AND CASH EQUIVALENTS............................................... 6,895 CASH AND CASH EQUIVALENTS, December 1, 1997......................................... -- --------- CASH AND CASH EQUIVALENTS, December 31, 1997........................................ $ 6,895 --------- ---------
The accompanying notes are an integral part of this consolidated financial statement. F-7 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 1. ORGANIZATION AND BUSINESS Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Gaming Holdings"), was established on December 1, 1997. Gaming Holdings is owned by Aladdin Gaming Enterprises, Inc. (25%), a Nevada corporation, Sommer Enterprises, LLC (72%), a Nevada limited-liability company, and GAI, LLC (3%), a Nevada limited-liability company. See Note 5 regarding the agreement to purchase membership interests. Aladdin Holdings, LLC, a Delaware limited liability company ("Holdings"), indirectly holds a majority interest in Gaming Holdings. The members of Holdings are the Trust Under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95% interest in Holdings, and GW Vegas, LLC, a Nevada limited-liability company ("GW"), a wholly owned subsidiary of Trust Company of the West ("TCW"), which holds a 5% interest in Holdings. Distributions shall be made in accordance with the respective ownership interests subject to Gaming Holdings' operating agreement. Since the planned principal operations had not commenced as of December 31, 1997, Gaming Holdings has accounted for its operations as a development stage company. There were no operations during the period from inception (December 1, 1997) through December 31, 1997 and hence no statement of income has been prepared. 2. PRINCIPLES OF CONSOLIDATION AND PRESENTATION The consolidated financial statements include the accounts of Gaming Holdings and its subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Gaming Holdings' wholly owned subsidiaries are Aladdin Capital Corp., a Nevada corporation, and Aladdin Gaming, LLC, a Nevada limited-liability company. 3. INCOME TAXES Gaming Holdings will file federal information tax returns only. Each member reports taxable income or loss on their respective tax returns. 4. PURCHASE OF RESTRICTED MEMBERSHIP INTERESTS Certain members of Gaming Holdings' executive management have purchased unvested restricted membership interests in 4.75% of Gaming Holdings' stock. These membership interests will vest over approximately a four-year period. As of December 31, 1997, none of these membership interests had vested. 5. COMMITMENTS On September 24, 1997 Gaming Holdings, the Sommer Trust, Holdings, Sommer Enterprises, London Clubs International plc, a company registered in the United Kingdom ("London Clubs") and London Clubs Nevada Inc. ("LCNI") entered into a purchase agreement (subsequently amended) providing for the acquisition by LCNI of 25 percent of Gaming Holdings' common membership interests for a purchase F-8 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 5. COMMITMENTS (CONTINUED) price of $50.0 million. LCNI's obligation to purchase such membership interests is subject to the satisfaction or waiver of various conditions. 6. SUBSEQUENT EVENTS Private Offering On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and, together with Gaming Holdings, the "Issuers") and Aladdin Gaming Enterprises, Inc. consummated a private offering (the "Offering") under Rule 144A of the Securities Exchange Act of 1933. The private offering consisted of 221,500 units (the "Units"), each unit consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B non-voting Common Stock, no par value, of Aladdin Gaming Enterprises, Inc. The initial accreted value of the Notes is $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 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 amounts held in a segregated construction disbursement account (the "Note Construction Disbursement Account") and by a first priority pledge of all of the issued and outstanding Series A Preferred Interests of Gaming Holdings in Aladdin Gaming, LLC. The Note Construction Disbursement Account is comprised of approximately $35 million remaining proceeds from the Offering, after the application of the net proceeds to repay certain previously existing indebtedness and certain fees and expenses. The Indenture to the Notes contains certain covenants that (subject to certain exceptions) restrict the ability of the Issuers 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. Equity Contributions On February 26, 1998, LCNI contributed $50.0 million ("London Clubs Contribution") for 25% of Gaming Holdings common membership interests. Sommer Enterprises, LLC contributed a portion of land in exchange for common membership interests in Gaming Holdings. Aladdin Gaming Enterprises, Inc. contributed the portion of land and $7.0 million of predevelopment costs, which were originally received from Sommer Enterprises, Inc. and the net proceeds (approximately $15 million) allocable from the sale of F-9 ALADDIN GAMING HOLDINGS, LLC AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 6. SUBSEQUENT EVENTS (CONTINUED) the Warrants to Gaming Holdings in exchange for 25% of the common membership interests in Gaming Holdings. Investments Gaming Holdings contributed the land appraised at $150.0 million, approximately $42 million in cash from the London Clubs Contribution and the $7.0 million of predevelopment costs in exchange for 100% of the common membership interests in Aladdin Gaming, LLC. Gaming Holdings also contributed $115 million in cash, consisting of the net proceeds of the sale of the Units and approximately $8 million from the London Clubs Contribution to Aladdin Gaming, LLC in exchange for 100% of the Series A Preferred Interests. F-10 ALADDIN CAPITAL CORP. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 F-11 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Board of Directors and Stockholders of Aladdin Capital Corp.: We have audited the accompanying balance sheet of ALADDIN CAPITAL CORP. (a Nevada Corporation), as of December 31, 1997, and the related statements of stockholders' equity and cash flows for the period from inception (December 1, 1997) through December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aladdin Capital Corp., as of December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Las Vegas, Nevada January 15, 1998, except for Note 3, as to which the date is February 26, 1998 F-12 ALADDIN CAPITAL CORP. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET AS OF DECEMBER 31, 1997 ASSETS Cash................................................................................ $ 1,000 --------- Total Assets...................................................................... $ 1,000 --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Common Stock, no par value, 2,500 shares authorized, issued and outstanding......... $ 1,000 --------- Total Liabilities and Stockholders' Equity........................................ $ 1,000 --------- ---------
The accompanying notes are an integral part of this financial statement. F-13 ALADDIN CAPITAL CORP. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997) THROUGH DECEMBER 31, 1997
SHARES ISSUED AMOUNT TOTAL --------- --------- --------- BALANCE, December 1, 1997............................................................ -- $ -- $ -- Issuance of common stock............................................................. 2,500 1,000 1,000 --------- --------- --------- BALANCE, December 31, 1997........................................................... 2,500 $ 1,000 $ 1,000 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of this financial statement. F-14 ALADDIN CAPITAL CORP. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION (DECEMBER 1, 1997) THROUGH DECEMBER 31, 1997 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of stock............................................... $ 1,000 --------- INCREASE IN CASH AND CASH EQUIVALENTS............................................... 1,000 CASH AND CASH EQUIVALENTS, December 1, 1997......................................... -- --------- CASH AND CASH EQUIVALENTS, December 31, 1997........................................ $ 1,000 --------- ---------
The accompanying notes are an integral part of this financial statement. F-15 ALADDIN CAPITAL CORP. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 1. ORGANIZATION AND BUSINESS Aladdin Capital Corp., a Nevada corporation ("Capital"), was established on December 1, 1997. Capital is wholly owned by Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Gaming Holdings"). Aladdin Holdings, LLC, a Delaware limited liability company ("Holdings"), indirectly holds a majority interest in Gaming Holdings. The members of Holdings are the Trust Under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95% interest in Holdings, and GW Vegas, LLC, a Nevada limited-liability company ("GW"), a wholly owned subsidiary of Trust Company of the West ("TCW"), which holds a 5% interest in Holdings. Since the planned principal operations had not commenced as of December 31, 1997, Capital has accounted for its operations as a development stage company. There were no operations during the period from inception (December 1, 1997) through December 31, 1997 and hence no statement of income has been prepared. 2. INCOME TAXES Capital accounts for income taxes using the liability method as set forth in Statement of Financial Accounting Standards 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 Capital's assets and liabilities. There was no income tax expense or benefit recorded for the period from inception (December 1, 1997) through December 31, 1997 as Capital is a development stage company and operations have not yet commenced. 3. SUBSEQUENT EVENTS Private Offering On February 26, 1998, Gaming Holdings, Capital (together with Gaming Holdings, the "Issuers") and Aladdin Gaming Enterprises, Inc. consummated a private offering (the "Offering") under Rule 144A of the Securities Exchange Act of 1933. The private offering consisted of 221,500 units (the "Units"), each unit consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B non-voting Common Stock, no par value, of Aladdin Gaming Enterprises, Inc. The initial accreted value of the Notes is $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 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 amounts held in a segregated construction disbursement account (the "Note Construction Disbursement Account") and by a first priority pledge of all of the issued and outstanding Series A Preferred Interests of Gaming Holdings in Aladdin Gaming, F-16 3. SUBSEQUENT EVENTS (CONTINUED) LLC. The Note Construction Disbursement Account is comprised of approximately $35 million remaining proceeds from the Offering, after the application of the net proceeds to repay certain previously existing indebtedness and certain fees and expenses. The Indenture to the Notes contains certain covenants that (subject to certain exceptions) restrict the ability of the Issuers and certain of their subsidiaries to, among other thing: (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. F-17 ALADDIN GAMING, LLC (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 F-18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Members of Aladdin Gaming, LLC: We have audited the accompanying balance sheet of ALADDIN GAMING, LLC (a Nevada Limited-Liability Company), as of December 31, 1997, and the related statements of members' equity and cash flows for the period from inception (January 24, 1997) through December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aladdin Gaming, LLC, as of December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Las Vegas, Nevada January 15, 1998, except for Note 4, as to which the date is February 26, 1998. F-19 ALADDIN GAMING, LLC (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET AS OF DECEMBER 31, 1997 ASSETS Cash................................................................................ $ 5,650 --------- Total Assets...................................................................... $ 5,650 --------- --------- LIABILITIES AND MEMBERS' EQUITY Due to Aladdin Gaming Holdings, LLC................................................. $ 4,650 Members' equity..................................................................... 1,000 --------- Total Liabilities and Members' Equity............................................. $ 5,650 --------- ---------
The accompanying notes are an integral part of this financial statement. F-20 ALADDIN GAMING, LLC (A DEVELOPMENT STAGE COMPANY) STATEMENT OF MEMBERS' EQUITY FOR THE PERIOD FROM INCEPTION (JANUARY 24, 1997) THROUGH DECEMBER 31, 1997 BALANCE, January 24, 1997........................................................... $ -- Members' contribution............................................................... 1,000 --------- BALANCE, December 31, 1997.......................................................... $ 1,000 --------- ---------
The accompanying notes are an integral part of this financial statement. F-21 ALADDIN GAMING, LLC (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION (JANUARY 24, 1997) THROUGH DECEMBER 31, 1997 CASH FLOWS FROM FINANCING ACTIVITIES: Due to Aladdin Gaming Holdings, LLC............................................... $ 4,650 Members' contributions............................................................ 1,000 --------- INCREASE IN CASH AND CASH EQUIVALENTS............................................... 5,650 CASH AND CASH EQUIVALENTS, January 24, 1997......................................... --
--------- CASH AND CASH EQUIVALENTS, December 31, 1997........................................ $ 5,650 --------- ---------
The accompanying notes are an integral part of this financial statement. F-22 ALADDIN GAMING, LLC (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 1. ORGANIZATION AND BUSINESS Aladdin Gaming, LLC, a Nevada limited-liability company (the "Company"), was established on January 24, 1997. The Company is wholly owned by Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Gaming Holdings"). Aladdin Holdings, LLC, a Delaware limited liability company ("Holdings"), indirectly holds a majority interest in Gaming Holdings. The members of Holdings are the Trust Under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95% interest in Holdings, and GW Vegas, LLC, a Nevada limited-liability company ("GW"), a wholly owned subsidiary of Trust Company of the West ("TCW"), which holds a 5% interest in Holdings. The Company term is 100 years. Distributions shall be made in accordance with the respective ownership interests subject to the Company's operating agreement. Since the planned principal operations had not commenced as of December 31, 1997, the Company has accounted for its operations as a development stage company. There were no operations during the period from inception (January 24, 1997) through December 31, 1997 and hence no statement of income has been prepared. 2. INCOME TAXES The Company will file federal information tax returns only. Each member reports taxable income or loss on their respective tax returns. 3. COMMITMENTS The Company has entered into a consulting agreement with GAI, LLC to render consulting services as are reasonably requested by the Board of the Company until June 30, 2002. The Company has entered into a commitment letter with an equipment finance company for provision of approximately $80.0 million of financing to obtain gaming and other specified equipment. The financing will be comprised of $60.0 million of operating leases and $20.0 million in loans. The Company has entered into a commitment letter with certain bank lenders for the provision of a bank credit facility. The facility will consist of three separate term loans (Term Loan A, B and C) of $136.0 million, $114.0 million and $160.0 million, respectively. Term A, B and C Loans will mature seven, eight and one-half and ten years after their respective borrowing dates, respectively. 4. SUBSEQUENT EVENTS Private Offering On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and, together with Gaming Holdings, the "Issuers") and Aladdin Gaming Enterprises, Inc. consummated a private offering (the "Offering") under Rule 144A of the Securities Exchange Act of 1933. The private offering consisted of 221,500 units (the "Units"), each unit consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B non-voting Common Stock, no par value, of Aladdin Gaming Enterprises, Inc. The initial accreted value of the Notes is $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 F-23 ALADDIN GAMING, LLC (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 4. SUBSEQUENT EVENTS (CONTINUED) accrue at the rate of 13 1/2% per annum based on the accreted value at maturity 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 amounts held in a segregated construction disbursement account (the "Note Construction Disbursement Account") and by a first priority pledge of all of the issued and outstanding Series A Preferred Interests on Gaming Holdings in the Company. The Note Construction Disbursement Account is comprised of approximately $35 million remaining proceeds from the Offering, after the application of the net proceeds to repay certain previously existing indebtedness and certain fees and expenses. The Indenture to the Notes contains certain covenants that (subject to certain exceptions) restrict the ability of the Issuers 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. Equity Contributions Gaming Holdings contributed land appraised at $150.0 million, approximately $42 million in cash from a contribution from London Clubs Nevada Inc. ("LCNI") and $7.0 million of predevelopment costs in exchange for 100% of the common membership interests in the Company. Gaming Holdings also contributed $115 million in cash, consisting of the net proceeds of the sale of the Units and approximately $8 million from LCNI to the Company in exchange for 100% of the Series A Preferred Interests. Bank Indebtedness On February 26, 1998, the Company entered into the bank credit facility for $410 million as discussed above in Note 3. F-24 ALADDIN GAMING ENTERPRISES, INC. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 F-25 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Board of Directors and Stockholders of Aladdin Gaming Enterprises, Inc.: We have audited the accompanying balance sheet of ALADDIN GAMING ENTERPRISES, INC. (a Nevada Corporation), as of December 31, 1997, and the related statements of stockholders' equity and cash flows for the period from inception (December 3, 1997) through December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aladdin Gaming Enterprises, Inc., as of December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Las Vegas, Nevada January 15, 1998, except for Note 4, as to which the date is February 26, 1998. F-26 ALADDIN GAMING ENTERPRISES, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET AS OF DECEMBER 31, 1997 ASSETS Cash................................................................................ $ 669 Investment in subsidiary............................................................ 331 --------- Total Assets.................................................................... $ 1,000 --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Common Stock, no par value, 2,500 shares authorized, 1 share issued and outstanding....................................................................... $ 1,000 --------- Total Liabilities and Stockholders' Equity...................................... $ 1,000 --------- ---------
The accompanying notes are an integral part of this financial statement. F-27 ALADDIN GAMING ENTERPRISES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION (DECEMBER 3, 1997) THROUGH DECEMBER 31, 1997
SHARES ISSUED AMOUNT TOTAL --------- --------- --------- BALANCE, December 3, 1997............................................................ -- $ -- $ -- Issuance of common stock............................................................. 1 1,000 1,000 --------- --------- --------- BALANCE, December 31, 1997........................................................... 1 $ 1,000 $ 1,000 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of this financial statement. F-28 ALADDIN GAMING ENTERPRISES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION (DECEMBER 3, 1997) THROUGH DECEMBER 31, 1997 CASH FLOWS USED FOR INVESTING ACTIVITIES: Investment in subsidiary........................................................... $ (331) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of stock................................................ 1,000 --------- INCREASE IN CASH AND CASH EQUIVALENTS................................................ 669 CASH AND CASH EQUIVALENTS, December 3, 1997.......................................... -- --------- CASH AND CASH EQUIVALENTS, December 31, 1997......................................... $ 669 --------- ---------
The accompanying notes are an integral part of this financial statement. F-29 ALADDIN GAMING ENTERPRISES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 1. ORGANIZATION AND BUSINESS Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Enterprises"), was established on December 3, 1997. Enterprises holds a 25% interest in Aladdin Gaming Holdings, LLC, and is wholly owned by Sommer Enterprises, LLC, a Nevada limited-liability company ("Sommer Enterprises"). Aladdin Holdings, LLC, a Delaware limited liability company ("Holdings"), holds a majority interest in Sommer Enterprises. The members of Holdings are the Trust Under Article Sixth u/w/o Sigmund Sommer (the "Sommer Trust") which holds a 95% interest in Holdings, and GW Vegas, LLC, a Nevada limited-liability company ("GW"), a wholly owned subsidiary of Trust Company of the West ("TCW"), which holds a 5% interest in Holdings. Enterprises' interest in Aladdin Gaming Holdings, LLC has been accounted for under the equity method. Since the planned principal operations had not commenced as of December 31, 1997, Enterprises has accounted for its operations as a development stage company. There were no operations during the period from inception (December 3, 1997) through December 31, 1997 and hence no statement of income has been prepared. 2. INCOME TAXES Enterprises accounts for income taxes using the liability method as set forth in Statement of Financial Accounting Standards 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 Enterprises' assets and liabilities. There was no income tax expense or benefit recorded for the period from inception (December 3, 1997) through December 31, 1997 as Enterprises is a development stage company and operations have not yet commenced. 3. AGREEMENTS Enterprises will enter into a Shareholders' Agreement with the Sommer Trust providing that the Sommer Trust shall have the right to elect the Board of Directors of Enterprises and otherwise manage the day to day affairs of Enterprises unless and until a qualified public offering occurs or the Sommer Trust no longer owns any equity in Enterprises. 4. SUBSEQUENT EVENTS Private Offerings On February 26, 1998, Gaming Holdings, Aladdin Capital Corp. ("Capital" and, together with Gaming Holdings, the "Issuers") and Enterprises consummated a private offering (the "Offering") under Rule 144A of the Securities Exchange Act of 1933. The private offering consisted of 221,500 units (the "Units"), each unit consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 (the "Notes") of Gaming Holdings and Capital and (ii) 10 Warrants (the "Warrants") to purchase 10 shares of Class B non-voting Common Stock, no par value, of Enterprises. F-30 ALADDIN GAMING ENTERPRISES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 (CONTINUED) 4. SUBSEQUENT EVENTS (CONTINUED) The initial accreted value of the Notes is $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 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 amounts held in a segregated construction disbursement account (the "Note Construction Disbursement Account") and by a first priority pledge of all of the issued and outstanding Series A Preferred Interests of Gaming Holdings in Aladdin Gaming, LLC. The Note Construction Disbursement Account is comprised of approximately $35 million remaining proceeds from the Offering, after the application of the net proceeds to repay certain previously existing indebtedness and certain fees and expenses. The Indenture to the Notes contains certain covenants that (subject to certain exceptions) restrict the ability of the Issuers 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. Equity Contributions On February 26, 1998, Sommer Enterprises, LLC contributed a portion of land and $7.0 million of predevelopment costs in exchange for 100% of the Class A Common Stock in Enterprises. Enterprises contributed the portion of land, the $7.0 million of predevelopment costs and the net proceeds (approximately $15 million) allocable from the sale of the Warrants to Gaming Holdings in exchange for 25% of the common membership interests in Gaming Holdings. F-31 ANNEX A CERTAIN HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF LONDON CLUBS London Clubs owns 25% of Holdings and, as described on pages 24 and 25, has entered into the Bank Completion Guaranty, the Noteholder Completion Guaranty and the Keep-Well Agreement in connection with the construction of the Aladdin. Following is certain historical consolidated financial information of London Clubs. The Registrant does not intend to provide this information in its periodic filings following this registration statement. The 1996 and 1997 full year financial information for London Clubs set forth herein has been extracted from the 1997 London Clubs' financial statements included on pages A-4 to A-33. The 1995 financial information for London Clubs set forth herein has been extracted from the published audited accounts of London Clubs. The unaudited interim financial information for the 6 months ended September 28, 1997 set forth herein has been extracted from the unaudited interim financial statements of London Clubs included on pages A-34 to A-42. The interim financial statements are unaudited; however in the opinion of management, such financial statements include all adjustments necessary to present the financial statements on a basis consistent with the audited annual accounts. Potential investors should note that such information has been calculated and presented in accordance with United Kingdom generally accepted accounting principles, which are not consistent with, and materially differ from, United States generally accepted accounting principles. Such information is expressed in thousands of United Kingdom pounds sterling (L'000). INDEX TO HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF LONDON CLUBS INTERNATIONAL, PLC Consolidated Profit and Loss Data for the 52 weeks ended March 26, 1995 and March 24, 1996, the 53 weeks ended March 30, 1997 and the 26 weeks ended September 28, 1997 (unaudited)........................................................................ A-2 Consolidated Balance Sheet Data at March 26, 1995, March 24, 1996, March 30, 1997 and September 28, 1997 (unaudited)..................................................... A-3 Directors' Report and Accounts for the 53 weeks ended March 30, 1997................. A-4 Interim Report 1997.................................................................. A-34
A-1 LONDON CLUBS INTERNATIONAL, PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT (IN THOUSANDS OF POUNDS STERLING)
(UNAUDITED) 26 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED 53 WEEKS ENDED SEPTEMBER 28, MARCH 26, 1995 MARCH 24, 1996 MARCH 30, 1997 1997 -------------- -------------- -------------- -------------- Turnover........................................ L155,675 L167,357 L179,489 L85,697 Operating Costs................................. (123,627) (133,078) (143,092) (71,385) -------------- -------------- -------------- ------- Operating profit................................ 32,048 34,279 36,397 14,312 Net interest payable............................ (2,643) (1,007) (1,154) (843) -------------- -------------- -------------- ------- Profit on ordinary activities before taxation... 29,405 33,272 35,243 13,469 Tax on ordinary activities...................... (11,119) (11,985) (12,588) (3,608) -------------- -------------- -------------- ------- Profit on ordinary activities after taxation.... 18,286 21,287 22,655 9,861 Dividends paid and proposed..................... (9,465) (10,970) (11,679) (3,856) -------------- -------------- -------------- ------- Transfer to reserves............................ L8,821 L10,317 L10,976 L6,005 -------------- -------------- -------------- ------- -------------- -------------- -------------- -------
A-2 LONDON CLUBS INTERNATIONAL, PLC CONSOLIDATED BALANCE SHEET (IN THOUSANDS OF POUNDS STERLING)
(UNAUDITED) AT MARCH 26, AT MARCH 24, AT MARCH 30, AT SEPTEMBER 28, 1995 1996 1997 1997 ------------ ------------ ------------ ---------------- Fixed assets......................................... L137,284 L160,191 L224,312 L237,617 Current assets: Stocks............................................. 934 1,158 1,353 1,333 Debtors............................................ 5,095 8,523 11,818 17,923 Cash at bank and in hand........................... 31,743 29,886 34,872 38,718 ------------ ------------ ------------ -------- Total Current Assets............................. 37,772 39,567 48,043 57,974 Creditors (amounts falling due within one year)...... (53,975) (51,369) (62,287) (50,489) ------------ ------------ ------------ -------- Net current assets/(liabilities)................... (16,203) (11,802) (14,244) 7,485 Total assets less current liabilities.............. 121,081 148,389 210,068 245,102 ------------ ------------ ------------ -------- Creditors (amounts falling due after one year)....... (16,292) (32,722) (24,816) (48,059) Provisions for liabilities and charges............... (113) (517) (317) (647) ------------ ------------ ------------ -------- L104,676 L115,150 L184,935 L196,396 ------------ ------------ ------------ -------- ------------ ------------ ------------ -------- Capital and reserves: Called up share capital............................ 3,538 3,539 7,078 7,345 Share premium...................................... 78,014 78,067 74,528 80,103 Other reserves..................................... 30,337 30,337 91,088 91,088 Profit and loss account............................ (7,213) 3,207 12,241 17,860 ------------ ------------ ------------ -------- L104,676 L115,150 L184,935 L196,396 ------------ ------------ ------------ -------- ------------ ------------ ------------ --------
A-3 LONDON CLUBS INTERNATIONAL PLC DIRECTORS' REPORT AND ACCOUNTS for the 53 weeks ended 30 March 1997 Registered number: 2862479 A-4 DIRECTOR'S REPORT The directors have pleasure in presenting their report and the audited financial statements of London Clubs International plc and its subsidiary undertakings for the 53 weeks ended 30 March 1997. PRINCIPAL ACTIVITIES The Group's principal activities are the operation of casinos. The Group operates seven casinos in London, one casino in Cannes, France and three casinos in Egypt. In addition, the Group has management concessions in respect of casinos on three cruise liners. On 4 December 1996, the Casino du Liban in Beirut opened for which the Group has a management contract. A non binding letter of intent between the Company and the Aladdin Gaming Corporation was signed in January 1997 in relation to a proposed investment by the Group in the Aladdin hotel and casino complex in Las Vegas. On 1 May 1997, the Company completed the purchase of the freehold of 50 St James's Street, London W1, for a total consideration of L13.5 million. RESULTS AND DIVIDENDS The Group's profit on ordinary activities after taxation was L22,655,000 (1996 L21,287,000). The directors propose a final dividend of 5.625 pence net per ordinary share amounting to L7,260,000. This, together with the interim dividend of 2.625 pence net per ordinary share paid on 31 January 1997, makes a total of 8.25 pence net per ordinary share for the year. The final dividend, if approved, will be paid on 31 July 1997 to shareholders on the register at the close of business on 6 June 1997. The retained profit transferred to reserves amounted to L10,976,000 (1996 L10,317,000). DIRECTORS The directors who have served since 25 March 1996 are as follows: Sir Timothy Kitson A L Goodenough Sir Gordon Booth (retired 5 December 1996) P Byrne G B C Hardy R R C Hobbs T Hodgson R A Wood At the forthcoming annual general meeting Mr. A L Goodenough and Mr. G B C Hardy retire by rotation pursuant to the Articles of Association and, being eligible, offer themselves for re-election. Both Mr. Goodenough and Mr. Hardy have service agreements with the Company which are terminable in two years' notice. The interests of the directors in the share capital of the Company are set out in note 6 to the financial statements. During their period in office, no director has had a material interest, directly or indirectly, at any time during the year in any contract significant to the business of the Group. A-5 DIRECTOR'S REPORT (CONTINUED) SUBSTANTIAL INTERESTS As at 18 May 1997 the Company had received notification of the following interests exceeding 5 percent of the Company's share capital: Mercury Asset Management plc.......... 19.03% Schroder Investment Management Limited............................... 12.52% Jupiter Asset Management Limited...... 7.68%
SHARE CAPITAL Changes to the share capital of the Company are set out in note 17 to the financial statements. Approval will be sought at the forthcoming annual general meeting to renew the authority granted to the directors to allot unissued ordinary shares in the capital of the Company and to obtain authority to allot shares for cash otherwise than to existing shareholders pro-rata to their holdings. Resolution 6 will renew the directors' authority to allot relevant securities up to an aggregate nominal amount of L2,335,698 representing 33 per cent of the current issued share capital (being 46,713,960 ordinary shares). Resolution 7 is a Special Resolution to renew the directors' authority under Section 95 of the Companies Act 1985 to allot a limited number of shares for cash up to an aggregate nominal amount of L355,893 representing 5 percent of the current issued ordinary share capital of the Company (being 7,077,875 ordinary shares). The proposed authorities conform with the guidelines issued by the institutional investment protection bodies to ensure that existing shareholders' interests are safeguarded and, if granted, will expire at the earlier of the conclusion of the annual general meeting in 1998 and the date fifteen months from the date the requisite authorities are granted. SHARE BASED INCENTIVE SCHEMES It is proposed to introduce a share based long term performance plan for executive directors and senior management of the Group and a savings related share scheme for all UK employees. Details of the two schemes, together with the notice convening the necessary extraordinary general meeting to seek shareholders' approval thereof will be sent to shareholders in due course. SUPPLIER PAYMENT TERMS It is the Group's policy and practice to agree appropriate payment terms and conditions individually with its suppliers, having regard to the spirit of the CBI's Prompt Payers Code. The average number of days outstanding for trade creditors at 30 March 1997 was 32. This figure takes into account the overseas operations, but excludes the effect of certain demand payments. EMPLOYMENT OF DISABLED PERSONS The Group recognises its obligations towards disabled persons and endeavours to provide as much employment as the demands of the Group's operations and the abilities of disabled persons allow. Applications for employment from disabled persons are studied with care and every effort is made to find them, and any existing employees who become disabled, appropriate work and training where it is needed. A-6 DIRECTOR'S REPORT (CONTINUED) EMPLOYEE INVOLVEMENT The Group is committed wherever possible to employee consultation and thereby to their involvement in the development of the Group's operations. CHARITABLE DONATIONS Charitable donations amounting to L48,000 (1996 L30,000) were paid during the year. TAXATION STATUS The Company is not a close company for taxation purposes. AUDITORS Price Waterhouse have expressed their willingness to continue as auditors and a resolution concerning their re-appointment will be proposed at the forthcoming annual general meeting. BY ORDER OF THE BOARD R I Talbot SECRETARY 20 May 1997 A-7 REPORT OF THE REMUNERATION COMMITTEE TERMS OF REFERENCE The remuneration committee comprises all the non-executive directors of the Company and is chaired by Mr. R. R. C. Hobbs. It is responsible for deciding on all elements of the remuneration of the executive directors, including base salaries, performance related bonuses, share based incentive schemes and other benefits. COMPENSATION POLICY The compensation of the executive directors is set by the remuneration committee of the Board. It is the policy of the committee to provide an overall remuneration and benefits package to enable it to attract and retain a high calibre group of senior management who hold the necessary 'White Certificates' required under the Gaming Act and who are capable of delivering the strategic objectives of the Group on behalf of the shareholders. The company has complied throughout the year with Section A of the Best Practice Provisions annexed to the London Stock Exchange Listing Rules. In framing its compensation policy, the committee has given full consideration to Section B of the best practice provisions annexed to the Listing Rules of the London Stock Exchange. The remuneration of the directors is shown in note 5 to the financial statements. SALARIES These reflect the executives' experience, responsibility and commitment. Basic salary levels are measured against those paid in comparable gaming companies. Subject to there being no material increase in anticipated levels of inflation or changes in responsibilities, it is intended that the executive directors' current basic salaries will not be reviewed until September 1998. BONUS AND SHARE BASED INCENTIVE SCHEMES The executive directors hold options in the Company's approved executive share option scheme introduced at the time of its flotation in June 1994. The exercise of the options granted under the scheme is conditional upon the achievement of specified demanding performance criteria. Details of the options granted to executive directors under the executive share option scheme are shown in note 6 to the financial statements. The Group remains committed to the principal of relating a substantial proportion of the total remuneration of senior management to the Group's long term financial performance and has established various incentive bonus schemes covering both executive directors and senior management. The remuneration committee has reviewed the basis of the long term incentivisation of executive directors and concluded that the current long term bonus arrangements should be discontinued as from 30 March 1997 and that no further options should be granted under the current Company share option scheme. It is intended that these arrangements be replaced by a combination of an annual bonus scheme based on single year performance providing comparable rewards for the achievement of annual targeted profits and a proposed share based long term performance plan which has been developed in consultation A-8 REPORT OF THE REMUNERATION COMMITTEE (CONTINUED) with the Company's advisors. The Company also intends to introduce a savings related share scheme for all UK employees in which the executive directors will be able to participate. Details of the two schemes together with the notice convening the necessary extraordinary general meeting to seek shareholders' approval thereof will be sent to shareholders in due course. PENSIONS Three directors have personal pension arrangements which were in place prior to their joining the Group and to which the Group makes an annual contribution payment. Mr. P. Byrne is an executive member of the main London Clubs contributory pension scheme. None of the non-executive directors participate in the Company pension arrangements nor do they receive any contribution towards pension provision. SERVICE CONTRACTS All the executive directors, with the exception of Mr. T. Hodgson, have service contracts which may be terminated on two years notice. Mr. Hodgson has a service contract for a fixed term of three years expiring on 6 June 1997. The present service contracts came into effect upon the flotation of the Company in June 1994. In establishing the notice periods prescribed within the contracts, the committee were mindful of the need to protect shareholders' interests by ensuring continuity of appropriately experienced and licensed management post-flotation. Mr. A. L. Goodenough and Mr. G. B. C. Hardy retire by rotation at the forthcoming annual general meeting. At the date of the meeting, Mr. Goodenough and Mr. Hardy will be entitled to a notice period of two years. OTHER BENEFITS Each executive director is provided with a fully expensed car, permanent health insurance, life assurance and family medical insurance. R. R. C. Hobbs CHAIRMAN OF THE REMUNERATION COMMITTEE 20 May 1997 A-9 CORPORATE GOVERNANCE The Board complies with the recommendations of the Code of Best Practice ("the Code") issued in 1992 by the Committee on the Financial Aspects of Corporate Governance (the Cadbury Committee). The Group complies and has fully complied throughout the accounting period, with all the current requirements of the Code and the Annual Report includes all the disclosures currently required by the Code. GOING CONCERN The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. INTERNAL FINANCIAL CONTROLS The directors are required to ensure that the Group's systems of internal control are appropriate given the scale and type of risk being managed, the likelihood of the risk materialising and the cost of implementing the controls necessary to manage the risk. The existence of appropriate internal controls provides reasonable assurance that the Group's operations are efficiently and effectively managed, that internal financial controls are in place and that the Group complies with its legal and regulatory obligations. However, any such system can only provide reasonable, and not absolute, assurance against misstatement or loss. The Group has a well defined operational/management hierarchy and organisational structure. Terms of reference exist for all principal committees within the Group and the roles and responsibilities of senior executives and key members of staff are clearly defined. The Board meets regularly throughout the year and is responsible for the overall Group strategy, approval of major capital expenditure, financing arrangements, the establishing and monitoring of internal controls and compliance with gaming regulations. The Board has also established separate audit, nomination, remuneration and compliance committees, the members of which are set out on page 9. The Company's internal financial control and monitoring procedures include: - clear responsibilities on the part of management for the maintenance of appropriate financial controls and the production of accurate and timely financial management information; - the control of key financial risks through authorisation levels, segregation of duties and written procedures manuals where relevant; - the preparation of detailed monthly budgets and the comparison by management of trading results and cash flows against budget on a regular basis; - the review of internal financial controls by the audit committee in consultation with the external auditors. The Group operates in a highly regulated environment and an independent compliance function reporting to the compliance committee has been developed to ensure adherence with all local and national requirements and the Group's own gaming procedures. Audits of all gaming operations take place at regular intervals and their recommendations are presented to the compliance committee. The Board has reviewed the effectiveness of the Group's system of internal financial controls for the period covered by the financial statements. In addition, the gaming activities of the Group are also subject to review by the Gaming Board in the U.K. and by the relevant government authorities for the overseas operations. A-10 STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss for the financial year. The directors have prepared the financial statements on pages A-13 to A-33 on a going concern basis and consider that the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates and that all accounting standards which they consider to be applicable have been followed. The directors have responsibility for ensuring that the Group keeps accounting records which disclose with reasonable accuracy the financial position of the Group and which enable them to ensure that the financial statements comply with the Companies Act 1985. The directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. REPORT BY THE AUDITORS TO THE DIRECTORS OF LONDON CLUBS INTERNATIONAL PLC ON CORPORATE GOVERNANCE MATTERS In addition to our audit of the financial statements we have reviewed your statement on page A-10 concerning the Group's compliance with the paragraphs of the Cadbury Code of Best Practice specified for our review by the London Stock Exchange and the adoption of the going concern basis in preparing the financial statements. The objective of our review is to draw attention to non-compliance with Listing Rules 12.43(j) and 12.43(v), if not otherwise disclosed. BASIS OF OPINION We carried out our review having regard to guidance issued by the Auditing Practices Board. That guidance does not require us to perform the additional work necessary to, and we do not, express any opinion on the effectiveness of either the Group's system of internal financial control or corporate governance procedures nor on the ability of the Group to continue in operational existence. OPINION In our opinion, your statements on internal financial control and on going concern on page A-10, have provided the disclosures required by the Listing Rules referred to above and are consistent with the information which came to our attention as a result of our audit work on the financial statements. In our opinion, based on enquiry of certain directors and officers of the Company and examination of relevant documents, your statement on page A-10 appropriately reflects the Group's compliance with the other aspects of the Code specified for our review by Listing Rule 12.43(j). PRICE WATERHOUSE CHARTERED ACCOUNTANTS London 20 May 1997 A-11 The following represents the statutory audit report of Price Waterhouse, London, whose audit was performed in accordance with generally accepted auditing standards of the United Kingdom (UK). The accompanying financial statements have been prepared in accordance with UK generally accepted accounting principles. REPORT OF THE AUDITORS TO THE MEMBERS OF LONDON CLUBS INTERNATIONAL PLC We have audited the financial statements on pages A-13 to A-33 which have been prepared under the historical cost convention, as modified by the revaluation of certain fixed assets, and the accounting policies set out on pages A-18 and A-19. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS As described on page A-11, the Company's directors are responsible for the preparation of the financial statements. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination on a test basis of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. OPINION In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30 March 1997 and of the profit and cash flows of the Group for the period then ended and have been properly prepared in accordance with the Companies Act 1985. PRICE WATERHOUSE CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS London 20 May 1997 A-12 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE 53 WEEKS ENDED 30 MARCH 1997
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 --------------------- --------------------- NOTES L'000 L'000 L'000 L'000 ----- Turnover..................................................... 2 179,489 167,357 Operating costs Gaming taxation............................................ (51,708) (47,772) Other...................................................... (74,134) (71,381) --------- --------- (125,842) (119,153) ---------- ---------- Gross profit................................................. 53,647 48,204 Administrative expenses Exceptional bid costs...................................... (1,080) -- Other...................................................... (16,170) (13,925) --------- --------- (17,250) (13,925) ---------- ---------- Operating profit............................................. 3 36,397 34,279 Net interest payable......................................... 7 (1,154) (1,007) ---------- ---------- Profit on ordinary activities before taxation................ 2 35,243 33,272 Tax on ordinary activities................................... 8 (12,588) (11,985) ---------- ---------- Profit on ordinary activities after taxation................. 22,655 21,287 Dividends paid and proposed.................................. 9 (11,679) (10,970) ---------- ---------- Transfer to reserves......................................... 18 10,976 10,317 ---------- ---------- Earnings per share........................................... 10 16.0p 15.0p ---------- ---------- Earnings per share before exceptional bid costs.............. 10 16.8p 15.0p ---------- ----------
The notes on pages A-18 to A-33 form part of these financial statements. A-13 CONSOLIDATED BALANCE SHEET AS AT 30 MARCH 1997
NOTES 30 MARCH 1997 24 MARCH 1996 ----- -------------------- -------------------- L'000 L'000 L'000 L'000 Fixed assets Tangible assets............................................. 11 219,646 159,496 Investments................................................. 12 4,666 695 --------- --------- --------- --------- 224,312 160,191 Current assets Stocks...................................................... 1,353 1,158 Debtors..................................................... 13 11,818 8,523 Cash at bank and in hand.................................... 34,872 29,886 --------- --------- 48,043 39,567 Creditors (amounts falling due within one year)............... 14 (62,287) (51,369) --------- --------- --------- --------- Net current liabilities....................................... (14,244) (11,802) --------- --------- Total assets less current liabilities......................... 210,068 148,389 Creditors (amounts falling due after one year)................ 15 (24,816) (32,722) Provision for liabilities and charges......................... 16 (317) (517) --------- --------- 184,935 115,150 --------- --------- --------- --------- Capital and reserves Called up share capital..................................... 17 7,078 3,539 Share premium............................................... 18 74,528 78,067 Merger reserve.............................................. 5,352 5,352 Revaluation reserve......................................... 18 85,736 24,985 Profit and loss account..................................... 13 12,241 3,207 --------- --------- 184,935 115,150 --------- --------- --------- ---------
Approved on behalf of the Board on 20 May 1997. Sir Timothy Kitson G B C Hardy DIRECTORS The notes on pages A-18 to A-33 form part of these financial statements. A-14 COMPANY BALANCE SHEET AS AT 30 MARCH 1997
30 MARCH 1997 24 MARCH 1996 -------------------- -------------------- NOTES L000 L000 L000 L000 ----- Fixed assets Tangible assets................................................. 11 2,807 -- Investments..................................................... 12 27,457 27,457 --------- --------- --------- --------- 30,264 27,457 Current assets Debtors......................................................... 13 73,069 58,304 Cash at bank and in hand........................................ 15,368 11,865 --------- --------- 88,437 70,169 Creditors (amounts falling due within one year)................... 14 (24,447) (9,602) --------- --------- --------- --------- Net current assets................................................ 63,990 60,567 --------- --------- Total assets less current liabilities............................. 94,254 88,024 Provision for liabilities and charges............................. 16 -- (765) --------- --------- 94,254 87,259 --------- --------- --------- --------- Capital and reserves Called up share capital......................................... 17 7,078 3,539 Share premium................................................... 18 74,528 78,067 Profit and loss account......................................... 18 12,648 5,653 --------- --------- 94,254 87,259 --------- --------- --------- ---------
Approved on behalf of the Board on 20 May 1997 Sir Timothy Kitson G B C Hardy DIRECTORS The notes on pages A-18 to A-33 form part of these financial statements. A-15 CONSOLIDATED CASH FLOW STATEMENT FOR THE 53 WEEKS ENDED 30 MARCH 1997
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 -------------------- -------------------- NOTES L'000 L'000 L'000 L'000 ----------- CASH FLOW FROM OPERATING ACTIVITIES............................. 21 44,806 26,849 Return on investments and servicing of finance.................. 22 (1,165) (2,200) Taxation........................................................ (11,791) (8,861) Capital expenditure and financial investment.................... 22 (8,645) (3,685) Acquisitions and disposals...................................... 22 -- (15,644) Equity dividends paid........................................... (11,148) (9,906) --------- --------- CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID RESOURCES AND FINANCING...................................................... 12,057 (13,447) Management of liquid resources.................................. 22 18 Financing--Issue of shares...................................... -- 54 --(Decrease)/Increase in debt........................... (6,200) 11,000 --------- --------- (6,200) 11,054 --------- --------- INCREASE/(DECREASE) IN CASH IN THE PERIOD....................... 5,875 (2,393) --------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT FOR THE 53 WEEKS ENDED 30 MARCH 1997
53 WEEKS 52 WEEKS ENDED 30 ENDED 24 MARCH MARCH 1997 1996 --------- --------- L'000 L'000 INCREASE/(DECREASE) IN CASH IN THE PERIOD.................................................... 5,875 (2,393) Cash outflow/(inflow) from movement in debt.................................................. 6,200 (11,000) Cash inflow from decrease in liquid resources................................................ (18) -- Other non cash changes....................................................................... (379) (5,652) Translation differences...................................................................... (871) 536 --------- --------- MOVEMENT IN NET DEBT IN THE PERIOD........................................................... 10,807 (18,509) NET (DEBT)/FUNDS AT BEGINNING OF PERIOD...................................................... (8,667) 9,842 --------- --------- NET FUNDS/(DEBT) AT END OF PERIOD............................................................ 2,140 (8,667) --------- ---------
The notes on pages A-18 to A-33 form part of these financial statements. A-16 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE 53 WEEKS ENDED 30 MARCH 1997
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 30 MARCH 1996 --------------- --------------- L'000 L'000 Profit on ordinary activities after taxation..................................... 22,655 21,287 Unrealised surplus on revaluation of properties.................................. 60,751 -- Exchange adjustments on foreign currency net investment.......................... (1,942) 103 ------ ------ Total recognised gains and losses for the period............................. 81,464 21,390 ------ ------ ------ ------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE 53 WEEKS ENDED 30 MARCH 1997
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 30 MARCH 1996 -------------- -------------- L'000 L'000 Profit on ordinary activities after taxation..................................... 22,655 21,287 Dividends........................................................................ (11,679) (10,970) ------- ------- 10,976 10,317 Unrealised surplus on revaluation of properties.................................. 60,751 -- Exchange adjustments on foreign currency net investment.......................... (1,942) 103 Issue of share capital........................................................... -- 54 ------- ------- Net addition to shareholders' funds.............................................. 69,785 10,474 Opening shareholders' funds...................................................... 115,150 104,676 ------- ------- Closing shareholders' funds.................................................. 184,935 115,150 ------- ------- ------- -------
The notes on pages A-18 to A-33 form part of these financial statements. A-17 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES (A) ACCOUNTING CONVENTION The financial statements have been prepared under the historical cost convention as modified by the revaluation of short leasehold properties and in accordance with applicable accounting standards. (B) CONSOLIDATION The consolidated accounts include the results and net assets of the Company and its subsidiary undertakings. Subsidiary undertakings acquired are consolidated from the effective date of acquisition. (C) TURNOVER Turnover represents gaming income and also includes management contract income, membership subscriptions and catering revenues. (D) FIXED ASSETS AND DEPRECIATION Fixed assets are stated at cost or valuation. The short leasehold properties from which the Group conducts its casino operations are carried at open market value on an existing use and fully operational basis, including the benefit of casino licences. Formal professional revaluations of the U.K. casinos are undertaken on at least a triennial basis and the resultant valuations is included in the balance sheet unless the surplus or deficit is immaterial. The directors review the valuations each year and it, in their opinion, there is any diminution in value, it is charged either to the revaluation reserve or the profit and loss account as appropriate. In the directors' opinion, on the basis of this review, the residual disposal value of the properties and the benefit of casino licences attaching to those properties is at least equal to their book value. All leases have an unexpired term of less than twenty years and the values of the leaseholds excluding the benefit of the casino licences are depreciated over the remaining term of the lease. Other assets are depreciated over their estimated useful lives on the following bases; Fixtures and fitting--10% to 20% straight line. Motor Vehicles--25% reducing balance. (E) INVESTMENTS Investments, including investments in subsidiary undertakings are valued individually at the lower of cost and directors' valuation. (F) TAXATION The charge for taxation is based on the profit for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes unless there is reasonable probability that the deferred tax will not crystallise in the foreseeable future. (G) STOCKS Stocks, which comprise consumables, are valued at the lower of cost and estimated net realisable value. A-18 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 1. ACCOUNTING POLICIES (CONTINUED) (H) TRADE DEBTORS Trade debtors include debtors of the overseas casino operations (where deferred payment is permitted) net of provisions raised for any amounts considered unlikely to be recoverable. In the U.K., full provision is charged to the profit and loss account for all unpaid gaming cheques net of any amounts recovered up to the date of approval of the accounts. (I) EXCHANGE RATES Transactions in foreign currencies are translated into sterling at the rates ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date and results of overseas operations are translated at the year end exchange rate. Exchange differences arising from the translation of the opening net assets of overseas subsidiaries and any foreign currency borrowings used to acquire overseas assets are dealt with as a movement in reserves. All other exchange differences are taken to the profit and loss account. (J) LEASES The rental charges in respect of operation leases are taken to the profit and loss account on a straight line basis over the life of the lease. (K) PENSION COSTS The Group operates a pension scheme covering the majority of employees. Pension costs are assessed in accordance with the advice of independent actuaries. Variations from the regular pensions cost are spread on a systematic basis over the estimated average remaining service lives of employees. The scheme is funded by payments to trustee administered fund completely independent of the Group's finances. 2. SEGMENTAL ANALYSIS Operations by geographical segment:
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 -------------- -------------- L'000 L'000 TURNOVER Europe....................................................................... 157,471 147,863 Middle East.................................................................. 22,018 19,494 ------- ------- 179,489 167,357 ------- ------- ------- -------
A-19 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2. SEGMENTAL ANALYSIS (CONTINUED)
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 -------------- -------------- L'000 L'000 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION Europe....................................................................... 34,712 32,719 Middle East.................................................................. 1,685 1,560 ------- ------- Operating profit............................................................. 36,397 34,279 Interest receivable.......................................................... 1,663 2,044 Interest payable............................................................. (2,817) (3,051) ------- ------- Profit on ordinary activities before taxation................................ 35,243 33,272 ------- ------- ------- -------
For the purposes of the segmental analysis all head office costs have been allocated to Europe. Substantially all of the net assets of the Group are located in Europe. Substantially all of the Group's turnover, operating profit and net assets relate to the operation of casinos. 3. OPERATING PROFIT Operating profit is stated after charging:
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 -------------- -------------- L'000 L'000 Employee costs (see note 4)................................................... 44,594 40,564 Operating lease rentals on properties........................................ 8,395 7,839 Operating lease rentals on equipment......................................... 620 683 Depreciation................................................................. 3,418 3,470 Auditors' remuneration Audit services........................................................... 198 203 Exceptional bid costs........................................................ 1,080 -- Other........................................................................ 33,079 32,547 ------- ------- 91,384 85,306 ------- ------- Shown as: Operating costs.............................................................. 74,134 71,381 Administrative expenses...................................................... 17,250 13,925 ------- ------- 91,384 85,306 ------- ------- ------- -------
Audit fees for the company were L15,000 (1996: L15,000). Non-audit fees for the group and company were L489,000 (1996: L244,000) and L300,000 (1996: L20,000) respectively. A proportion of the non-audit fees for the current year relates to work in respect of the bid for Capital Corporation plc. The exceptional bid costs represent professional and other costs incurred in respect of the bid for Capital Corporation plc which lapsed on 7 April 1997, following referral to the Monopolies and Mergers Commission. Other costs include catering costs, the net movement in provisions for gaming cheques, marketing expenditure, irrecoverable VAT, other establishment costs and professional fees. A-20 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 4. EMPLOYEE INFORMATION
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 -------------- -------------- L'000 L'000 Employee costs (including directors): Wages and salaries........................................................... 38,963 35,117 Social security costs........................................................ 4,403 4,465 Other pension costs.......................................................... 1,228 982 ------- ------- 44,594 40,564 ------- ------- ------- ------- Average number of employees by geographic location Europe....................................................................... 1,865 1,833 Middle East.................................................................. 380 385 ------- ------- 2,245 2,218 ------- ------- ------- -------
5. DIRECTORS' REMUNERATION
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 --------------- --------------- L'000 L'000 Payments to non-executive directors.............................................. 128 169 Salaries, allowances and taxable benefits........................................ 824 718 Bonuses--payments on account under long term bonus scheme........................................................ 405 405 --payments on discontinuance of long term bonus scheme.................... 1076 -- Pension contributions............................................................ 100 87 ----- ----- 2,533 1,379 ----- ----- ----- -----
Note: Bonuses in respect of prior years that are payable on discontinuance of the long term bonus scheme were fully provided in the results of those years and do not impact on the reported results for the current year. The remuneration of the Chairmen and of the highest paid director is given below:
HIGHEST PAID CHAIRMEN DIRECTOR ------------------------ ----------- 1997 1996 1997 ----- ----- ----- L'000 L'000 L'000 Salaries, allowances and taxable benefits........................................... 61 60 263 Bonuses--payment on account under long term bonus scheme................................................................. -- -- 150 --payment on discontinuance of long term bonus scheme................................................................. -- -- 394 Pension contributions............................................................... -- -- 44 -- -- --- 61 60 851 -- -- -- -- --- --- 1996 ----- L'000 Salaries, allowances and taxable benefits........................................... 219 Bonuses--payment on account under long term bonus scheme................................................................. 150 --payment on discontinuance of long term bonus scheme................................................................. -- Pension contributions............................................................... 36 --- 405 --- ---
The remuneration of the Chairmen for 1996 relates to Sir Gordon Booth up to 31 March 1995, when he stood down as Chairman, and to Sir Timothy Kitson from that date. A-21 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 5. DIRECTORS' REMUNERATION (CONTINUED) The remuneration of the directors, excluding pension contributions, is given below:
30 MARCH 1997 24 MARCH 1996 ------------------- ------------------- NUMBER NUMBER L5,000 - L10,000.............................................. -- 1 L15,001 - L20,000............................................. 1 -- L20,001 - L25,000............................................. -- 3 L25,001 - L50,000............................................. 2 -- L50,001 - L55,000............................................. -- 1 L55,001 - L60,000............................................. -- 1 L60,001 - L65,000............................................. 1 -- L250,001 - L255,000........................................... -- 3 L365,001 - L370,000........................................... -- 1 L490,001 - L495,000........................................... 1 -- L495,001 - L500,000........................................... 1 -- L500,001 - L505,000........................................... 1 -- L805,001 - L810,000........................................... 1 --
The value of all the elements of remuneration received by each director in respect of the 53 weeks to 30 March 1997 was as follows:
FEES AND BENEFITS TOTAL SALARY (I) (II) IN KIND PENSION 1997 ----------- --------- --------- ----------- ----------- --------- L'000 L'000 L'000 L'000 L'000 L'000 EXECUTIVE A.L. Goodenough................................... 244 150 394 19 44 851 (CHIEF EXECUTIVE) P. Byrne.......................................... 173 85 230 11 8 507 (GROUP OPERATIONS DIRECTOR) G B C Hardy....................................... 173 85 232 15 31 536 (FINANCE DIRECTOR) T. Hodgson........................................ 173 85 220 16 17 511 (COMPLIANCE AND SECURITY DIRECTOR) NON-EXECUTIVE Sir Timothy Kitson................................ 61 -- -- -- -- 61 (CHAIRMAN) Sir Gordon Booth.................................. 17 -- -- -- -- 17 R R R C Hobbs..................................... 25 -- -- -- -- 25 R A Wood.......................................... 25 -- -- -- -- 25 P J Harper........................................ -- -- -- -- -- -- M Seal............................................ -- -- -- -- -- -- TOTAL 1996 --------- L'000 EXECUTIVE A.L. Goodenough................................... 405 (CHIEF EXECUTIVE) P. Byrne.......................................... 258 (GROUP OPERATIONS DIRECTOR) G B C Hardy....................................... 280 (FINANCE DIRECTOR) T. Hodgson........................................ 267 (COMPLIANCE AND SECURITY DIRECTOR) NON-EXECUTIVE Sir Timothy Kitson................................ 60 (CHAIRMAN) Sir Gordon Booth.................................. 32 R R R C Hobbs..................................... 25 R A Wood.......................................... 25 P J Harper........................................ 6 M Seal............................................ 21
- ------------------------ (i) payments on account under long term bonus scheme (ii) payments on discontinuance of long term bonus scheme The Company introduced a long term bonus scheme at the time of the flotation in June 1994. Bonuses were payable to each of the executive directors based upon the cumulative operating profits of the Group for an initial measurement period represented by the four financial years ended March 1998. However, following a review by the remuneration committee of the long term incentivisation of the executive A-22 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 5. DIRECTORS' REMUNERATION (CONTINUED) directors, and the subsequent proposal to introduce a new long term incentive plan for executive directors and senior managers, the directors' long term bonus scheme was discontinued as at 30 March 1997. Three of the executive directors were entitled to a bonus equal to 100 per cent. of their salaries for each financial year provided that the targeted cumulative operating profit was achieved. One executive director was entitled to a bonus equal to 125 per cent. of salary providing the same condition was met. The targeted operating profits, as determined by the remuneration committee for each of the years, subsequently exceeded. Payments on account, equal to 50% of the full bonus entitlements, were made in respect of each financial year provided that at least 75% of the targeted operating profit was achieved for that year. Whilst it was not possible to determine whether the targeted cumulative profit for the measurement period would be achieved, provision was nonetheless made in the financial statements for the full potential liability. The figures disclosed as bonuses for the 52 weeks ended 24 March 1996, which amounted to a total of L405,000, represent the payments on account under the long term bonus scheme in respect of the results for that year. Similar payments on account are due as at 30 March 1997 in respect of the results for the year then ended. Bonuses accrued, but not previously paid, in respect of the three financial years ended 30 March 1997, which become payable upon the discontinuance of the long term bonus scheme, are shown separately in the tables on the previous page. 6. DIRECTORS' INTEREST (a) The interests of the directors and their immediate families in the share capital of the Company at the end of the year and at the beginning of the year were as follows:
30 MARCH 1997 24 MARCH 1996 -------------------- -------------------- ORDINARY SHARE ORDINARY SHARE SHARES OPTIONS SHARES OPTIONS --------- --------- --------- --------- P Byrne........................................... 280,000 512,400 140,000 256,200 A L Goodenough.................................... 202,228 622,400 101,114 311,200 G B C Hardy....................................... 901,048 512,400 480,524 256,200 R R C Hobbs....................................... 98,800 -- 49,400 -- T Hodgson......................................... 207,048 512,400 103,524 256,200 Sir Timothy Kitson................................ 40,800 -- 20,400 -- R A Wood.......................................... 10,000 -- 5,000 --
The interests represent ordinary shares of 5p each and options over ordinary shares. All the options were granted on 6 June 1994 under the London Clubs International plc executive share option scheme. As a result of the one for one bonus issue on 26 July 1996, the number of shares under option doubled and the option price was adjusted from 218.5p to 109.25p. The options are exercisable between June 1997 and June 2004. They may only be exercised if the total shareholder return on an investment in the Company's shares between the date of grant and the intended exercise date is at least 75 per cent. of the returns of the FTSE 100 Index for the same period. Where the return is between 75 per cent. and 100 per cent. of the FTSE 100 Index, then options may be exercised over an equivalent proportion of ordinary shares. The mid market price of the Company's shares as at 30 March 1997 was 417p. The range of share prices during the 53 weeks to 30 March 1997 was between 254p and 418p. A-23 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 6. DIRECTORS' INTEREST (CONTINUED) The share prices, where appropriate, have been adjusted to reflect the one for one bonus issue in July 1996. (b) Other than as stated above, none of the directors nor any member of their immediate families at 30 March 1997 had any interest in the share capital of the Company. No changes in details have occurred between 30 March 1997 and 20 May 1997. (c) The Company's Register of Directors' Interests contains full details of directors' shareholdings and options to subscribe for ordinary shares. 7. NET INTEREST PAYABLE
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 --------------- --------------- L'000 L'000 Interest payable on bank loans................................................... 2,817 3,051 Interest receivable - --on fixed asset investment...................................................... (303) -- - --other.......................................................................... (1,360) (2,044) ------ ------ Net interest payable............................................................. 1,154 1,007 ------ ------ ------ ------
8. TAXATION
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 --------------- --------------- L'000 L'000 UK corporation tax at 33% (1996;33%) on the taxable profit for the period........ 12,341 11,603 Deferred taxation................................................................ (200) 337 Overseas taxation................................................................ 618 622 Prior year adjustments........................................................... (171) (577) ------ ------ 12,588 11,985 ------ ------ ------ ------
Movements in deferred taxation are explained in note 16. 9. DIVIDENDS
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 -------------- -------------- L'000 L'000 Dividends on equity shares Interim 2.625p per share (1996; 2.5p) paid on 31 January 1997.................. 3,716 3,538 Final 5.825p per share (1996;5.25p) proposed to be paid on 31 July 1997........ 7,963 7,432 ------- ------- 11,679 10,970 ------- ------- ------- -------
The prior year comparative for dividends per share have been restated to reflect the one for one bonus issue on 26 July 1996. A-24 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10. EARNINGS PER SHARE Earnings per ordinary share for each year have been calculated on profit on ordinary activities after taxation and dividend by the weighted average number of ordinary shares in issue during the period. The weighted average number of shares has been adjusted to reflect the one for one bonus issue on 26 July 1996. Fully diluted earnings per share, taking into account all options over the Company's shares, is not materially different to basic earnings per share. The earnings and weighted average number of shares used in the calculation of earnings per share were as follows:
53 WEEKS ENDED 52 WEEKS ENDED 30 MARCH 1997 24 MARCH 1996 -------------- -------------- Earnings per ordinary share(p)................................................... 16.0 15.0 Earnings (L'000)................................................................. 22,655 21,287 Weighted average number of shares ('000)......................................... 141,557 141,557 ------- ------- ------- -------
Earnings per share before exceptional bid costs have been calculated as 16.8 pence per share. This figure is based upon the profit after taxation but before exceptional bid costs of 23,735,000 and on 141,557,000 ordinary shares. The exceptional bid costs, for Capital Corporation pic to 7 April 1997, being the date on which the offer lapsed. No tax credit is assumed to arise on the bid costs. 11. TANGIBLE FIXED ASSETS
FIXTURES, FITTINGS SHORT AND ASSETS IN LEASEHOLD MOTOR COURSE OF GROUP PROPERTIES VEHICLES CONSTRUCTION TOTAL ----------- ----------- ------------- --------- L'000 L'000 L'000 L'000 COST OR VALUATION At 24 March 1996.................................... 159,257 18,151 -- 177,408 Revaluation......................................... 60,751 -- -- 60,751 Additions........................................... 134 1,268 2,977 4,379 Disposals........................................... -- (232) -- (232) Transfers........................................... (1,242) 1,242 -- -- Exchange movement................................... (1,251) (725) -- (1,976) ----------- ----------- ----- --------- At 30 March 1997.................................... 217,649 19,704 2,977 240,330 ----------- ----------- ----- --------- DEPRECIATION At 24 March 1996.................................... 8,798 9,114 -- 17,912 Charge for year..................................... 1,463 1,955 -- 3,418 Disposals........................................... -- (74) -- (74) Transfers........................................... (152) 152 -- -- Exchange movement................................... (80) (492) -- (572) ----------- ----------- ----- --------- At 30 March 1997.................................... 10,029 10,655 -- 20,684 ----------- ----------- ----- --------- NET BOOK VALUE At 30 March 1997.................................... 207,620 9,049 2,977 219,646 ----------- ----------- ----- --------- At 24 March 1996.................................... 150,459 9,037 -- 159,496 ----------- ----------- ----- ---------
A-25 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 11. TANGIBLE FIXED ASSETS (CONTINUED) The short leasehold properties from which the Group conducts its casino operations are carried at open market value on an existing one and fully operational basis, including the benefit of casino licences. In line with the Group's policy to revalue at least triennially, the directors have included the Group's U.K. short leasehold properties at the amount determined by G L Hearn & Partners (Chartered Surveyors) as at 30 March 1997. The resultant change in value is reflected within the revaluation reserve. The next such valuation is due to take place in March 2000. The value of short leasehold properties on an historical cost basis comprises assets with a cost of L131.9 million (1996 L134.3 million) and accumulated depreciation of L10.0 million (1996 L8.8 million). The net book value of the short leasehold properties, on an historical cost basis, is L125.5 million (1996 L125.5 million). No provision has been made for the potential liability to taxation on capital gains which could arise if the short leasehold properties held as fixed assets were sold at the amounts at which they have been revalued and included in these accounts as the directors have no current intentions of selling these assets with gaming licences attached. COMPANY The Company acquired fixed assets with a cost of L2,807,000 during the period, of which L2,776,000 are classified as assets in course of construction. No depreciation has been charged on the amount. 12. INVESTMENTS GROUP
FLOATING RATE NOTES INVESTMENT TOTAL --------------- ----------- --------- L'000 L'000 L'000 At 24 March 1996.............................................................. -- 695 695 Additions..................................................................... 3,981 295 4,276 Exchange movement............................................................. (305) -- (305) ----- ----- --------- At 30 March 1997.............................................................. 3,676 990 4,666 ----- ----- ---------
A subsidiary undertaking, London Clubs (Overseas) Limited, holds 12.5 cent, of the issued share capital of Abela Tourism and Development Company SAL ("ATDC"). ATDC is incorporated in Lebanon and has a management concession for the Casino du Liban complex in Beirut. During the period, the Company subscribed for floating rate notes issued by Casino du Liban, which have a nominal value of US $6 million. COMPANY
30 MARCH 1997 24 MARCH 1996 --------------- --------------- L'000 L'000 Shares in Group undertakings...................................................... 27,457 27,457 ------ ------
A-26 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 12. INVESTMENTS (CONTINUED) Principal subsidiary undertakings of the Company are noted below:
COUNTRY OF INCORPORATION PERCENTAGE OF COUNTRY OF PRINCIPAL OF VOTING PRINCIPAL SUBSIDIARY UNDERTAKING REGISTRATION OPERATION ACTIVITY SHARES HELD - -------------------------------------------- ------------- ---------- -------------------------- ----------- London Clubs Holdings Limited*.............. England England Holding company 100% London Clubs Management Limited............. England England Management company 100% Ritz Club (London) Limited.................. England England Gaming casino 100% Les Ambassadeurs Club Limited............... England England Gaming casino 100% Rendezvous Club (London) Limited............ England England Gaming casino 100% Zealcastle Limited.......................... England England Gaming casino 100% Palm Beach Club Limited..................... England England Gaming casino 100% The Sportsman Club Limited.................. England England Gaming casino 100% Golden Nugget Club Limited.................. England England Gaming casino 100% London Clubs (Overseas) Limited............. England England Holding company 100% LCL (France) SA et cie...................... France France Gaming casino 100% Inter Casino Management (Egypt) Limited..... Isle of Man Egypt Gaming casino 100% Mayfair Maritime Casinos Limited............ Gibraltar Gibraltar Ships casino operations 100% Six Hamilton Place Limited.................. England England Banqueting operation 100%
- ------------------------ (All companies owned indirectly except *) 13. DEBTORS
GROUP COMPANY GROUP COMPANY --------- ----------- --------- ----------- 30 MARCH 1997 24 MARCH 1996 ---------------------- ---------------------- L'000 L'000 L'000 L'000 Trade debtors............................................................. 2,137 3 4,639 -- Amounts due from group companies.......................................... -- 68,663 -- 56,903 Other debtors............................................................. 5,211 2,333 1,219 517 Prepayments and accrued income............................................ 2,479 79 1,781 -- ACT recoverable........................................................... 1,991 1,991 884 884 --------- ----------- --------- ----------- 11,818 73,069 8,523 58,304 --------- ----------- --------- ----------- --------- ----------- --------- -----------
The ACT recoverable is receivable after more than one year. A-27 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 14. CREDITORS (AMOUNTS FALLING DUE WITHIN ONE YEAR)
GROUP COMPANY GROUP COMPANY --------- ----------- --------- ----------- 30 MARCH 1997 24 MARCH 1996 ---------------------- ---------------------- L'000 L'000 L'000 L'000 Short term element of bank loan (see note 15)........................... 5,916 -- 5,831 -- Loan notes (see note 15)................................................ 2,000 -- -- -- Trade creditors......................................................... 1,715 255 1,479 174 Amounts due to group companies.......................................... -- 12,320 -- 925 Corporation tax......................................................... 15,622 -- 14,268 -- ACT payable............................................................. 2,920 2,920 884 884 Gaming taxation payable................................................. 10,528 -- 5,520 -- Other tax including social security..................................... 194 -- 1,330 Interest payable........................................................ 16 -- 156 -- Other creditors and accruals............................................ 15,413 989 14,469 187 Proposed dividend....................................................... 7,963 7,963 7,432 7,432 --------- ----------- --------- ----- 62,287 24,447 51,369 9,602 --------- ----------- --------- ----- --------- ----------- --------- -----
15. CREDITORS (AMOUNTS FALLING DUE AFTER ONE YEAR)
GROUP COMPANY GROUP COMPANY --------- ----------- --------- ----------- 30 MARCH 1997 24 MARCH 1996 ---------------------- ---------------------- L'000 L'000 L'000 L'000 Bank loan Repayable between one and two years................................... 6,031 -- 5,916 -- Repayable between two and five years.................................. 14,785 -- 20,806 -- Deferred consideration.................................................. 4,000 -- 6,000 -- --------- ----- --------- ----- 24,816 -- 32,722 -- --------- ----- --------- ----- --------- ----- --------- -----
The bank loan is secured by means of fixed and floating charges over all U.K. leasehold properties, together with a floating charge over all assets of the Company and all its present and future U.K. subsidiaries. Interest was payable at LIBOR plus 1 per cent with a small variable adjustment. On 11 April 1997, the Company completed a supplemental agreement, whereby all outstanding facilities were replaced by a Revolving Credit Facility. The Revolving Credit Facility is available until 11 April 2002. Interest is payable at LIBOR plus 0.65 per cent, with a small variable adjustment. Advances are available in foreign currencies which may be used to finance overseas investments. Until 29 September 1998, a certain proportion of the loan is subject to interest rate cap based on LIBOR of 9 per cent. The deferred consideration is payable based upon the cumulative results of Zealcastle Limited for the three years ending 1 October 1998. Provision has been made for the maximum amount payable. During the year, loan notes with a value of L2 million were issued in settlement of part of the liability. These loan notes are disclosed within creditors falling due within one year. A-28 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 16. PROVISIONS FOR LIABILITIES AND CHARGES The amount of deferred taxation which has been provided in the financial statements is as follows:
GROUP COMPANY ----------- ----------- L'000 L'000 Deferred tax liability at 24 March 1996........................................................ 517 765 Credit for the period.......................................................................... (200) (765) --- --- Deferred tax liability at 30 March 1997........................................................ 317 -- --- --- --- ---
Comprising: GROUP
30 MARCH 1997 24 MARCH 1996 ------------------------------ ------------------------------ PROVIDED UNPROVIDED PROVIDED UNPROVIDED ----------- ----------------- ----------- ----------------- L'000 L'000 L'000 L'000 Accelerated capital allowances........... 607 (23) 568 (28) Short term timing differences............ (290) -- (51) (25) -- -- --- --- 317 (23) 517 (53) -- -- -- -- --- --- --- ---
COMPANY The only deferred tax liabilities for the Company relate to short term timing differences. There are no unprovided deferred tax liabilities. 17. SHARE CAPITAL The following information relates to the share capital of the Company during the period.
30 MARCH 1997 24 MARCH 1996 ------------------------ ------------------------ NUMBER L'000 NUMBER L'000 ------------- --------- ------------- --------- Authorised Ordinary shares of 5p each...................................... 233,565,100 11,678 233,565,100 11,678 Issued, allotted and fully paid Ordinary shares of 5p each...................................... 141,557,502 7,078 70,778,751 3,539
On 26 July 1996, 70,778,751 ordinary shares were allotted by way of a one for one bonus issue. The issued share capital of the company was increased to L7,077,875 by the capitalisation of the sum of L3,538,938 standing to the credit of the share premium account. At 30 March 1997 there were outstanding options to subscribe for 6,989,600 ordinary shares (1996 3,504,800) under the London Clubs International plc executive share option scheme, which are exercisable between June 1997 and June 2004. The number of options increased by a factor of two following the one for one bonus on 26 July 1996. A-29 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 18. RESERVES
GROUP AND COMPANY ----------- L'000 SHARE PREMIUM ACCOUNT At 24 March 1996........................................................ 78,067 Bonus issue (see note 17)............................................... (3,539) ----------- Balance at 30 March 1997................................................ 74,528 ----------- ----------- GROUP ----------- L'000 REVALUATION RESERVE At 24 March 1996........................................................ 24,985 Revaluation during the period........................................... 60,751 ----------- Balance at 30 March 1997................................................ 85,736 ----------- ----------- GROUP COMPANY --------- ----------- L'000 L'000 PROFIT AND LOSS ACCOUNT At 24 March 1996........................................................ 3,207 5,653 Retained profit for the period.......................................... 10,976 6,995 Exchange movement....................................................... (1,942) -- --------- ----------- Balance at 30 March 1997................................................ 12,241 12,648 --------- ----------- --------- -----------
As permitted by Section 230 of the Companies Act 1985, the Company's profit and loss account is not separately presented. The amount of the Company's retained profit for the peroid is L6,995,000 (1996 L4,130,000). 19. CAPITAL COMMITMENTS At 30 March 1997 the Group had capital commitments contracted for but not provided of L396,260 (1996 L4.0 million). 20. OPERATING LEASE COMMITMENTS
GROUP COMPANY GROUP COMPANY --------- ------------- --------- ------------- 30 MARCH 1997 24 MARCH 1996 ------------------------ ------------------------ L'000 L'000 L'000 L'000 Operating lease commitments on land and buildings payable within one year for leases expiring: within one year.......................................................... 1,381 -- -- -- between one and five years............................................... 4,337 -- 5,785 -- after five years......................................................... 3,453 723 2,697 -- --------- --- --------- --- 9,171 723 8,482 -- --------- --- --------- --- --------- --- --------- ---
A-30 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 20. OPERATING LEASE COMMITMENTS (CONTINUED)
GROUP COMPANY GROUP COMPANY --------- ------------- --------- ------------- 30 MARCH 1997 24 MARCH 1996 ------------------------ ------------------------ L'000 L'000 L'000 L'000 Operating lease commitments on plant and equipment payable within one year for leases expiring: within one year.......................................................... 131 -- 97 -- between one and five years............................................... 302 -- 561 -- --------- --- --------- --- 433 -- 658 -- --------- --- --------- --- --------- --- --------- ---
21. RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOW
53 WEEKS ENDED 52 WEELS ENDED 30 MARCH 1997 24 MARCH 1996 --------------- --------------- L'000 L'000 Operating profit................................................................. 36,397 34,279 Depreciation charges............................................................. 3,418 3,470 Loss on sale of fixed assets..................................................... 75 128 Exchange movement................................................................ 305 -- Increase in stock................................................................ (195) (178) Increase in debtors.............................................................. (784) (2,339) Increase/(Decrease) in creditors................................................. 5,590 (8,511) ------ ------ Net cash inflow from operating activities........................................ 44,806 26,849 ------ ------ ------ ------
A-31 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 22. ANALYSIS OF CASH FLOWS FOR HEADINGS SUMMARISED IN THE CASH FLOW STATEMENT
30 MARCH 1997 24 MARCH 1996 -------------------- -------------------- L'000 L'000 L'000 L'000 Returns on investments and servicing of finance Interest received....................................................... 1,360 2,044 Interest paid........................................................... (2,525) (4,244) --------- --------- --------- --------- Net cash outflow for returns on investments and servicing of finance...... (1,165) (2,200) --------- --------- --------- --------- Capital expenditure and financial investments Purchase of tangible fixed assets....................................... (4,379) (3,064) Purchase of fixed asset investment...................................... (4,276) (695) Proceeds of tangible fixed asset sales.................................. 10 74 --------- --------- --------- --------- Net cash outflow for capital expenditure and financial investment..................................................... (8,645) (3,685) --------- --------- --------- --------- Acquisitions and disposals Purchase of subsidiary undertaking...................................... -- (8,089) Net overdrafts acquired with subsidiary................................. -- (7,555) --------- --------- --------- --------- Net cash outflow for acquisitions and disposals........................... -- (15,644) --------- --------- --------- --------- Management of liquid resources Purchase and sale of securities......................................... 18 -- --------- --------- --------- --------- Net cash inflow from management of liquid resources....................... 18 -- --------- --------- --------- --------- Financing Issue of ordinary share capital......................................... -- 54 Debt due within a year --repayment of unsecured loan......................................... (6,200) (5,850) --loan finance raised................................................. -- 16,850 --------- --------- --------- --------- Net cash (outflow)/inflow from financing.................................. (6,200) 11,054 --------- --------- --------- --------- --------- --------- --------- ---------
23. ANALYSIS OF NET FUNDS
EXCHANGE AT OTHER NON MOVEMENT AT 24 MARCH CASH AND CHANGES IN 30 MARCH 1990 CASHFLOW CHANGES MARKET VALUES 1997 ----------- --------- ----------- -------------- ----------- L'000 L'000 L'000 L'000 L'000 Cash in hand and at bank............................ 29,886 5,875 -- (889) 34,872 Debt due after one year............................. (32,722) -- 7,906 -- (24,816) Debt due within one year............................ (5,831) 6,200 (8,285) -- (7,916) Current asset investment............................ -- (18) -- 18 -- ----------- --------- ----------- ------- ----------- (8,667) 12,057 (379) (871) 2,140 ----------- --------- ----------- ------- ----------- ----------- --------- ----------- ------- -----------
A-32 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 24. PENSIONS The principal pension scheme operated by the Group is a defined benefits scheme providing benefits based on final pensionable salary. The assets of this scheme are held in a separate trustee administered fund. The latest formal actuarial valuation of the fund was at 31 March 1995 using the projected unit method. The assumptions which have the most significant effect on the results of the valuation are the relative rates of return on the investments of the fund compared with increases in pay and pensions. It was assumed for this purpose that, on average, the annual return on investments would exceed increases in pay by 4 per cent. until 31 March 1997 and by 2 per cent. thereafter and would exceed increases in pensions by 4 per cent. At the date of the latest formal actuarial valuation, the market value of the assets of the fund was L31.3 million. The valuation showed that the assets represented 111 per cent. of the benefits that have accrued to members. Taking this surplus into account, the actuary has recommended a future contribution rate for the Group as follows: from 1 April 1998 to 31 March 1999 10.0 per cent. of pensionable pay; from 1 April 1999 to 31 March 2005 11.9 per cent. of pensionable pay and from 1 April 2005 15.0 per cent of pensionable pay. Death in service benefits, professional fees and other expenses are paid by the pension scheme. The pension charge for the year was L1,122,000 (1996 L885,000) which was paid to the fund. In addition the company makes contributions in respect of individual personal pension schemes. The annual contribution for the year was L106,000 (1990 L69,000). 25. SUBSEQUENT EVENT On 1 May 1997, the Company completed the purchase of the freehold of 50 St. James's Street, London W1, for a total consideration of L13.5 million. The business of Ritz Club (London) Limited will be transferred to these premises in June 1998. A-33 LONDON CLUBS INTERNATIONAL INTERIM REPORT 1997 A-34 INTERIM STATEMENT FINANCIAL RESULTS We are pleased to report that business volumes in the first half of the year were once again at record levels. The house win in London was, however, negatively affected by the volatility which can occasionally occur at the upper level of the market and this resulted in a lower than normal win to drop percentage. This in turn contributed substantially to a decrease in turnover from L94,342,000 to L85,697,000 and caused profit before interest and tax to fall from the record level of L19,897,000 in the prior year to L14,312,000. Group earnings per share were 6.9p before exceptional costs compared with 8.9p in the prior year. It is the group's experience that short term volatility in win percentage is corrected over a longer period of time and will return to its normal level. We are pleased to report that since the half year business levels have been strong with an improved win percentage, and as a result, the cumulative win in our London casinos to the end of November has exceeded that for the same eight month period in the prior year. DIVIDEND The interior dividend will be maintained at 2.625p (1996:2.625p) and will be paid on 30 January 1998 to shareholders on the register at 30 December 1997. TRADING COMMENTARY The total volume of business in our London casinos was again strong with an increase in drop of 4%. Les Ambassadeurs produced yet another excellent performance with win, drop and attendance ahead of the record prior year. At the opposite end of the market spectrum, the Golden Nugget also enjoyed a better half year with drop and win much improved. The Sportsman traded close to expectations and at similar levels to the previous year whilst the Palm Beach fell a little behind on win and drop although with improved attendances. The Park Tower continued to trade satisfactorily although not at last year's exceptional levels. Good fortunes were enjoyed by a number of major customers at both the Ritz and more unusually at the Rendezvous which resulted in poor win percentages at both of these clubs and served to depress the group win percentage. The half year profit contribution from our up market casinos was 53% with 47% coming from the middle and lower market casinos. This compares with the 52% and 48% of last year. Overseas, the Casino du Liban made a first full half year contribution having opened in December 1996. The business has performed well and in accordance with our expectations, with slot and table game areas benefiting from a high level of attendance. In Egypt, our casinos also trade well with Taba once again performing strongly, while Cairo produced another consistent performance. In France, the Cannes casino enjoyed a higher level of income and this, combined with operational improvements, led to an increased half year contribution. OUTLOOK IN THE UNITED KINGDOM AND OVERSEAS We were surprised and disappointed that our all share offer for Capital Corporation Plc was blocked on the recommendation of the MMC in August of this year. However, excellent progress has been made on other strategic initiatives and the group's overall progress will not therefore be inhibited as a result of the authorities' decision. In London, work on our two development projects at 50 St. James Street and at Old Park Lane, which will accommodate the relocation of the Ritz and Rendezvous casino businesses respectively, is proceeding A-35 INTERIM STATEMENT (CONTINUED) well. Gaming licences have been granted for both the new locations and the expanded facilities will offer considerable improvements for our customers and greater operational efficiency. We remain concerned at the delay in the implementation of material changes to the UK gaming legislation but, together with other members of the British Casino Association, continue to discuss with the Government at every opportunity ways in which changes can be expedited to allow our industry to remain internationally competitive. Overseas, our intention to expand the group's interests and continue to reduce our dependence upon the upper London market has advanced significantly with the completion of the Aladdin negotiations. Work is due to commence upon the Aladdin site in Las Vegas immediately and the recently announced involvement of the Planet Hollywood group at this prestigious development is particularly positive. Shareholders will be receiving a circular setting out the details of and seeking their approval for this exciting opportunity. In South Africa, joint venture proposals have been submitted to the Gautcog gaming authorities for casino operations in Central Johannesburg and at the Vaal River, a tourist centre close to Johannesburg. We intend to take minority equity positions and participate in the management of the casinos if the tenders are successful. The results of these applications should be known in the early part of 1998. In recent years we have committed substantial resources to developing our overseas strategy. These efforts have significantly raised the group's international profile and as a result we are increasingly being approached to take part in high calibre opportunities. Since the first half, overall levels of activity have continued to be good throughout the group. In our London casinos, despite press reports to the contrary, there has been a good level of premium player activity and an improved win percentage has resulted in a higher level of win than in the same period in 1996. For the eight months of the financial year to date, the group's London table win is now at a level which exceeds that experienced in the prior year. In the Lebanon, trading is continuing strongly and the international showroom at the Casino du Liban is nearing completion. The recent political unrest and terrorist activity in Egypt is clearly unsettling and we continue to watch events closely but so far no negative effect upon our business has been detected. Cannes is now trading in its traditionally quiet period which will continue for the remainder of the financial year. The number of ships on which we operate casinos has reduced in recent years and, in view of the marginal nature of this activity, we have now agreed with Cunard to cease remaining operations early in the new year. The trading volatility which we experienced in London in the first half of the year and the disappointing lack of progress in respect of United Kingdom gaming deregulation underlines the rationale for our international growth strategy. We have a number of excellent overseas projects in progress and these will be pursued aggressively. DIRECTORS AND EMPLOYEES The Company wishes to promote share participation by employees to encourage loyalty and identification with the success of the Group. It is therefore proposed that an Inland Revenue approved Sharesave Scheme be introduced in which all eligible UK employees will be invited to participate. A circular has been sent to shareholders setting out the details of the Scheme and requesting their approval thereto. Once again we would like to record our thanks to all of the group's employees for their individual contributions during the half year. Sir Timothy Kitson Alan Goodenough CHAIRMAN CHIEF EXECUTIVE 5 December 1997
A-36 CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
26 WEEKS 26 WEEKS 53 WEEKS ENDED ENDED ENDED 28 SEPTEMBER 22 SEPTEMBER 30 MARCH 1997 1996 1997 ------------- ------------- ----------- L'000 L'000 L'000 Turnover................................................................. 85,697 94,342 179,489 Operating costs: - -- Gaming taxation....................................................... (24,823) (28,412) (51,708) - -- Other................................................................. (37,493) (38,003) (74,134) ------------- ------------- ----------- Gross profit............................................................. 23,381 27,927 53,647 Administrative expense: - -- Exceptional costs in respect of abortive bid for Capital Corporation Plc..................................................................... (109) -- (1,080) - -- Other................................................................. (8,960) (8,030) (16,170) ------------- ------------- ----------- Profit before interest and taxation...................................... 14,312 19,897 36,397 Net interest payable..................................................... (843) (770) (1,154) ------------- ------------- ----------- Profit on ordinary activities before taxation............................ 13,469 19,127 35,243 Tax on ordinary activities............................................... (3,608) (6,493) (12,588) ------------- ------------- ----------- Profit on ordinary activities after taxation............................. 9,861 12,634 22,655 ------------- ------------- ----------- Dividends Dividend proposed/paid on ordinary shares of 2.625p per share (1996:2.625p interim 8.25p full year)................................... (3,856) (3,716) (11,679) ------------- ------------- ----------- Transfer to reserves..................................................... 6,005 8,918 10,976 ------------- ------------- ----------- Earnings per share....................................................... 6.8p 8.9p 16.0p ------------- ------------- ----------- Earnings per share before exceptional costs in respect of the abortive bid..................................................................... 6.9p 8.9p 16.8p ------------- ------------- -----------
See notes 3 and 4 for details of earnings per share and dividends respectively. A-37 CONSOLIDATED BALANCE SHEET (UNAUDITED)
28 SEPTEMBER 22 SEPTEMBER 30 MARCH 1997 1996 1997 ------------ ------------ ----------- L'000 L'000 L'000 Fixed Assets Tangible assets........................................................ 232,912 157,991 219,646 Investments............................................................ 4,705 4,676 4,666 ------------ ------------ ----------- 237,617 162,667 224,312 Current Assets Stocks................................................................. 1,333 1,077 1,353 Debtors................................................................ 17,923 11,248 11,818 Cash at bank and in hand............................................... 38,718 36,103 34,872 ------------ ------------ ----------- 57,974 48,428 48,043 Creditors (amounts falling due within one year).......................... (50,489) (59,034) (62,287) ------------ ------------ ----------- Net current assets/(liabilities)....................................... 7,485 (10,606) (14,244) ------------ ------------ ----------- Total assets less current liabilities.................................. 245,102 152,061 210,068 ------------ ------------ ----------- Creditors (amounts falling due after one year)........................... (48,059) (27,775) (24,816) Provision for liabilities and charges.................................... (647) (550) (317) ------------ ------------ ----------- 196,396 123,736 184,935 ------------ ------------ ----------- ------------ ------------ ----------- Capital and reserves Called up share capital................................................ 7,345 7,078 7,078 Share premium.......................................................... 80,103 74,528 74,528 Other reserves......................................................... 91,088 30,337 91,088 Profit and loss account................................................ 17,860 11,793 12,241 ------------ ------------ ----------- 196,396 123,736 184,935 ------------ ------------ ----------- ------------ ------------ -----------
A-38 CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
26 WEEKS 26 WEEKS 52 WEEKS ENDED 28 ENDED 22 ENDED 30 SEPTEMBER SEPTEMBER MARCH 1997 1997 1996 ------------- ------------- ------------- L'000 L'000 L'000 CASH FLOW FROM OPERATING ACTIVITIES (NOTE 5)............................................................ 6,755 23,452 44,806 Return on investments and servicing of Finance............................................................. (875) (624) (1,165) Taxation............................................................ (1,667) (810) (11,791) Capital expenditure and financial investment........................ (15,435) (4,632) (8,645) Equity dividends paid............................................... (7,963) (7,432) (11,148) ------------- ------------- ------------- CASH (OUTFLOW)/INFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING............................................. (19,185) 9,954 12,057 Management of liquid resources........................................ 385 -- 18 Financing--issue of shares............................................ 5842 -- -- --increase/(decrease) in debt................................. 16,894 (3,100) (6,200) ------------- ------------- ------------- 22,736 (3,100) (6,200) ------------- ------------- ------------- INCREASE IN CASH FOR THE PERIOD....................................... 3,936 6,854 5,875 ------------- ------------- ------------- ------------- ------------- -------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (UNAUDITED)
26 WEEKS 26 WEEKS 53 WEEKS ENDED 28 ENDED 22 ENDED 30 SEPTEMBER SEPTEMBER MARCH 1997 1997 1996 ----------- ------------- ------------- L'000 L'000 L'000 INCREASE IN CASH IN THE PERIOD........................................... 3,936 6,854 5,875 Cash (inflow)/outflow from movement in debt.............................. (16,894) 3,100 6,200 Cash inflow from decrease in liquid resources............................ (385) -- (18) Other non cash changes................................................... 567 1,801 (379) Translation differences.................................................. 295 (637) (871) ------------- ------ ----------- MOVEMENT IN NET DEBT IN THE PERIOD....................................... (12,481) 11,118 10,807 NET FUNDS/(DEBT) AT BEGINNING OF PERIOD.................................. 2,140 (8,667) (8,667) ------------- ------ ----------- NET (DEBT)/FUNDS AT END OF PERIOD........................................ (10,341) 2,451 2,140 ------------- ------ ----------- ------------- ------ -----------
A-39 NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED) 1. BASIS OF PREPARATION The interim financial information has been prepared in accordance with the accounting policies set out in the statutory accounts of London Clubs International plc and its subsidiaries for the 53 weeks ended 30 March 1997. The unaudited interim financial information has been approved by the directors and reviewed by the auditors. The statutory accounts of London Clubs International plc and its subsidiaries for the 53 weeks ended 30 March 1997 have been filed with the Registrar of Companies and contained no qualifications nor statements under Section 237 of the Companies Act 1985. 2. TAXATION The charge for taxation has been calculated on the basis of the taxable results for the period, after taking appropriate account of permanent and timing differences, assuming a UK corporation tax rate of 31% (1996: 33%). The current period tax charge includes a credit of L805,000 relating to adjustments in respect of prior years. 3. EARNINGS PER ORDINARY SHARE Earnings per ordinary share for each period have been calculated on profit on ordinary activities after taxation divided by the weighted average number of ordinary shares deemed to be in issue during the period. During the 26 weeks to 28 September 1997 the company's issued share capital was increased by 5,347,200 ordinary shares arising from the exercise of options under the company's executive share option scheme. The earnings and weighted average number of shares used in the calculation of basic earnings per share were as follows:
26 WEEKS 26 WEEKS 53 WEEKS ENDED ENDED ENDED 28 SEPTEMBER 22 SEPTEMBER 30 MARCH 1997 1996 1997 ------------ ------------ ----------- Earnings per ordinary share (p).......................................... 6.8 8.9 16.0 Earnings (L'000)......................................................... 9,861 12,634 22,655 Weighted average number of shares ('000)................................. 141,785 141,557 141,557
Earnings per ordinary share before exceptional bid costs in respect of the abortive bid for Capital Corporation Plc have been calculated as 6.9 pence per share for the 26 weeks ended 28 September 1997 and as 16.8 pence per share for the 53 weeks ended 30 March 1997. These figures are based upon the profit after taxation but before exceptional bid costs of L9,970,000 and of L23,735,000 for the respective periods noted above. The weighted average number of shares used in the calculations for each period are the same as set out in the above table. No tax credit is assumed to arise on the bid costs. 4. DIVIDENDS The interim dividend of 2.625p net per share will be paid on 30 January 1998. The net cost of L3.856 million appears in the consolidated profit and loss account for the 26 weeks ended 28 September 1997. A-40 NOTES TO THE INTERIM FINANCIAL INFORMATION (UNAUDITED) (CONTINUED) 5. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
26 WEEKS 26 WEEKS 53 WEEKS ENDED ENDED ENDED 28 SEPTEMBER 22 SEPTEMBER 30 MARCH 1997 1996 1997 ------------- ------------- ----------- L'000 L'000 L'000 Operating profit before interest and taxation............................ 14,312 19,897 36,397 Depreciation............................................................. 1,918 2,092 3,418 Loss/(gain) on sale of fixed assets...................................... 3 (5) 75 Exchange movements....................................................... (39) 74 305 Movement in stocks....................................................... 20 81 (195) Movement in debtors...................................................... (6,545) (3,542) (784) Movement in creditors.................................................... (2,914) 4,855 5,590 ------ ------ ----------- Net cash inflow from operating activities................................ 6,755 23,452 44,806 ------ ------ ----------- ------ ------ -----------
A-41 The following represents the review report issued by Price Waterhouse, London to the Board of Directors of London Clubs International plc. The review was undertaken in accordance with guidance issued by the Auditing Practices Board in the United Kingdom (UK). The accompanying interim financial information has been prepared in conformity with UK generally accepted accounting principles. REVIEW REPORT BY THE AUDITORS TO THE BOARD OF DIRECTORS OF LONDON CLUBS INTERNATIONAL PLC We have reviewed the interim financial information for the 26 weeks ended 28 September 1997, set out on pages A-37 to A-41 which is the responsibility of, and has been approved by, the Directors. Our responsibility is to report on the results of our review. Our review was carried out having regard to the Bulletin "Review of Interim Financial Information", issued by the Auditing Practices Board. This review consisted principally of applying analytical procedures to the underlying financial data, assessing whether accounting policies have been consistently applied, and making enquiries of group management responsible for financial and accounting matters. The review excluded audit procedures such as tests of controls and verification of assets and liabilities and was therefore substantially less in scope than an audit performed in accordance with Auditing Standards. Accordingly we do not express an audit opinion on the interim financial information. On the basis of our review: - in our opinion the interim financial information has been prepared using accounting policies consistent with those adopted by London Clubs International plc and its subsidiaries in the financial statements for the 53 weeks ended 30 March 1997, and - we are not aware of any material modifications that should be made to the interim financial information as presented. PRICE WATERHOUSE CHARTERED ACCOUNTANTS London 5 December 1997 A-42 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY THE WARRANTS OR THE WARRANT SHARES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN AFFAIRS OF THE ALADDIN PARTIES SINCE THE DATE HEREOF. -------------- TABLE OF CONTENTS
PAGE --------- Prospectus Summary.............................. 1 Risk Factors.................................... 14 Use of Proceeds................................. 29 Capitalization.................................. 31 Dividends and Distributions..................... 33 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 34 Business........................................ 37 Regulation and Licensing........................ 57 Management...................................... 62 Controlling Stockholders........................ 68 Certain Transactions............................ 72 Security Ownership of Certain Beneficial Owners........................................ 74 Description of Capital Stock.................... 77 Description of the Warrants..................... 79 Description of Noteholder Completion Guaranty and Disbursement Agreement.................... 82 Description of Certain Indebtedness and Other Obligations................................... 88 Certain Material Agreements..................... 97 Certain United States Federal Income Tax Considerations................................ 122 Plan of Distribution............................ 124 Legal Matters................................... 125 Experts......................................... 125 Index to Historical Financial Information of the Aladdin Parties and the Company............... F-1 Annex A Certain Historical Consolidated Financial Information of London Clubs................. A-1
[LOGO] 2,215,000 WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF ALADDIN GAMING ENTERPRISES, INC. --------------------- PROSPECTUS ---------------------------- , 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION. The following expenses (other than the SEC filing fee) are estimated. SEC Registration Fee.............................................. $ 4,425 Accounting Fees and Expenses...................................... $ 12,000 Printing and Engraving Expenses................................... $ 48,000 Legal Fees and Expenses (other than blue sky)..................... $ 175,000 Blue Sky Fees and Expenses........................................ $ 10,000 Transfer Agent and Registrar Fees................................. $ 1,500 Miscellaneous Expenses............................................ $ 5,000 --------- Total............................................................. $ 255,925 --------- ---------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The following summary of material provisions of the Articles of Incorporation and Bylaws of Aladdin Gaming Enterprises, Inc. (the "Issuer") and Nevada law does not purport to be complete and is subject to and qualified in its entirety by reference to Nevada law and the text of the Issuer's Articles of Incorporation and Bylaws, which have been filed as exhibits to this Registration Statement. The Issuer's Articles of Incorporation provide that no officer or director will be personally liable to the Issuer or any stockholder for damages for breach of fiduciary duty as a director or officer, except for (i) acts or omissions which involve intentional misconduct, fraud or knowing violation of the law, or (ii) the payment of distributions in violation of Nevada Revised Statutes ("NRS") Section78.300. Additionally, the Issuer's Bylaws limit the liability of its directors and officers (and, by action of the board of directors, its employees, and other persons) to the fullest extent permitted by Nevada law. If the Nevada law is subsequently amended to permit further limitation of personal liability of directors and officers, the liability of the Issuer's directors and officers will be eliminated or limited to the fullest extent permitted by Nevada law, as amended. Nevada law permits corporations to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (except in an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. This same permissible indemnification is not allowed as to any action or suit by or in the right of the corporation if the person has been adjudged by a court (after exhaustion of all appeals) to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that a court determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses, as the court deems proper. To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in the defense of any claim, issue or matter therein, Nevada law requires that he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with that defense. II-1 The Issuer's Bylaws further provide that the Issuer may purchase and maintain insurance or make other financial arrangements for such indemnification and that such indemnification shall continue as to any indemnitee who has ceased to be a director or officer and shall inure to the benefit of his heirs, executors and administrators. The inclusion of the permissive indemnification provision in the Issuer's Bylaws may have the effect of reducing the likelihood of derivative litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefitted the Issuer and its stockholders. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act") may be permitted to directors, officers or persons controlling the registrants pursuant to the foregoing provisions, the Issuer has been informed that in the opinion of the Securities and Exchange Commission (the "Commission") such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Pursuant to the registration rights agreement (the "Registration Rights Agreement") relating to the Warrants (the "Warrants") to acquire Class B Common Stock of the Issuer and the Class B Common Stock of the Issuer into which the Warrants are exercisable, the holders of such securities and certain underwriters, broker dealers and the Initial Purchasers (as defined herein) have agreed to indemnify the directors, officers and controlling persons of the registrant against certain liabilities, costs and expenses that may be incurred in connection with the registration of such securities, to the extent that such liabilities, costs and expenses that may be incurred in connection with the registration of such securities arise from an omission or untrue statement contained in information provided to the registrant by a holder of such securities, underwriter, broker dealer or Initial Purchaser. The Purchase Agreement, dated as of February 18, 1998 among Aladdin Gaming Holdings LLC, Aladdin Capital Corp. and the Issuer (collectively, the "Unit Issuers") and Merrill Lynch, Pierce, Fenner and Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheiner Corp. and Scotia Capital Markets (USA) Inc. (the "Initial Purchasers"), contains provisions by which the Initial Purchasers agree to indemnify the Unit Issuers (including their respective officers, directors, employees, agents and controlling persons) against certain liabilities. ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ----------- -------------------------------------------------------------------------------------------------------- 3.1 Articles of Incorporation of Aladdin Gaming Enterprises, Inc. ("Enterprises"). 3.2 Amendment No. 1 to Articles of Incorporation of Enterprises. 3.3 Articles of Organization of Aladdin Gaming Holdings, LLC ("Holdings"). 3.4 Articles of Incorporation of Aladdin Capital Corp. ("Capital"). 3.5 Articles of Organization of Aladdin Gaming, LLC (the "Company"). 3.6 Bylaws of Enterprises. * 3.7 Operating Agreement of Holdings. 3.8 Bylaws of Capital. 3.9 Operating Agreement of the Company. 4.1 Warrant Agreement, dated February 26, 1998, among Enterprises and State Street Bank and Trust Company, as Warrant Agent (the "Warrant Agent").
II-2
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ----------- -------------------------------------------------------------------------------------------------------- 4.2 Warrant Registration Rights Agreement dated February 26, 1998, among Enterprises and the Initial Purchasers (as defined). 4.3 Equity Participation Agreement, dated February 26, 1998, among Sommer Enterprises, LLC, Enterprises, London Clubs Nevada, Inc. ("LCNI") and the Trustee (as defined). * 5.1 Opinion of Schreck Morris regarding legality of the securities being registered. * 8.1 Opinion of Skadden, Arps, Slate, Meagher and Flom LLP regarding certain tax matters. 10.1 Indenture, dated February 26, 1998, among Holdings, Capital and State Street Bank and Trust Company, as trustee (the "Trustee"). 10.2 Note Registration Rights Agreement, dated February 26, 1998, among Holdings, Capital and the Initial Purchasers. * 10.3 Noteholder Completion Guaranty, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs International plc ("London Clubs"), Aladdin Bazaar Holdings, LLC and the Trustee. * 10.4 Disbursement Agreement, dated February 26, 1998, among Holdings, the Company, 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. * 10.5 The LLC Interest Pledge and Security Agreement, dated February 26, 1998, between Holdings and the Trustee. * 10.6 The Holdings Collateral Account Agreement, dated February 26, 1998, between Holdings and the Trustee. 10.7 Subsidiary Guaranty, dated February 26, 1998, among subsidiaries of London Clubs and the Trustee. 10.8 Amended and Restated London Clubs Purchase Agreement, dated February 26, 1998, among LCNI, London Clubs, Holdings, Aladdin Holdings, LLC, the Company, Sommer Enterprises, LLC and the Trust Under Article Sixth u/w/o Sigmund Sommer. 10.9 Closing Schedules to Amended and Restated London Clubs Purchase Agreement. 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. 10.11 Salle Privee Agreement, dated February 26, 1998, among the Company, LCNI and London Clubs. * 10.12 Tax Indemnity Agreement, dated February 26, 1998, among the Trust Under Article Sixth u/w/o Sigmund Sommer, Aladdin Holdings, LLC and LCNI. * 10.13 Credit Agreement, dated February 26, 1998, among the Company, a syndicate of lenders (the "Bank Lenders"), The Bank of Nova Scotia as Administrative Agent, Merrill Lynch Capital Corporation as Syndication Agent and CIBC Oppenheimer Corp. as Documentation Agent. * 10.14 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. * 10.15 Keep-Well Agreement, dated February 26, 1998, among Aladdin Holdings, LLC, London Clubs and Aladdin Bazaar Holdings, LLC. 10.16 Design/Build Contract, dated December 4, 1997, between the Company and Fluor Daniel, Inc.
II-3
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ----------- -------------------------------------------------------------------------------------------------------- * 10.17 Amendment No. 1 to Design/Build Contract, dated January 21, 1998, between the Company and Fluor Daniel, Inc. * 10.18 Amendment No. 2 to Design/Build Contract, dated January 28, 1998, between the Company and Fluor Daniel, Inc. * 10.19 Fluor Guaranty, dated December 4, 1997, between the Company and Fluor Corporation. * 10.20 Site Work, Development and Construction Agreement, dated February 26, 1998, among the Company, Aladdin Bazaar, LLC and Aladdin Holdings, LLC. * 10.21 Construction, Operation and Reciprocal Easement Agreement, dated February 26, 1998, among the Company, Aladdin Bazaar, LLC and Aladdin Music Holdings, LLC. * 10.22 Common Parking Area Use Agreement, dated February 26, 1998 between the Company and Aladdin Bazaar, LLC. * 10.23 Music Project Lease, dated February 26, 1998, between the Company and Aladdin Music Holdings, LLC. * 10.24 Mall Project Lease, dated February 26, 1998, between the Company and Aladdin Bazaar, LLC. * 10.25 Deed of Trust, Assignment of Rents and Leases, Fixture Filing and Security Agreement, dated February 26, 1998, made by the Company to Stewart Title of Nevada, as trustee for the benefit of the Bank of Nova Scotia. 10.26 Development Agreement, dated December 3, 1998, between the Company and Northwind Aladdin, LLC. * 10.27 Energy Service Agreement, dated , 1998, between the Company and Northwind Aladdin, LLC. 10.28 Energy Lease, dated December 3, 1997, between the Company and Northwind Aladdin, LLC. 10.29 Unicom Guaranty, dated December 3, 1997, between Unicom Corporation and the Company. 10.30 Limited Liability Company Agreement of Aladdin Bazaar, LLC, dated September 3, 1997, between TH Bazaar Centers Inc. and Aladdin Bazaar Holdings, LLC. 10.31 First Amendment to the Limited Liability Company Operating Agreement of Aladdin Bazaar, LLC, dated October 16, 1997. * 10.32 Music Project Memorandum of Understanding and Letter of Intent, dated September 2, 1997, between the Company and Planet Hollywood International, Inc. * 10.33 Amendment to Music Project Memorandum of Understanding and Letter of Intent, dated October 15, 1997, between the Company and Planet Hollywood International, Inc. 10.34 GAI Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and GAI, LLC. 10.35 Goeglein Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and Richard J. Goeglein. 10.36 McKennon Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and James H. McKennon. 10.37 Klerk Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and Cornelius T. Klerk. 10.38 Galati Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings, and Lee A. Galati.
II-4
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ----------- -------------------------------------------------------------------------------------------------------- 10.39 Rueda Contribution and Amendment Agreement, dated February 26, 1998, among the Company, Holdings and Jose A. Rueda. * 10.40 GAI Consulting Agreement, dated July 1, 1997, between GAI, LLC and the Company. * 10.41 Employment and Consulting Agreement, dated July 1, 1997, between the Company and Richard J. Goeglein. * 10.42 Employment Agreement, dated July 28, 1997, between the Company and James H. McKennon. * 10.43 Employment Agrement, dated July 28, 1997, between the Company and Cornelius T. Klerk. * 10.44 Employment Agreement, dated August 19, 1997, between the Company and Lee A. Galati. * 10.45 Employment Agreement, dated July 1, 1997, between the Company and Jose A. Rueda. 10.46 FF&E Commitment Letter, dated January 23, 1998, between the Company and General Electric Capital Corporation. * 10.47 Mall Commitment Letter, dated December 29, 1997, between Aladdin Bazaar, LLC and Fleet National Bank, as Administrative Agent. 10.48 Purchase Agreement, dated February 18, 1998, among Enterprises, Holdings, Capital, Aladdin Holdings, LLC, the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (the "Initial Purchasers"). 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Price Waterhouse. * 23.3 Consent of Schreck Morris (included in exhibit 5.1). * 23.4 Consent of Skadden, Arps, Slate, Meagher & Flom, LLP (included in exhibit 8.1). 23.5 Awareness Letter from Price Waterhouse.
- ------------------------ * To be filed by amendment. II-5 ITEM 17. UNDERTAKINGS. (a) The undersigned Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii) to reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 per cent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and (iii) to include any material information with respect to the plan for distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) To file a post-effective amendment to the registration statement to include any financial statements required by Rule 3-19 of Regulation S-X at the start of any delayed offering or throughout a continuous offering. (b) The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-6 (d) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Las Vegas, State of Nevada on April 8, 1998. ALADDIN GAMING ENTERPRISES, INC. By: /s/ JACK SOMMER ----------------------------------------- Jack Sommer PRESIDENT/DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ JACK SOMMER - ------------------------------ President/Director April 8, 1998 Jack Sommer /s/ RONALD DICTROW - ------------------------------ Secretary/Director April 8, 1998 Ronald Dictrow /s/ CORNELIUS T. KLERK - ------------------------------ Treasurer April 8, 1998 Cornelius T. Klerk II-8 EX-3.1 2 ARTICLES OF INCORPORATION OF ENTERPRISES ARTICLES OF INCORPORATION OF ALADDIN GAMING ENTERPRISES, INC. The undersigned, for the purpose of forming a corporation pursuant to and by virtue of Chapter 78 of the Nevada Revised Statutes, hereby adopts, executes and acknowledges the following Articles of Incorporation. ARTICLE I NAME The name of the corporation shall be ALADDIN GAMING ENTERPRISES, INC. ARTICLE II REGISTERED OFFICE The name of the initial resident agent and the street address of the initial registered office in the State of Nevada where process may be served upon the corporation is Schreck Morris, 300 South Fourth Street, Suite 1200, Las Vegas, Clark County, Nevada 89101. The corporation may, from time to time, in the manner provided by law, change the resident agent and the registered office within the State of Nevada. The corporation may also maintain an office or offices for the conduct of its business, either within or without the State of Nevada. ARTICLE III CAPITAL STOCK Section 1. AUTHORIZED SHARES. The aggregate number of shares which the corporation shall have authority to issue shall consist of two thousand five hundred (2,500) shares of common stock without par value. Section 2. CONSIDERATION FOR SHARES. The common stock authorized by Section 1 of this Article shall be issued for such consideration as shall be fixed, from time to time, by the Board of Directors. Section 3. ASSESSMENT OF STOCK. The capital stock of this corporation, after the amount of the subscription price has been fully paid in, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed. No stockholder of the corporation is individually liable for the debts or liabilities of the corporation. Section 4. CUMULATIVE VOTING FOR DIRECTORS. No stockholder of the corporation shall be entitled to cumulative voting of his shares for the election of directors. Section 5. PREEMPTIVE RIGHTS. No stockholder of the corporation shall have any preemptive rights. ARTICLE IV DIRECTORS AND OFFICERS Section 1. NUMBER OF DIRECTORS. The members of the governing board of the corporation are styled as directors. The Board of Directors of the corporation shall consist of at least one (1) individual who shall be elected in such manner as shall be provided in the bylaws of the corporation. The number of directors may be changed from time to time in such manner as shall be provided in the bylaws of the corporation. Section 2. INITIAL DIRECTORS. The name and post office box or street address of each of the directors constituting the first Board of Directors, which be one (1) in number, is: NAME ADDRESS Jack Sommer 2810 W. Charleston Blvd., Ste. F-58 Las Vegas, Nevada 89102 Section 3. LIMITATION OF PERSONAL LIABILITY. No director or officer of the corporation shall be personally liable to the corporation or its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision does not eliminate or limit the liability of a director or officer of the corporation for: (a) Acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or (b) The payment of distributions in violation of Nevada Revised Statutes 78.300. Section 4. PAYMENT OF EXPENSES. In addition to any other rights of indemnification permitted by the law of the State of Nevada as may be provided for by the corporation in its bylaws or by agreement, the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding, involving alleged acts or omissions of such officer or director in his or her capacity as an officer or director of the corporation, must be paid, by the corporation or through insurance purchased and maintained by the corporation or through other financial arrangements made by the corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Section 5. REPEAL AND CONFLICTS. Any repeal or modification of Sections 3 or 4 above approved by the stockholders of the corporation shall be prospective only. In the event of any conflict between Sections 3 or 4 of this Article and any other Article of the corporation's Articles of Incorporation, the terms and provisions of Sections 3 or 4 of this Article shall control. ARTICLE V INCORPORATOR The name and post office box or street address of the incorporator signing these Articles of Incorporation is: NAME ADDRESS Ellen L. Schulhofer, Esq. 300 S. Fourth Street, Ste. 1200 Las Vegas, Nevada 89101 IN WITNESS WHEREOF, I have executed these Articles of Incorporation this 3rd day of December, 1997. /s/ Ellen L. Schulhofer --------------------------------------------- Ellen L. Schulhofer, Esq. State of Nevada ) ) ss. County of Clark ) This instrument was acknowledged before me on December 3, 1997, by Ellen L. Schulhofer as Incorporator of Aladdin Gaming Enterprises, Inc. --------------------------------------------- Notary Public EX-3.2 3 AMEND #1 TO ARTICLES OF INCORPORATION CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF ALADDIN GAMING ENTERPRISES, INC. THIS IS TO CERTIFY that on the 17th day of February, 1998, Aladdin Gaming Enterprises, Inc., a Nevada corporation (the "Corporation"), pursuant to the unanimous written consent of the Board of Directors of the Corporation, adopted the following resolutions in accordance with Nevada Revised Statutes Sections 78.385 and 78.390: RESOLVED, that the Corporation's Articles of Incorporation be amended so as to replace Article III, which shall read in its entirety as follows: "ARTICLE III CAPITAL STOCK Section 1. AUTHORIZED SHARES. The aggregate number of shares which the corporation shall have authority to issue shall consist of ten million (10,000,000) shares of common stock without par value. Such common stock shall be divided into two classes, Class A voting common stock which shall have two million (2,000,000) shares authorized for issuance (the "Class A Stock"), and Class B non-voting common stock which shall have eight million (8,000,000) shares authorized for issuance (the "Class B Stock"). Section 2. VOTING RIGHTS. The holders of Class A Stock shall be entitled to one vote for each share of Class A Stock held on all matters to be voted on by the stockholders of the corporation. Except as otherwise expressly required by law, the holders of Class B Stock shall have no right to vote on any matter to be voted on by the stockholders of the corporation (including, without limitation, any election or removal of the directors of the Corporation) and the Class B Stock shall not be included in determining the number of shares voting or entitled to vote on such matters. Section 3. OTHER RIGHTS. Except as set forth in Section 2 of this Article, holders of Class A Stock and holders of Class B Stock shall have the same rights and privileges and shall rank equally, share ratably and be identical in all respects as to all matters, including rights to dividends and rights in liquidation. Section 4. CONSIDERATION FOR SHARES. The common stock authorized by Section 1 of this Article shall be issued for such consideration as shall be fixed, from time to time, by the Board of Directors. Section 5. ASSESSMENT OF STOCK. The capital stock of this corporation, after the amount of the subscription price has been fully paid in, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed. No stockholder of the corporation is individually liable for the debts or liabilities of the corporation. Section 6. CUMULATIVE VOTING FOR DIRECTORS. No stockholder of the corporation shall be entitled to cumulative voting of such stockholder's shares for the election of directors. Section 7. PREEMPTIVE RIGHTS. No stockholder of the corporation shall have any preemptive rights. Section 8. SUBDIVISION AND COMBINATION OF SHARES. If the corporation in any manner subdivides or combines the outstanding shares of one class of common stock, the outstanding shares of the other class of common stock shall be likewise subdivided or combined." We further hereby certify that the written consent of the sole stockholder of the Corporation was secured immediately subsequent to the written consent of the Board of Directors approving the amendment of the Articles of Incorporation as provided in the foregoing resolution. DATED this 17th day of February, 1998. /s/ Jack Sommer -------------------------------- Jack Sommer, President /s/ Ronald Dictrow -------------------------------- Ronald Dictrow, Secretary State of Nevada ) ) ss. County of Clark ) This instrument was acknowledged before me on February , 1998 by Jack Sommer as President of Aladdin Gaming Enterprises, Inc. _________________________________ (Signature of notarial officer) State of New York ) ) ss. County of _________ ) This instrument was acknowledged before me on February , 1998 by Ronald Dictrow as Secretary of Aladdin Gaming Enterprises, Inc. _________________________________ (Signature of notarial officer) EX-3.3 4 ARTICLES OF ORGANIZATION OF HOLDINGS ARTICLES OF ORGANIZATION OF ALADDIN GAMING HOLDINGS, LLC The undersigned, for the purpose of forming a limited-liability company (the "company"), pursuant to and by virtue of Chapter 86 of Nevada Revised Statutes, hereby adopts, executes and acknowledges the following articles of organization. ARTICLE I NAME The name of the company is Aladdin Gaming Holdings, LLC. ARTICLE II REGISTERED OFFICE AND RESIDENT AGENT The name of the initial resident agent and the initial address of the registered office where process may be served in the State of Nevada is Schreck Morris, 300 S. Fourth Street, Suite 1200, Las Vegas, Nevada 89101. The company may, from time to time, in the manner provided by Nevada law, change the resident agent and the registered office within the State of Nevada. ARTICLE III ORGANIZER The name and post office box or street address of the organizer signing these articles of organization is: NAME ADDRESS Ellen L. Schulhofer 300 S. Fourth Street, Suite 1200 Las Vegas, Nevada 89101 ARTICLE IV INDEMNIFICATION AND PAYMENT OF EXPENSES Section 6.1 INDEMNIFICATION AND PAYMENT OF EXPENSES. In addition to any other rights of indemnification permitted by the laws of the State of Nevada as may be provided for by the company in its operating agreement or by any other agreement, the expenses of members and managers incurred in defending a civil or criminal action, suit or proceeding, involving alleged acts or omissions of such member or manager in his or her capacity as a member or manager of the company, must be paid by the company, or through insurance purchased and maintained by the company or through other financial arrangements made by the company as permitted by the laws of the State of Nevada, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an unsecured undertaking by or on behalf of the member or manager to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the company. Section 6.2 REPEAL, MODIFICATION AND CONFLICTS. Any repeal or modification of Section 6.1 approved by the members of the company shall be prospective only. In the event of any conflict between Section 6.1 and any other article of the company's articles of organization, the terms and provisions of Section 6.1 shall control. ARTICLE V MANAGEMENT Section 7.1 NUMBER OF MANAGERS. The management of the company shall be vested in managers. The number of managers may be changed from time to time in such manner as shall be provided in the company's operating agreement. The manager or managers shall be elected in the manner prescribed by the company's operating agreement. The manager or managers shall hold the offices and have the responsibilities accorded to them by the members and set forth in the company's operating agreement. Section 7.2 INITIAL MANAGERS. The name and address of the manager constituting the initial manager of the company, which shall be one (1) in number, is: NAME ADDRESS Jack Sommer 2810 W. Charleston Blvd., Ste. F-58 Las Vegas, Nevada 89102 IN WITNESS WHEREOF, pursuant to Nevada Revised Statutes 86.151, I have executed these articles of organization this 1st day of December, 1997. /s/ Ellen L. Schulhofer ----------------------------------- Ellen L. Schulhofer, Organizer State of Nevada ) ) ss. County of Clark ) This instrument was acknowledged before me on the 1st day of December, 1997, by Ellen L. Schulhofer, as organizer of Aladdin Gaming Holdings, LLC ------------------------------------ Notary Public EX-3.4 5 ARTICLES OF INCORPORATION OF CAPITAL ARTICLES OF INCORPORATION OF ALADDIN CAPITAL CORP. The undersigned, for the purpose of forming a corporation pursuant to and by virtue of Chapter 78 of the Nevada Revised Statutes, hereby adopts, executes and acknowledges the following Articles of Incorporation. ARTICLE I NAME The name of the corporation shall be Aladdin Capital Corp. ARTICLE II REGISTERED OFFICE The name of the initial resident agent and the street address of the initial registered office in the State of Nevada where process may be served upon the corporation is Schreck Morris, 300 South Fourth Street, Suite 1200, Las Vegas, Clark County, Nevada 89101. The corporation may, from time to time, in the manner provided by law, change the resident agent and the registered office within the State of Nevada. The corporation may also maintain an office or offices for the conduct of its business, either within or without the State of Nevada. ARTICLE III CAPITAL STOCK Section 1. AUTHORIZED SHARES. The aggregate number of shares which the corporation shall have authority to issue shall consist of two thousand five hundred (2,500) shares of common stock without par value. Section 2. CONSIDERATION FOR SHARES. The common stock authorized by Section 1 of this Article shall be issued for such consideration as shall be fixed, from time to time, by the Board of Directors. Section 3. ASSESSMENT OF STOCK. The capital stock of this corporation, after the amount of the subscription price has been fully paid in, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed. No stockholder of the corporation is individually liable for the debts or liabilities of the corporation. Section 4. CUMULATIVE VOTING FOR DIRECTORS. No stockholder of the corporation shall be entitled to cumulative voting of his shares for the election of directors. Section 5. PREEMPTIVE RIGHTS. No stockholder of the corporation shall have any preemptive rights. ARTICLE IV DIRECTORS AND OFFICERS Section 1. NUMBER OF DIRECTORS. The members of the governing board of the corporation are styled as directors. The Board of Directors of the corporation shall consist of at least one (1) individual who shall be elected in such manner as shall be provided in the bylaws of the corporation. The number of directors may be changed from time to time in such manner as shall be provided in the bylaws of the corporation. Section 2. INITIAL DIRECTORS. The name and post office box or street address of each of the directors constituting the first Board of Directors, which be one (1) in number, is: NAME ADDRESS Jack Sommer 2810 W. Charleston Blvd., Ste. F-58 Las Vegas, Nevada 89102 Section 3. LIMITATION OF PERSONAL LIABILITY. No director or officer of the corporation shall be personally liable to the corporation or its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision does not eliminate or limit the liability of a director or officer of the corporation for: (a) Acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or (b) The payment of distributions in violation of Nevada Revised Statutes 78.300. Section 4. PAYMENT OF EXPENSES. In addition to any other rights of indemnification permitted by the law of the State of Nevada as may be provided for by the corporation in its bylaws or by agreement, the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding, involving alleged acts or omissions of such officer or director in his or her capacity as an officer or director of the corporation, must be paid, by the corporation or through insurance purchased and maintained by the corporation or through other financial arrangements made by the corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Section 5. REPEAL AND CONFLICTS. Any repeal or modification of Sections 3 or 4 above approved by the stockholders of the corporation shall be prospective only. In the event of any conflict between Sections 3 or 4 of this Article and any other Article of the corporation's Articles of Incorporation, the terms and provisions of Sections 3 or 4 of this Article shall control. ARTICLE V INCORPORATOR The name and post office box or street address of the incorporator signing these Articles of Incorporation is: NAME ADDRESS Ellen L. Schulhofer, Esq. 300 S. Fourth Street, Ste. 1200 Las Vegas, Nevada 89101 IN WITNESS WHEREOF, I have executed these Articles of Incorporation this 1st day of December, 1997. /s/ Ellen Schulhofer ----------------------------------------- Ellen L. Schulhofer, Esq. State of Nevada ) ) ss. County of Clark ) This instrument was acknowledged before me on December 1, 1997, by Ellen L. Schulhofer as Incorporator of Aladdin Capital Corp. _____________________________________________ Notary Public EX-3.5 6 ARTICLES OF ORGANIZATION OF ALADDIN GAMING, LLC ARTICLES OF ORGANIZATION OF ALADDIN GAMING, LLC The undersigned, for the purpose of forming a limited-liability company (the "company"), pursuant to and by virtue of Chapter 86 of Nevada Revised Statutes, hereby adopts, executes and acknowledges the following articles of organization. ARTICLE I NAME The name of the company is Aladdin Gaming, LLC. ARTICLE II TERM The latest date upon which the company is to dissolve shall be January 24, 2097. ARTICLE III REGISTERED OFFICE AND RESIDENT AGENT The name of the initial resident agent and the initial address of the registered office where process may be served in the State of Nevada is Schreck Morris, 300 S. Fourth Street, Suite 1200, Las Vegas, Nevada 89101. The company may, from time to time, in the manner provided by Nevada law, change the resident agent and the registered office within the State of Nevada. ARTICLE IV CONTINUANCE OF COMPANY BUSINESS Upon the consent of not less than a majority in interest of the remaining members, the business of the company shall continue on the death, insanity, retirement, resignation, expulsion, bankruptcy or dissolution of a member or occurrence of any other event which terminates the continued membership of a member in the company. 1 of 4 ARTICLE V ORGANIZER The name and post office box or street address of the organizer signing these articles of organization is: NAME ADDRESS Ellen L. Schulhofer 300 S. Fourth Street, Suite 1200 Las Vegas, NV 89101 ARTICLE VI INDEMNIFICATION AND PAYMENT OF EXPENSES Section 6.1 Indemnification and Payment of Expenses. In addition to any other rights of indemnification permitted by the laws of the State of Nevada as may be provided for by the company in its operating agreement or by any other agreement, the expenses of members and managers incurred in defending a civil or criminal action, suit or proceeding, involving alleged acts or omissions of such member or manager in his or her capacity as a member or manager of the company, must be paid by the company, or through insurance purchased and maintained by the company or through other financial arrangements made by the company as permitted by the laws of the State of Nevada, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an unsecured undertaking by or on behalf of the member or manager to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the company. Section 6.2 Repeal, Modification and Conflicts. Any repeal or modification of Section 6.1 approved by the members of the company shall be prospective only. In the event of any conflict between Section 6.1 and any other article of the company's articles of organization, the terms and provisions of Section 6.1 shall control. ARTICLE VII MANAGEMENT Section 7.1 Number of Managers. The management of the company shall be vested in a manager. The number of managers may be changed from time to time in such manner as shall be provided in the company's operating agreement. The manager or managers shall be elected in the manner prescribed by the company's operating agreement. The manager of managers shall hold the offices and have the responsibilities accorded to them by the members and set forth in the company's operating agreement. 2 of 4 Section 7.2 Initial Manager. The name and address of the manager constituting the initial manager of the company, which shall be one (1) in number, is: NAME ADDRESS Aladdin Gaming Corp. 2820 W. Charleston Blvd., Ste. 41 Las Vegas, NV 89102 ARTICLE VIII PURPOSES The character and general nature of the business to be conducted by the company is to operate, manage, and conduct gaming in a gaming casino on or within the premises known as the Aladdin Hotel & Casino and located at 3667 S. Las Vegas Blvd., Las Vegas, Nevada 89109. ARTICLE IX RESTRICTIONS Section 9.1 Transfer of Interest in the Company. Notwithstanding anything to the contrary expressed or implied in these articles of organization, the sale, assignment, transfer, pledge or other disposition of any interest in the company is ineffective unless approved in advance by the Nevada Gaming Commission. If at any time the Commission finds that a member which owns any such interest is unsuitable to hold that interest, the Commission shall immediately notify the company of that fact. The company shall, within 10 days from the date that it receives the notice from the Commission, return to the unsuitable member the amount of his capital account as reflected on the books of the company. Beginning on the date when the Commission serves notice of a determination of unsuitability, pursuant to the preceding sentence, upon the company, it is unlawful for the unsuitable member: (a) to receive any share of the distribution of profits or cash or any other property of, or payments upon dissolution of, the company, other than a return of capital as required above; (b) to exercise directly or through a trustee or nominee, any voting right conferred by such interest; (c) to participate in the management of the business and affairs of the company; or (d) to receive any remuneration in any form from the company, for services rendered or otherwise. Section 9.2 Determination of Unsuitability. Any member that is found unsuitable by the Nevada Gaming Commission shall return all evidence of any ownership in the company to the company, at which time the company shall, within 10 days, after the company receives notice from the Commission, return to the member in cash, the amount of his capital account as reflected on the books of the company, and the unsuitable member shall no longer have any direct or indirect interest in the company. 3 of 4 IN WITNESS WHEREOF, pursuant to Nevada Revised Statutes 86.151, I have executed these articles of organization this 24th day of January, 1997. /s/ Ellen L. Schulhofer ------------------------------------ Ellen L. Schulhofer, Esq., Organizer State of Nevada ) ) ss. County of Clark ) This instrument was acknowledged before me on the 24th day of January, 1997, by Ellen L. Schulhofer, Esq., as organizer of Aladdin Gaming, LLC. ------------------------------------ Notary Public 4 of 4 EX-3.6 7 BYLAWS OF ENTERPRISES BYLAWS OF ALADDIN GAMING ENTERPRISES, INC. ARTICLE I STOCKHOLDERS SECTION 1.01 ANNUAL MEETING. An annual meeting of the stockholders of the corporation shall be held at 2:00 o'clock in the afternoon on the second Thursday of December in each year, commencing after the first anniversary of incorporation, but if such date is a legal holiday, then on the next succeeding business day, for the purpose of electing directors of the corporation to serve during the ensuing year and for the transaction of such other business as may properly come before the meeting. If the election of the directors is not held on the day designated herein for any annual meeting of the stockholders, or at any adjournment thereof, the president shall cause the election to be held at a special meeting of the stockholders as soon thereafter as is convenient. SECTION 1.02 SPECIAL MEETINGS. (a) Special meetings of the stockholders may be called by the Chairman of the Board of Directors or the president and shall be called by the Chairman of the Board of Directors, the president or the Board of Directors at the written request of the holders of not less than 51% of the voting power of any class of the corporation's stock entitled to vote. (b) No business shall be acted upon at a special meeting except as set forth in the notice calling the meeting, unless one of the conditions for the holding of a meeting without notice set forth in Section 1.05 shall be satisfied, in which case any business may be transacted and the meeting shall be valid for all purposes. SECTION 1.03 PLACE OF MEETINGS. Any meeting of the stockholders of the corporation may be held at its registered office in the State of Nevada or at such other place in or out of the United States as the Board of Directors may designate. A waiver of notice signed by stockholders entitled to vote may designate any place for the holding of such meeting. SECTION 1.04 NOTICE OF MEETINGS. (a) The president, a vice president, the secretary, an assistant secretary or any other individual designated by the Board of Directors shall sign and deliver written notice of any meeting at least ten (10) days, but not more than sixty (60) days, before the date of such meeting. The notice shall state the place, date and time of the meeting and the purpose or purposes for which the meeting is called. (b) In the case of an annual meeting, any proper business may be presented for action, except that action on any of the following items shall be taken only if the general nature of the proposal is stated in the notice: (1) Action with respect to any contract or transaction between the corporation and one or more of its directors or officers or between the corporation and any corporation, firm or association in which one or more of the corporation's directors or officers is a director or officer or is financially interested; (2) Adoption of amendments to the Articles of Incorporation; or (3) Action with respect to a merger, share exchange, reorganization, partial or complete liquidation, or dissolution of the corporation. (c) A copy of the notice shall be personally delivered or mailed postage prepaid to each stockholder of record entitled to vote at the meeting at the address appearing on the records of the corporation, and the notice shall be deemed delivered the date the same is deposited in the United States mail for transmission to such stockholder. If the address of any stockholder does not appear upon the records of the corporation, it will be sufficient to address any notice to such stockholder at the registered office of the corporation. (d) The written certificate of the individual signing a notice of meeting, setting forth the substance of the notice or having a copy thereof attached, the date the notice was mailed or personally delivered to the stockholders and the addresses to which the notice was mailed, shall be prima facie evidence of the manner and fact of giving such notice. (e) Any stockholder may waive notice of any meeting by a signed writing, either before or after the meeting. SECTION 1.05 MEETING WITHOUT NOTICE. (a) Whenever all persons entitled to vote at any meeting consent, either by: (1) A writing on the records of the meeting or filed with the secretary; or (2) Presence at such meeting and oral consent entered on the minutes; or (3) Taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed. (b) At such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time. (c) If any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of the meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meeting. (d) Such consent or approval may be by proxy or attorney, but all such proxies and powers of attorney must be in writing. SECTION 1.06 DETERMINATION OF STOCKHOLDERS OF RECORD. (a) For the purpose of determining the stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. (b) If no record date is fixed, the record date for determining stockholders: (i) entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (ii) entitled to express consent to corporate action in writing without a meeting shall be the day on which the first written consent is expressed; and (iii) for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote an any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 1.07 QUORUM; ADJOURNED MEETINGS. (a) Unless the Articles of Incorporation provide for a different proportion, stockholders holding at least a majority of the voting power of the corporation's stock, represented in person or by proxy, are necessary to constitute a quorum for the transaction of business at any meeting. If, on any issue, voting by classes is required by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, at least a majority of the voting power within each such class is necessary to constitute a quorum of each such class. (b) If a quorum is not represented, a majority of the voting power so represented may adjourn the meeting from time to time until holders of the voting power required to constitute a quorum shall be represented. At any such adjourned meeting at which a quorum shall be represented, any business may be transacted which might have been transacted as originally called. When a stockholders' meeting is adjourned to another time or place hereunder, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum of the voting power. SECTION 1.08 VOTING. (a) Unless otherwise provided in the Articles of Incorporation, or in the resolution providing for the issuance of the stock adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of the Articles of Incorporation, each stockholder of record, or such stockholder's duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for each share of voting stock standing registered in such stockholder's name on the record date. (b) Except as otherwise provided herein, all votes with respect to shares standing in the name of an individual on the record date (including pledged shares) shall be cast only by that individual or such individual's duly authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting trust. With respect to shares held by a representative of the estate of a deceased stockholder, guardian, conservator, custodian or trustee, votes may be cast by such holder upon proof of capacity, even though the shares do not stand in the name of such holder. In the case of shares under the control of a receiver, the receiver may cast votes carried by such shares even though the shares do not stand in the name of the receiver; provided, that the order of the court of competent jurisdiction which appoints the receiver contains the authority to cast votes carried by such shares. If shares stand in the name of a minor, votes may be cast only by the duly appointed guardian of the estate of such minor if such guardian has provided the corporation with written proof of such appointment. (c) With respect to shares standing in the name of another corporation, partnership, limited liability company or other legal entity on the record date, votes may be cast: (i) in the case of a corporation, by such individual as the bylaws of such other corporation prescribe, by such individual as may be appointed by resolution of the board of directors of such other corporation or by such individual (including the officer making the authorization) authorized in writing to do so by the Chairman of the Board of Directors, president or any vice president of such corporation and (ii) in the case of a partnership, limited liability company or other legal entity, by an individual representing such stockholder upon presentation to the corporation of satisfactory evidence of his authority to do so. (d) Notwithstanding anything to the contrary herein contained, no votes may be cast for shares owned by this corporation or its subsidiaries, if any. If shares are held by this corporation or its subsidiaries, if any, in a fiduciary capacity, no votes shall be cast with respect thereto on any matter except to the extent that the beneficial owner thereof possesses and exercises either a right to vote or to give the corporation holding the same binding instructions on how to vote. (e) Any holder of shares entitled to vote on any matter may cast a portion of the votes in favor of such matter and refrain from casting the remaining votes or cast the same against the proposal, except in the case of elections of directors. If such holder entitled to vote fails to specify the number of affirmative votes, it will be conclusively presumed that the holder is casting affirmative votes with respect to all shares held. (f) With respect to shares standing in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a stockholder voting agreement or otherwise and shares held by two or more persons (including proxy holders) having the same fiduciary relationship in respect to the same shares, votes may be cast in the following manner: (1) If only one person votes, the vote of such person binds all. (2) If more than one person casts votes, the act of the majority so voting binds all. (3) If more than one person casts votes, but the vote is evenly split on a particular matter, the votes shall be deemed cast proportionately, as split. (g) If a quorum is present, unless the Articles of Incorporation provide for a different proportion, the affirmative vote of holders of at least a majority of the voting power represented at the meeting and entitled to vote on any matter shall be the act of the stockholders, unless voting by classes is required for any action of the stockholders by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, in which case the affirmative vote of holders of a least a majority of the voting power of each such class shall be required. SECTION 1.09 PROXIES. At any meeting of stockholders, any holder of shares entitled to vote may designate, in a manner permitted by the laws of the State of Nevada, another person or persons to act as a proxy or proxies. No proxy is valid after the expiration of six (6) months from the date of its creation, unless it is coupled with an interest or unless otherwise specified in the proxy. In no event shall the term of a proxy exceed seven (7) years from the date of its creation. Every proxy shall continue in full force and effect until its expiration or revocation in a manner permitted by the laws of the State of Nevada. SECTION 1.10 ORDER OF BUSINESS. At the annual stockholder's meeting, the regular order of business shall be as follows: 1. Determination of stockholders present and existence of quorum, in person or by proxy; 2. Reading and approval of the minutes of the previous meeting or meetings; 3. Reports of the Board of Directors, and, if any, the president, treasurer and secretary of the corporation; 4. Reports of committees; 5. Election of directors; 6. Unfinished business; 7. New business; 8. Adjournment. SECTION 1.11 ABSENTEES' CONSENT TO MEETINGS. Transactions of any meeting of the stockholders are as valid as though had at a meeting duly held after regular call and notice if a quorum is represented, either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not represented in person or by proxy (and those who, although present, either object at the beginning of the meeting to the transaction of any business because the meeting has not been lawfully called or convened or expressly object at the meeting to the consideration of matters not included in the notice which are legally required to be included therein), signs a written waiver of notice and/or consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents, and approvals shall be filed with the corporate records and made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not properly included in the notice if such objection is expressly made at the time any such matters are presented at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice or consent, except as otherwise provided in Section 1.04(a) and (b) of these Bylaws. SECTION 1.12 TELEPHONIC MEETINGS. Stockholders may participate in a meeting of the stockholders by means of a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 1.12 constitutes presence in person at the meeting. SECTION 1.13 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting if a written consent thereto is signed by the holders of the voting power of the corporation that would be required at a meeting to constitute the act of the stockholders. Whenever action is taken by written consent, a meeting of stockholders need not be called or notice given. The written consent may be signed in counterparts and must be filed with the minutes of the proceedings of the stockholders. ARTICLE II DIRECTORS SECTION 2.01 NUMBER, TENURE, AND QUALIFICATIONS. Unless a larger number is required by the laws of the State of Nevada or the Articles of Incorporation or until changed in the manner provided herein, the Board of Directors of the corporation shall consist of at least one (1) individual who shall be elected at the annual meeting of the stockholders of the corporation and who shall hold office for one (1) year or until his or her successor or successors are elected and qualify. A director need not be a stockholder of the corporation. SECTION 2.02 CHANGE IN NUMBER. Subject to any limitations in the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, the number of directors may be changed from time to time by resolution adopted by the Board of Directors or the stockholders. SECTION 2.03 REDUCTION IN NUMBER. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his term of office. SECTION 2.04 RESIGNATION. Any director may resign effective upon giving written notice to the Chairman of the Board of Directors, the president, the secretary, or in the absence of all of them, any other officer, unless the notice specifies a later time for effectiveness of such resignation. A majority of the remaining directors, though less than a quorum, may appoint a successor to take office when the resignation becomes effective, each director so appointed to hold office during the remainder of the term of office of the resigning director. SECTION 2.05 REMOVAL. (a) The Board of Directors of the corporation, by majority vote, may declare vacant the office of a director who has been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. (b) Any director may be removed from office by the vote or written consent of stockholders representing not less than two-thirds of the voting power of the issued and outstanding stock entitled to vote, except that if the corporation's Articles of Incorporation provide for the election of directors by cumulative voting, no director may be removed from office except upon the vote of stockholders owning sufficient shares to have prevented such director's election to office in the first instance. SECTION 2.06 VACANCIES. (a) All vacancies, including those caused by an increase in the number of directors, may be filled by a majority of the remaining directors, though less than a quorum, unless it is otherwise provided in the Articles of Incorporation unless, in the case of removal of a director, the stockholders by a majority of voting power shall have appointed a successor to the removed director. Subject to the provisions of Subsection (b) below, (i) in the case of the replacement of a director, the appointed director shall hold office during the remainder of the term of office of the replaced director, and (ii) in the case of an increase in the number of directors, the appointed director shall hold office until the next meeting of stockholders at which directors are elected. (b) If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the stockholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of five percent (5%) or more of the total voting power entitled to vote may call a special meeting of the stockholders to elect the entire Board of Directors. The term of office of any director shall terminate upon such election of a successor. SECTION 2.07 ANNUAL AND REGULAR MEETINGS. Immediately following the adjournment of, and at the same place as, the annual or any special meeting of the stockholders at which directors are elected other than pursuant to Section 2.06 of this Article, the Board of Directors, including directors newly elected, shall hold its annual meeting without notice, other than this provision, to elect officers and to transact such further business as may be necessary or appropriate. The Board of Directors may provide by resolution the place, date, and hour for holding regular meetings between annual meetings. SECTION 2.08 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, or if there be no Chairman, by the president or secretary, and shall be called by the Chairman of the Board of Directors, the president or the secretary upon the request of any two (2) directors. If the Chairman of the Board of Directors, or if there be no Chairman, both the president and secretary, refuses or neglects to call such special meeting, a special meeting may be called by notice signed by any two (2) directors. SECTION 2.09 PLACE OF MEETINGS. Any regular or special meeting of the directors of the corporation may be held at such place as the Board of Directors, or in the absence of such designation, as the notice calling such meeting, may designate. A waiver of notice signed by directors may designate any place for the holding of such meeting. SECTION 2.10 NOTICE OF MEETINGS. Except as otherwise provided in Section 2.07, there shall be delivered to all directors, at least forty-eight (48) hours before the time of such meeting, a copy of a written notice of any meeting by delivery of such notice personally by mailing such notice postage prepaid or by telegram. Such notice shall be addressed in the manner provided for notice to stockholders in Section 1.04(c). If mailed, the notice shall be deemed delivered two (2) business days following the date the same is deposited in the United States mail, postage prepaid. Any director may waive notice of any meeting, and the attendance of a director at a meeting and oral consent entered on the minutes of such meeting shall constitute waiver of notice of the meeting unless such director objects, prior to the transaction of any business, that the meeting was not lawfully called or convened. Attendance for the express purpose of objecting to the transaction of business because the meeting was not properly called or convened shall not constitute presence nor a waiver of notice for purposes hereof. SECTION 2.11 QUORUM; ADJOURNED MEETINGS. (a) A majority of the directors in office, at a meeting duly assembled, is necessary to constitute a quorum for the transaction of business. (b) At any meeting of the Board of Directors where a quorum is not present, a majority of those present may adjourn, from time to time, until a quorum is present, and no notice of such adjournment shall be required. At any adjourned meeting where a quorum is present, any business may be transacted which could have been transacted at the meeting originally called. SECTION 2.12 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present is the act of the Board of Directors. SECTION 2.13 TELEPHONIC MEETINGS. Members of the Board of Directors or of any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by means of a telephone conference or similar method of communication by which all persons participating in such meeting can hear each other. Participation in a meeting pursuant to this Section 2.13 constitutes presence in person at the meeting. SECTION 2.14 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of the Board of Directors or of a committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all of the members of the Board of Directors or the committee. The written consent may be signed in counterparts and must be filed with the minutes of the proceedings of the Board of Directors or committee. SECTION 2.15 POWERS AND DUTIES. (a) Except as otherwise restricted in the laws of the State of Nevada or the Articles of Incorporation, the Board of Directors has full control over the affairs of the corporation. The Board of Directors may delegate any of its authority to manage, control or conduct the business of the corporation to any standing or special committee or to any officer or agent and to appoint any persons to be agents of the corporation with such powers, including the power to subdelegate, and upon such terms as may be deemed fit. (b) The Board of Directors may present to the stockholders at annual meetings of the stockholders, and when called for by a majority vote of the stockholders at an annual meeting or a special meeting of the stockholders shall so present, a full and clear report of the condition of the corporation. (c) The Board of Directors, in its discretion, may submit any contract or act for approval or ratification at any annual meeting of the stockholders or any special meeting properly called for the purpose of considering any such contract or act, provided a quorum is present. SECTION 2.16 COMPENSATION. The directors and members of committees shall be allowed and paid all necessary expenses incurred in attending any meetings of the Board of Directors or committees. Subject to any limitations contained in the laws of the State of Nevada, the Articles of Incorporation or any contract or agreement to which the corporation is a party, directors may receive compensation for their services as directors as determined by the Board of Directors, but only during such times as the corporation may legally declare and pay distributions on its stock, unless the payment of such compensation is first approved by the stockholders entitled to vote for the election of directors. SECTION 2.17 BOARD OF DIRECTORS' OFFICERS; CHAIRMAN PRESIDING OVER MEETINGS. (a) At its annual meeting, the Board of Directors may elect, from among its members, a Chairman of the Board of Directors, who may serve as the chief executive officer of the corporation and who may preside at meetings of the Board of Directors and at meetings of the stockholders. If no Chairman of the Board of Directors is elected, or if the stockholders or the Board of Directors determine that the Chairman of the Board of Directors shall not preside at a meeting of the stockholders or of the Board, respectively, or if the Chairman of the Board of Directors elects not to preside at a meeting or is absent, the stockholders and the Board of Directors may appoint a chairman, who need not be from among their or its members, who may preside over such meetings of the stockholders and the Board of Directors, respectively, or, in the absence of any such appointment, the president shall preside at such meetings and perform such other duties as shall be prescribed by the Board of Directors. The Board of Directors shall also elect such other officers of the Board of Directors and for such term as it may, from time to time, determine advisable. (b) Any vacancy in any office of the Board of Directors because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. SECTION 2.18 ORDER OF BUSINESS. The order of business at any meeting of the Board of Directors shall be as follows: 1. Determination of members present and existence of quorum; 2. Reading and approval of the minutes of any previous meeting or meetings; 3. Reports of officers and committeemen; 4. Election of officers (annual meeting); 5. Unfinished business; 6. New business; 7. Adjournment. ARTICLE III OFFICERS SECTION 3.01 ELECTION. The Board of Directors, at its annual meeting, shall elect a president, a secretary and a treasurer to hold office for a term of one (1) year or until their successors are chosen and qualify. Any individual may hold two or more offices. The Board of Directors may, from time to time, by resolution, elect a chief executive officer and one or more vice presidents, assistant secretaries and assistant treasurers and appoint agents of the corporation, prescribe their duties and fix their compensation. SECTION 3.02 REMOVAL; RESIGNATION. Any officer or agent elected or appointed by the Board of Directors may be removed by it with or without cause. Any officer may resign at any time upon written notice to the corporation. Any such removal or resignation shall be subject to the rights, if any, of the respective parties under any contract between the corporation and such officer or agent. SECTION 3.03 VACANCIES. Any vacancy in any office because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. SECTION 3.04 PRESIDENT; CHIEF EXECUTIVE OFFICER. (a) The president may also be the chief executive officer of the corporation, or, if the Chairman of the Board of Directors or any other individual has been designated as the chief executive officer, the president shall be the chief operations officer of the corporation, in either case subject to the supervision and control of the Board of Directors. The president shall direct the corporate affairs, with full power to execute all resolutions and orders of the Board of Directors not expressly delegated to some other officer or agent of the corporation. (b) The president shall have full power and authority on behalf of the corporation to attend and to act and to vote, or designate such other officer or agent of the corporation to attend and to act and to vote, at any meetings of the stockholders of any corporation in which the corporation may hold stock and, at any such meetings, shall possess and may exercise any and all rights and powers incident to the ownership of such stock. The Board of Directors, by resolution from time to time, may confer like powers on any person or persons in place of the president to exercise such powers for these purposes. (c) The chief executive officer shall perform such duties as usually pertain to the position of chief executive officer and such duties as may be prescribed by the Board of Directors. SECTION 3.05 VICE PRESIDENTS. The Board of Directors may elect one or more vice presidents who shall be vested with all the powers and perform all the duties of the president whenever the president is absent or unable to act and such other duties as shall be prescribed by the Board of Directors or the president. SECTION 3.06 SECRETARY. The secretary shall keep, or cause to be kept, the minutes of proceedings of the stockholders and the Board of Directors in books provided for that purpose. The secretary shall attend to the giving and service of all notices of the corporation, may sign with the president in the name of the corporation all contracts in which the corporation is authorized to enter, shall have the custody or designate control of the corporate seal, shall affix the corporate seal to all certificates of stock duly issued by the corporation, shall have charge or designate control of stock certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors or appropriate committee may direct, and shall, in general, perform all duties incident to the office of the secretary. SECTION 3.07 ASSISTANT SECRETARIES. The Board of Directors may appoint one or more assistant secretaries who shall have such powers and perform such duties as may be prescribed by the Board of Directors or the secretary. SECTION 3.08 TREASURER. The treasurer shall be the chief financial officer of the corporation, subject to the supervision and control of the Board of Directors, and shall have custody of all the funds and securities of the corporation. When necessary or proper, the treasurer shall endorse on behalf of the corporation for collection checks, notes, and other obligations, and shall deposit all monies to the credit of the corporation in such bank or banks or other depository as the Board of Directors may designate, and shall sign all receipts and vouchers for payments made by the corporation. Unless otherwise specified by the Board of Directors, the treasurer may sign with the president all bills of exchange and promissory notes of the corporation, shall also have the care and custody of the stocks, bonds, certificates, vouchers, evidence of debts, securities, and such other property belonging to the corporation as the Board of Directors shall designate, and shall sign all papers required by law, by these Bylaws, or by the Board of Directors to be signed by the treasurer. The treasurer shall enter, or cause to be entered, regularly in the financial records of the corporation, to be kept for that purpose, full and accurate accounts of all monies received and paid on account of the corporation and, whenever required by the Board of Directors, the treasurer shall render a statement of any or all accounts. The treasurer shall at all reasonable times exhibit the books of account to any director of the corporation and shall perform all acts incident to the position of treasurer subject to the control of the Board of Directors. The treasurer shall, if required by the Board of Directors, give bond to the corporation in such sum and with such security as shall be approved by the Board of Directors for the faithful performance of all the duties of treasurer and for restoration to the corporation, in the event of the treasurer's death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other property in the treasurer's custody or control and belonging to the corporation. The expense of such bond shall be borne by the corporation. SECTION 3.09 ASSISTANT TREASURERS. The Board of Directors may appoint one or more assistant treasurers who shall have such powers and perform such duties as may be prescribed by the Board of Directors or the treasurer. The Board of Directors may require an assistant treasurer to give a bond to the corporation in such sum and with such security as it may approve, for the faithful performance of the duties of assistant treasurer, and for restoration to the corporation, in the event of the assistant treasurer's death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other property in the assistant treasurer's custody or control and belonging to the corporation. The expense of such bond shall be borne by the corporation. ARTICLE IV CAPITAL STOCK SECTION 4.01 ISSUANCE. Shares of the corporation's authorized stock shall, subject to any provisions or limitations of the laws of the State of Nevada, the Articles of Incorporation or any contracts or agreements to which the corporation may be a party, be issued in such manner, at such times, upon such conditions and for such consideration as shall be prescribed by the Board of Directors. SECTION 4.02 CERTIFICATES. Ownership in the corporation shall be evidenced by certificates for shares of stock in such form as shall be prescribed by the Board of Directors, shall be under the seal of the corporation and shall be manually signed by the president or a vice president and also by the secretary or an assistant secretary; provided, however, whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of said officers of the corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. If the Corporation uses facsimile signatures of its officers on its stock certificates, it shall not act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns any stock certificates in both capacities. Each certificate shall contain the name of the record holder, the number, designation, if any, class or series of shares represented, a statement or summary of any applicable rights, preferences, privileges or restrictions thereon, and a statement, if applicable, that the shares are assessable. All certificates shall be consecutively numbered. If provided by the stockholder, the name, address and federal tax identification number of the stockholder, the number of shares, and the date of issue shall be entered in the stock transfer records of the corporation. SECTION 4.03 SURRENDERED; LOST OR DESTROYED CERTIFICATES. All certificates surrendered to the corporation, except those representing shares of treasury stock, shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been canceled, except that in case of a lost, stolen, destroyed or mutilated certificate, a new one may be issued therefor. However, any stockholder applying for the issuance of a stock certificate in lieu of one alleged to have been lost, stolen, destroyed or mutilated shall, prior to the issuance of a replacement, provide the corporation with his, her or its affidavit of the facts surrounding the loss, theft, destruction or mutilation and, if required by the Board of Directors, an indemnity bond in an amount not less than twice the current market value of the stock, and upon such terms as the treasurer or the Board of Directors shall require which shall indemnify the corporation against any loss, damage, cost or inconvenience arising as a consequence of the issuance of a replacement certificate. SECTION 4.04 REPLACEMENT CERTIFICATE. When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares of capital stock of the corporation or it becomes desirable for any reason, in the discretion of the Board of Directors, including, without limitation, the merger of the corporation with another corporation or the reorganization of the corporation, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the Board of Directors may order any holders of outstanding certificates for shares to surrender and exchange the same for new certificates within a reasonable time to be fixed by the Board of Directors. The order may provide that a holder of any certificate(s) ordered to be surrendered shall not be entitled to vote, receive distributions or exercise any other rights of stockholders of record until the holder has complied with the order, but the order operates to suspend such rights only after notice and until compliance. SECTION 4.05 TRANSFER OF SHARES. No transfer of stock shall be valid as against the corporation except on surrender and cancellation of the certificates therefor accompanied by an assignment or transfer by the registered owner made either in person or under assignment. Whenever any transfer shall be expressly made for collateral security and not absolutely, the collateral nature of the transfer shall be reflected in the entry of transfer in the records of the corporation. SECTION 4.06 TRANSFER AGENT; REGISTRARS. The Board of Directors may appoint one or more transfer agents, transfer clerk and registrars of transfer and may require all certificates for shares of stock to bear the signature of such transfer agent, transfer clerk and/or registrar of transfer. SECTION 4.07 STOCK TRANSFER RECORDS. The stock transfer records shall be closed for a period of at least ten (10) days prior to all meetings of the stockholders and shall be closed for the payment of distributions as provided in Article V hereof and during such periods as, from time to time, may be fixed by the Board of Directors, and, during such periods, no stock shall be transferable for purposes of Article V and no voting rights shall be deemed transferred during such periods. Subject to the forgoing limitations, nothing contained herein shall cause transfers during such periods to be void or voidable. SECTION 4.08 MISCELLANEOUS. The Board of Directors shall have the power and authority to make such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of the corporation's stock. ARTICLE V DISTRIBUTIONS SECTION 5.01 Distributions may be declared, subject to the provisions of the laws of the State of Nevada and the Articles of Incorporation, by the Board of Directors at any regular or special meeting and may be paid in cash, property, shares of corporate stock, or any other medium. The Board of Directors may fix in advance a record date, as provided in Section 1.06, prior to the distribution for the purpose of determining stockholders entitled to receive any distribution. The Board of Directors may close the stock transfer books for such purpose for a period of not more than ten (10) days prior to the date of such distribution. ARTICLE VI RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS SECTION 6.01 RECORDS. All original records of the corporation shall be kept by or under the direction of the secretary or at such places as may be prescribed by the Board of Directors. SECTION 6.02 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every director and officer shall have the absolute right at any reasonable time for a purpose reasonably related to the exercise of such individual's duties to inspect and copy all of the corporation's books, records, and documents of every kind and to inspect the physical properties of the corporation and/or its subsidiary corporations. Such inspection may be made in person or by agent or attorney. SECTION 6.03 CORPORATE SEAL. The Board of Directors may, by resolution, authorize a seal, and the seal may be used by causing it, or a facsimile, to be impressed or affixed or reproduced or otherwise. Except when otherwise specifically provided herein, any officer of the corporation shall have the authority to affix the seal to any document requiring it. SECTION 6.04 FISCAL YEAR-END. The fiscal year-end of the corporation shall be such date as may be fixed from time to time by resolution of the Board of Directors. SECTION 6.05 RESERVES. The Board of Directors may create, by resolution, such reserves as the directors may, from time to time, in their discretion, think proper to provide for contingencies, or to equalize distributions or to repair or maintain any property of the corporation, or for such other purpose as the Board of Directors may deem beneficial to the corporation, and the directors may modify or abolish any such reserves in the manner in which they were created. ARTICLE VII INDEMNIFICATION SECTION 7.01 INDEMNIFICATION AND INSURANCE. (a) INDEMNIFICATION OF DIRECTORS AND OFFICERS. (i) For purposes of this Article, (A) "Indemnitee" shall mean each director or officer who was or is a party to, or is threatened to be made a party to, or is otherwise involved in, any Proceeding (as hereinafter defined), by reason of the fact that he or she is or was a director or officer of the corporation or is or was serving in any capacity at the request of the corporation as a director, officer, employee, agent, partner, or fiduciary of, or in any other capacity for, another corporation or any partnership, joint venture, trust, or other enterprise; and (B) "Proceeding" shall mean any threatened, pending or completed action or suit (including without limitation an action, suit or proceeding by or in the right of the corporation), whether civil, criminal, administrative or investigative. (ii) Each Indemnitee shall be indemnified and held harmless by the corporation for all actions taken by him or her and for all omissions (regardless of the date of any such action or omission), to the fullest extent permitted by Nevada law, against all expense, liability and loss (including without limitation attorneys' fees, judgments, fines, taxes, penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Indemnitee in connection with any Proceeding. (iii) Indemnification pursuant to this Section shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. (b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS. The corporation may, by action of its Board of Directors and to the extent provided in such action, indemnify employees and other persons as though they were Indemnitees. (c) NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification provided in this Article shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, provision of the corporation's Articles of Incorporation or Bylaws, agreement, vote of stockholders or directors, or otherwise. (d) INSURANCE. The corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or not the corporation has the authority to indemnify him or her against such liability and expenses. (e) OTHER FINANCIAL ARRANGEMENTS. The other financial arrangements which may be made by the corporation may include the following (i) the creation of a trust fund; (ii) the establishment of a program of self-insurance; (iii) the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; (iv) the establishment of a letter of credit, guarantee or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud, or a knowing violation of law, except with respect to advancement of expenses or indemnification ordered by a court. (f) OTHER MATTERS RELATING TO INSURANCE OR FINANCIAL ARRANGEMENTS. Any insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the corporation or any other person approved by the Board of Directors, even if all or part of the other person's stock or other securities is owned by the corporation. In the absence of fraud: (i) the decision of the Board of Directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this section and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (ii) the insurance or other financial arrangement: (A) is not void or voidable; and (B) does not subject any director approving it to personal liability for his action, even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement. SECTION 7.02 AMENDMENT. The provisions of this Article relating to indemnification shall constitute a contract between the corporation and each of its directors and officers which may be modified as to any director or officer only with that person's consent or as specifically provided in this Section. Notwithstanding any other provision of these Bylaws relating to their amendment generally, any repeal or amendment of this Article which is adverse to any director or officer shall apply to such director or officer only on a prospective basis and shall not limit the rights of an Indemnitee to indemnification with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provision of these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of this Article so as to limit or reduce the indemnification in any manner unless adopted by (a) the unanimous vote of the directors of the corporation then serving, or (b) by the stockholders as set forth in Article VIII hereof; provided that no such amendment shall have retroactive effect inconsistent with the preceding sentence. SECTION 7.03 CHANGES IN NEVADA LAW. References in this Article to Nevada law or to any provision thereof shall be to such law as it existed on the date this Article was adopted or as such law thereafter may be changed; provided that (a) in the case of any change which expands the liability of directors or officers or limits the indemnification rights or the rights to advancement of expenses which the corporation may provide, the rights to limited liability, to indemnification and to the advancement of expenses provided in the corporation's Articles of Incorporation and/or these Bylaws shall continue as theretofore to the extent permitted by law; and (b) if such change permits the corporation, without the requirement of any further action by stockholders or directors, to limit further the liability of directors (or limit the liability of officers) or to provide broader indemnification rights or rights to the advancement of expenses than the corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law. ARTICLE VIII AMENDMENT OR REPEAL SECTION 8.01 AMENDMENT. Except as otherwise restricted in the Articles of Incorporation or these Bylaws: (a) Any provision of these Bylaws may be altered, amended or repealed at the annual or any regular meeting of the Board of Directors without prior notice, or at any special meeting of the Board of Directors if notice of such alteration, amendment or repeal be contained in the notice of such special meeting. (b) These Bylaws may also be altered, amended, or repealed at a duly convened meeting of the stockholders by the affirmative vote of the holders of 51% of the voting power of the corporation entitled to vote. The stockholders may provide by resolution that any Bylaw provision altered, amended or repealed by them, or any Bylaw provision adopted by them, may not be altered, amended or repealed by the Board of Directors. CERTIFICATION The undersigned duly elected secretary of the corporation, does hereby certify that the foregoing Bylaws were adopted by the Board of Directors on the 4th day of December, 1997. /s/ Ronald Dictrow -------------------------------- Ronald Dictrow, Secretary EX-3.8 8 BY-LAWS OF CAPITAL BYLAWS OF ALADDIN CAPITAL CORP. ARTICLE I STOCKHOLDERS SECTION 1.01 ANNUAL MEETING. An annual meeting of the stockholders of the corporation shall be held at 2:00 o'clock in the afternoon on the second Thursday of December in each year, commencing after the first anniversary of incorporation, but if such date is a legal holiday, then on the next succeeding business day, for the purpose of electing directors of the corporation to serve during the ensuing year and for the transaction of such other business as may properly come before the meeting. If the election of the directors is not held on the day designated herein for any annual meeting of the stockholders, or at any adjournment thereof, the president shall cause the election to be held at a special meeting of the stockholders as soon thereafter as is convenient. SECTION 1.02 SPECIAL MEETINGS. (a) Special meetings of the stockholders may be called by the Chairman of the Board of Directors or the president and shall be called by the Chairman of the Board of Directors, the president or the Board of Directors at the written request of the holders of not less than 51% of the voting power of any class of the corporation's stock entitled to vote. (b) No business shall be acted upon at a special meeting except as set forth in the notice calling the meeting, unless one of the conditions for the holding of a meeting without notice set forth in Section 1.05 shall be satisfied, in which case any business may be transacted and the meeting shall be valid for all purposes. SECTION 1.03 PLACE OF MEETINGS. Any meeting of the stockholders of the corporation may be held at its registered office in the State of Nevada or at such other place in or out of the United States as the Board of Directors may designate. A waiver of notice signed by stockholders entitled to vote may designate any place for the holding of such meeting. SECTION 1.04 NOTICE OF MEETINGS. (a) The president, a vice president, the secretary, an assistant secretary or any other individual designated by the Board of Directors shall sign and deliver written notice of any meeting at least ten (10) days, but not more than sixty (60) days, before the date of such meeting. The notice shall state the place, date and time of the meeting and the purpose or purposes for which the meeting is called. (b) In the case of an annual meeting, any proper business may be presented for action, except that action on any of the following items shall be taken only if the general nature of the proposal is stated in the notice: (1) Action with respect to any contract or transaction between the corporation and one or more of its directors or officers or between the corporation and any corporation, firm or association in which one or more of the corporation's directors or officers is a director or officer or is financially interested; (2) Adoption of amendments to the Articles of Incorporation; or (3) Action with respect to a merger, share exchange, reorganization, partial or complete liquidation, or dissolution of the corporation. (c) A copy of the notice shall be personally delivered or mailed postage prepaid to each stockholder of record entitled to vote at the meeting at the address appearing on the records of the corporation, and the notice shall be deemed delivered the date the same is deposited in the United States mail for transmission to such stockholder. If the address of any stockholder does not appear upon the records of the corporation, it will be sufficient to address any notice to such stockholder at the registered office of the corporation. (d) The written certificate of the individual signing a notice of meeting, setting forth the substance of the notice or having a copy thereof attached, the date the notice was mailed or personally delivered to the stockholders and the addresses to which the notice was mailed, shall be prima facie evidence of the manner and fact of giving such notice. (e) Any stockholder may waive notice of any meeting by a signed writing, either before or after the meeting. SECTION 1.05 MEETING WITHOUT NOTICE. (a) Whenever all persons entitled to vote at any meeting consent, either by: (1) A writing on the records of the meeting or filed with the secretary; or (2) Presence at such meeting and oral consent entered on the minutes; or (3) Taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed. (b) At such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time. (c) If any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of the meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meeting. (d) Such consent or approval may be by proxy or attorney, but all such proxies and powers of attorney must be in writing. SECTION 1.06 DETERMINATION OF STOCKHOLDERS OF RECORD. (a) For the purpose of determining the stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. (b) If no record date is fixed, the record date for determining stockholders: (i) entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (ii) entitled to express consent to corporate action in writing without a meeting shall be the day on which the first written consent is expressed; and (iii) for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote an any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 1.07 QUORUM; ADJOURNED MEETINGS. (a) Unless the Articles of Incorporation provide for a different proportion, stockholders holding at least a majority of the voting power of the corporation's stock, represented in person or by proxy, are necessary to constitute a quorum for the transaction of business at any meeting. If, on any issue, voting by classes is required by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, at least a majority of the voting power within each such class is necessary to constitute a quorum of each such class. (b) If a quorum is not represented, a majority of the voting power so represented may adjourn the meeting from time to time until holders of the voting power required to constitute a quorum shall be represented. At any such adjourned meeting at which a quorum shall be represented, any business may be transacted which might have been transacted as originally called. When a stockholders' meeting is adjourned to another time or place hereunder, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum of the voting power. SECTION 1.08 VOTING. (a) Unless otherwise provided in the Articles of Incorporation, or in the resolution providing for the issuance of the stock adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of the Articles of Incorporation, each stockholder of record, or such stockholder's duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for each share of voting stock standing registered in such stockholder's name on the record date. (b) Except as otherwise provided herein, all votes with respect to shares standing in the name of an individual on the record date (including pledged shares) shall be cast only by that individual or such individual's duly authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting trust. With respect to shares held by a representative of the estate of a deceased stockholder, guardian, conservator, custodian or trustee, votes may be cast by such holder upon proof of capacity, even though the shares do not stand in the name of such holder. In the case of shares under the control of a receiver, the receiver may cast votes carried by such shares even though the shares do not stand in the name of the receiver; provided, that the order of the court of competent jurisdiction which appoints the receiver contains the authority to cast votes carried by such shares. If shares stand in the name of a minor, votes may be cast only by the duly appointed guardian of the estate of such minor if such guardian has provided the corporation with written proof of such appointment. (c) With respect to shares standing in the name of another corporation, partnership, limited liability company or other legal entity on the record date, votes may be cast: (i) in the case of a corporation, by such individual as the bylaws of such other corporation prescribe, by such individual as may be appointed by resolution of the board of directors of such other corporation or by such individual (including the officer making the authorization) authorized in writing to do so by the Chairman of the Board of Directors, president or any vice president of such corporation and (ii) in the case of a partnership, limited liability company or other legal entity, by an individual representing such stockholder upon presentation to the corporation of satisfactory evidence of his authority to do so. (d) Notwithstanding anything to the contrary herein contained, no votes may be cast for shares owned by this corporation or its subsidiaries, if any. If shares are held by this corporation or its subsidiaries, if any, in a fiduciary capacity, no votes shall be cast with respect thereto on any matter except to the extent that the beneficial owner thereof possesses and exercises either a right to vote or to give the corporation holding the same binding instructions on how to vote. (e) Any holder of shares entitled to vote on any matter may cast a portion of the votes in favor of such matter and refrain from casting the remaining votes or cast the same against the proposal, except in the case of elections of directors. If such holder entitled to vote fails to specify the number of affirmative votes, it will be conclusively presumed that the holder is casting affirmative votes with respect to all shares held. (f) With respect to shares standing in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a stockholder voting agreement or otherwise and shares held by two or more persons (including proxy holders) having the same fiduciary relationship in respect to the same shares, votes may be cast in the following manner: (1) If only one person votes, the vote of such person binds all. (2) If more than one person casts votes, the act of the majority so voting binds all. (3) If more than one person casts votes, but the vote is evenly split on a particular matter, the votes shall be deemed cast proportionately, as split. (g) If a quorum is present, unless the Articles of Incorporation provide for a different proportion, the affirmative vote of holders of at least a majority of the voting power represented at the meeting and entitled to vote on any matter shall be the act of the stockholders, unless voting by classes is required for any action of the stockholders by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, in which case the affirmative vote of holders of a least a majority of the voting power of each such class shall be required. SECTION 1.09 PROXIES. At any meeting of stockholders, any holder of shares entitled to vote may designate, in a manner permitted by the laws of the State of Nevada, another person or persons to act as a proxy or proxies. No proxy is valid after the expiration of six (6) months from the date of its creation, unless it is coupled with an interest or unless otherwise specified in the proxy. In no event shall the term of a proxy exceed seven (7) years from the date of its creation. Every proxy shall continue in full force and effect until its expiration or revocation in a manner permitted by the laws of the State of Nevada. SECTION 1.10 ORDER OF BUSINESS. At the annual stockholder's meeting, the regular order of business shall be as follows: 1. Determination of stockholders present and existence of quorum, in person or by proxy; 2. Reading and approval of the minutes of the previous meeting or meetings; 3. Reports of the Board of Directors, and, if any, the president, treasurer and secretary of the corporation; 4. Reports of committees; 5. Election of directors; 6. Unfinished business; 7. New business; 8. Adjournment. SECTION 1.11 ABSENTEES' CONSENT TO MEETINGS. Transactions of any meeting of the stockholders are as valid as though had at a meeting duly held after regular call and notice if a quorum is represented, either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not represented in person or by proxy (and those who, although present, either object at the beginning of the meeting to the transaction of any business because the meeting has not been lawfully called or convened or expressly object at the meeting to the consideration of matters not included in the notice which are legally required to be included therein), signs a written waiver of notice and/or consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents, and approvals shall be filed with the corporate records and made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not properly included in the notice if such objection is expressly made at the time any such matters are presented at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice or consent, except as otherwise provided in Section 1.04(a) and (b) of these Bylaws. SECTION 1.12 TELEPHONIC MEETINGS. Stockholders may participate in a meeting of the stockholders by means of a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 1.12 constitutes presence in person at the meeting. SECTION 1.13 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting if a written consent thereto is signed by the holders of the voting power of the corporation that would be required at a meeting to constitute the act of the stockholders. Whenever action is taken by written consent, a meeting of stockholders need not be called or notice given. The written consent may be signed in counterparts and must be filed with the minutes of the proceedings of the stockholders. ARTICLE II DIRECTORS SECTION 2.01 NUMBER, TENURE, AND QUALIFICATIONS. Unless a larger number is required by the laws of the State of Nevada or the Articles of Incorporation or until changed in the manner provided herein, the Board of Directors of the corporation shall consist of at least one (1) individual who shall be elected at the annual meeting of the stockholders of the corporation and who shall hold office for one (1) year or until his or her successor or successors are elected and qualify. A director need not be a stockholder of the corporation. SECTION 2.02 CHANGE IN NUMBER. Subject to any limitations in the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, the number of directors may be changed from time to time by resolution adopted by the Board of Directors or the stockholders. SECTION 2.03 REDUCTION IN NUMBER. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his term of office. SECTION 2.04 RESIGNATION. Any director may resign effective upon giving written notice to the Chairman of the Board of Directors, the president, the secretary, or in the absence of all of them, any other officer, unless the notice specifies a later time for effectiveness of such resignation. A majority of the remaining directors, though less than a quorum, may appoint a successor to take office when the resignation becomes effective, each director so appointed to hold office during the remainder of the term of office of the resigning director. SECTION 2.05 REMOVAL. (a) The Board of Directors of the corporation, by majority vote, may declare vacant the office of a director who has been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. (b) Any director may be removed from office by the vote or written consent of stockholders representing not less than two-thirds of the voting power of the issued and outstanding stock entitled to vote, except that if the corporation's Articles of Incorporation provide for the election of directors by cumulative voting, no director may be removed from office except upon the vote of stockholders owning sufficient shares to have prevented such director's election to office in the first instance. SECTION 2.06 VACANCIES. (a) All vacancies, including those caused by an increase in the number of directors, may be filled by a majority of the remaining directors, though less than a quorum, unless it is otherwise provided in the Articles of Incorporation unless, in the case of removal of a director, the stockholders by a majority of voting power shall have appointed a successor to the removed director. Subject to the provisions of Subsection (b) below, (i) in the case of the replacement of a director, the appointed director shall hold office during the remainder of the term of office of the replaced director, and (ii) in the case of an increase in the number of directors, the appointed director shall hold office until the next meeting of stockholders at which directors are elected. (b) If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the stockholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of five percent (5%) or more of the total voting power entitled to vote may call a special meeting of the stockholders to elect the entire Board of Directors. The term of office of any director shall terminate upon such election of a successor. SECTION 2.07 ANNUAL AND REGULAR MEETINGS. Immediately following the adjournment of, and at the same place as, the annual or any special meeting of the stockholders at which directors are elected other than pursuant to Section 2.06 of this Article, the Board of Directors, including directors newly elected, shall hold its annual meeting without notice, other than this provision, to elect officers and to transact such further business as may be necessary or appropriate. The Board of Directors may provide by resolution the place, date, and hour for holding regular meetings between annual meetings. SECTION 2.08 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, or if there be no Chairman, by the president or secretary, and shall be called by the Chairman of the Board of Directors, the president or the secretary upon the request of any two (2) directors. If the Chairman of the Board of Directors, or if there be no Chairman, both the president and secretary, refuses or neglects to call such special meeting, a special meeting may be called by notice signed by any two (2) directors. SECTION 2.09 PLACE OF MEETINGS. Any regular or special meeting of the directors of the corporation may be held at such place as the Board of Directors, or in the absence of such designation, as the notice calling such meeting, may designate. A waiver of notice signed by directors may designate any place for the holding of such meeting. SECTION 2.10 NOTICE OF MEETINGS. Except as otherwise provided in Section 2.07, there shall be delivered to all directors, at least forty-eight (48) hours before the time of such meeting, a copy of a written notice of any meeting by delivery of such notice personally by mailing such notice postage prepaid or by telegram. Such notice shall be addressed in the manner provided for notice to stockholders in Section 1.04(c). If mailed, the notice shall be deemed delivered two (2) business days following the date the same is deposited in the United States mail, postage prepaid. Any director may waive notice of any meeting, and the attendance of a director at a meeting and oral consent entered on the minutes of such meeting shall constitute waiver of notice of the meeting unless such director objects, prior to the transaction of any business, that the meeting was not lawfully called or convened. Attendance for the express purpose of objecting to the transaction of business because the meeting was not properly called or convened shall not constitute presence nor a waiver of notice for purposes hereof. SECTION 2.11 QUORUM; ADJOURNED MEETINGS. (a) A majority of the directors in office, at a meeting duly assembled, is necessary to constitute a quorum for the transaction of business. (b) At any meeting of the Board of Directors where a quorum is not present, a majority of those present may adjourn, from time to time, until a quorum is present, and no notice of such adjournment shall be required. At any adjourned meeting where a quorum is present, any business may be transacted which could have been transacted at the meeting originally called. SECTION 2.12 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present is the act of the Board of Directors. SECTION 2.13 TELEPHONIC MEETINGS. Members of the Board of Directors or of any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by means of a telephone conference or similar method of communication by which all persons participating in such meeting can hear each other. Participation in a meeting pursuant to this Section 2.13 constitutes presence in person at the meeting. SECTION 2.14 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of the Board of Directors or of a committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all of the members of the Board of Directors or the committee. The written consent may be signed in counterparts and must be filed with the minutes of the proceedings of the Board of Directors or committee. SECTION 2.15 POWERS AND DUTIES. (a) Except as otherwise restricted in the laws of the State of Nevada or the Articles of Incorporation, the Board of Directors has full control over the affairs of the corporation. The Board of Directors may delegate any of its authority to manage, control or conduct the business of the corporation to any standing or special committee or to any officer or agent and to appoint any persons to be agents of the corporation with such powers, including the power to subdelegate, and upon such terms as may be deemed fit. (b) The Board of Directors may present to the stockholders at annual meetings of the stockholders, and when called for by a majority vote of the stockholders at an annual meeting or a special meeting of the stockholders shall so present, a full and clear report of the condition of the corporation. (c) The Board of Directors, in its discretion, may submit any contract or act for approval or ratification at any annual meeting of the stockholders or any special meeting properly called for the purpose of considering any such contract or act, provided a quorum is present. SECTION 2.16 COMPENSATION. The directors and members of committees shall be allowed and paid all necessary expenses incurred in attending any meetings of the Board of Directors or committees. Subject to any limitations contained in the laws of the State of Nevada, the Articles of Incorporation or any contract or agreement to which the corporation is a party, directors may receive compensation for their services as directors as determined by the Board of Directors, but only during such times as the corporation may legally declare and pay distributions on its stock, unless the payment of such compensation is first approved by the stockholders entitled to vote for the election of directors. SECTION 2.17 BOARD OF DIRECTORS' OFFICERS; CHAIRMAN PRESIDING OVER MEETINGS. (a) At its annual meeting, the Board of Directors may elect, from among its members, a Chairman of the Board of Directors, who may serve as the chief executive officer of the corporation and who may preside at meetings of the Board of Directors and at meetings of the stockholders. If no Chairman of the Board of Directors is elected, or if the stockholders or the Board of Directors determine that the Chairman of the Board of Directors shall not preside at a meeting of the stockholders or of the Board, respectively, or if the Chairman of the Board of Directors elects not to preside at a meeting or is absent, the stockholders and the Board of Directors may appoint a chairman, who need not be from among their or its members, who may preside over such meetings of the stockholders and the Board of Directors, respectively, or, in the absence of any such appointment, the president shall preside at such meetings and perform such other duties as shall be prescribed by the Board of Directors. The Board of Directors shall also elect such other officers of the Board of Directors and for such term as it may, from time to time, determine advisable. (b) Any vacancy in any office of the Board of Directors because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. SECTION 2.18 ORDER OF BUSINESS. The order of business at any meeting of the Board of Directors shall be as follows: 1. Determination of members present and existence of quorum; 2. Reading and approval of the minutes of any previous meeting or meetings; 3. Reports of officers and committeemen; 4. Election of officers (annual meeting); 5. Unfinished business; 6. New business; 7. Adjournment. ARTICLE III OFFICERS SECTION 3.01 ELECTION. The Board of Directors, at its annual meeting, shall elect a president, a secretary and a treasurer to hold office for a term of one (1) year or until their successors are chosen and qualify. Any individual may hold two or more offices. The Board of Directors may, from time to time, by resolution, elect a chief executive officer and one or more vice presidents, assistant secretaries and assistant treasurers and appoint agents of the corporation, prescribe their duties and fix their compensation. SECTION 3.02 REMOVAL; RESIGNATION. Any officer or agent elected or appointed by the Board of Directors may be removed by it with or without cause. Any officer may resign at any time upon written notice to the corporation. Any such removal or resignation shall be subject to the rights, if any, of the respective parties under any contract between the corporation and such officer or agent. SECTION 3.03 VACANCIES. Any vacancy in any office because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office. SECTION 3.04 PRESIDENT; CHIEF EXECUTIVE OFFICER. (a) The president may also be the chief executive officer of the corporation, or, if the Chairman of the Board of Directors or any other individual has been designated as the chief executive officer, the president shall be the chief operations officer of the corporation, in either case subject to the supervision and control of the Board of Directors. The president shall direct the corporate affairs, with full power to execute all resolutions and orders of the Board of Directors not expressly delegated to some other officer or agent of the corporation. (b) The president shall have full power and authority on behalf of the corporation to attend and to act and to vote, or designate such other officer or agent of the corporation to attend and to act and to vote, at any meetings of the stockholders of any corporation in which the corporation may hold stock and, at any such meetings, shall possess and may exercise any and all rights and powers incident to the ownership of such stock. The Board of Directors, by resolution from time to time, may confer like powers on any person or persons in place of the president to exercise such powers for these purposes. (c) The chief executive officer shall perform such duties as usually pertain to the position of chief executive officer and such duties as may be prescribed by the Board of Directors. SECTION 3.05 VICE PRESIDENTS. The Board of Directors may elect one or more vice presidents who shall be vested with all the powers and perform all the duties of the president whenever the president is absent or unable to act and such other duties as shall be prescribed by the Board of Directors or the president. SECTION 3.06 SECRETARY. The secretary shall keep, or cause to be kept, the minutes of proceedings of the stockholders and the Board of Directors in books provided for that purpose. The secretary shall attend to the giving and service of all notices of the corporation, may sign with the president in the name of the corporation all contracts in which the corporation is authorized to enter, shall have the custody or designate control of the corporate seal, shall affix the corporate seal to all certificates of stock duly issued by the corporation, shall have charge or designate control of stock certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors or appropriate committee may direct, and shall, in general, perform all duties incident to the office of the secretary. SECTION 3.07 ASSISTANT SECRETARIES. The Board of Directors may appoint one or more assistant secretaries who shall have such powers and perform such duties as may be prescribed by the Board of Directors or the secretary. SECTION 3.08 TREASURER. The treasurer shall be the chief financial officer of the corporation, subject to the supervision and control of the Board of Directors, and shall have custody of all the funds and securities of the corporation. When necessary or proper, the treasurer shall endorse on behalf of the corporation for collection checks, notes, and other obligations, and shall deposit all monies to the credit of the corporation in such bank or banks or other depository as the Board of Directors may designate, and shall sign all receipts and vouchers for payments made by the corporation. Unless otherwise specified by the Board of Directors, the treasurer may sign with the president all bills of exchange and promissory notes of the corporation, shall also have the care and custody of the stocks, bonds, certificates, vouchers, evidence of debts, securities, and such other property belonging to the corporation as the Board of Directors shall designate, and shall sign all papers required by law, by these Bylaws, or by the Board of Directors to be signed by the treasurer. The treasurer shall enter, or cause to be entered, regularly in the financial records of the corporation, to be kept for that purpose, full and accurate accounts of all monies received and paid on account of the corporation and, whenever required by the Board of Directors, the treasurer shall render a statement of any or all accounts. The treasurer shall at all reasonable times exhibit the books of account to any director of the corporation and shall perform all acts incident to the position of treasurer subject to the control of the Board of Directors. The treasurer shall, if required by the Board of Directors, give bond to the corporation in such sum and with such security as shall be approved by the Board of Directors for the faithful performance of all the duties of treasurer and for restoration to the corporation, in the event of the treasurer's death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other property in the treasurer's custody or control and belonging to the corporation. The expense of such bond shall be borne by the corporation. SECTION 3.09 ASSISTANT TREASURERS. The Board of Directors may appoint one or more assistant treasurers who shall have such powers and perform such duties as may be prescribed by the Board of Directors or the treasurer. The Board of Directors may require an assistant treasurer to give a bond to the corporation in such sum and with such security as it may approve, for the faithful performance of the duties of assistant treasurer, and for restoration to the corporation, in the event of the assistant treasurer's death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other property in the assistant treasurer's custody or control and belonging to the corporation. The expense of such bond shall be borne by the corporation. ARTICLE IV CAPITAL STOCK SECTION 4.01 ISSUANCE. Shares of the corporation's authorized stock shall, subject to any provisions or limitations of the laws of the State of Nevada, the Articles of Incorporation or any contracts or agreements to which the corporation may be a party, be issued in such manner, at such times, upon such conditions and for such consideration as shall be prescribed by the Board of Directors. SECTION 4.02 CERTIFICATES. Ownership in the corporation shall be evidenced by certificates for shares of stock in such form as shall be prescribed by the Board of Directors, shall be under the seal of the corporation and shall be manually signed by the president or a vice president and also by the secretary or an assistant secretary; provided, however, whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of said officers of the corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. If the Corporation uses facsimile signatures of its officers on its stock certificates, it shall not act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns any stock certificates in both capacities. Each certificate shall contain the name of the record holder, the number, designation, if any, class or series of shares represented, a statement or summary of any applicable rights, preferences, privileges or restrictions thereon, and a statement, if applicable, that the shares are assessable. All certificates shall be consecutively numbered. If provided by the stockholder, the name, address and federal tax identification number of the stockholder, the number of shares, and the date of issue shall be entered in the stock transfer records of the corporation. SECTION 4.03 SURRENDERED; LOST OR DESTROYED CERTIFICATES. All certificates surrendered to the corporation, except those representing shares of treasury stock, shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been canceled, except that in case of a lost, stolen, destroyed or mutilated certificate, a new one may be issued therefor. However, any stockholder applying for the issuance of a stock certificate in lieu of one alleged to have been lost, stolen, destroyed or mutilated shall, prior to the issuance of a replacement, provide the corporation with his, her or its affidavit of the facts surrounding the loss, theft, destruction or mutilation and, if required by the Board of Directors, an indemnity bond in an amount not less than twice the current market value of the stock, and upon such terms as the treasurer or the Board of Directors shall require which shall indemnify the corporation against any loss, damage, cost or inconvenience arising as a consequence of the issuance of a replacement certificate. SECTION 4.04 REPLACEMENT CERTIFICATE. When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares of capital stock of the corporation or it becomes desirable for any reason, in the discretion of the Board of Directors, including, without limitation, the merger of the corporation with another corporation or the reorganization of the corporation, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the Board of Directors may order any holders of outstanding certificates for shares to surrender and exchange the same for new certificates within a reasonable time to be fixed by the Board of Directors. The order may provide that a holder of any certificate(s) ordered to be surrendered shall not be entitled to vote, receive distributions or exercise any other rights of stockholders of record until the holder has complied with the order, but the order operates to suspend such rights only after notice and until compliance. SECTION 4.05 TRANSFER OF SHARES. No transfer of stock shall be valid as against the corporation except on surrender and cancellation of the certificates therefor accompanied by an assignment or transfer by the registered owner made either in person or under assignment. Whenever any transfer shall be expressly made for collateral security and not absolutely, the collateral nature of the transfer shall be reflected in the entry of transfer in the records of the corporation. SECTION 4.06 TRANSFER AGENT; REGISTRARS. The Board of Directors may appoint one or more transfer agents, transfer clerk and registrars of transfer and may require all certificates for shares of stock to bear the signature of such transfer agent, transfer clerk and/or registrar of transfer. SECTION 4.07 STOCK TRANSFER RECORDS. The stock transfer records shall be closed for a period of at least ten (10) days prior to all meetings of the stockholders and shall be closed for the payment of distributions as provided in Article V hereof and during such periods as, from time to time, may be fixed by the Board of Directors, and, during such periods, no stock shall be transferable for purposes of Article V and no voting rights shall be deemed transferred during such periods. Subject to the forgoing limitations, nothing contained herein shall cause transfers during such periods to be void or voidable. SECTION 4.08 MISCELLANEOUS. The Board of Directors shall have the power and authority to make such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of the corporation's stock. ARTICLE V DISTRIBUTIONS SECTION 5.01 Distributions may be declared, subject to the provisions of the laws of the State of Nevada and the Articles of Incorporation, by the Board of Directors at any regular or special meeting and may be paid in cash, property, shares of corporate stock, or any other medium. The Board of Directors may fix in advance a record date, as provided in Section 1.06, prior to the distribution for the purpose of determining stockholders entitled to receive any distribution. The Board of Directors may close the stock transfer books for such purpose for a period of not more than ten (10) days prior to the date of such distribution. ARTICLE VI RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS SECTION 6.01 RECORDS. All original records of the corporation shall be kept by or under the direction of the secretary or at such places as may be prescribed by the Board of Directors. SECTION 6.02 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every director and officer shall have the absolute right at any reasonable time for a purpose reasonably related to the exercise of such individual's duties to inspect and copy all of the corporation's books, records, and documents of every kind and to inspect the physical properties of the corporation and/or its subsidiary corporations. Such inspection may be made in person or by agent or attorney. SECTION 6.03 CORPORATE SEAL. The Board of Directors may, by resolution, authorize a seal, and the seal may be used by causing it, or a facsimile, to be impressed or affixed or reproduced or otherwise. Except when otherwise specifically provided herein, any officer of the corporation shall have the authority to affix the seal to any document requiring it. SECTION 6.04 FISCAL YEAR-END. The fiscal year-end of the corporation shall be such date as may be fixed from time to time by resolution of the Board of Directors. SECTION 6.05 RESERVES. The Board of Directors may create, by resolution, such reserves as the directors may, from time to time, in their discretion, think proper to provide for contingencies, or to equalize distributions or to repair or maintain any property of the corporation, or for such other purpose as the Board of Directors may deem beneficial to the corporation, and the directors may modify or abolish any such reserves in the manner in which they were created. ARTICLE VII INDEMNIFICATION SECTION 7.01 INDEMNIFICATION AND INSURANCE. (a) INDEMNIFICATION OF DIRECTORS AND OFFICERS. (i) For purposes of this Article, (A) "Indemnitee" shall mean each director or officer who was or is a party to, or is threatened to be made a party to, or is otherwise involved in, any Proceeding (as hereinafter defined), by reason of the fact that he or she is or was a director or officer of the corporation or is or was serving in any capacity at the request of the corporation as a director, officer, employee, agent, partner, or fiduciary of, or in any other capacity for, another corporation or any partnership, joint venture, trust, or other enterprise; and (B) "Proceeding" shall mean any threatened, pending or completed action or suit (including without limitation an action, suit or proceeding by or in the right of the corporation), whether civil, criminal, administrative or investigative. (ii) Each Indemnitee shall be indemnified and held harmless by the corporation for all actions taken by him or her and for all omissions (regardless of the date of any such action or omission), to the fullest extent permitted by Nevada law, against all expense, liability and loss (including without limitation attorneys' fees, judgments, fines, taxes, penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Indemnitee in connection with any Proceeding. (iii) Indemnification pursuant to this Section shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. (b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS. The corporation may, by action of its Board of Directors and to the extent provided in such action, indemnify employees and other persons as though they were Indemnitees. (c) NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification provided in this Article shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, provision of the corporation's Articles of Incorporation or Bylaws, agreement, vote of stockholders or directors, or otherwise. (d) INSURANCE. The corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or not the corporation has the authority to indemnify him or her against such liability and expenses. (e) OTHER FINANCIAL ARRANGEMENTS. The other financial arrangements which may be made by the corporation may include the following (i) the creation of a trust fund; (ii) the establishment of a program of self-insurance; (iii) the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; (iv) the establishment of a letter of credit, guarantee or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud, or a knowing violation of law, except with respect to advancement of expenses or indemnification ordered by a court. (f) OTHER MATTERS RELATING TO INSURANCE OR FINANCIAL ARRANGEMENTS. Any insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the corporation or any other person approved by the Board of Directors, even if all or part of the other person's stock or other securities is owned by the corporation. In the absence of fraud: (i) the decision of the Board of Directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this section and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (ii) the insurance or other financial arrangement: (A) is not void or voidable; and (B) does not subject any director approving it to personal liability for his action, even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement. SECTION 7.02 AMENDMENT. The provisions of this Article relating to indemnification shall constitute a contract between the corporation and each of its directors and officers which may be modified as to any director or officer only with that person's consent or as specifically provided in this Section. Notwithstanding any other provision of these Bylaws relating to their amendment generally, any repeal or amendment of this Article which is adverse to any director or officer shall apply to such director or officer only on a prospective basis and shall not limit the rights of an Indemnitee to indemnification with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provision of these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of this Article so as to limit or reduce the indemnification in any manner unless adopted by (a) the unanimous vote of the directors of the corporation then serving, or (b) by the stockholders as set forth in Article VIII hereof; provided that no such amendment shall have retroactive effect inconsistent with the preceding sentence. SECTION 7.03 CHANGES IN NEVADA LAW. References in this Article to Nevada law or to any provision thereof shall be to such law as it existed on the date this Article was adopted or as such law thereafter may be changed; provided that (a) in the case of any change which expands the liability of directors or officers or limits the indemnification rights or the rights to advancement of expenses which the corporation may provide, the rights to limited liability, to indemnification and to the advancement of expenses provided in the corporation's Articles of Incorporation and/or these Bylaws shall continue as theretofore to the extent permitted by law; and (b) if such change permits the corporation, without the requirement of any further action by stockholders or directors, to limit further the liability of directors (or limit the liability of officers) or to provide broader indemnification rights or rights to the advancement of expenses than the corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law. ARTICLE VIII AMENDMENT OR REPEAL SECTION 8.01 AMENDMENT. Except as otherwise restricted in the Articles of Incorporation or these Bylaws: (a) Any provision of these Bylaws may be altered, amended or repealed at the annual or any regular meeting of the Board of Directors without prior notice, or at any special meeting of the Board of Directors if notice of such alteration, amendment or repeal be contained in the notice of such special meeting. (b) These Bylaws may also be altered, amended, or repealed at a duly convened meeting of the stockholders by the affirmative vote of the holders of 51% of the voting power of the corporation entitled to vote. The stockholders may provide by resolution that any Bylaw provision altered, amended or repealed by them, or any Bylaw provision adopted by them, may not be altered, amended or repealed by the Board of Directors. CERTIFICATION The undersigned duly elected secretary of the corporation, does hereby certify that the foregoing Bylaws were adopted by the Board of Directors on the 2nd day of December, 1997. /s/ Ronald Dictrow --------------------------------- Ronald Dictrow, Secretary EX-3.9 9 OPERATING AGREEMENT OF THE COMPANY OPERATING AGREEMENT OF ALADDIN GAMING, LLC, A NEVADA LIMITED LIABILITY COMPANY TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS 1.1 Adjusted Capital Account Deficit. . . . . . . . . . . . . . . . . . . 1 1.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Aladdin Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 Articles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.6 Assumed Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.7 Available Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 Bank Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.9 Bank Lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.10 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.11 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.12 Board Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.13 Board Supermajority . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.14 Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.15 Capital Contribution. . . . . . . . . . . . . . . . . . . . . . . . . 3 1.16 Certificate of Shares . . . . . . . . . . . . . . . . . . . . . . . . 3 1.17 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.18 Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.19 Completion Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.20 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.21 Covered Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.23 Discount Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.24 Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.25 Employment and Consulting Agreements. . . . . . . . . . . . . . . . . 4 1.26 Executive Management Committee. . . . . . . . . . . . . . . . . . . . 5 1.27 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.28 Gaming Problem. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.29 Gross Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.30 Guaranteed Payment. . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.31 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.32 LCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.33 Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.34 Member Nonrecourse Debt . . . . . . . . . . . . . . . . . . . . . . . 6 1.35 Member Nonrecourse Debt Minimum Gain. . . . . . . . . . . . . . . . . 6 1.36 Member Nonrecourse Deductions . . . . . . . . . . . . . . . . . . . . 7 i Page ---- 1.37 Minimum Gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.38 Nevada Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.39 Nevada Commission . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.40 Nevada Gaming Authorities . . . . . . . . . . . . . . . . . . . . . . 7 1.41 Non-Exercise Notice . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.42 Nonrecourse Deductions. . . . . . . . . . . . . . . . . . . . . . . . 7 1.43 NRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.44 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.45 Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.46 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.47 Profits and Losses. . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.48 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.49 Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.50 Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.51 Records Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.52 Related Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.53 Required Series A Capital Account Balance . . . . . . . . . . . . . . 9 1.54 Salle Privee Facilities . . . . . . . . . . . . . . . . . . . . . . . 9 1.55 Secretary of State. . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.56 Series A Preferred Return . . . . . . . . . . . . . . . . . . . . . . 9 1.57 Series A Preferred Shares . . . . . . . . . . . . . . . . . . . . . . 9 1.58 Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.59 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.60 Substituted Member. . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.61 Total Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.62 Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.63 Treasury Regulations. . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE II INTRODUCTORY MATTERS 2.1 Records Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.3 Resident Agent and Registered Office. . . . . . . . . . . . . . . . . 10 2.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.5 No Liability to Third Parties . . . . . . . . . . . . . . . . . . . . 11 ii Page ---- ARTICLE III INTERESTS 3.1 Member's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.2 Classes of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.3 UCC Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE IV CAPITAL ACCOUNTS 4.1 Initial Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.2 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.5 Additional Capital Contributions. . . . . . . . . . . . . . . . . . . 12 ARTICLE V PROFITS AND LOSSES 5.1 Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.2 Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.3 Special Allocation to Series A Preferred Shares . . . . . . . . . . . 13 5.4 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.5 Section 704(c) Allocation . . . . . . . . . . . . . . . . . . . . . . 15 5.6 Federal Income Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VI DISTRIBUTIONS 6.1 Priority Distributions. . . . . . . . . . . . . . . . . . . . . . . . 16 6.2 Tax Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 16 6.3 Distributions on Common Shares. . . . . . . . . . . . . . . . . . . . 16 6.4 Limitations on Distribution . . . . . . . . . . . . . . . . . . . . . 17 iii Page ---- ARTICLE VII MEMBERS 7.1 Powers of Members . . . . . . . . . . . . . . . . . . . . . . . . . . 17 7.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 17 7.3 Action by the Members . . . . . . . . . . . . . . . . . . . . . . . . 17 7.4 Meetings of Members . . . . . . . . . . . . . . . . . . . . . . . . . 17 7.5 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 7.6 Adjourned Meetings and Notice Thereof . . . . . . . . . . . . . . . . 18 7.7 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . 18 7.8 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 18 7.9 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE VIII RESIGNATION, TRANSFER OF SHARES, CHANGE IN CONTROL, TRUST MEMBERS 8.1 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 8.2 Transfers of Interests. . . . . . . . . . . . . . . . . . . . . . . . 19 8.3 Gaming Control Act. . . . . . . . . . . . . . . . . . . . . . . . . . 19 8.4 Further Restriction on Transfer of Shares . . . . . . . . . . . . . . 19 8.5 Gaming Holdings Shares. . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE IX BOARD OF MANAGERS 9.1 Board of Managers . . . . . . . . . . . . . . . . . . . . . . . . . . 20 9.2 Powers and Duties of the Board. . . . . . . . . . . . . . . . . . . . 20 9.3 Election of Officers. . . . . . . . . . . . . . . . . . . . . . . . . 21 9.4 Removal, Resignation and Vacancies. . . . . . . . . . . . . . . . . . 21 9.5 Meetings of the Board . . . . . . . . . . . . . . . . . . . . . . . . 21 9.6 Compensation of Board Members; Compensation of Officers . . . . . . . 22 9.7 Expense Reimbursements. . . . . . . . . . . . . . . . . . . . . . . . 22 iv Page ---- ARTICLE X ACCOUNTING, RECORDS AND BANK ACCOUNTS 10.1 Records and Accounting. . . . . . . . . . . . . . . . . . . . . . . . 23 10.2 Access to Accounting Records. . . . . . . . . . . . . . . . . . . . . 23 10.3 Annual Tax Information. . . . . . . . . . . . . . . . . . . . . . . . 23 10.4 Obligations of Members to Report Allocations. . . . . . . . . . . . . 23 10.5 Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE XI DISSOLUTION OF THE COMPANY AND TERMINATION OF A MEMBER'S INTEREST 11.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 11.2 Company's Option To Purchase Bankrupt Member's Interest . . . . . . . 24 11.3 Distribution on Dissolution and Liquidation . . . . . . . . . . . . . 24 ARTICLE XII LIABILITY, EXCULPATION AND INDEMNIFICATION 12.1 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 12.2 Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 12.3 Outside Businesses. . . . . . . . . . . . . . . . . . . . . . . . . . 26 12.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 12.5 Indemnity for Actions By or In the Right of the Company. . . . . . . 27 12.6 Indemnity If Successful . . . . . . . . . . . . . . . . . . . . . . . 27 12.7 Determination of Right to Indemnification . . . . . . . . . . . . . . 27 12.8 Advance Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 28 12.9 Other Arrangements Not Excluded . . . . . . . . . . . . . . . . . . . 28 12.10 Errors and Omissions Insurance. . . . . . . . . . . . . . . . . . . . 28 12.11 Property of the Company . . . . . . . . . . . . . . . . . . . . . . . 29 12.12 Violation of this Agreement . . . . . . . . . . . . . . . . . . . . . 29 v Page ---- ARTICLE XIII MISCELLANEOUS PROVISIONS 13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 13.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 13.3 Membership Certificates . . . . . . . . . . . . . . . . . . . . . . . 29 13.4 Complete Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 30 13.5 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 13.6 Applicable Law; Jurisdiction. . . . . . . . . . . . . . . . . . . . . 30 13.7 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 13.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 13.9 Facsimile Copies. . . . . . . . . . . . . . . . . . . . . . . . . . . 31 13.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 13.11 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 13.12 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . 31 vi OPERATING AGREEMENT OF ALADDIN GAMING, LLC, A NEVADA LIMITED LIABILITY COMPANY This Operating Agreement of Aladdin Gaming, LLC, a Nevada limited liability company (the "Company") is made and entered into at Las Vegas, Nevada, as of this 26th day of February, 1998, by and between the Company and Aladdin Gaming Holdings, LLC, a Nevada limited liability company ("Gaming Holdings"). R E C I T A L S A. The Company was formed on January 24, 1997 pursuant to the provisions of Chapter 86 of the Nevada Revised Statutes; B. On or prior to the date hereof Gaming Holdings has made the Capital Contributions set forth on Schedule 1 in exchange for the number of Common Shares set forth on Schedule 1, and has been admitted as the sole member of the Company. C. Gaming Holdings and the Company desire by this Agreement to set forth their agreement as to the relationships between the Company and the Members, and among the Members themselves and as to the conduct of the business and the internal affairs of the Company. THEREFORE, in consideration of the mutual covenants, agreements and promises made herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 ADJUSTED CAPITAL ACCOUNT DEFICIT. "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (a) increase such Capital Account by any amounts which such Member is obligated to contribute to the Company pursuant to the terms of this Agreement or otherwise, or is deemed to be obligated to contribute pursuant to Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) reduce such Capital Account by the amount of the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. 1.2 AFFILIATE. "Affiliate" means, with respect to a specified Person, any other Person who or which is (a) the principal of the specified Person, (b) directly or indirectly Controlling, Controlled by or under common Control with the specified Person, or (c) any member, director, officer, manager, relative or spouse of the specified Person. 1.3 AGREEMENT. "Agreement" means this Operating Agreement, as amended from time to time. 1.4 ALADDIN ENTERPRISES. "Aladdin Enterprises" means Aladdin Gaming Enterprises, Inc., a Nevada limited liability company. 1.5 ARTICLES. "Articles" means the Articles of Organization of the Company, as amended from time to time. 1.6 ASSUMED RATE. "Assumed Rate" shall initially mean 40%. The Board may adjust this rate upward or downward from time to time to avoid any material discrepancy between the prevailing Assumed Rate and the effective average rate of tax applicable to taxable income allocated from the Company to Gaming Holdings. For this purpose, the effective average rate of tax of Gaming Holdings or any other pass-through entity for tax purposes shall be determined by reference to the members thereof. 1.7 AVAILABLE CASH. "Available Cash" means cash available in the accounts of the Company, less reasonable reserves established by the Board based on an assessment of the Company's needs for the payment of Company expenses, operations and contingencies. 1.8 BANK FINANCING. "Bank Financing" means the financing under a senior credit facility in the amount of $410 million effective as of the date hereof between the Company as borrower and the Bank Lenders. 1.9 BANK LENDERS. "Bank Lenders" means a syndicate of lenders, including The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation. 1.10 BANKRUPTCY. "Bankruptcy" means, and a Member shall be referred to as a "Bankrupt Member" upon, (a) the entry of a decree or order for relief against the Member by a court of competent jurisdiction in any voluntary or involuntary case brought by or against the Member 2 under any bankruptcy, insolvency or similar law (collectively, "Debtor Relief Laws") generally affecting the right of creditors and relief of debtors now or hereafter in effect; (b) the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar agent under applicable Debtor Relief Laws for the Member or for any substantial part of the Member's assets or property; (c) the ordering of the winding up or liquidation of the Member's affairs; (d) the filing of a petition by or against the Member in any such voluntary or involuntary bankruptcy case, which petition remains not dismissed for a period of 180 days or which is not dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding provision of any future United States Bankruptcy Law); (e) the consent by the Member to the entry of an order for relief in a voluntary or involuntary case under any Debtor Relief Laws or to the appointment of, or the taking of any possession by, a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar agent under any applicable Debtor Relief Laws for the Member or for any substantial part of the Member's assets or property; or (f) the making by the Member of any general assignment for the benefit of the Member's creditors. 1.11 BOARD. "Board" means the Board of Managers of the Company, as provided for in Section 9.1. 1.12 BOARD MEMBER. "Board Member" means a member of the Board. 1.13 BOARD SUPERMAJORITY. "Board Supermajority" means an affirmative vote of at least eighty percent of the Board Members. 1.14 CAPITAL ACCOUNT. "Capital Account" means, with respect to any Member or Disassociated Member, the capital account maintained for such Member or Disassociated Member as set forth in Section 4.2 after giving effect to the adjustments set forth in Section 4.3. 1.15 CAPITAL CONTRIBUTION. "Capital Contribution" means the total amount of cash and the agreed fair market value (net of liabilities) of any property contributed at any time to the capital of the Company by a Member. 1.16 CERTIFICATE OF SHARES. "Certificate of Shares" means a certificate of the Company representing Shares in the Company. 1.17 CODE. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding United States federal tax statute enacted after the date of this Agreement. A reference to a specific section of the Code refers not only to such specific section but also to any corresponding provision of any United States federal tax statute enacted after the date of this Agreement, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Agreement containing such reference. 1.18 COMMON SHARES. "Common Shares" means Shares with rights and obligations as provided in Section 3.2(b). 3 1.19 COMPLETION GUARANTY. "Completion Guaranty" means any of (a) the Guaranty of Performance and Completion dated as of the date hereof, made by the Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor of the Bank Lenders, (b) the Guaranty of Performance and Completion dated as of the date hereof, made by the Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in favor of the holders of the Discount Notes or (c) the Guaranty of Performance and Completion to be entered into after the date hereof by the Trust, Aladdin Bazaar Holdings, LLC and LCI Parent in respect of the Aladdin development. 1.20 CONTROL. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have corresponding meanings. 1.21 COVERED PERSON. "Covered Person" means (a) a Member or any Affiliate of a Member, (b) any officers, directors, shareholders, members, controlling Persons, partners, employees, representatives or agents of a Member or a Board Member, (c) any Board Member, officer, employee, representative or agent of the Company or its Affiliates, or (d) any Person who was, at the time of the act or omission in question, a Person described in any of the preceding clauses (a) through (c). 1.22 CUMULATIVE TAX LIABILITY ACCOUNT. "Cumulative Tax Liability Account" means, with respect to each Member for any Quarter, the product of (a) the Assumed Rate and (b) the excess of the cumulative amount of federal taxable income or gain expected to be allocated to such Member in respect of its Common Shares for such Quarter and actually allocated or expected to be allocated for all prior Quarters pursuant to Article V, over the cumulative amount of federal taxable loss or deduction allocated to such Member in respect of its Common Shares for such Quarter and actually allocated or expected to be allocated for all prior Quarters pursuant to Article V. 1.23 DISCOUNT NOTES. "Discount Notes" means 13.5% senior discount notes accreting to an aggregate principal amount of $221.5 million at maturity, due 2010 issued by Gaming Holdings and Aladdin Capital Corp. on or about the date hereof. 1.24 DISTRIBUTION. "Distribution" means a distribution of cash or other property made by the Company with respect to Shares, including upon dissolution or liquidation of the Company or in respect of a redemption of Shares, but shall not mean payments or transfers of cash or other property to Members for reasons other than their ownership of Shares. 1.25 EMPLOYMENT AND CONSULTING AGREEMENTS. "Employment and Consulting Agreements" means (a) the Employment and Consulting Agreement effective January 1, 1997 entered into by and among Goeglein, the Company, Aladdin Gaming and Aladdin Holdings as amended on January 30, 1998 and February 26, 1998, (b) the Consulting Agreement effective January 1, 1997 entered into by and among GAI, the Company, Aladdin Gaming and Aladdin 4 Holdings as amended on January 30, 1998 and February 26, 1998, (c) the Employment Agreement effective April 15, 1997 entered into by and among McKennon, the Company, Aladdin Gaming and Aladdin Holdings as amended on February 26, 1998, (d) the Employment Agreement effective July 1, 1997 entered into by and among Klerk, the Company, Aladdin Gaming and Aladdin Holdings as amended on February 26, 1998, (e) the Employment Agreement effective July 1, 1997 entered into by and among Rueda, the Company, Aladdin Gaming and Aladdin Holdings as amended on February 26, 1998, (f) the Employment Agreement effective July 1, 1997 entered into by and among Galati, the Company, Aladdin Gaming and Aladdin Holdings as amended on February 26, 1998. 1.26 EXECUTIVE MANAGEMENT COMMITTEE. "Executive Management Committee" means the committee of the management of the Company with the day-to-day responsibility for the operation of the Company's business, as provided for in Section 9.2. 1.27 FISCAL YEAR. "Fiscal Year" means the period commencing on January 1 of each calendar year and terminating on December 31 of the same calendar year, or such other period as determined by the Board and permitted by the Code, the Treasury Regulations or any other applicable laws. 1.28 GAMING PROBLEM. "Gaming Problem" means circumstances such that any Member, any Affiliate of any Member or any Related Party of any Member or of any Affiliate of any Member may preclude or materially delay, impede or impair the ability of the Company to obtain or retain any licenses required by the Nevada Gaming Authorities for the conduct of business of the Company and its Subsidiaries, or such as may result in the imposition of materially burdensome terms and conditions on any such license. 1.29 GROSS ASSET VALUE. "Gross Asset Value" means, with respect to any Company asset, the asset's adjusted basis for federal income tax purposes, except as follows: (a) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the fair market value of such asset on the date of contribution; PROVIDED, that the Gross Asset Value of any asset (other than cash) contributed by a Member shall be as set forth on Schedule 1; (b) the Gross Asset Value of all Company assets shall be adjusted to equal their respective fair market values as of the following times: (i) the acquisition of an additional Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an Interest; and (iii) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); PROVIDED, however, that the adjustment pursuant to clauses (i) and (ii) shall be made only if the Board reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company; 5 (c) the Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the fair market value of such asset on the date of the Distribution; and (d) the Gross Asset Values of the Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m); PROVIDED, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) to the extent the Board determines that an adjustment pursuant to paragraph (b) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d). If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraphs (a), (b) or (d) above, such Gross Asset Value shall thereafter be adjusted by the depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. 1.30 GUARANTEED PAYMENT. "Guaranteed Payment" means a payment determined without regard to income of the Company, made to a Member for the use of capital, as described under Section 707(c) of the Code. 1.31 INTEREST. "Interest" means the entire ownership interest of a Member in the Company at any time, including the right of such Member to any and all benefits to which a Member may be entitled as provided under the NRS and in this Agreement and includes the ownership interests in respect of both Common Shares and Series A Preferred Shares. 1.32 LCI. "LCI" means London Clubs Nevada, Inc., a Nevada corporation. 1.33 MEMBER. "Member" means a Person who has been admitted to the Company as a member in accordance with the NRS and this Agreement. 1.34 MEMBER NONRECOURSE DEBT. "Member Nonrecourse Debt" has the meaning set forth in Treasury Regulations Section 1.704-2(b)(4) for "partner non-recourse debt". 1.35 MEMBER NONRECOURSE DEBT MINIMUM GAIN. "Member Nonrecourse Debt Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt, equal to the Minimum Gain that would result if such Member Nonrecourse Debt were treated as a nonrecourse liability of the Company, determined in accordance with Treasury Regulations Sections 1.704-2(i)(3). 6 1.36 MEMBER NONRECOURSE DEDUCTIONS. "Member Nonrecourse Deductions" has the meaning set forth in Treasury Regulations Sections 1.704-2(i)(l) and 1.704-2(i)(2) for "partner non-recourse deductions". 1.37 MINIMUM GAIN. "Minimum Gain" means the amount determined by computing, with respect to each nonrecourse liability of the Company, the amount of gain (of whatever character), if any, that would be realized by the Company if it disposed (in a taxable transaction) of the Property subject to such liability in full satisfaction thereof, and by then aggregating the amounts so computed as set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d). 1.38 NEVADA ACT. "Nevada Act" means the Nevada Gaming Control Act (or any successor statute), and any rules or regulations promulgated thereunder. 1.39 NEVADA COMMISSION. "Nevada Commission" means the Nevada Gaming Commission. 1.40 NEVADA GAMING AUTHORITIES. "Nevada Gaming Authorities" means the Nevada Commission, the Nevada State Gaming Control Board and any other applicable governmental or administrative state or local agency involved in the regulation of gaming or gaming activities in the State of Nevada. 1.41 NON-EXERCISE NOTICE. "Non-Exercise Notice" has the meaning ascribed thereto in Section 11.2. 1.42 NONRECOURSE DEDUCTIONS. "Nonrecourse Deductions" has the meaning set forth in Treasury Regulations Section 1.704-2(b)(1) and 1.704-2(c). 1.43 NRS. "NRS" means the Nevada Revised Statutes, as amended from time to time. 1.44 OFFICERS. "Officers" means the officers of the Company, as elected by the Board from time to time. 1.45 PERCENTAGE INTEREST. "Percentage Interest" means, with respect to a specified Member, the proportionate share of such Member's Common Shares in the Company, computed by dividing the number of Common Shares held by such Member by the Total Common Shares. 1.46 PERSON. "Person" means a natural person, any form of business or social organization and any other nongovernmental legal entity, whether domestic or foreign, including, but not limited to, a corporation, partnership, association, trust, unincorporated organization, estate or limited liability company. 7 1.47 PROFITS AND LOSSES. "Profits" and "Losses" mean, for any applicable period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (a) any income of the Company that is exempt from gross income for federal income tax purposes and not otherwise taken into account in computing Profits or Losses shall be included in computing Profits or Losses; (b) any expenditures of the Company that are described in Code Section 705(a)(2)(B) or that are treated as expenditures described in that Code Section pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses shall reduce Profits or Losses; (c) in the event that the Gross Asset Value of any Company asset is adjusted pursuant to clause (b), (c) or (d) of the definition thereof, such adjustment shall be taken into account as gain or loss from disposition of such asset for purposes of computing Profits and Losses; (d) gain or loss resulting from a disposition of property with respect to which gain or loss has been recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from such value; (e) an amount equal to the depreciation, depletion, amortization, and gain or loss or other cost recovery reduction allowable with respect to an asset for such Fiscal Year or other period, determined in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) shall be taken into account in computing Profits or Losses; and (f) notwithstanding any other provisions of this definition, any items of income, gain, loss or deduction which are specifically allocated shall not be taken into account in computing Profits or Losses. 1.48 PROPERTY. "Property" means all assets of the Company, including all real, personal and intangible property, or any portion thereof. 1.49 PURCHASE OPTION. "Purchase Option" has the meaning ascribed thereto in Section 11.2. 1.50 QUARTER. "Quarter" means any three month period commencing on January 1, April 1, July 1 or October 1 of any year during the term of this Agreement. 8 1.51 RECORDS OFFICE. "Records Office" means the records office of the Company maintained in the State of Nevada. 1.52 RELATED PARTY. "Related Party" means, in respect of a Member, its Affiliates, and the Member's and the Affiliates' respective shareholders, partners, members, directors and officers. 1.53 REQUIRED SERIES A CAPITAL ACCOUNT BALANCE. "Required Series A Capital Account Balance" means, as of the date of determination, the sum of (a) the Capital Contributions with respect to the Series A Preferred Shares, plus (b) the sum of (i) the cumulative Series A Preferred Return and (ii) any premium currently due and payable on the Discount Notes, less (c) any actual Distributions previously made with respect to the Series A Preferred Shares (other than Distributions made pursuant to Section 6.2). It is anticipated that the Required Series A Capital Account Balance will be $221,500,000 on March 1, 2003. 1.54 SALLE PRIVEE FACILITIES. "Salle Privee Facilities" means facilities open to the public at large, consisting of (a) a gaming facility, containing approximately 20 to 30 high limit tables and approximately 100 high limit slot devices, located on the mezzanine level directly above the main gaming floor of the Aladdin hotel and casino;(b) a super-premium gourmet restaurant facility, located adjacent to and as part of the gaming facility of the Salle Privee Facilities and containing a separate kitchen, a bar, approximately 25 dining tables inside the restaurant, as well as several additional dining tables located in a roof garden accessible through the restaurant;(c) an exclusive hospitality facility comprising approximately 25 double-module luxury suites, 5 triple-module suites, a concierge facility and guest bar and lounge, to be located in the main tower of the Aladdin hotel and casino;(d) a separate entrance and reception area for guests of the Salle Privee Facilities, offering secure and discrete access for arrivals and departures; and (e) vertical and horizontal circulation infrastructure providing for private elevator access to the hospitality facility and private corridor access from the hospitality facility to the gaming facility of the Salle Privee Facilities. 1.55 SECRETARY OF STATE. "Secretary of State" means the office of the Nevada Secretary of State. 1.56 SERIES A PREFERRED RETURN. "Series A Preferred Return" means, as of the date of determination, with respect to a holder of Series A Preferred Shares, (a) in respect of the first five years after the initial issuance of the Series A Preferred Interests, an amount equal to the product of (i) 13.5 % on a semi-annual bond equivalent basis and (ii) the Required Series A Capital Account Balance, and (b) beginning in the sixth year after the initial issuance of the Series A Preferred Interests, an amount equal to the product of (i) 13.5% per annum and (ii) $221.5 million. 1.57 SERIES A PREFERRED SHARES. "Series A Preferred Shares" means cumulative and compounding preferred Shares with rights and obligations as provided in Section 3.2(c). 9 1.58 SHARE. "Share" represents a share of an Interest in the Company held by a Member, and includes Common Shares and Series A Preferred Shares. 1.59 SUBSIDIARY. "Subsidiary" means, with respect to a specified Person, any other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by the specified Person. Unless a contrary intention is indicated in this Agreement, any reference to a Subsidiary shall mean a Subsidiary of the Company. 1.60 SUBSTITUTED MEMBER. "Substituted Member" means the transferee of a Member's Shares, or a permitted successor or assign of such Member who is admitted to the Company as a Member. 1.61 TOTAL COMMON SHARES. "Total Common Shares" means all issued and outstanding Common Shares. 1.62 TRANSFER. "Transfer" means any transfer, sale, conveyance, distribution, hypothecation, pledge, encumbrance, assignment or other disposal, either voluntary or involuntary. 1.63 TREASURY REGULATIONS. "Treasury Regulations" means the U.S. federal income tax regulations promulgated by the U.S. Treasury Department under the Code and codified at Title 26 of the Code of Federal Regulations, as amended from time to time. ARTICLE II INTRODUCTORY MATTERS 2.1 RECORDS OFFICE. The Company shall continuously maintain in the state of Nevada a Records Office, which may, but need not be, a place of its business in the state of Nevada, at which it shall keep all records identified in NRS 86.241. As of the date hereof, the Records Office shall be 2810 West Charleston Boulevard, Suite F-58, Las Vegas, Nevada 89102. The Records Office may be changed to another location within the State of Nevada as the Board may from time to time determine. 2.2 OTHER OFFICES. The Company may establish and maintain other offices at any time and at any place or places as the Members may designate or as the business of the Company may require. 2.3 RESIDENT AGENT AND REGISTERED OFFICE. The resident agent for service of process shall be as set forth in the Articles. The resident agent may be changed as the Board may from time to time determine. The Company shall have as its registered office in the state of Nevada the street address of its resident agent. 10 2.4 PURPOSE. The Company is organized for the purpose(s) of developing, constructing, financing, owning and operating hotels and casinos and related businesses and to engage in such other lawful enterprises as may be incidental or appurtenant to the foregoing. 2.5 NO LIABILITY TO THIRD PARTIES. No Member shall be liable for the debts, obligations or liabilities of the Company, including under a judgment decree or order of a court. . ARTICLE III INTERESTS 3.1 MEMBER'S INTEREST. A Member's Interests shall for all purposes be personal property. A Member shall have no interest in specific Company assets or property, including any assets or property contributed to the Company by such Member as part of any Capital Contribution. 3.2 CLASSES OF SHARES. (a) The Shares shall be divided between Common Shares and Series A Preferred Shares. (b) There shall be authorized 10,000,000 Common Shares. Each of such Shares shall have identical rights and terms in all respects except as specifically set forth in this Agreement. The Common Shares shall have rights to an allocation of Profits and Losses and to any Distributions as may be authorized under this Agreement and under the NRS. Except as specifically provided in this Agreement or under the NRS, the Common Shares collectively shall have all management and voting rights of the Company. (c) There shall be authorized 5,000,000 Series A Preferred Shares. Each of such Shares shall have identical rights and terms in all respects. The Series A Preferred Shares shall have rights to an allocation of Profits and Losses, other allocations and any Distributions as may be authorized under this Agreement and under the NRS. Except as specifically provided in this Agreement or the NRS, the Series A Preferred Shares shall not have management or voting rights under the NRS or otherwise. Notwithstanding anything, express or implied, to the contrary in this Agreement but subject to the following sentence, at any relevant date, the aggregate Distribution, redemption and liquidation preference (without duplication) that the Members holding Series A Preferred Shares are entitled to receive from the Company prior to any Distribution with respect to Common (other than tax Distributions and any other mandatory Distributions provided for in Article IV) shall equal the Required Series A Capital Account Balance. Nothing in the foregoing sentence shall be interpreted to override the limitations of Members' liabilities and obligations to the Company and other Members set forth in Sections 2.5, 4.6 and 7.2. The Series A Preferred Shares may be redeemed at the option of the Company, but in no event shall any Series A Preferred Shares be redeemed for an amount less than the portion of the Required Series A Capital Account Balance attributable to such Shares. 11 3.3 UCC ELECTION. The Company hereby irrevocably elects that all Interests shall be securities governed by Article 8 of the Uniform Commercial Code. Each Certificate of Shares shall bear the following legend: "This certificate evidences an interest in Aladdin Gaming, LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code." No change to this provision shall be effective until the all outstanding Certificates of Shares have been surrendered for cancellation and any new Certificates of Shares thereafter issued shall not bear the foregoing legend. ARTICLE IV CAPITAL ACCOUNTS 4.1 INITIAL CAPITAL. As of the date hereof the capital of the Company shall be the Capital Contributions of the Members on or prior to the date hereof in such amounts or value as are set forth opposite the name of each Member on Schedule 1, such Capital Contributions made in exchange for the Shares indicated on Schedule 1. No such initial Capital Contributions shall be accepted by the Company and no Shares shall be issued until all necessary approvals under the Nevada Act are obtained with respect to such Capital Contribution and issuance of Shares. 4.2 CAPITAL ACCOUNTS. Capital Accounts shall be established on the Company's books representing the Members' respective Capital Contributions to the Company. A separate Capital Account shall be maintained for each Member and, for book purposes, separated into a contribution account and an income (loss) account for each class of Shares held by each Member at any time maintained in accordance with the accounting methods elected to be followed by the Company. The Capital Account of each contributing Member shall be credited with the amount of such Member's initial Capital Contribution and any subsequent Capital Contributions upon receipt thereof by the Company; PROVIDED, however, that the Capital Account of a Member shall not be credited with the amount of any Capital Contribution until all necessary approvals under the Nevada Act are obtained with respect to such initial Capital Contribution. 4.3 ADJUSTMENT OF CAPITAL ACCOUNTS. To the extent consistent with Section 5.4, the Member's Capital Account shall be maintained and adjusted in accordance with the Code and the Treasury Regulations, including Treasury Regulation Section 1.704-1(b)(2)(iv). 4.4 RIGHTS WITH RESPECT TO CAPITAL; INTEREST. No Member shall have the right to withdraw or receive any return of such Member's Capital Contribution, and no Capital Contribution must be returned in the form of property other than cash except as specifically provided herein. No interest shall be paid or credited to the Members on their Capital Accounts or upon any undistributed profits left on deposit with the Company. 4.5 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as specifically provided in this Agreement, the Keep Well Agreement or the Contribution Agreement, 12 (a) no Member shall be required to make an additional Capital Contribution to the Company, or to make any loan (or cause any loan to be made) to the Company, and (b) no Member shall have the right to make an additional Capital Contribution to the Company without the consent of the Company. ARTICLE V PROFITS AND LOSSES 5.1 PROFITS. After giving effect to the special allocations set forth in Sections 5.3 and 5.4, Profits for any Fiscal Year shall be allocated among the Members holding Common Shares in proportion to their Percentage Interests. 5.2 LOSSES. After giving effect to the special allocations set forth in Sections 5.3 and 5.4, Losses for any Fiscal Year shall be allocated in the following order and priority: (a) first, to the Members holding Common Shares in proportion to and to the extent of the Members' Capital Accounts with respect to the Common Shares; (b) second, to the Members holding Series A Preferred Shares to the extent of the Members' Capital Account with respect to the Series A Preferred Shares; and (c) the balance, if any, among the Members holding Common Shares in proportion to their Percentage Interests. 5.3 SPECIAL ALLOCATION TO SERIES A PREFERRED SHARES. Subsequent to any allocations pursuant to Section 5.4 but prior to any allocations pursuant to Sections 5.1 or 5.2, items of gross income of the Company shall be allocated semi-annually to the Capital Account in respect of the Series A Preferred Shares in an amount sufficient to cause the Capital Account in respect of the Series A Preferred Shares to equal the Required Series A Capital Account Balance; PROVIDED, that if there is insufficient gross income of the Company to satisfy such allocation, items of gross income, to the extent available, shall be allocated to the Capital Account in respect of the Series A Preferred Shares pursuant to the foregoing and then the Company shall make a Guaranteed Payment to the Series A Preferred Shareholders in the form of an increase in their capital accounts with respect to such Series A Preferred Shares in an amount which, together with the gross income allocation under this Section 5.3, causes the Capital Account in respect of the Series A Preferred Shares to equal the Required Series A Capital Account Balance before taking into account current year allocations under Section 5.2. 5.4 SPECIAL ALLOCATIONS. Notwithstanding any other provision of this Article V, the following special allocations shall be made: 13 (a) MINIMUM GAIN CHARGEBACK. Except as provided in Treasury Regulations Section 1.704.2(f), notwithstanding any other provision of this Article V, if there is a net decrease in Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent years) in proportion to and to the extent of an amount equal to such Member's share of the net decrease in Minimum Gain determined in accordance with Treasury Regulations Section 1.704-2(g). Items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 5.4(a) is intended to comply with the "minimum gain chargeback" provisions of Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. (b) MEMBER MINIMUM GAIN CHARGEBACK. Except as provided in Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision of this Article V, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year of the Company, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items of income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Sections 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.4(b) is intended to comply with the "minimum gain chargeback" requirement of Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. (c) QUALIFIED INCOME OFFSET. In the event any Member unexpectedly receives any adjustments, allocations or distributions described in clauses (4), (5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d), items of income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit created by such adjustments, allocations or distributions of such Member as quickly as possible. Allocation pursuant to this Section 5.4(c) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article V have been tentatively made as if this Section 5.4(c) were not in the Agreement. This Section 5.4(c) is intended to constitute a "qualified income offset" within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3). (d) GROSS INCOME ALLOCATION. In the event any Member has a deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of (i) the amount such Member is obligated to restore pursuant to any provision of the Agreement and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated 14 items of income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 5.4(d) shall be made only if and to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article V have been made as if Sections 5.4(c) and 5.4(d) were not in this Agreement. (e) MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions for any Fiscal Year or other period shall be specially allocated to the Member who bears (or is deemed to bear) the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i)(1). (f) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any year shall be specially allocated among the Members pro rata in proportion to their Percentage Interests. (g) REGULATORY ALLOCATIONS. Any special allocation of items pursuant to this Section 5.4 shall be taken into account in determining subsequent allocations pursuant to Sections 5.1, 5.2 and 5.3 so that the cumulative net amount of all items allocated to each Member shall, to the extent possible, be equal to the amount that would have been allocated to such Member if there had never been any special allocation pursuant to this Section 5.4. 5.5 SECTION 704(C) ALLOCATION. For tax purposes, all items of income, gain, loss, deduction, expense and credit, other than tax items corresponding to items allocated pursuant to Section 5.4, shall be allocated in the same manner as are Profits and Losses; PROVIDED that in accordance with Code Section 704(c) and the Treasury Regulations promulgated thereunder, income, gain, loss and deduction with respect to property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property for federal income tax purposes and its fair market value. In the event that any asset of the Company is revalued pursuant to this Agreement in accordance with Section 704 of the Code and the regulations thereunder, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its fair market value in the same manner as under Code Section 704(c) and the Treasury Regulations promulgated thereunder. Any elections or other decisions relating to allocations referred to in this Section 5.5 shall be made by the Board in any manner that reasonably reflects the purpose and intention of this Agreement; PROVIDED that the Company elects to apply the traditional method described in Treasury Regulations Section 1.704-3(b) without curative allocations. Allocations pursuant to this Section 5.5 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of this Agreement. 5.6 FEDERAL INCOME TAX. It is the intent of the Company and its Member, that for so long as the Company has only one Member, the Company shall be disregarded as an entity 15 separate from its owner for federal income tax purposes, and all actions necessary to carry out such intent shall be taken by the Company or its Member. ARTICLE VI DISTRIBUTIONS 6.1 PRIORITY DISTRIBUTIONS. Distributions of Available Cash shall be made on the Series A Preferred Shares from time to time as may be determined by the Board, PROVIDED that (i) in the 6th and each subsequent year after initial issuance of the Series A Preferred Shares a Distribution shall be made in an amount equal to the Series A Preferred Return for such year, and (ii) prior to the end of the twelfth year after the initial issuance of the Series A Preferred Shares, a Distribution in redemption of the Series A Preferred Shares shall be made in an amount equal to the portion of the Required Series A Capital Account Balance attributable to the Series A Preferred Shares redeemed. 6.2 TAX DISTRIBUTIONS. (a) Subject to having made all Distributions provided for in Section 6.1, no later than thirty days following the end of each Quarter, the Company shall, to the extent of Available Cash, make a Distribution of cash pro-rata to each Member (based on the balance in each Member's Cumulative Liability Account) to the extent that the balance in that Member's Cumulative Tax Liability Account (determined as of the end of such Quarter) exceeds the cumulative Distributions of cash made to such Member pursuant to Section 6.2. (b) If and to the extent a Member establishes, to the reasonable satisfaction of the Board, that such Member or, if such Member is a pass through entity for federal income tax purposes, its direct or indirect equity holders, will incur a material tax liability with respect to its income derived from the Company (including any liability arising under tax indemnification agreements among the members of Gaming Holdings) in excess of tax Distributions otherwise receivable, the Board may provide for appropriate additional Distributions to such Member with respect to its tax liability. (c) Amounts distributed pursuant to this Section 6.2 shall be treated as non-interest bearing advances of Distributions under this Article VI, and shall be taken into account in determining the amount of future Distributions under this Article VI. 6.3 DISTRIBUTIONS ON COMMON SHARES. (a) the Company shall be required to distribute any Available Cash (after making all required Distributions provided for in Sections 6.1 and 6.2) to Gaming Holdings, in respect of its Common Shares, in an amount sufficient to permit Gaming Holdings to satisfy any additional obligations it may have to make payments on the Discount Notes. 16 (b) Subject to having made all Distributions required by Sections 6.1, 6.2 and 6.3(a), additional Distributions shall be made Quarterly as determined by the Board among the Members holding Common Shares in proportion to their Percentage Interests; 6.4 LIMITATIONS ON DISTRIBUTION. Notwithstanding any other provision of this Agreement, the Company shall not make any Distribution if such Distribution would violate the NRS, the Nevada Act or other applicable law or would cause a breach or default under any agreement or instrument to which the Company is a party or by which the Company or any of its assets are bound, but shall instead make such Distribution as soon as practicable after the making of such Distribution would not cause such violation, breach or default. ARTICLE VII MEMBERS 7.1 POWERS OF MEMBERS. Except as provided in Section 7.3, Members shall not have the authority to bind the Company by virtue of their status as Members. 7.2 LIMITATION OF LIABILITY. No Member shall be individually liable under a judgment, decree or order of a court, or in any other manner, for a debt, obligation or liability of the Company or any other Member, except as provided by law or in an agreement signed by the Member to be charged. No Member shall be required to loan any funds to the Company, nor shall any Member be required to make any contribution to the Company, nor shall any Member be subject to any liability to the Company, the other Members, or any third party, solely as a result of a Member's negative Capital Account balance. 7.3 ACTION BY THE MEMBERS. Except as otherwise specifically provided in this Agreement, all actions of the Members shall be taken by the Members in proportion to their Percentage Interests at the time of the action taken. Except as otherwise specifically provided herein, the Members may vote, approve a matter or take any action by the vote of the Members at a meeting at which a quorum is present, in person or by proxy, or without a meeting by written consent as provided in Section 7.7. The vote or written consent of a majority of the Members shall be required to approve any matter or to take any action at any meeting of Members at which a quorum is present, unless a greater or lesser vote or consent is provided for by this Agreement or required by the NRS. 7.4 MEETINGS OF MEMBERS. Meetings of the Members for any purpose may be called at any time by the Board or by one or more Members holding in the aggregate more than a ten percent Percentage Interest. Except in special cases where other express provision is made by the NRS, written notice of each meeting, signed by a Board representative or by a Member or Members, as the case may be, shall be given to each Member entitled to vote. All notices shall be sent in accordance with Section 13.1 to each Member entitled thereto not less than ten (except in 17 respect of an adjournment of a meeting of the Members) nor more than sixty days before each meeting, and shall specify the place, date and time of such meeting, as well as the purpose or purposes for which the meeting is called. 7.5 WAIVER OF NOTICE. The transactions carried out at any meeting of the Members, however called and noticed or wherever held, shall be as valid as though carried out at a meeting regularly called and noticed if (a) all of the Members holding Common Shares are present at the meeting or (b) a quorum of the Members is present and if, either before or after the meeting, each of the Members holding Common Shares who are not present signs a written waiver of notice or a consent to holding such meeting or an approval of the minutes thereof, which waiver, consent or approval shall be filed with the other records of the Company or made a part of the minutes of the meeting; PROVIDED that no Member holding Common Shares attending such meeting without notice protests prior to the meeting or at its commencement that notice was not given to such Member. 7.6 ADJOURNED MEETINGS AND NOTICE THEREOF. Any Members' meeting, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of Members holding Common Shares present in person or represented by proxy, but in the absence of a quorum no other business may be transacted at any such meeting. When any Members' meeting is adjourned for five days or more, notice of the adjourned meeting shall be given as in the case of an original meeting, otherwise it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting other than by announcement at the meeting at which such adjournment is taken. 7.7 ACTION BY WRITTEN CONSENT. Any action which may be taken at a meeting of Members may be taken by the Members without a meeting if authorized by the written consent of a majority of the Members, or such other greater or lesser Percentage Interest as is provided for in this Agreement or required by the NRS. Whenever action is taken by written consent, a meeting of Members need not be called nor notice of meeting given. The written consent may be executed in one or more counterparts and by facsimile, and each such consent so executed shall be deemed an original. A copy of such consent shall be sent to each Member holding Common Shares. 7.8 TELEPHONIC MEETINGS. Members may participate in a meeting of the Members by means of a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 7.8 constitutes presence in person at the meeting. 7.9 QUORUM. Members holding an aggregate fifty percent Percentage Interest, represented in person or by proxy, shall constitute a quorum for the transaction of business. Except as specifically provided in this Agreement, each Member shall be entitled to vote in proportion to such Member's Percentage Interest, provided that if, pursuant to the NRS or the terms of this Agreement, a Member is not entitled to vote on a specific matter, then such Member's vote and Percentage Interest shall not be considered for purposes of determining whether a quorum is present 18 or whether approval by the vote of the Members has been obtained in respect of such specific matter. ARTICLE VIII RESIGNATION, TRANSFER OF SHARES, CHANGE IN CONTROL, TRUST MEMBERS 8.1 RESIGNATION. A Member may not resign from the Company before the dissolution and winding up of the Company, subject to the provisions of Chapter 463 of the NRS or other applicable law. Except as specifically provided in this Agreement, any right of a Member under applicable law to demand a return of that Member's Capital Contribution prior to dissolution is hereby waived. 8.2 TRANSFERS OF INTERESTS. (a) Except for any pledge in connection with the arrangements in respect of the Bank Financing or the exercise of remedies in respect of such pledge (including, without limitation, any sale or transfer in connection with the enforcement of such pledge), the Common Shares of each Member are personal property, and such Shares may not be Transferred and any attempt to Transfer shall be null and void and of no effect whatsoever. (b) Except for a pledge to the holders of the Discount Notes, the exercise of remedies in respect of such pledge, or any Transfers after foreclosure under such pledge, the holders of the Series A Preferred Shares may not Transfer any Series A Preferred Share and any attempt to do so shall be null and void and of no effect whatsoever. 8.3 GAMING CONTROL ACT. Notwithstanding any other provision of this Agreement, no Shares or other ownership interest in the Company, and no Upstream Ownership Interest, shall be issued or Transferred in any manner whatsoever except in compliance with the provisions of the Nevada Act. 8.4 FURTHER RESTRICTION ON TRANSFER OF SHARES. In addition to the other restrictions set forth in this Agreement, no Member may assign, convey, sell, encumber or in any way alienate all or any part of such Member's Shares, if the Shares to be assigned, conveyed, sold or encumbered, when added to the total of all other Shares assigned, conveyed, sold or encumbered in the preceding twelve months, would result in the termination of the Company under Code Section 708, if such termination will result in adverse tax consequences to the non-transferring Member. 8.5 GAMING HOLDINGS SHARES. If the Company purchases any shares in Gaming Holdings pursuant to the Employment and Consulting Agreements, the parties agree that forthwith thereafter Gaming Holdings shall purchase such shares from the Company for a total consideration of $1. 19 ARTICLE IX BOARD OF MANAGERS 9.1 BOARD OF MANAGERS. (a) Except for matters expressly requiring the approval of the Members (or a percentage or class of the Members) pursuant to this Agreement or the NRS, the business and affairs of the Company shall be managed by a Board of Managers pursuant to this Article IX. Subject to the provisions of the Nevada Act and except as specifically provided in this Agreement, the Board Members shall each serve for a three year term or until such Board Member shall resign or be removed or otherwise disqualified to serve, or until such Board Member's successor shall have been appointed. (b) The Board shall be comprised of Board Members appointed by Gaming Holdings to reflect the same representation that Aladdin Enterprises and LCI have on the Board of Managers of Gaming Holdings. On the date hereof, the Board Members shall be: Jack Sommer, Ronald B. Dictrow and Richard J. Goeglein as representatives of Aladdin Enterprises and Alan L. Goodenough and G. Barry C. Hardy as representatives of LCI. 9.2 POWERS AND DUTIES OF THE BOARD. (a) The Board (or the Executive Management Committee or any Officer acting at the direction of the Board) shall manage the business affairs of the Company. The Board shall have the general powers and duties of management typically vested in a director or board of directors of a corporation, and all powers and duties necessary, advisable or convenient to administer and operate the business and affairs of the Company, and such other powers and duties as may be prescribed by the Members or implied by law. Subject to the provisions of this Agreement, such powers and duties shall include, without limitation, the following: (i) to select and remove all Officers (as more fully described in Section 9.3), agents and employees of the Company, prescribe such powers and duties for them as may be consistent with law, the Articles and this Agreement, and fix their compensation; (ii) to borrow money and incur indebtedness on behalf of the Company for the purposes of the Company, and to cause to be executed and delivered therefor, in the name of the Company, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidence of debt and securities; (iii) to change the principal office of the Company from one location to another within Nevada and to establish from time to time one or more subsidiary offices of the Company; and (iv) to enter into or commit to any agreement, contract, commitment, instrument, deed, mortgage or obligation on behalf of the Company for any Company purpose. (b) For each Fiscal Year the Board shall adopt an annual operating budget, capital budget and marketing plan, which shall include a detailed operating budget and marketing plan in respect of the Salle Privee Facilities. (c) The Board shall be responsible for establishing and overseeing all policies and procedures in connection with the operation of the Company's business, but shall delegate day-to-day management responsibility to the Executive Management Committee. The 20 Executive Management Committee shall include (without limitation) the following persons: the president and chief executive officer of the Company, the chief financial officer of the Company, the senior vice president of the Company who is the president and chief operating officer of the Aladdin hotel and casino, the senior vice president of the Company who is the president and chief operating officer of the Second Hotel and casino, the senior vice president human resources of the Company, the senior vice president electronic gaming of the Company and the managing director of the Salle Privee Facilities. 9.3 ELECTION OF OFFICERS. Subject to the applicable provisions of the Nevada Act, the Board may from time to time elect such Officers as the Board shall deem appropriate. Subject to the provisions of this Agreement, the Board may confer upon any of the Officers such duties, authority and titles as the business of the Company may require in the reasonable judgment of the Board (including the authority to represent and bind the Company in accordance with the scope of the particular duties involved and such other general powers and duties of a type similar to those typically vested in an officer of a corporation). The Officers shall serve at the sole discretion of the Board. 9.4 REMOVAL, RESIGNATION AND VACANCIES. (a) Board Members may be removed or appointed by Gaming Holdings at any time to ensure that Aladdin Enterprises and LCI have the same representation of the Board as they have on the Board of Managers of Gaming Holdings. (b) In the event any Person elected to serve as a Board Member at any time is found by the Nevada Gaming Authorities to be unsuitable to hold a gaming license, such Person shall thereupon automatically cease to be a Board Member without any further action. (c) Any Board Member may resign at any time by giving written notice to the Company and the Members. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 9.5 MEETINGS OF THE BOARD. (a) PLACE AND TIME OF MEETINGS. The meetings of the Board shall be held at least Quarterly at the Records Office, unless some other place is designated in the notice of the meeting. Meetings of the Board shall be held at such times as is determined by the Board. Accurate minutes of any meeting of the Board shall be maintained by the Officer designated by the Board for such purpose. (b) SPECIAL MEETINGS; NOTICE. Special meetings of the Board for any purpose may be called at any time by any Board Member. At least forty-eight hours written notice of the time and place of a special meeting of the Board shall be delivered personally to the Board Members at their last known business addresses as it is shown on the records of the Company or personally communicated to them by a Board Member or officer of the Company by telegraph or facsimile. Such telegraphing, faxing or delivery shall be considered due, legal and personal notice to such Board Member. 21 (c) WAIVER OF NOTICE. The transactions carried out at any meeting of the Board, however called and noticed or wherever held, shall be as valid as though had at a meeting regularly called and noticed if: (i) all Board Members are present at the meeting or (ii) if a majority of the Board Members are present and if, either before or after the meeting, those not present sign a waiver of notice of such meeting or a consent to holding the meeting or an approval of the minutes thereof, which waiver, consent or approval shall be filed with the other records of the Company or made a part of the minutes of the meeting; PROVIDED that no Board Member attending such meeting without notice protests prior to the meeting or at its commencement that notice was not given to him or her. (d) ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken by the Board may be taken without a meeting and will have the same force and effect as if taken by a vote of the Board Members at a meeting properly called and noticed, if authorized by the written consent of all, but not less than all, of the Board Members. In no instance where action is authorized by written consent need a meeting of the Board be called or noticed. A copy of the action taken by written consent shall be filed with the records of the Company. The written consent may be executed in one or more counterparts and by facsimile, and each such consent so executed shall be deemed an original. (e) QUORUM. Three incumbent Board Members present in person or by proxy shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board. Except as otherwise provided in this Agreement or by the NRS, the action of a majority of the Board Members present in person or by proxy at any meeting at which there is a quorum, when duly assembled, is valid. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of Board Members, if any action taken is approved by a majority of the required quorum for such meeting. (f) TELEPHONIC MEETINGS. Board Members may participate in a meeting of the Board by means of a telephone conference call or similar method of communication so long as all Persons participating in the meeting can hear one another. Participation in a meeting of the Board pursuant to this Section 9.5(f) constitutes presence in person at the meeting. 9.6 COMPENSATION OF BOARD MEMBERS; COMPENSATION OF OFFICERS. The Company shall not pay any Board Member in their capacity as a Board Member any salary or other benefits, other than such insurance and/or indemnification as may be determined by the Board and is permitted under the Articles, this Agreement and the NRS. The Company shall pay to each Officer such salary and other benefits as shall be approved from time to time by the Board. 9.7 EXPENSE REIMBURSEMENTS. The Company shall reimburse the Board Members for all expenses reasonably incurred by the Board Members on behalf of the Company or in connection with the performance of the obligations of the Board Members hereunder. 22 ARTICLE X ACCOUNTING, RECORDS AND BANK ACCOUNTS 10.1 RECORDS AND ACCOUNTING. The books and records of the Company shall be kept, and the financial position and the results of its operations recorded, in accordance with the accounting methods elected to be followed by the Company for federal income tax purposes. The books and records of the Company shall reflect all Company transactions and shall be appropriate and adequate for the Company's business. 10.2 ACCESS TO ACCOUNTING RECORDS. All accounting books and records of the Company, including files, tax returns and information, shall be maintained at an office of the Company or at the Records Office. Each Member, and its duly authorized representative, agent or attorney, upon written demand providing at least five days notice, shall have access to such books and records and the right to inspect, examine and copy them (at such Member's expense) at reasonable times during normal business hours. The rights authorized by this Section 10.2 may be denied to a Member upon such Member's refusal to provide to the Company an affidavit stating that such inspection, extracts or audit is not desired for any purpose not related to the Member's interest in the Company as a Member. 10.3 ANNUAL TAX INFORMATION. The Board shall use its best efforts to cause the Company to deliver to each Member within ninety days after the end of each Fiscal Year all information necessary for the preparation of such Member's federal income tax return. Federal, state and local tax returns of the Company, if any are required under applicable law, shall be prepared or caused to be prepared and filed in a timely manner by the Board. 10.4 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are aware of the income tax consequences of the allocations made by this Agreement and hereby agree to be bound by the provisions of this Agreement in reporting their shares of the income and loss for income tax purposes. 10.5 TAX STATUS. For so long as the Company has only one Member, the Company shall be disregarded as an entity separate from its owner for federal income tax purposes and the Member agrees not to take any action inconsistent with such classification for federal income tax purposes. 23 ARTICLE XI DISSOLUTION OF THE COMPANY AND TERMINATION OF A MEMBER'S INTEREST 11.1 DISSOLUTION. The Company shall be dissolved and its affairs wound up (a) at the time specified in the Articles or (b) upon the written agreement of all of the Members, in which event the Members will proceed with reasonable promptness to liquidate the Company. The death, insanity, retirement, resignation, expulsion, Bankruptcy or dissolution of any Member, or the occurrence of any other event which terminates a Member's continued membership in the Company shall not, in and of itself, cause the dissolution of the Company. 11.2 COMPANY'S OPTION TO PURCHASE BANKRUPT MEMBER'S INTEREST. Upon the institution of a Bankruptcy by or against a Member, the Company shall have the option (the "Purchase Option"), exercisable by written notice to all the Members within 120 days of the date the Bankruptcy petition is filed by or against the Bankrupt Member, to purchase the Bankrupt Member's Common Shares, subject, however, to receipt of all required approvals under the Nevada Act (such approvals to be obtained as soon as reasonably practicable), for an agreed upon price, or if no price can be agreed upon, for the fair market value of such Common Shares at the time of such Bankruptcy, as determined by an independent qualified appraiser appointed by unanimous agreement by the Members and the Company. If they cannot agree on an appraiser, the Bankrupt Member, on the one hand, and the Company, on the other hand, shall each select an appraiser, which appraisers together shall select a third appraiser, which third appraiser shall determine the fair market value of such Common Shares, which determination shall be binding upon the parties. If the Company elects to exercise the Purchase Option, it shall pay the agreed price or the fair market value, as the case may be, of the Bankrupt Member's Shares to the Bankrupt Member, in cash, within such 120-day period or at such later time as all approvals required under the Nevada Act are obtained. If the Company elects to not exercise the Purchase Option, the Company shall notify the Bankrupt Member of its decision in writing (the "Non-Exercise Notice"), within such 120-day period. 11.3 DISTRIBUTION ON DISSOLUTION AND LIQUIDATION. In the event of the dissolution of the Company for any reason, the business of the Company shall be continued to the extent necessary to allow an orderly winding up of its affairs, including the liquidation and termination of the Company pursuant to the provisions of this Section 11.3, as promptly as practicable thereafter, and each of the following shall be accomplished: (a) holders of a majority of the Common Shares shall elect or appoint a liquidator; (b) the liquidator shall cause to be prepared a statement setting forth the Property and liabilities of the Company as of the date of dissolution, a copy of which statement shall be furnished to the Members; 24 (c) the Property of the Company shall be liquidated by the liquidator as promptly as possible, but in an orderly and businesslike manner. The liquidator may, in the exercise of its business judgment, determine not to sell all or any portion of the Property, in which event such Property shall be distributed in kind based upon fair market value as of the date of such distribution; (d) any Profits or Losses realized by the Company upon the sale of its Property shall be recognized and allocated to the Members in the manner set forth in Article V; and (e) the proceeds of sale and all other Property of the Company shall be applied and distributed as follows and in the following order of priority: (i) to the expenses of liquidation; (ii) to the payment of the debts and liabilities of the Company (including loans from Members); (iii) to the setting up of any reserves which the liquidator shall determine to be reasonably necessary, for such period as the liquidator shall deem advisable, for contingent, unliquidated or unforeseen liabilities or obligations of the Company or the Members arising out of or in connection with the Company. Such reserves shall be held by the liquidator or paid over to a bank or title company selected by it, to be held by such bank or title company as escrow holder or liquidator for the purposes of disbursing such reserves to satisfy the liabilities and obligations described above; (iv) to the holders of the Series A Preferred Shares in an amount equal to the Required Series A Capital Account Balance; and (v) the balance (including amounts released from any unnecessary reserves set up pursuant to Section 11.3(e)(iii)), if any, after giving effect to all contributions, distributions and allocations for all periods, to the holders of Common Shares pro rata in proportion to their positive Capital Account balances. Each Member understands and agrees that by accepting the provisions of this Section 11.3 setting forth the priority of the distribution of assets of the Company to be made upon a liquidation, such Member expressly waives any right which it, as a creditor of the Company, might otherwise have to receive distributions of assets pari passu with the other creditors of the Company in connection with a distribution of assets of the Company in satisfaction of any liability of the Company, and hereby subordinates to said creditors any such right. 25 ARTICLE XII LIABILITY, EXCULPATION AND INDEMNIFICATION 12.1 EXCULPATION. (a) No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, the Board or an appropriate Officer or employee of the Company, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's gross negligence, fraud or willful misconduct. (b) A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, Profits or Losses or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid. 12.2 FIDUCIARY DUTY. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any Member, then, to the fullest extent permitted by applicable law, a Covered Person acting under this Agreement shall not be liable to the Company or to any Member for its good faith acts or omissions in reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Covered Person. 12.3 OUTSIDE BUSINESSES. Subject to any other agreement to the contrary, any Covered Person, Member or Affiliate thereof may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Company, and the Company and the Members shall have no rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Company, shall not be deemed wrongful or improper. Subject to any agreement to the contrary, no Covered Person, Member or Affiliate thereof shall be obligated to present any particular investment opportunity to the Company even if such opportunity is of a character that, if presented to the Company, could be taken by the Company, and any Covered Person, Member or Affiliate thereof shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity. 12.4 INDEMNITY. The Company does hereby indemnify and hold harmless each Covered Person who was or is a party or is threatened to be made a party to any threatened, pending 26 or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that he or she is or was a Member, Affiliate, Board Member, Officer, employee or agent of the Company, or is or was serving at the request of the Company as manager, member, director, officer, employee or agent of another limited-liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including attorneys' fees, judgment, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding, if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the Covered Person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company, and that, with respect to any criminal action or proceeding, he or she had reasonable cause to believe that his or her conduct was unlawful. 12.5 INDEMNITY FOR ACTIONS BY OR IN THE RIGHT OF THE COMPANY. The Company does hereby indemnify each Covered Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he or she is or was a Member, Affiliate, manager, Board Member, Officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, manager, officer, employee or agent of another limited-liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit, if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company. Indemnification may not be made for any claim, issue or matter as to which such Covered Person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that, in view of all the circumstances of the case, he or she is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 12.6 INDEMNITY IF SUCCESSFUL. To the extent that a Covered Person has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 12.4 and 12.5, or in defense of any claim, issue or matter therein, the Company does hereby indemnify such Covered Person against expenses, including attorneys' fees actually and reasonably incurred by it in connection with the defense. 12.7 DETERMINATION OF RIGHT TO INDEMNIFICATION. Any indemnification under Sections 12.4 and 12.5, unless ordered by a court or advanced pursuant to Section 12.8 below, must be made by the Company only as authorized in the specific case upon a determination that 27 indemnification of the Covered Person is proper in the circumstances. The determination must be made: 12.8 ADVANCE PAYMENT OF EXPENSES. The expenses of Members and Board Members incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Member or Board Member to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Company. The provisions of this subsection do not affect any rights to advancement of expenses to which personnel of the Company other than Members or Board Members may be entitled under any contract or otherwise by law. 12.9 OTHER ARRANGEMENTS NOT EXCLUDED. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article XII: (a) do not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Articles or any agreement, vote of Members, or disinterested Board Members, if any, or otherwise, for an action in their official capacity or an action in another capacity while holding their office, except that indemnification, unless ordered by a court pursuant to Section 12.5 or for the advancement of expenses made pursuant to Section 12.8, may not be made to or on behalf of any Member or Board Member if a final adjudication establishes that their acts or omissions involved intentional misconduct, fraud or a knowing violation of the law which was material to the cause of action; and (b) continue for a Person who has ceased to be a Member, Board Member, Officer, employee or agent and inures to the benefit of his or her heirs, executors and administrators. 12.10 ERRORS AND OMISSIONS INSURANCE. (a) The Company may purchase and maintain insurance or (by a Board Supermajority) make other financial arrangements on behalf of any Covered Person for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a Board Member, an officer, director, employee or agent of the Company or of another entity at the request of the Company, or arising out of his or her status as such, whether or not the Company has the authority to indemnify him or her against such liability and expenses. (b) The other financial arrangements made by the Company pursuant to Section 12.10(a) may include (i) the creation of a trust fund; (ii) the establishment of a program of self-insurance; (iii) the security of its obligation of indemnification by granting a security interest or other lien on any assets of the Company; and (iv) the establishment of a letter of credit, guaranty or surety. No financial arrangement made pursuant hereto may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court. 28 (c) In the absence of fraud, no Board Member or Member approving the insurance or financial arrangement made pursuant to this Section 12.10 shall be subject to personal liability for such action, even if the Board Member approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement. 12.11 PROPERTY OF THE COMPANY. Any indemnification under this Article XII shall be satisfied solely out of the Property of the Company. 12.12 VIOLATION OF THIS AGREEMENT. Any Member who commits fraud or otherwise violates any of the terms, conditions and provisions of this Agreement will keep and save harmless the Property and the Company, and will indemnify the Company and the other Members from any and all claims, demands and actions of every kind and nature whatsoever which may arise out of or by reason of such fraud or violation. ARTICLE XIII MISCELLANEOUS PROVISIONS 13.1 NOTICES. All notices to be given hereunder shall be in writing and shall be addressed to the party at such party's last known address or facsimile number appearing on the books of the Company. If no such address or facsimile number has been provided, it will be sufficient to address any notice (or fax any notice that may be faxed) to such party at the Records Office of the Company. Notice shall, for all purposes, be deemed given and received, (a) if hand-delivered, when the notice is received, (b) if sent by an internationally recognized delivery service, when the notice is received, or (c) if sent by facsimile, when the facsimile is transmitted and confirmation of complete receipt is received by the transmitting party during normal business hours. If any notice is sent by facsimile, the transmitting party shall send a duplicate copy of the notice to the parties to whom it is faxed by regular mail. If notice is tendered and is refused by the intended recipient, the notice shall nonetheless be considered to have been given and shall be effective as of the date of such refusal. The contrary notwithstanding, any notice given in a manner other than that provided in this Section 13.1 that is actually received by the intended recipient shall be deemed an effective delivery of such notice. Any party may, at any time, by giving ten days written notice to the Company, designate a new address for the giving of notice to such party. 13.2 INSURANCE. The Company shall carry liability insurance in such amounts as deemed appropriate by the Board. 13.3 MEMBERSHIP CERTIFICATES. The Company shall issue a Certificate to each Member to represent such Member's Shares in the Company upon execution of this Agreement and the payment of the Capital Contributions by such Member. The Company shall issue a new Certificate in place of any previously issued if the record holder of the Certificate (a) presents proof by affidavit, in form and substance satisfactory to the Board, that a previously issued Certificate has 29 been lost, destroyed or stolen, or (b) if requested by the Board, delivers to the Company a bond, in form and substance reasonably satisfactory to the Board, with such surety or sureties and with fixed or open penalty as the Board may direct in its reasonable discretion, to indemnify the Company against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate. If a Member fails to notify the Company within a reasonable time after it has knowledge of the loss, destruction or theft of a Certificate, and a transfer of the Member's Shares represented by that Certificate is registered before receiving such notification, the Company shall have no liability with respect to any claim against the Company for such transfer or for the issuance of a new Certificate consistent with such registration. 13.4 COMPLETE AGREEMENT. This Agreement, together with the Articles to the extent referenced herein, constitute the complete and exclusive agreement and understanding of the Members with respect to the subject matter contained herein. This Agreement and the Articles replace and supersede all prior agreements, negotiations, statements, memoranda and understandings, whether written or oral, by and among the Members or any of them. 13.5 AMENDMENTS. This Agreement may be amended by the Members only if all of the Members agree to the proposed amendment and such amendment is set forth in a writing signed by all Members; PROVIDED that this Agreement, including Schedule 1, shall be amended to reflect any admission of a new Member, Transfer of Shares or change in Percentage Interests pursuant to the terms of this Agreement. 13.6 APPLICABLE LAW; JURISDICTION. This Agreement and the rights and obligations of the parties hereto shall be interpreted and enforced in accordance with and governed by the laws of the State of Nevada without regard to the conflict laws of that State. Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth in this Agreement shall be effective service of process for any action brought against it in connection with this Agreement in said court. 13.7 INTERPRETATION. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provisions contained herein. In the interpretation of this Agreement, the singular may be read as the plural, and VICE VERSA, the neuter gender as the masculine or feminine, and VICE VERSA, and the future tense as the past or present, and VICE VERSA, all interchangeably as the context may require in order to fully effectuate the intent of the parties and the transactions contemplated herein. 13.8 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall be deemed to constitute one and the same instrument, and it shall be sufficient for each party to have executed at least one, but not necessarily the same, counterpart. 30 13.9 FACSIMILE COPIES. Facsimile copies of this Agreement or of any counterpart, and facsimile signatures hereon or on any counterpart, shall have the same force and effect as originals. 13.10 SEVERABILITY. If any provision of this Agreement, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void, illegal or unenforceable to any extent, that provision shall be deemed severable and the remainder of this Agreement, and all applications thereof, shall not be affected, impaired or invalidated thereby, and shall continue in full force and effect to the fullest extent permitted by law. 13.11 WAIVERS. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver, and no waiver shall be binding unless evidenced by an instrument in writing and executed by the party making the waiver. 13.12 NO THIRD PARTY BENEFICIARIES. This Agreement is made solely among and for the benefit of the Members and their respective successors and assigns, and no other Person shall have any rights, interest or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise. 31 IN WITNESS WHEREOF, this Agreement was executed as of the date first-above written. ALADDIN GAMING, LLC By: /s/ Jack Sommer ------------------------------- Name: Jack Sommer Title: Chairman ALADDIN GAMING HOLDINGS, LLC By: /s/ Jack Sommer ------------------------------- Name: Jack Sommer Title: Chairman 32 SCHEDULE 1 CAPITAL STRUCTURE
SERIES A CAPITAL CAPITAL PERCENTAGE COMMON PREFERRED MEMBER CONTRIBUTION ACCOUNT INTEREST SHARES SHARES - ------ ------------ ------- -------- ------ ------ Gaming Holdings $165 million in cash, $322 million 100% 1,000,000 1,150,000 $7 million in pre- development costs and 100% of the Aladdin site.
EX-4.1 10 WARRANT AGREEMENT DATED 2/26/98 ________________________________ Warrant Agreement Dated As of February 26, 1998 among Aladdin Gaming Enterprises, Inc., Aladdin Gaming Holdings, Inc. and State Street Bank and Trust Company, as Warrant Agent __________________________________ WARRANT AGREEMENT ("Agreement"), dated as of February 26, 1998, by and between Aladdin Gaming Enterprises, Inc. a Nevada corporation ("Enterprises"), Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), and State Street Bank and Trust Company, as warrant agent (the "Warrant Agent"). WHEREAS, Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), Aladdin Capital Corp., a Nevada corporation ("Capital" and, together with Enterprises and Holdings, the "Aladdin Parties"), Enterprises, Aladdin Holdings, LLC, a Delaware limited liability company, the Trust Under Article Sixth u/w/o Sigmund Sommer and London Clubs International, plc, a United Kingdom public limited company under the laws of England and Wales, have entered into a Purchase Agreement (the "Purchase Agreement") dated February 18, 1998, with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (collectively, the "Initial Purchasers") under which the Aladdin Parties have agreed to sell to the Initial Purchasers 221,500 Units (the "Units"), each Unit consisting of (i) $1,000 principal amount at maturity of 13 1/2% Senior Discount Notes due 2010 of Holdings and Capital (the "Notes") to be issued under an Indenture, dated as of the date hereof (the "Indenture"), among Holdings, Capital and State Street Bank and Trust Company, as trustee (the "Trustee") and (ii) 10 Warrants (the "Warrants") to purchase 10 shares (the "Warrant Shares") of Class B non-voting Common Stock, no par value, of Enterprises (the "Class B Stock"); WHEREAS, Enterprises desires the Warrant Agent to assist Enterprises in connection with the issuance, exchange, cancellation, replacement and exercise of the Warrants, and in this Agreement wishes to set forth, among other things, the terms and conditions on which the Warrants may be issued, exchanged, canceled, replaced and exercised; WHEREAS, the holders of outstanding membership interests of Holdings desire for Enterprises to have the benefit of certain anti-dilution protections; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Appointment of Warrant Agent. Enterprises hereby appoints the Warrant Agent to act as agent for Enterprises in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment. SECTION 2. Warrant Certificates. The certificates evidencing the Warrants (the "Warrant Certificates") shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. Each Warrant Certificate shall, prior to the Separation Date (as defined herein), bear the legend set forth in Exhibit B attached hereto. All of the Warrants initially will be issued in global form (the "Global Warrant"), substantially in the form of Exhibit A attached hereto (including the text referred to in footnote 1 thereto). Each Global Warrant shall represent such of the outstanding Warrants as shall be specified therein and shall provide that it shall represent the aggregate amount of outstanding Warrants from time to time endorsed thereon and that the aggregate amount of outstanding Warrants represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and exercises. Any endorsement of a Global Warrant to reflect the amount of any increase or decrease in the amount of outstanding Warrants represented thereby shall be made by the Warrant Agent or the depositary with respect to the Global Warrants (the "Depositary") in accordance with instructions given by the holder thereof. Enterprises initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Warrants in global form. Subject to Section 5(n), beneficial owners of interests in a Global Warrant may receive Warrants in definitive form (the "Definitive Warrants"), substantially in the form of Exhibit A attached hereto (but without the text referred to in footnote 1 thereto) in the name of such beneficial owners in accordance with the procedures of the Warrant Agent and the Depositary. Subject to Section 5(n), in connection with the execution and delivery of such Definitive Warrants, the Warrant Agent shall reflect on its books and records a decrease in the amount of the Warrants represented by the relevant Global Warrant equal to the amount of such Definitive Warrants and Enterprises shall execute and the Warrant Agent shall countersign and deliver one or more Definitive Warrants in an aggregate amount equal to the amount of such decrease. SECTION 3. Execution of Warrant Certificates. (a) Warrant Certificates shall be signed on behalf of Enterprises by its Chairman of the Board, Chief Executive Officer, its President or a Vice President and by its Secretary or an Assistant Secretary. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, Chief Executive Officer, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose Enterprises may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, Chief Executive Officer, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be countersigned and delivered or disposed of such person shall have ceased to hold such office. The seal of Enterprises may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. (b) In case any officer of Enterprises who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned by the Warrant Agent, or disposed of by Enterprises, such Warrant Certificates nevertheless may be countersigned and delivered or disposed of as though such person had not ceased to be such officer of Enterprises; and any Warrant Certificate may be signed on behalf of Enterprises by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of Enterprises to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. (c) Warrant Certificates shall be dated the date of countersignature by the Warrant Agent. SECTION 4. Registration and Countersignature. (a) The Warrant Agent, on behalf of Enterprises, shall number and register the Warrant Certificates in a register as they are issued by Enterprises. (b) In the case of offers and sales of Warrants outside the United States without registration under the Securities Act, Enterprises shall, and the Warrant Agent, on behalf of Enterprises, shall refuse register any transfer of the Warrants not made in accordance with the provisions of Regulation S under the Securities Act; provided, however, that if foreign law prevents Enterprises from refusing to register securities transfers, other reasonable procedures (such as a legend to the effect that transfer is prohibited except in accordance with the provisions of Regulation S under the Securities Act) shall be implemented to prevent any transfer of the securities not made in accordance with the provisions of Regulation S under the Securities Act. (c) Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, the Chief Executive Officer, the President, a Vice President, the Treasurer or the Controller of Enterprises, initially countersign, issue and deliver Warrant Certificates entitling the holders thereof to purchase not more than the number of Warrant Shares referred to above in the first recital hereof and shall countersign and deliver Warrant Certificates as otherwise provided in this Agreement. (d) Enterprises and the Warrant Agent may deem and treat a registered holder of a Warrant Certificate as the absolute owner thereof (notwithstanding any notation of ownership or other writing thereon made by anyone) for all purposes, and neither Enterprises nor the Warrant Agent shall be affected by any notice to the contrary. SECTION 5. Registration of Transfers and Exchanges. (a) Transfer and Exchange of Global Warrants. A Global Warrant may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. A Global Warrant will be exchanged by Enterprises for Definitive Warrants if (i) Enterprises delivers to the Warrant Agent notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Securities Exchange Act of 1934, as amended, and, in either case, a successor Depositary is not appointed by Enterprises within 120 days after the date of such notice from the Depositary or (ii) Enterprises in its sole discretion determines that a Global Warrant (in whole but not in part) should be exchanged for Definitive Warrants and delivers a written notice to such effect to the Warrant Agent; provided that in no event shall a Regulation S Global Warrant be exchanged by Enterprises for Definitive Warrants prior to (x) the expiration of the Restricted Period (as defined herein) and (y) the receipt by the Warrant Agent of any certificates required pursuant to Rule 903 under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Warrants shall be issued in such names as 3 the Depositary shall identify as beneficial owners to the Warrant Agent. Global Warrants also may be exchanged or replaced, in whole or in part. Every Warrant authenticated and delivered in exchange for, or in lieu of, a Global Warrant or any portion thereof, pursuant to this Section 5, shall be authenticated and delivered in the form of, and shall be, a Global Warrant. A Global Warrant may not be exchanged for another Warrant other than as provided in this Section 5(a); however, beneficial interests in a Global Warrant may be transferred and exchanged as provided in Section 5(b) or (c) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Warrants. The transfer and exchange of beneficial interests in the Global Warrants shall be effected through the Depositary, in accordance with the provisions of this Warrant Agreement and the rules and procedures of the Depositary, Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system ("Euroclear"), and Cedel Bank, SA ("Cedel") that apply to such transfer or exchange (the "Applicable Procedures"). Beneficial interests in a Global Warrant bearing the Private Placement Legend (as defined herein) (a "Restricted Global Warrant") shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Warrants also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Warrant. Beneficial interests in any Restricted Global Warrant may be transferred to any individual, corporation, partnership, limited-liability company or partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity (each, a "Person") who takes delivery thereof in the form of a beneficial interest in the same Restricted Global Warrant in accordance with the transfer restrictions set forth in the legend set forth in Section 5(f) hereof (the "Private Placement Legend"); provided, however, that prior to the expiration of the 1-year restricted period as defined in Regulation S under the Securities Act (the "Restricted Period"), transfers of beneficial interests in the Global Note bearing the Private Placement Legend and deposited with or on behalf of the Depositary and registered in the name of the Depositary or its nominee, issued in an amount equal to the outstanding Warrants initially sold in reliance on Rule 903 of Regulation S (the "Regulation S Global Warrant") may not be made to a U.S. person (as defined in Rule 902(o) under the Securities Act) or for the account or benefit of a U.S. person (other than the Initial Purchaser). Beneficial interests in any Unrestricted Global Warrant (defined for purposes hereof as any Global Warrant in the form of Exhibit A hereto that bears the legend set forth in Section 2 hereof and that has the "Schedule of Exchanges of Global Warrants" attached thereto, and that is deposited with or on behalf of the Depositary, representing Warrants that do not bear the Private Placement Legend) may be transferred to Persons who take delivery thereof in the form of a beneficial 4 interest in an Unrestricted Global Warrant. No written orders or instructions shall be required to be delivered to the Warrant Agent to effect the transfers described in this Section 5(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Warrant. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 5(b)(i) above, the transferor of such beneficial interest must deliver to the Warrant Agent either (A)(1) a written order from a Person who has an account with the Depositary, Euroclear or Cedel (a "Participant") or with a Person who has an account with a Participant (an "Indirect Participant") given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Warrant in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B)(1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Warrant in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Warrant Agent containing information regarding the Person in whose name such Definitive Warrant shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Warrants be issued upon the transfer or exchange of beneficial interests in the Regulation S Global Warrant prior to (x) the expiration of the Restricted Period and (y) the receipt by the Warrant Agent of any certificates required pursuant to Rule 903 under the Securities Act. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Warrants contained in this Warrant Agreement, the Warrant Agent shall adjust the amount of the relevant Global Warrant(s) pursuant to Section 5(g) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Warrant. A beneficial interest in any Restricted Global Warrant may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Warrant if the transfer complies with the requirements of Section 5(b)(ii) above and the Warrant Agent receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in a 144A Global Warrant (defined for purposes hereof as any Global Warrant in the form of Exhibit A hereto that bears the Private Placement Legend and the legend set forth in Section 2 hereof and that is deposited with or on behalf of, and registered in 5 the name of, the Depositary or its nominee that will be issued in an amount equal to the amount of Warrants sold in reliance on Rule 144A under the Securities Act), then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Warrant, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Warrant (defined for purposes hereof as any Global Warrant in the form of Exhibit A hereto that bears the Private Placement Legend and the --------- legend set forth in Section 2 hereof and that is deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in an amount equal to the amount of Warrants sold to institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) ("Institutional Accredited Investors")), then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications and certificates and Opinion of --------- Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Warrant for Beneficial Interests in the Unrestricted Global Warrant. A beneficial interest in any Restricted Global Warrant may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Warrant or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant if the exchange or transfer complies with the requirements of Section 5(b)(ii) above and: (A) such transfer is effected pursuant to a Registration Statement in accordance with the Warrant Registration Rights Agreement; or (B) the Warrant Agent receives the following: (1) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (l)(a) thereof; or 6 (2) if the holder of such beneficial interest in a Restricted Global Warrant proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Warrant Agent or Enterprises so requests or if the Applicable Procedures so require, an opinion of counsel from legal counsel reasonably acceptable to the Warrant Agent or Enterprises, as applicable, (an "Opinion of Counsel") to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) above at a time when an Unrestricted Global Warrant has not yet been issued, Enterprises shall issue and, upon receipt of written instructions from Enterprises, the Warrant Agent shall countersign one or more Unrestricted Global Warrants in an aggregate amount equal to the aggregate amount of beneficial interests transferred pursuant to subparagraph (B) above. Beneficial interests in an Unrestricted Global Warrant cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Warrant. (c) Transfer or Exchange of Beneficial Interests for Definitive Warrants. (i) Beneficial Interests in Restricted Global Warrants to Restricted Definitive Warrants. If any holder of a beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Restricted Definitive Warrant or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Warrant, then, upon receipt by the Warrant Agent of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Restricted Definitive Warrant, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a "qualified institutional buyer" as defined in Rule 144A under the Securities Act (a "QIB") in accordance with Rule 144A under the Securities 7 Act,a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a person who is not a U.S. person (a "Non-U.S. Person") in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit C hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to Enterprises or any of its subsidiaries, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(c) thereof, the Warrant Agent shall cause the aggregate amount of the applicable Global Warrant to be reduced accordingly pursuant to Section 5(g) hereof, and Enterprises shall execute and the Warrant Agent shall countersign and deliver to the Person designated in the instructions a Definitive Warrant in the appropriate amount. Any Definitive Warrant issued in exchange for a beneficial interest in a Restricted Global Warrant pursuant to this Section 5(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Warrant Agent through instructions from the Depositary and the Participant or Indirect Participant. The Warrant Agent shall deliver such Definitive Warrants to the Persons in whose names such Warrants are so registered. Any Definitive Warrant issued in exchange for a beneficial interest in a Restricted Global Warrant pursuant to this Section 5(c)(i) shall bear the 8 Private Placement Legend and shall be subject to all restrictions on transfer contained therein. Notwithstanding Sections 5(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Global Warrant may not be exchanged for a Definitive Warrant or transferred to a Person who takes delivery thereof in the form of a Definitive Warrant prior to (x) the expiration of the Restricted Period and (y) the receipt by the Warrant Agent of any certificates required pursuant to Rule 903 under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (ii) Beneficial Interests in Restricted Global Warrants to Unrestricted Definitive Warrants. A holder of a beneficial interest in a Restricted Global Warrant may exchange such beneficial interest for an Unrestricted Definitive Warrant or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Warrant only if: (A) such transfer is effected pursuant to a Registration Statement in accordance with the Warrant Registration Rights Agreement; or (B) the Warrant Agent receives the following: (1) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Definitive Warrant that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (l)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Warrant proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Warrant that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Warrant Agent or Enterprises so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Agent or Enterprises, as applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein 9 and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Warrants to Unrestricted Definitive Warrants. If any holder of a beneficial interest in an Unrestricted Global Warrant proposes to exchange such beneficial interest for a Definitive Warrant or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Warrant, then, upon satisfaction of the conditions set forth in Section 5(b)(ii) hereof, the Warrant Agent shall cause the aggregate amount of the applicable Global Warrant to be reduced accordingly pursuant to Section 5(g) hereof, and Enterprises shall execute and the Warrant Agent shall countersign and deliver to the Person designated in the instructions a Definitive Warrant in the appropriate amount. Any Definitive Warrant issued in exchange for a beneficial interest pursuant to this Section 5(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Warrant Agent through instructions from the Depositary and the Participant or Indirect Participant. The Warrant Agent shall deliver such Definitive Warrants to the Persons in whose names such Warrants are so registered. Any Definitive Warrant issued in exchange for a beneficial interest pursuant to this Section 5(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Warrants for Beneficial Interests. (i) Restricted Definitive Warrants to Beneficial Interests in Restricted Global Warrants. If any holder of a Restricted Definitive Warrant proposes to exchange such Warrant for a beneficial interest in a Restricted Global Warrant or to transfer such Restricted Definitive Warrants to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Warrant, then, upon receipt by the Warrant Agent of the following documentation: (A) if the holder of such Restricted Definitive Warrant proposes to exchange such Warrant for a beneficial interest in a Restricted Global Warrant, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Warrant is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Warrant is being transferred to a Non-U.S. person in an offshore transaction in accordance with 10 Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Warrant is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Warrant is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit C hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Warrant is being transferred to Enterprises or any of its subsidiaries, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Warrant is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(c) thereof, the Warrant Agent shall cancel the Restricted Definitive Warrant, increase or cause to be increased the aggregate amount of, in the case of clause (A) above, the appropriate Restricted Global Warrant, in the case of clause (B) above, the 144A Global Warrant, in the case of clause (C) above, the Regulation S Global Warrant, and in all other cases, the IAI Global Warrant. (ii) Restricted Definitive Warrants to Beneficial Interests in Unrestricted Global Warrants. A holder of a Restricted Definitive Warrant may exchange such Warrant for a beneficial interest in an Unrestricted Global Warrant or transfer such Restricted Definitive Warrant to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant only if: (A) such transfer is effected pursuant to a Registration Statement in accordance with the Warrant Registration Rights Agreement; or (B) the Warrant Agent receives the following: 11 (1) if the holder of such Definitive Warrants proposes to exchange such Warrants for a beneficial interest in the Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (l)(c) thereof; or (2) if the holder of such Definitive Warrants proposes to transfer such Warrants to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Warrant Agent or Enterprises so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Agent or Enterprises, as applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 5(d)(ii), the Warrant Agent shall cancel the Definitive Warrants and increase or cause to be increased the aggregate amount of the Unrestricted Global Warrant. (iii) Unrestricted Definitive Warrants to Beneficial Interests in Unrestricted Global Warrants. A holder of an Unrestricted Definitive Warrant may exchange such Warrant for a beneficial interest in an Unrestricted Global Warrant or transfer such Definitive Warrants to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant at any time. Upon receipt of a request for such an exchange or transfer, the Warrant Agent shall cancel the applicable Unrestricted Definitive Warrant and increase or cause to be increased the aggregate amount of one of the Unrestricted Global Warrants. If any such exchange or transfer from a Definitive Warrant to a beneficial interest is effected pursuant to subparagraphs (ii) or (iii) above at a time when an Unrestricted Global Warrant has not yet been issued, Enterprises shall issue and, upon receipt of written instructions from Enterprises, the Warrant Agent shall countersign one or more Unrestricted Global Warrants in an aggregate amount equal to the amount of Definitive Warrants so transferred. 12 (e) Transfer and Exchange of Definitive Warrants for Definitive Warrants. Upon request by a holder of Definitive Warrants and such holder's compliance with the provisions of this Section 5(e), the Warrant Agent shall register the transfer or exchange of Definitive Warrants. Prior to such registration of transfer or exchange, the requesting holder shall present or surrender to the Warrant Agent the Definitive Warrants duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Warrant Agent duly executed by such holder or by his attorney, duly authorized in writing. In addition, the requesting holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 5(e). (i) Restricted Definitive Warrants to Restricted Definitive Warrants. Any Restricted Definitive Warrant may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Warrant if the Warrant Agent receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Warrants to Unrestricted Definitive Warrants. Any Restricted Definitive Warrant may be exchanged by the holder thereof for an Unrestricted Definitive Warrant or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Warrant if: (A) any such transfer is effected pursuant to a Registration Statement in accordance with the Warrant Registration Rights Agreement; or (B) the Warrant Agent receives the following: (1) if the holder of such Restricted Definitive Warrants proposes to exchange such Warrants for an Unrestricted Definitive Warrant, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (l)(d) thereof; or 13 (2) if the holder of such Restricted Definitive Warrants proposes to transfer such Warrants to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Warrant Agent or Enterprises so requests, an Opinion of Counsel in form reasonably acceptable to the Warrant Agent or Enterprises, as applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Warrants to Unrestricted Definitive Warrants. A holder of Unrestricted Definitive Warrants may transfer such Warrants to a Person who takes delivery thereof in the form of an Unrestricted Definitive Warrant. Upon receipt of a request to register such a transfer, the Warrant Agent shall register the Unrestricted Definitive Warrants pursuant to the instructions from the holder thereof. (f) Legends. The following legend shall appear on the face of all Global Warrants and Definitive Warrants issued under this Warrant Agreement unless specifically stated otherwise in the applicable provisions of this Warrant Agreement. (i) Except as permitted by subparagraph (ii) below, each Global Warrant and each Definitive Warrant (and all Warrants issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED 14 IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS A NON-U.S. PERSON AS DEFINED IN RULE 904 UNDER THE SECURITIES ACT (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ENTERPRISES OR ANY AFFILIATE OF ENTERPRISES WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO ENTERPRISES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO ENTERPRISES' AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT." (ii) Notwithstanding the foregoing, any Global Warrant or Definitive Warrant issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), 15 (e)(ii) or (e)(iii) to this Section 5 and all Warrants issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (g) Cancellation and/or Adjustment of Global Warrants. At such time as all beneficial interests in a particular Global Warrant have been exchanged for Definitive Warrants or a particular Global Warrant has been redeemed, repurchased or canceled in whole and not in part, each such Global Warrant shall be returned to or retained and canceled by the Warrant Agent in accordance with Section 5(k). At any time prior to such cancellation, if any beneficial interest in a Global Warrant is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant or for Definitive Warrants, the amount of Warrants represented by such Global Warrant shall be reduced accordingly and an adjustment shall be made on such Global Warrant or on the schedule maintained by the Depositary in respect of such Global Warrant for such purposes, in accordance with the rules and procedures of the Depositary, or by the Depositary at the direction of the Warrant Agent to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant, such other Global Warrant shall be increased accordingly and an adjustment shall be made on the books and records of the Warrant Agent respecting such Global Warrant or by the Depositary at the direction of the Warrant Agent to reflect such increase. (h) Indemnification. Each holder of a Warrant Certificate agrees to indemnify Enterprises and the Warrant Agent against any losses, claims, liabilities, damages or expenses, whatsoever, that may result from the transfer, exchange or assignment of such holder's Warrant Certificate in violation of any provision of this Agreement and/or applicable law. (i) Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to the Global Warrants, as the case may be, held on their behalf by the Depositary or the Warrant Agent as its custodian, and the Depositary may be treated by Enterprises, the Warrant Agent and any agent of Enterprises or the Warrant Agent as the absolute owner of such Global Warrants for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent Enterprises, the Warrant Agent or any agent of Enterprises or the Warrant Agent, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Warrants. (j) Notices. The Warrant Agent shall retain copies of all letters, notices and other written communications received pursuant to this Section 5. Enterprises shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Warrant Agent. (k) Cancellation of Warrant Certificates. Any Warrant Certificate surrendered for registration of transfer, exchange or exercise of the Warrants represented thereby shall, if surrendered to Enterprises, be delivered to the Warrant Agent, and all Warrant Certificates 16 surrendered or so delivered to the Warrant Agent shall be promptly canceled by the Warrant Agent and shall not be reissued by Enterprises and, except as provided in this Section 5 in case of an exchange, Section 6 hereof in case of the exercise of less than all the Warrants represented thereby or Section 8 hereof in case of a mutilated Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to Enterprises from time to time or otherwise dispose of such canceled Warrant Certificates as Enterprises may direct in writing. (l) Countersignature of New Certificates. The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 5 and of Section 4 hereof, the new Warrant Certificates required pursuant to the provisions of this Section 5. (m) Charges. No service charge shall be made for registration of transfer or exchange upon surrender of any Warrant Certificate at the office of the Warrant Agent maintained for that purpose. Enterprises may require from Warrant holders payment of a sum sufficient to cover all taxes and/or other governmental charges (including, without limitation, documentary and stamp taxes) that may be imposed in connection with any registration, transfer or exchange of Warrant Certificates. (n) Warrant Endorsement. Notwithstanding the foregoing provisions of this Section 5, until Separated (as defined herein) each Warrant will be held by the Trustee, as custodian for the registered holders of each Note or Note in global form, and will be registered in the name of the registered holder of such Note initially in the amount specified in writing to the Warrant Agent by Enterprises. Such holder may, at any time, on or after the Separation Date (as defined herein), at its option, by notice to the Trustee elect to separate and/or separately transfer the Notes and the Warrants represented by such Note or Note in global form containing a Warrant Endorsement (as defined in the Indenture), in whole or in part, for a definitive Warrant Certificate or Warrant Certificates or a beneficial interest in a Global Warrant evidencing the underlying Warrants (in accordance with this Agreement) and for a Note or Notes or a beneficial interest in a global Note of a like aggregate principal amount at maturity of authorized denominations and not containing a Warrant Endorsement in accordance with the Indenture (such surrender and exchange being referred to herein as a "Separation" and the related Warrants being referred to as "Separated"); provided that no delay or failure on the part of the Trustee or the Warrant Agent to exchange such Warrant Certificate and Note or Notes shall affect the Separation of the Notes and the Warrants or their separate transferability. Prior to Separation, record ownership of the Warrants will be evidenced by the certificates for Notes or a global Note registered in the names of the holders of the Notes or global Notes, which certificates or global Note will bear thereon a Warrant Endorsement substantially in the form set forth in the Indenture, and the right to receive or exercise Warrants will be transferable only in connection with the transfer of such Notes or a beneficial interest in a global Note. All Notes and global Notes containing a Warrant Endorsement presented for Separation shall be duly endorsed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, and in the case of transfer, such signature shall be medallion guaranteed by an institution which is a member of a Securities 17 Transfer Association recognized signature guarantee program. Upon notice from the Trustee of a Separation, the Warrant Agent shall, with respect to Definitive Warrants, deliver (or cause to be delivered) to such holder, legal representative or authorized attorney the Warrant Certificate or Warrant Certificates executed by Enterprises and countersigned by the Warrant Agent in the name of such registered holder or holders or such transferee or transferees or shall, with respect to (i) 144A Global Warrants, deliver (or cause to be delivered) to the Depositary or its nominee a 144A Global Warrant, (ii) Regulation S Global Warrants, deliver (or cause to be delivered) to the Depositary or its nominee a Regulation S Global Warrant and (iii) IAI Global Warrants, deliver (or cause to be delivered) to the Depositary or its nominee an IAI Global Warrant, in each case, executed by Enterprises and countersigned by the Warrant Agent in the name of the Depositary or its nominee for such aggregate amount of Warrants (or, with respect to a Global Warrant, increasing the amount of Warrants represented thereby in such amount) as shall equal one Warrant for each $1,000 principal amount at maturity of Notes so exchanged for Separation, bearing numbers or other distinguishing symbols not contemporaneously outstanding, to the Person or Persons entitled thereto. Upon registration of transfer or exchange of a Warrant Certificate, the Warrant Agent shall countersign and deliver by certified mail a new Warrant Certificate to the holders of the Notes so separated or the transferee or transferees thereof, as the case may be. SECTION 6. Separation, Terms and Exercise of Warrants. (a) The Notes and the Warrants will not be separately transferable until the earliest of (i) September 1, 1998, (ii) the date on which a registration statement with respect to the Notes or a registration statement with respect to the Warrants and the Warrant Shares is filed with the Commission under the Securities Act, (iii) the occurrence of a Change of Control (as defined in the Indenture) or a sale or recapitalization of Enterprises, Holdings or Aladdin Gaming, LLC, a Nevada limited-liability company, occurs, (iv) 30 days after a Qualified Public Offering (as defined in the Indenture) occurs, (v) the occurrence of an Event of Default (as defined in the Indenture) or (vi) such earlier date as determined by Merrill Lynch & Co. in its sole discretion (the date of the earliest occurrence of an event specified in clauses (i) through (vi) is referred to herein as the "Separation Date"), at which time such Warrants shall become separately transferable. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised during the period commencing at the opening of business on the Separation Date (the "Warrant Exercise Commencement Date") and until 5:00 p.m., New York City time on March 1, 2010 (the "Warrant Exercise Period") to receive from Enterprises upon payment of the exercise price (the "Exercise Price") then in effect for each Warrant Share and subject to other conditions to exercise the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants; provided that holders shall be able to exercise their Warrants only if a registration statement relating to the Warrant Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act, and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other Persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. Each holder of Warrants may exercise its right, during the Warrant Exercise Period, to receive Warrant Shares when such holder makes a payment to Enterprises in cash (or in the form of certified or official bank check payable to the order of Enterprises) in an amount equal to the Exercise Price of the Warrants being exercised by such holder. Each Initial Warrant not exercised 18 prior to 5:00 p.m., New York City time, on March 1, 2010 (the "Warrant Expiration Date") shall lapse and become void and all rights thereunder and all rights in respect thereof under this agreement shall cease as of such time. No adjustments as to dividends will be made upon exercise of the Warrants. Enterprises will give notice of expiration of the Warrants not less than 90 and not more than 120 days prior to the Expiration Date to the registered holders of the then outstanding Warrants and to the Warrant Agent. If Enterprises fails to give such notice, the Warrants will not expire until 90 days after Enterprises gives notice. In no event will holders of Warrants be entitled to any damages or other remedy for Enterprises' failure to give such notice other than any such extension. (b) In order to exercise all or any of the Warrants represented by a Warrant Certificate, (i) in the case of Definitive Warrants, the holder thereof must surrender for exercise the Warrant Certificate to Enterprises at the office of the Warrant Agent at its corporate trust office set forth in Section 20 (which office shall be maintained in Boston) hereof, or the affiliate office of the Warrant Agent (which office shall be maintained in New York), (ii) in the case of a book-entry interest in a Global Warrant, the exercising Agent Member whose name appears on a securities position listing of the Depositary as the holder of such book-entry interest must comply with the Depositary's procedures relating to the exercise of such book-entry interest in such Global Warrant and (iii) in the case of both Global Warrants and Definitive Warrants, the holder thereof or the Agent Member, as applicable, must deliver to Enterprises at the office of the Warrant Agent the form of election to purchase on the reverse thereof duly filled in and signed, which signature shall be medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent in New York for the account of Enterprises of the Exercise Price, which is set forth in the form of Warrant Certificate attached hereto as Exhibit A as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised. (c) Subject to the provisions of Section 7 hereof, upon compliance with clause (b) above, Enterprises shall deliver or cause to be delivered with all reasonable dispatch, to or upon the written order of the holder and in such name or names as the Warrant holder or Agent Member may designate, a certificate or certificates for the number of whole Warrant Shares issuable upon the exercise of such Warrants or other securities or property to which such holder is entitled hereunder, together with cash (if any) as provided in Section 13 hereof; provided that if any consolidation, merger or lease or sale of assets is proposed to be effected by Enterprises as described in Section 11(m) hereof, or a tender offer or an exchange offer for shares of Class B Stock shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, Enterprises shall, as soon as possible, but in any event not later than two business days thereafter, deliver or cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence or other securities or property to which such holder is entitled hereunder, together with cash as provided in Section 13 hereof (if any). Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. 19 (d) The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part. If less than all the Warrants represented by a Definitive Warrant are exercised, such Definitive Warrant shall be surrendered and a new Definitive Warrant of the same tenor and for the number of Warrants which were not exercised shall be executed by Enterprises and delivered to the Warrant Agent and the Warrant Agent shall countersign the new Definitive Warrant, registered in such name or names as may be directed in writing by the holder, and shall deliver the new Definitive Warrant to the Person or Persons entitled to receive the same. The Warrant Agent shall make such notations on Schedule A to each Global Warrant as are required to reflect any change in the number of Warrants represented by such Global Warrant resulting from any exercise in accordance with the terms hereof. (e) All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be disposed of by the Warrant Agent in a manner satisfactory to Enterprises. The Warrant Agent shall account promptly to Enterprises with respect to Warrants exercised and concurrently pay to Enterprises all moneys received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. (f) The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection upon reasonable notice by the registered holders during normal business hours at its office. Enterprises shall supply the Warrant Agent with such numbers of copies of this Agreement as the Warrant Agent may reasonably request from time to time. SECTION 7. Payment of Taxes. Enterprises will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided that Enterprises shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and Enterprises shall not be required to issue or deliver such Warrant Certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to Enterprises the amount of such tax or shall have established to the satisfaction of Enterprises that such tax has been paid. Holders will be responsible for the payment of any and all brokerage costs, documentary, stamp and transfer taxes and associated costs and expenses upon the subsequent sale of Warrant Shares. SECTION 8. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, Enterprises shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to Enterprises and the Warrant Agent of such loss, theft or destruction of such Warrant Certificate and indemnity or bond, if requested, also satisfactory to them. Applicants for such substitute Warrant Certificates shall also comply 20 with such other reasonable regulations and pay such other reasonable charges as Enterprises or the Warrant Agent may prescribe. SECTION 9. Reservation of Warrant Shares. (a) Enterprises will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Class B Stock or its authorized and issued Class B Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Class B Stock which may then be deliverable upon the exercise of all outstanding Warrants. (b) Enterprises or, if appointed, the transfer agent for the Class B Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of Enterprises' capital stock issuable upon the exercise of any of the rights of the Warrants as aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. Enterprises will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of Enterprises' capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. Enterprises will furnish such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each holder pursuant to Section 15 hereof. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. Enterprises will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 13. (c) Before taking any action which would cause an adjustment pursuant to Section 11 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, Enterprises will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by Enterprises), be necessary in order that Enterprises may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. (d) Enterprises covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon issue in accordance with the terms of this Agreement, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issuance thereof. SECTION 10. Obtaining Stock Exchange Listings. Enterprises will from time to time use its reasonable best efforts to take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Class B Stock are then listed, if any. Upon the listing of such Warrant Shares, Enterprises shall notify the Warrant Agent in writing. Enterprises will obtain and keep all required permits and records in connection with such listing. 21 SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 11. For purposes of this Section 11, "Common Stock" means, as applicable, shares now or hereafter authorized of any class of common stock of Enterprises and any other stock of Enterprises, however designated, that have the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of Enterprises without limit as to per share amount. (a) Adjustment for Change in Capital Stock. If Enterprises (i) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock, (ii) subdivides its outstanding shares of Common Stock into a greater number of shares, (iii) combines its outstanding shares of Common Stock into a smaller number of shares, (iv) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock or (v) issues by reclassification of its Common Stock any shares of its capital stock; then the Exercise Price in effect immediately prior to such action shall be proportionately adjusted so that the holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of Enterprises which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If, after an adjustment, a holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of Enterprises, Enterprises shall determine the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 11. Such adjustment shall be made successively whenever any event listed above shall occur. If the occurrence of any event listed in this subsection (a) results in an adjustment under any provision of this Section 11 other than Section 11(q), no adjustment shall be made under this subsection (a). (b) Adjustment for Rights Issue. If Enterprises distributes any rights, options or warrants to all holders of its Common Stock entitling them to purchase shares of Common Stock at a price per share less than the Fair Value (as defined herein) per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: 22 O + N x P ----- E' = E x M -------- O + N where: E' = the adjusted Exercise Price. E = the current Exercise Price. O = the number of shares of Common Stock issued and outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. M = the Fair Value per share on the record date of Common Stock offered. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. Subject to paragraph (p) of this Section 11, if at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Exercise Price (and any subsequent adjustment thereto) shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If Enterprises distributes to all holders of its Common Stock any of its assets (including, without limitation, cash) or debt securities or any rights or warrants to purchase debt securities, assets or other securities of Enterprises, the Exercise Price shall be adjusted in accordance with the formula: 23 E' = E x M - F ----- M where: E' = the adjusted Exercise Price. E = the current Exercise Price. M = the current market price per share of Class B Stock on the record date mentioned below. F = the fair market value on the record date of the assets, securities, rights or warrants to be distributed in respect of one share of Class B Stock as determined in good faith by the Board of Directors of Enterprises (the "Board of Directors"). The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. Subject to paragraph (p) of this Section 11, if an adjustment is made pursuant to this subsection (c) as a result of the issuance of rights or warrants and at the end of the period during which any such rights or warrants are exercisable, not all such rights or warrants shall have been exercised, the Exercise Price (and any subsequent adjustments thereto) shall be immediately readjusted as if "F" in the above formula was the fair market value on the record date of the assets, securities, rights or warrants actually distributed upon exercise of such rights or warrants divided by the number of shares of Common Stock outstanding on the record date. This Section 11(c) does not apply to, and no adjustment shall be made whatsoever for, cash dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of Enterprises prepared in accordance with generally accepted accounting principles. Also, this Section 11(c) does not apply to, and no adjustment shall be made pursuant to this Section 11(c) with respect to, rights, options or warrants referred to in Section 11(b) or for which adjustments are made under any provision of this Section 11 other than Section 11(q). (d) Adjustment for Common Stock Issue. If Enterprises issues shares of Common Stock for a consideration per share less than the Fair Value per share on the date Enterprises fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the formula: 24 P - E' = E x O + M ----- A where: E' = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. M = the Fair Value per share on the date of issuance of such additional shares. A = the number of shares issued and outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This subsection (d) does not apply to and no adjustment shall be made pursuant to this subsection (d) with respect to: (1) any of the transactions described in subsections (b) and (c) of this Section 11 or for which adjustments are made under any provision of this Section 11 other than Section 11(q), (2) the exercise of Warrants, or the conversion or exchange of other securities convertible or exchangeable for Common Stock, (3) Common Stock issued in a bona fide public offering (4) Common Stock issued upon the exercise of rights or warrants issued to the holders of Common Stock, or (5) Common Stock issued to shareholders of any Person which merges into Enterprises in proportion to their stock holdings of such Person immediately prior to such merger, upon such merger. (e) Adjustment for Convertible Securities Issue. If Enterprises issues any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in subsections (a), (b), (c) or (d) of this Section 11) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less 25 than the Fair Value per share on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with this formula: P - E' = E x O + M ----- O + D where: E' = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares issued and outstanding immediately prior to the issuance of such securities. P = the aggregate consideration received for the issuance of such securities. M = the Fair Value per share on the date of issuance of such securities. D = the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the shares deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, then the Exercise Price (and any subsequent adjustment thereto) shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of common stock issued upon conversion or exchange of such securities. This subsection (e) does not apply to: (1) convertible securities issued to shareholders of any Person which merges into Enterprises, or with a subsidiary of Enterprises, in proportion to their stock holdings of such Person immediately prior to such merger, upon such merger, (2) convertible securities issued in a bona fide public offering, or (3) convertible securities issued in a bona fide private placement through a placement agent which is a member firm of the National Association of Securities Dealers, Inc. (except to the extent that any discount from the current market price attributable to restrictions on transferability of Common Stock issuable upon conversion, as determined in good faith by the 26 Board of Directors of Enterprises (the "Board of Directors") and described in a resolution thereof which shall be filed with the Warrant Agent, shall exceed 20% of the then current market price). (f) Consideration Received. For purposes of any computation respecting consideration received pursuant to subsections (d) and (e) of this Section 11, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that deductions may be made for any commissions, discounts or other expenses incurred by Enterprises for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a resolution thereof which shall be filed with the Warrant Agent; (3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by Enterprises for the issuance of such securities plus the additional consideration, if any, to be received by Enterprises upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection); and (4) in the case of the issuance of shares of Common Stock pursuant to rights, options or warrants which rights, options or warrants were originally issued together with one or more other securities as part of a unit, the consideration shall be deemed to be (i) the fair value of such rights, options or warrants at the time of issuance thereof as determined in good faith by the Board of Directors whose determination shall be conclusive and described in a resolution thereof which shall be filed with the Warrant Agent plus (ii) the additional consideration, if any, to be received by Enterprises upon the exercise, conversion or exchange thereof (as determined in the same manner as provided in clause (1) and (2) of this subsection). (g) Fair Value. In Sections 11(b), (c), (d) and (e) hereof, the "Fair Value" per security at any date of determination shall be (1) in connection with a sale by Enterprises to a party that is not an Affiliate (as defined below) of Enterprises in an arm's-length transaction (a "Non-Affiliate Sale"), the price per security at which such security is sold and (2) in connection with any sale by Enterprises to an Affiliate of Enterprises, (a) the last price per security at which such security was sold in a Non-Affiliate Sale within the three-month period preceding such date of determination or (b) if clause (a) is not applicable, the fair market value of such security determined in good faith by a nationally recognized investment banking, appraisal or valuation firm, which is not an Affiliate of Enterprises, in each case, taking into account, among all other factors deemed relevant by such investment banking, appraisal or valuation firm, the trading price and volume of such security on any national securities exchange or automated quotation system on which such security is traded. Notwithstanding the foregoing, any sale to the Initial 27 Purchasers (or any successor thereto) pursuant to an underwritten public offering registered under the Securities Act shall be deemed to be and treated as a Non-Affiliate Sale. For purposes of this Section 11(g), "Affiliate" of any specified Person means (A) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and (B) any director, officer or employee of such specified Person. For purposes of this definition "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with") as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. (h) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest 1/1000th of a cent or to the nearest 1/l000th of a share, as the case may be. (i) No Dilution of Impairment. Enterprises will not, by amendment of its articles of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Warrants against dilution or other impairment. Without limiting the generality of the foregoing, Enterprises (1) will take all such action as may be necessary or appropriate in order that Enterprises may validly and legally issue fully paid and nonassessable shares of Common Stock on the exercise of the Warrants from time to time outstanding and (2) will not take any action which results in any adjustment of the Exercise Price if the total number of Warrant Shares issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by Enterprises' certificate of incorporation and available for the purpose of issue upon such exercise. A consolidation, merger, reorganization or transfer of assets involving Enterprises covered by Section 11(m) shall not be prohibited by or require any adjustment under this Section 11(i). (j) Notice of Adjustment. Whenever the Exercise Price is adjusted, Enterprises shall provide the notices required by Section 14 hereof. (k) Voluntary Reduction. Enterprises from time to time may reduce the Exercise Price by any amount for any period of time, if the period is at least 20 days and if the reduction is irrevocable during the period. Whenever the Exercise Price is reduced, Enterprises shall mail to the Warrant Agent and the Warrant holders a notice of the reduction. Enterprises shall mail the notice at least 15 days before the date the reduced Exercise Price takes effect. The notice shall state the reduced Exercise Price and the period in which it will be in effect. A 28 reduction of the Exercise Price does not change or adjust the Exercise Price otherwise in effect for purposes of Sections 11(a), (b), (c), (d), (e) and (g) hereof. (1) Notice of Certain Transactions. If (i) Enterprises takes any action that would require an adjustment in the Exercise Price pursuant to this Section 11, (ii) Enterprises takes any action that would require a supplemental Warrant Agreement pursuant to Section 11(m) hereof or (iii) there is a liquidation or dissolution of Enterprises, then Enterprises shall mail to the Warrant Agent and the Warrant holders a notice stating the proposed record date (if any) for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. Enterprises shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity or proposed timing of the transaction. (m) Reorganization of Enterprises. If Enterprises consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any Person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the effective date of the transaction. Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger if other than Enterprises, or the Person to which such sale or conveyance shall have been made, shall enter into a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 11(m). The successor company shall mail to Warrant holders a notice describing the supplemental Warrant Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. (n) When No Adjustment Required. No adjustment need be made for a transaction referred to in this Section 11 hereof, if Warrant holders are to participate in the transaction on a basis (and with notice) that the Board of Directors determines to be fair and appropriate in light of the basis (and notice) on which holders of Common Stock participate in the transaction. No adjustment need be made for (i) rights to purchase Common Stock pursuant to an Enterprises plan for reinvestment of dividends or interest or (ii) a change in the par value or no par value of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on any cash amounts relating to adjustments hereunder. (o) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Section 11 should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental Warrant Agreement under Section 11(m) hereof are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon 29 exercise of Warrants. The Warrant Agent shall not be responsible for Enterprises' failure to comply with this Section 11 or any of Enterprises' other obligations hereunder. (p) When Issuance or Payment May Be Deferred. In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, Enterprises may elect to defer until the final adjustment or readjustment required in connection with the occurrence of such event is able to be made (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of Enterprises, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of Enterprises, if any, issuable upon such exercise on the basis of the Exercise Price immediately before adjustment is made for the specified event and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 13 hereof; provided that Enterprises shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment, subject to the following sentence. Upon the final adjustment or readjustment required in connection with the occurrence of the event referred to in the previous sentence, Enterprises shall be required to deliver to a holder of Warrants exercised after such date only such cash or number of Warrant Shares or capital stock of Enterprises issuable based upon the Exercise Price determined as of the time of such final adjustment or readjustment. (q) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to this Section 11 (including any readjustment), each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth) obtained from the following formula: N' = N x E -- E' where: N' = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number or Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment. E' = the adjusted Exercise Price. E = the Exercise Price prior to adjustment. (r) Form of Warrants. In respect of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. 30 (s) No Duplicative Adjustments. Other than pursuant to Section 11(q) hereof, no adjustment shall be made under any provision of this Agreement for an issuance of securities by Enterprises for which an adjustment is made under any other provision of this Agreement. Furthermore, notwithstanding anything to the contrary herein, if an adjustment is made under this Section 11 upon the issuance by Enterprises of any rights, options, warrants or any other securities convertible into or exchangeable into Common Stock, no further adjustment shall be made hereunder upon the exercise, conversion or exchange of such securities and the issuance of Common Stock therefrom. SECTION 12. Holdings Anti-Dilution. In addition to any adjustment to the Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants pursuant to Section 11 hereof, if any event of the type described in Section 11 hereof occurs with respect to the outstanding common membership interests of Holdings, Enterprises' common membership interest in Holdings shall be adjusted and the number of Warrant Shares issuable upon exercise of the Warrants shall be adjusted (without duplication), in each case, so that the holders of the Warrants shall thereafter, in the aggregate, have the same indirect ownership of the common membership interests of Holdings after the occurrence of such event that such Holders, in the aggregate, had immediately before the occurrence of such event; provided that any such adjustment shall be subject to readjustment and to the limitations and restrictions of the types set forth in Section 11 hereof. SECTION 13. Fractional Interests. Notwithstanding any adjustment required pursuant to this Agreement, Enterprises shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrants (or specified portion thereof), Enterprises shall pay an amount in cash equal to the Fair Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole U.S. cent. SECTION 14. Notices to Warrant Holders and the Warrant Agent. (a) Upon any adjustment of the Exercise Price pursuant to Section 11 hereof, Enterprises shall, as soon as reasonably practicable, thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of Enterprises) setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each such registered holders of Warrants at the address appearing on the Warrant register for each such registered holder written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 14. 31 (b) In case: (i) Enterprises shall authorize the issuance to all holders of shares of Class B Stock of rights, options or warrants to subscribe for or purchase shares of Class B Stock or of any other subscription rights or warrants; (ii) Enterprises shall authorize the distribution to all holders of shares of Class B Stock of evidences of its indebtedness or assets (other than issuances of securities of Enterprises by Enterprises and other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends payable in shares of Class B Stock or distributions referred to in Section 11(a) hereof); (iii) of any consolidation or merger to which Enterprises is a party and for which approval of any stockholders of Enterprises is required, or of the conveyance or transfer of the properties and assets of Enterprises substantially as an entirety, or of any reclassification or change of Class B Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Class B Stock; (iv) of the voluntary or involuntary dissolution, liquidation or winding up of Enterprises; (v) a Change of Control occurs; or (vi) Enterprises proposes to take any action which would require an adjustment of the Exercise Price pursuant to Section 11 hereof; then Enterprises shall cause to be filed with the Warrant Agent and shall cause to be given to each of the registered holders of Warrants at his address appearing on the Warrant register, at least 20 days (or 10 days in any case specified in clauses (i) or (ii) above) or, if not reasonably practicable, as soon as reasonably practicable thereafter, prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (x) the date as of which the holders of record of shares of Class B Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, (y) the initial expiration date set forth in any tender offer or exchange offer for shares of Class B Stock or (z) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Class B Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 14 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. 32 (c) Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders of Warrants the right to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of Enterprises or any other matter, or any rights whatsoever as stockholders of Enterprises. SECTION 15. Merger, Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the corporate trust business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor warrant agent under the provisions of Section 17 hereof. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and in case at that time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which Enterprises and the holders of Warrants, by their acceptance thereof, shall be bound: (a) The statements contained herein and in the Warrant Certificates shall be taken as statements of Enterprises and the Warrant Agent assumes no responsibility for the correctness of any of the same except as such describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise expressly provided. (b) The Warrant Agent shall not be responsible for any failure of Enterprises to comply with any of the covenants or obligations contained in this Agreement or in the Warrant Certificates to be complied with by Enterprises. (c) The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for Enterprises) and the Warrant Agent shall incur no liability or 33 responsibility to Enterprises or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. (d) The Warrant Agent in absence of good faith shall incur no liability or responsibility to Enterprises or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, opinion, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. The Warrant Agent shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its powers and shall not be liable for any error of judgment made in good faith by one of its officers unless the Warrant Agent is held to have been negligent. (e) Enterprises agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution and performance of this Agreement, to reimburse the Warrant Agent for all expenses (including the fees and expenses of its counsel), taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement and to indemnify and hold harmless the Warrant Agent. Enterprises shall indemnify the Warrant Agent against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Warrant Agreement, including the costs and expenses of enforcing this Warrant Agreement against Enterprises (including this Section 16) and defending itself against any claim (whether asserted by Enterprises or any holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Warrant Agent shall notify Enterprises promptly of any claim for which it may seek indemnity. Failure by the Warrant Agent to so notify Enterprises shall not relieve Enterprises of its obligations hereunder. Enterprises shall defend the claim and the Warrant Agent shall cooperate in the defense. The Warrant Agent may have separate counsel and Enterprises shall pay the reasonable fees and expenses of such counsel. Enterprises need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. (f) The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless Enterprises or one or more registered holders of Warrants shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. 34 (g) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of Enterprises or become pecuniarily interested in any transaction in which Enterprises may be interested, or contract with or lend money to Enterprises or otherwise act as fully and freely as though it were not Warrant Agent or stockholder, director, officer or employee under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for Enterprises or for any other legal entity. (h) The Warrant Agent shall act hereunder solely as agent for Enterprises, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence or bad faith. (i) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Certificates or Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. (j) The duties of the Warrant Agent shall be determined solely by the express provisions of this Warrant Agreement and the Warrant Agent need perform only those duties that are specifically set forth in this Warrant Agreement and no others, and no implied covenants or obligations shall be read into this Warrant Agreement against the Warrant Agent. In the absence of bad faith on its part, the Warrant Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Warrant Agent and conforming to the requirements of this Warrant Agreement. However, the Warrant Agent shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Warrant Agreement. (k) Unless otherwise specifically provided in this Warrant Agreement, any demand, request, direction or notice from Enterprises shall be sufficient if signed by an officer of Enterprises. SECTION 17. Resignation and Removal of Warrant Agent. No resignation or removal of the Warrant Agent and no appointment of a successor warrant agent shall become effective until the acceptance of appointment by the successor warrant agent as provided herein. The Warrant Agent may resign its duties and be discharged from all further duties and liability hereunder (except liability arising as a result of the Warrant Agent's own negligence or willful misconduct) after giving written notice to Enterprises. Enterprises or the holders of a majority of 35 the unexercised Warrants may remove the Warrant Agent upon written notice, and the Warrant Agent shall thereupon in like manner be discharged from all further duties and liabilities hereunder, except as aforesaid. The Warrant Agent shall, at Enterprises' expense, cause to be mailed (by first class mail, postage prepaid) to each holder of a Warrant at his last address as shown on the register of Enterprises maintained by the Warrant Agent a copy of said notice of resignation or notice of removal, as the case may be. Upon such resignation or removal, Enterprises shall appoint in writing a new warrant agent. If Enterprises shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation by the resigning Warrant Agent or after such removal, then the resigning Warrant Agent or the holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by Enterprises or by such a court, shall be a corporation doing business under the laws of the United States or any state thereof, in good standing and having a combined capital and surplus of not less than $50,000,000. The combined capital and surplus of any such new warrant agent shall be deemed to be the combined capital and surplus as set forth in the most recent annual report of its condition published by such warrant agent prior to its appointment, provided that such reports are published at least annually pursuant to law or to the requirements of a federal or state supervising or examining authority. After acceptance in writing of such appointment by the new warrant agent, it shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of Enterprises and shall be legally and validly executed and delivered by the resigning or removed Warrant Agent. Not later than the effective date of any such appointment, Enterprises shall give notice thereof to the resigning or removed Warrant Agent. Failure to give any notice provided for in this Section 17, however, or any defect therein, shall not affect the legality or validity of the resignation of the Warrant Agent or the appointment of a new warrant agent, as the case may be. SECTION 18. Registration. The Initial Purchasers and each subsequent holder of Warrants shall be able to exercise their Warrants only if a registration statement relating to the Warrant Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act, and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other Persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. The Initial Purchaser and each subsequent holder of Warrants shall have the registration rights set forth in the Warrant Registration Rights Agreement, dated as of the date hereof, by and between Enterprises and the Initial Purchasers (the "Warrant Registration Rights Agreement"). SECTION 19. Reports. (a) Whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), for so long as any Warrants remain outstanding, Enterprises shall file with the Commission (unless the Commission will not accept such a filing (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if Enterprises were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition 36 and Results of Operations" and, with respect to the annual information only, a report thereon by Enterprises' certified independent accountants, (ii) all reports that would be required to be filed with the Commission on Form 8-K if Enterprises were required to file such reports and (iii) any other information, documents and other reports which Enterprises would be required to file with the Commission if it were subject to Section 13 or 15(d) of the Exchange Act. In addition, whether or not required by the rules and regulations of the Commission, Enterprises shall make such information available to securities analysts and prospective investors upon request. Furthermore, for so long as any of the Warrants remain outstanding, Enterprises shall make available to any prospective purchaser of the Warrants, the information required by Rule 144A(d)(4) under the Securities Act. Any such request should be directed to Jack Sommer, President of Enterprises, c/o Aladdin Gaming, LLC, P.O. Box 94827, Las Vegas, Nevada 89193, telephone (702) 736-7114; facsimile: (702) 736-7107. (b) Enterprises shall provide the Warrant Agent with a sufficient number of copies of all such reports that the Warrant Agent may be required to deliver to the holders of the Warrants under this Section 19. The Warrant Agent shall have no responsibilities with respect to any such reports, except to distribute them to holders if required pursuant to this Section 19. SECTION 20. Notices to Enterprises and Warrant Agent. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant to or on Enterprises shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by Enterprises with the Warrant Agent) as follows: Aladdin Gaming Enterprises, Inc. c/o Aladdin Gaming, LLC P.O. Box 94827 Las Vegas, Nevada 89193 Attn: Richard J. Goeglein With a copy (which shall not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attn: Wallace L. Schwartz, Esq. In case Enterprises shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the principal office of the Warrant Agent. Any notice pursuant to this Agreement to be given by Enterprises or by the registered holder(s) of any Warrant to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with Enterprises) to the Warrant Agent as follows: 37 State Street Bank and Trust Company Two International Place Boston, MA 02110 Attn: Corporate Trust Division SECTION 21. Supplements and Amendments. Enterprises and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrants in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other changes in regard to matters or questions arising hereunder which Enterprises and the Warrant Agent may deem necessary or desirable and which shall not in any way materially and adversely affect the interests of the holders of Warrants. Any amendment or supplement to this Agreement that has a material adverse effect on the interests of the holders of Warrants shall require the written consent of the holders of a majority of the then outstanding Warrants (excluding Warrants held by Enterprises or any of its affiliates). The consent of each holder of Warrants affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares purchasable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided in this Agreement). SECTION 22. Successors. All the covenants and provisions of this Agreement by or for the benefit of Enterprises or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder, whether so expressed or not. SECTION 23. Termination. This Agreement shall terminate at 5:00 p.m., New York City time on March 1, 2010. SECTION 24. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. SECTION 25. Benefits of This Agreement. (a) Nothing in this Agreement shall be construed to give to any Person or corporation other than Enterprises, the Warrant Agent and the registered holders of Warrants any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of Enterprises, the Warrant Agent and the registered holders of Warrants. (b) All rights of action in respect of this Agreement are vested in the holders of the Warrants Certificates, and any holder of any Warrant Certificates, without the consent of the Warrant Agent or the holder of any other Warrant Certificates, may, on such holder's own behalf and for such holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against Enterprises suitable to enforce, or otherwise in respect of, such holder's 38 rights hereunder, including the right to exercise, exchange or surrender for purchase such holder's Warrants in the manner provided in this Agreement. SECTION 26. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [Signature Page Follows] 39 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. ALADDIN GAMING ENTERPRISES, INC. By: /s/ Jack Sommer ---------------------------- Name: Jack Sommer Title: President STATE STREET BANK AND TRUST COMPANY, as Warrant Agent By: /s/ Ruth A. Smith ---------------------------- Name: Ruth A. Smith Title: Vice President EXHIBIT A [FORM OF WARRANT] [Face of Warrant Certificate] WARRANT CERTIFICATE ALADDIN GAMING ENTERPRISES, INC. No. [ ] [ ] Warrants CUSIP Number [ ] This Warrant Certificate certifies that [ ], or registered assigns, is the registered holder of ________________ (_______) warrants (the "Warrants") to purchase shares of Class B non-voting common stock, no par value (the "Class B Stock"), of ALADDIN GAMING ENTERPRISES, INC., a Nevada corporation ("Enterprises"). Each Warrant entitles the holder upon exercise to receive from Enterprises commencing on the Warrant Exercise Commencement Date (as defined in the Warrant Agreement (as defined below)) until 5:00 p.m. New York City Time on March 1, 2010, the number of fully paid and nonassessable Warrant Shares as set forth in the Warrant Agreement, subject to adjustment as set forth in Section 11 of the Warrant Agreement, at the initial exercise price (the "Exercise Price") of $.001 per share payable pursuant to the provisions of Section 6 of the Warrant Agreement upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. Subject to the provisions of the Warrant Agreement, no Warrant may be exercised after 5:00 p.m., New York City Time on March 1, 2010, and to the extent not exercised by such time such Warrants shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York. Reference is hereby made to the further provisions on the reverse hereof which provisions shall for all purposes have the same effect as though fully set forth at this place. Terms used and not otherwise defined in this Warrant Certificate shall have the meanings given them in the Warrant Agreement. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York. A-1 IN WITNESS WHEREOF, Aladdin Gaming Enterprises, Inc. has caused this Warrant Certificate to be signed by its authorized officers and may cause its corporate seal to be affixed hereunto or imprinted hereon. Dated:__________________ ALADDIN GAMING ENTERPRISES, INC. By:_____________________________ Name: Title: By:_____________________________ Name: Title: Countersigned: STATE STREET BANK AND TRUST COMPANY, as Warrant Agent By:________________________________ Authorized Signatory A-2 [FORM OF WARRANT] [Reverse of Warrant Certificate] [Unless and until it is exchanged in whole or in part for Warrants in certificated form, this Warrant may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]1 THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS A NON-U.S. PERSON AS DEFINED IN RULE 904 UNDER THE SECURITIES ACT (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ENTERPRISES OR ANY AFFILIATE OF ENTERPRISES WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO ENTERPRISES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN _________________ 1 This paragraph is to be included only if the Warrant is in global form. A-3 THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ENTERPRISES' AND THE WARRANT AGENT'S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. [THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH THE WARRANTS UNTIL THE EARLIEST OF (I) SEPTEMBER 1, 1998, (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT (III) THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OR A SALE OR RECAPITALIZATION OF ENTERPRISES, ALADDIN GAMING HOLDINGS, LLC OR THE ALADDIN GAMING, LLC OCCURS, (IV) 30 DAYS AFTER A QUALIFIED PUBLIC OFFERING (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OCCURS, (V) THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OR (VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION. PRIOR TO SUCH DATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF $1,000 PRINCIPAL AMOUNT OF NOTES FOR EACH WARRANT SO TRANSFERRED.] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring March 1, 2010 entitling the holder on exercise to receive shares of Class B Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as of February 26, 1998 (the "Warrant Agreement"), duly executed and delivered by Enterprises to State Street A-4 Bank and Trust Company, as warrant agent (the " Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, Enterprises and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to Enterprises. Warrants may be exercised at any time on or after the Warrant Exercise Commencement Date and on or before March 1, 2010; provided that holders shall be able to exercise their Warrants only if a registration statement relating to the Warrant Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other Persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. In order to exercise all or any of the Warrants represented by this Warrant Certificate, (i) in the case of Definitive Warrants, the holder must surrender for exercise this Warrant Certificate to the Warrant Agent at its corporate trust office set forth in Section 20 of the Warrant Agreement, (ii) in the case of a book-entry interest in a Global Warrant, the exercising Agent Member whose name appears on a securities position listing of the Depositary as the holder of such book-entry interest must comply with the Depositary's procedures relating to the exercise of such book-entry interest in such Global Warrant and (iii) in the case of both Global Warrants and Definitive Warrants, the holder thereof or the Agent Member, as applicable, must deliver to the Warrant Agent the form of election to purchase on the reverse hereof duly filled in and signed, which signature shall be medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent for the account of Enterprises of the Exercise Price, as adjusted as provided in the Warrant Agreement, for the number of Warrant Shares in respect of which such Warrants are then exercised. No adjustment shall be made for any dividends on any Class B Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Class B Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Class B Stock will be issued upon the exercise of any Warrant, but Enterprises will pay the cash value thereof determined as provided in the Warrant Agreement. In addition to any adjustment to the Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants pursuant to Section 11 hereof, if any event of the type described in Section 11 hereof occurs with respect to the outstanding common membership interests of Holdings, Enterprises' common membership interest in Holdings shall be adjusted and the number of Warrant Shares issuable upon exercise of the Warrants shall be adjusted (without duplication), in each case, so that the holders of the Warrants shall thereafter, in the aggregate, have the same indirect ownership of the common membership interests of Holdings after the occurrence of such event that such Holders, in the aggregate, had immediately before the occurrence of such event; provided that any such A-5 adjustment shall be subject to readjustment and to the limitations and restrictions of the types set forth in Section 11 hereof. The holders of the Warrants shall have the registration rights set forth in the Warrant Registration Rights Agreement, dated as of the date hereof, by and between Enterprises and the Initial Purchasers. Warrant Certificates, when surrendered at the office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. Enterprises and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither Enterprises nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of Enterprises. A-6 [FORM OF] SCHEDULE A SCHEDULE OF EXCHANGES OF GLOBAL WARRANT The following exchanges of a part of this Global Warrant for an interest in another Global Warrant, or of other Restricted Global Warrants for an interest in this Global Warrant, have been made:
Amount of Warrants represented by Signature of Amount of Amount of this Global authorized decrease in increase in Warrant following officer of number of number of such decrease (or Warrant Agent Date of Warrants of this Warrants of this increase) or Warrant Exchange Global Warrant Global Warrant Custodian
A-7 [FORM OF] ELECTION TO EXERCISE (To be executed upon exercise of Warrants) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive [ ] shares of Class B Stock and herewith tenders payment for such shares to the order of Enterprises in the amount of $[ ] in accordance with Section 6 of the Warrant Agreement. The undersigned requests that a certificate for such shares be registered in the name of [ ], whose address is [ ] and that such shares be delivered to [ ] whose address is [ ]. If said number of shares is less than all of the shares of Class B Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of [ ], whose address is [ ], and that such Warrant Certificate be delivered to [ ], whose address is [ ]. Date:___________ ------------------------------------------- (Signature) Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. ------------------------------------------- (Signature Guaranteed) Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Warrant Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. Tax Identification or Social Security Number:_____________________ Address:__________________________________ [FORM OF] ASSIGNMENT For value received [ ] hereby sells, assigns and transfers unto [ ] the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint [ ] attorney, to transfer said Warrant Certificate on the books of Enterprises, with full power of substitution in the premises. Date__________________________ ------------------------------------------- (Signature) Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. ------------------------------------------- (Signature Guaranteed) Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Warrant Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EXHIBIT B Each Certificate evidencing Warrants originally issued as part of a Unit of Notes and Warrants issued by Enterprises (and each Certificate evidencing Warrants issued on registration of transfer thereof or in exchange or substitution therefor prior to the close of business on the Separation Date (as defined)) shall bear a legend, which may be affixed by stamp or sticker, in substantially the following form: THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH THE WARRANTS UNTIL THE EARLIEST OF (I) SEPTEMBER 1, 1998, (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT (III) THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OR A SALE OR RECAPITALIZATION OF ENTERPRISES, ALADDIN GAMING HOLDINGS, LLC OR ALADDIN GAMING, LLC OCCURS, (IV) 30 DAYS AFTER A QUALIFIED PUBLIC OFFERING (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OCCURS, (V) THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OR (VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION. PRIOR TO SUCH DATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF $1,000 PRINCIPAL AMOUNT OF NOTES FOR EACH WARRANT SO TRANSFERRED. EXHIBIT C FORM OF CERTIFICATE OF TRANSFER Aladdin Gaming Enterprises, Inc. 3667 Las Vegas Blvd. South Las Vegas, NV 89109 Attn: Corporate Secretary State Street Bank and Trust Company Two International Place Boston, MA 02110 Attn: Corporate Trust Division Re: Warrants to Purchase Class B Stock of Aladdin Gaming Enterprises, Inc. Reference is hereby made to the Warrant Agreement dated as of February 26, 1998 (the "Warrant Agreement"), between Aladdin Gaming Enterprises, Inc. ("Enterprises"), and State Street Bank and Trust Company, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. [ ], (the "Transferor") owns and proposes to transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A hereto, in the amount of [ ] Warrants or interests (the "Transfer"), to [ ] (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. / / Check if Transferee will take delivery of a beneficial interest in the 144A Global Warrant or a Definitive Warrant Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Warrant is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Warrant for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and the Securities Act. C-1 2. / / Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Warrant or a Definitive Warrant pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903 or Rule 904 of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Warrant Agreement and the Securities Act. 3. / / Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Warrant or a Definitive Warrant pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Warrants and Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) / / such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) / / such Transfer is being effected to Enterprises or a subsidiary thereof; or (c) / / such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or C-2 (d) / / such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Warrant or Restricted Definitive Warrants and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit E to the Warrant Agreement and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Warrant and/or the Definitive Warrants and in the Warrant Agreement and the Securities Act. 4. / / Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Warrant or of an Unrestricted Definitive Warrant. (a) / / Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (b) / / Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (c) / / Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any State of the United States and (ii) C-3 the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants or Restricted Definitive Warrants and in the Warrant Agreement. This certificate and the statements contained herein are made for your benefit and the benefit of Enterprises. _____________________________________________ [Insert Name of Transferor] _____________________________________________ (Signature) Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. _____________________________________________ (Signature Guaranteed) Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Warrant Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. Dated: C-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) / / a beneficial interest in the: (i) / / 144A Global Warrant, or (ii) / / Regulation S Global Warrant, or (iii) / / IAI Global Warrant, or (b) / / a Restricted Definitive Warrant. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) / / a beneficial interest in the: (i) / / 144A Global Warrant, or (ii) / / Regulation S Global Warrant, or (iii) / / IAI Global Warrant, or (iv) / / Unrestricted Global Warrant, or (b) / / a Restricted Definitive Warrant, or (c) / / an Unrestricted Definitive Warrant. in accordance with the terms of the Warrant Agreement. C-5 EXHIBIT D FORM OF CERTIFICATE OF EXCHANGE Aladdin Gaming Enterprises, Inc. 3667 Las Vegas Blvd. South Las Vegas, NV 89109 Attn: Secretary State Street Bank and Trust Company Two International Place Boston, MA 02110 Attn: Corporate Trust Division Re: Warrants to Purchase Class B Stock of Aladdin Gaming Enterprises, Inc. Reference is hereby made to the Warrant Agreement, dated as of February 26, 1998 (the "Warrant Agreement"), between Aladdin Gaming Enterprises, Inc., as issuer ("Enterprises"), and State Street Bank and Trust Company, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. [ ], (the "Owner") owns and proposes to exchange the Warrant[s] or interest in such Warrant[s] specified herein, in the amount of [ ] Warrant[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. / / Exchange of Restricted Definitive Warrants or Beneficial Interests in a Restricted Global Warrant for Unrestricted Definitive Warrants or Beneficial Interests in an Unrestricted Global Warrant (a) / / Check if Exchange is from beneficial interest in a Restricted Global Warrant to beneficial interest in an Unrestricted Global Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a beneficial interest in an Unrestricted Global Warrant in an equal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Warrants and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) / / Check if Exchange is from beneficial interest in a Restricted Global Warrant to Unrestricted Definitive D-1 Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) / / Check if Exchange is from Restricted Definitive Warrant to beneficial interest in an Unrestricted Global Warrant. In connection with the Owner's Exchange of a Restricted Definitive Warrant for a beneficial interest in an Unrestricted Global Warrant, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) / / Check if Exchange is from Restricted Definitive Warrant to Unrestricted Definitive Warrant. In connection with the Owner's Exchange of a Restricted Definitive Warrant for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the Unrestricted Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. / / Exchange of Restricted Definitive Warrants or Beneficial Interests in Restricted Global Warrants for Restricted Definitive Warrants or Beneficial Interests in Restricted Global Warrants (a) / / Check if Exchange is from beneficial interest in a Restricted Global Warrant to Restricted Definitive Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a Restricted Definitive Warrant with an equal amount, the Owner hereby certifies that the Restricted Definitive Warrant is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the Restricted Definitive Warrant issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Warrant and in the Indenture and the Securities Act. D-2 (b) / / Check if Exchange is from Restricted Definitive Warrant to beneficial interest in a Restricted Global Warrant. In connection with the Exchange of the Owner's Restricted Definitive Warrant for a beneficial interest in the [CHECK ONE] / / 144A Global Warrant, / / Regulation S Global Warrant, / / IAI Global Warrant with an equal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Warrant and in the Warrant Agreement and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of Enterprises. _____________________________________________ [Insert Name of Owner] _____________________________________________ (Signature) Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. _____________________________________________ (Signature Guaranteed) Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Warrant Agent in D-3 addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. Dated: D-4 EXHIBIT E FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Aladdin Gaming Enterprises, Inc. 3667 Las Vegas Blvd. South Las Vegas, NV 89109 Attn: Secretary State Street Bank and Trust Company Two International Place Boston, MA 02110 Attn: Corporate Trust Division Re: Warrants to Purchase Class B Stock of Aladdin Gaming Enterprises, Inc. Reference is hereby made to the Warrant Agreement, dated as of February 26, 1998 (the "Warrant Agreement"), between Aladdin Gaming Enterprises, Inc., as issuer ("Enterprises"), and State Street Bank and Trust Company, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. In connection with our proposed purchase of [ ] number of: (a) / / a beneficial interest in a Global Warrant, or (b) / / a Definitive Warrant, we confirm that: 1. We understand that any subsequent transfer of the Warrants or any interest therein is subject to certain restrictions and conditions set forth in the Warrant Agreement and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Warrants or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Warrants have not been registered under the Securities Act, and that the Warrants and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Warrants or any interest therein, we will do so only (A) to Enterprises or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to Enterprises a signed letter substantially in the form of this letter and an Opinion of Counsel in E-1 form reasonably acceptable to Enterprises to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Warrant or beneficial interest in a Global Warrant from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Warrants or beneficial interest therein, we will be required to furnish to you and Enterprises such certifications, legal opinions and other information as you and Enterprises may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Warrants purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Warrants, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Warrants or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. _____________________________________________ [Insert Name of Accredited Investor] _____________________________________________ (Signature) Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. E-2 _____________________________________________ (Signature Guaranteed) Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Warrant Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. Dated: EX-4.2 11 WARRANT REG RIGHTS AGREEMENT DATED 2/26/98 ________________________________________ Warrant Registration Rights Agreement Dated As of February 26, 1998 among Aladdin Gaming Enterprises, Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. ________________________________________ WARRANT REGISTRATION RIGHTS AGREEMENT This Warrant Registration Rights Agreement (the "Agreement") is made and entered into this 26th day of February, 1998, among Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Enterprises"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement dated February 18, 1998, among Aladdin Gaming Holdings, LLC ("Holdings"), a Nevada limited-liability company, Aladdin Capital Corp., a Nevada corporation, Enterprises, Aladdin Holdings, LLC, a Delaware limited liability company, the Trust Under Article Sixth u/w/o Sigmund Sommer, London Clubs International, plc, a United Kingdom public limited company, and the Initial Purchasers (the "Purchase Agreement"), which provides for, among other things, the sale by Enterprises to the Initial Purchasers of 2,215,000 Warrants (the "Warrants") to purchase 2,215,000 shares of Class B non-voting Common Stock, no par value (the "Common Stock"), of Enterprises. The Warrants have been issued pursuant to the Warrant Agreement dated as of February 26, 1998, among Enterprises, Holdings and State Street Bank and Trust Company, as warrant agent. In order to induce the Initial Purchasers to enter into the Purchase Agreement, Enterprises has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Agreement" shall have the meaning set forth in the preamble. "Black Out Period" shall have the meaning set forth in Section 2.2(b). "Commission" shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission. "Common Stock" shall have the meaning set forth in the preamble. "Company" shall mean Aladdin Gaming, LLC, a Nevada limited-liability company. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by Enterprises, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York. "Enterprises" shall have the meaning set forth in the preamble. "Exchange Act" shall mean the Securities Exchange Act of 19 34, as amended. "Holder" shall mean a Person who owns Transfer Restricted Securities or has the right to acquire such Transfer Restricted Securities, whether or not such acquisition has actually been effected and disregarding any legal restrictions upon the exercise of such right. "Holdings" shall have the meaning set forth in the preamble. "Initial Purchasers" shall have the meaning set forth in the preamble. "IPO Entity" shall mean Enterprises, Holdings or another entity which controls the Company. "Issue Date" shall mean February 26, 1998. "Majority Holders" shall mean the Holders of a majority of the outstanding Transfer Restricted Securities; provided that whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by Enterprises or any Affiliate (as defined in the Warrant Agreement) of Enterprises shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount. "Participating Broker-Dealer" shall mean any of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. and any other broker-dealer which makes a market in the Securities or the Warrant Shares. "Person" shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a governmental agency or body or political subdivision thereof. "Prospectus" shall mean the prospectus included in the Warrant Shelf Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Transfer Restricted Securities covered by the Warrant Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Qualified Public Offering" shall have the meaning set forth in Section 2.1(c). 2 "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by Enterprises with this Agreement, including without limitation: (i) all Commission, stock exchange or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained by any holder of Transfer Restricted Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Transfer Restricted Securities and any filings with the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing the Warrant Shelf Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, except for such expenses incurred by Holders, underwriters or their respective counsel, (iv) all fees and expenses incurred in connection with the listing if any, of any of the Transfer Restricted Securities on any securities exchange or exchanges, (v) the fees and disbursements of counsel for Enterprises and of the independent public accountants of Enterprises, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vi) the fees and expenses of the Warrant Agent, but excluding, except as otherwise expressly provided in clauses (i) through (vi) above, (a) the fees and expenses of the Initial Purchasers in connection with the Warrant Shelf Registration, including fees and expenses of counsel of the Initial Purchasers in connection therewith and (b) underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Transfer Restricted Securities by a Holder. "Rule 144" shall mean Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the Commission providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. "Rule 144A" shall mean Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the Commission. "Securities" shall mean the Warrants and the Warrant Shares, collectively. "Securities Act" shall mean the Securities Act of 1933, as amended. "Transfer Restricted Securities" shall mean the Warrants, Warrant Shares, any securities issued to a holder of Warrants or Warrant Shares pursuant to the provisions of Section 11(m) of the Warrant Agreement (the "New Securities") and any other securities 3 issued or issuable with respect to the Warrants, Warrant Shares or New Securities by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization; provided that a security shall cease to be a Transfer Restricted Security when it, as applicable, (i) has been effectively registered under the Securities Act and disposed of in accordance with the Warrant Shelf Registration Statement, (ii) is distributed to the public pursuant to Rule 144 or (iii) may be sold or transferred pursuant to Rule 144(k) (or any similar provisions then in force) under the Act or otherwise. "Warrant Agent" shall mean the warrant agent with respect to the Securities under the Warrant Agreement. "Warrant Agreement" shall mean the Warrant Agreement relating to the Securities dated as of February 26, 1998, between Enterprises, Holdings and State Street Bank and Trust Company, as warrant agent, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof. "Warrant Expiration Date" shall mean March 1, 2010. "Warrant Shares" shall mean the shares of Common Stock delivered or deliverable upon exercise of the Warrants. "Warrant Shelf Registration" shall mean a registration effected pursuant to Section 2.1 hereof. "Warrant Shelf Registration Statement" shall mean a "shelf" registration statement of Enterprises pursuant to the provisions of Section 2.1 of this Agreement which covers all of the Transfer Restricted Securities on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Warrants" shall have the meaning set forth in the preamble. 2. Registration Under the Securities Act. 2.1. Warrant Shelf Registration. Enterprises shall, at its cost: (a) use its reasonable best efforts to file no later than 45 days after the Issue Date with the Commission the Warrant Shelf Registration Statement covering (i) the offer and sale of the Warrants and the Warrant Shares and (ii) the issuance of Warrant Shares upon the exercise of Warrants that were sold pursuant to the Warrant Shelf Registration Statement; 4 (b) use its reasonable best efforts to cause such Warrant Shelf Registration Statement to be declared effective by the Commission on or prior to 150 days after the Issue Date; and (c) subject to Section 2.2 hereof, use its reasonable best efforts to continuously maintain the effectiveness of the Warrant Shelf Registration Statement under the Securities Act in order to permit the Prospectus included therein to be lawfully delivered by Enterprises to the Holders offering and selling Warrants or Warrant Shares or exercising the Warrants until the earlier of (i) the date on which (x) there are no Warrants outstanding and (y) all Warrant Shares have been sold pursuant to the Warrant Shelf Registration Statement or pursuant to Rule 144 under the Securities Act and (ii) the consummation of a public offering of common stock registered under the Securities Act and resulting in proceeds of at least $50.0 million (a "Qualified Public Offering") of an IPO Entity other than Enterprises. 2.2 Limitations, Conditions and Qualifications to Obligations Under Registration Covenants The obligations of Enterprises set forth in Section 2.1 hereof are subject to each of the following limitations, conditions and qualifications: (a) Subject to the next proviso of this paragraph, Enterprises shall be entitled to postpone, for a reasonable period of time, the filing or effectiveness of, or suspend the rights of any Holders to, directly or indirectly, sell, offer to sell, pledge, contract to sell, sell any option or contract to purchase any option or contract to sell or grant any option, right or warrant for the sale of the Warrants or the Warrant Shares pursuant to, the Warrant Shelf Registration Statement otherwise required to be prepared, filed and made and kept effective pursuant to Section 2.1 of this Agreement or otherwise; provided, however, that the duration of such postponement or suspension may not exceed 180 days after the date of the good faith determination of the Board of Directors of Enterprises that the filing or effectiveness of, or sales pursuant to, the Warrant Shelf Registration Statement would materially impede, delay or interfere with or affect the marketing of any material financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction involving Enterprises which material financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction is under active consideration at the time of such postponement or suspension; provided, however, that Enterprises shall not be entitled to such postponement or suspension more than twice in any 12-month period; (b) Enterprises shall not be required to amend or supplement the Warrant Shelf Registration Statement filed pursuant to Section 2.1 of this Agreement, any related prospectus or any document incorporated therein by reference, for a period (a "Black Out Period") not to exceed, for so long as this Agreement is in effect, an aggregate of 120 days in any calendar year, in the event that (i) the Board of Directors of Enterprises determines in good faith that sales pursuant to the Warrant Shelf Registration Statement would materially impede, delay or interfere with or affect the marketing of any material financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction involving Enterprises which 5 material financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction is under active consideration at the time of such postponement or suspension, (ii) an event occurs and is continuing as a result of which the Warrant Shelf Registration Statement, any related prospectus or any document incorporated therein by reference as then amended or supplemented would, in the good faith judgment of the Board of Directors of Enterprises, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) the disclosure otherwise relates to a material business transaction which has not yet been publicly disclosed; provided that no Black Out Period may be in effect during the 60 days prior to the Warrant Expiration Date; and (c) Enterprises' obligations shall be subject to the obligations of the Holders, which the Holders acknowledge, to furnish all information and materials required of such Holders and to take any and all actions required of such Holders as may be required under applicable federal and state securities laws and regulations to permit Enterprises to comply with all applicable requirements of the Commission and to obtain any acceleration of the effective date of the Warrant Shelf Registration Statement. 2.3. Rule 144 and Rule 144A Enterprises covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder in a timely manner and, if at any time Enterprises is not required to file such reports, it will, upon the request of any Holder or beneficial owner of Transfer Restricted Securities, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. Enterprises further covenants that it will take such further reasonable action as any Holder of Transfer Restricted Securities may reasonably request, to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission (it being expressly understood that the foregoing shall not create any obligation on the part of Enterprises to file periodic reports or other reports under the Exchange Act at any time that it is not then required to file such reports pursuant to the Exchange Act). Upon the written request of any Holder of Transfer Restricted Securities, Enterprises will in a timely manner deliver to such Holder a written statement as to whether it has complied with such information requirements. 3. "Market Stand-Off" Agreement (a) Each Holder hereby agrees that it shall not, to the extent requested by a managing underwriter of common stock or common equivalents of Enterprises, sell or otherwise transfer or dispose of any Transfer Restricted Securities of Enterprises then owned by such Holder (other than to donees or partners of the Holder who agree to be similarly bound) for up to 180 days following the date of the final Prospectus in connection with the Warrant Shelf Registration Statement filed under the Securities Act; provided, however, that such agreement (i) 6 shall not be applicable to Transfer Restricted Securities sold pursuant to such registration as part of that offering and (ii) shall only be applicable if the managing underwriters request such agreement from each Holder. (b) In order to enforce the foregoing covenant, Enterprises shall have the right to impose stop transfer instructions with respect to the Transfer Restricted Securities until the end of such period. The provisions of this Section 3 shall be binding upon any transferee of any Transfer Restricted Securities. 4. Registration Procedures. In connection with the obligations of Enterprises with respect to the Warrant Shelf Registration Statement pursuant to Sections 2.1 hereof, Enterprises shall, except as otherwise provided: (a) Use its reasonable best efforts to prepare and file with the Commission no later than 45 days after the Issue Date the Warrant Shelf Registration Statement as provided herein, on the appropriate form under the Securities Act, which form (i) shall be selected by Enterprises, (ii) shall be available for the sale of the Transfer Restricted Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be filed therewith or incorporated by reference therein and (iv) shall comply in all material respects with the requirements of Regulation S-T under the Securities Act; (b) Use its reasonable best efforts to (i) prepare and file with the Commission such amendments and post-effective amendments to the Warrant Shelf Registration Statement as may be necessary to keep the Warrant Shelf Registration Statement continuously effective for the time period prescribed hereby; and (ii) cause the related Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and (iii) materially comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable to it with respect to the Warrant Shelf Registration Statement as so amended or in such prospectus as so supplemented; (c) Upon receiving notice of any of the following events, notify promptly each Holder of Transfer Restricted Securities and the managing underwriter or underwriters, if any, and, if requested by such Holder, managing underwriter or underwriters, confirm such notice in writing promptly (i) when the Warrant Shelf Registration Statement or any post-effective amendment has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of the Warrant Shelf Registration Statement or post-effective amendment including financial statements and schedules and exhibits), (ii) of any request by the Commission or any state securities authority for post-effective amendments and supplements to the Warrant Shelf Registration Statement and Prospectus or for additional information after the Warrant Shelf Registration Statement has become effective, (iii) of the issuance by the Commission or any state securities authority of any 7 stop order suspending the effectiveness of the Warrant Shelf Registration Statement or the initiation of any proceedings for that purpose, (iv) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Transfer Restricted Securities, the representations and warranties of Enterprises contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period the Warrant Shelf Registration Statement is effective which makes any statement made in such Warrant Shelf Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Warrant Shelf Registration Statement or Prospectus in order to make the statements therein not misleading in any material respect, (vi) of the receipt by Enterprises of any notification with respect to the suspension of the qualification of the Transfer Restricted Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose and (vii) of any determination by Enterprises that a post-effective amendment to such Warrant Shelf Registration Statement would be appropriate; (d) Make commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the Warrant Shelf Registration Statement as soon as reasonably practicable; (e) A reasonable time prior to filing the Warrant Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Warrant Shelf Registration Statement or amendment or supplement to such Prospectus, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request if Enterprises, acting reasonably and in good faith, deems such changes to be reasonable, and not file any such document in a form to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities, counsel for the Holders of Transfer Restricted Securities or any underwriter shall not have previously been advised and furnished a copy of or to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities, counsel to the Holders of Transfer Restricted Securities or any underwriter shall reasonably object if Enterprises, acting reasonably and in good faith, deems such objection to be reasonable, and make the representatives of Enterprises available for discussion of such document as shall be reasonably requested by the Holders of Transfer Restricted Securities, the Initial Purchasers on behalf of such Holders, counsel for the Holders of Transfer Restricted Securities or any underwriter; (f) Furnish to each Holder of Transfer Restricted Securities who so requests and to counsel for the Holders of Transfer Restricted Securities and each managing underwriter, if any, without charge, upon written request, one conformed copy of the Warrant Shelf Registration Statement and each post-effective amendment thereto, including financial statements and schedules, and, if requested, of all documents incorporated or deemed to be incorporated therein by reference and all exhibits (including exhibits incorporated by reference); 8 (g) Deliver to each Holder of Transfer Restricted Securities, their counsel and each underwriter, if any, without charge, a reasonable number of copies of each Prospectus (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and, subject to the last paragraph of this Section 4, Enterprises consents to the use of such Prospectus and each amendment or supplement thereto by each of the Holders of Transfer Restricted Securities and the underwriter or underwriters or agents, if any, in connection with the offering and sale of the Transfer Restricted Securities covered by such Prospectus and any amendment or supplement thereto. (h) Use its reasonable best efforts to register or qualify the Transfer Restricted Securities under all applicable state securities or "blue sky" laws of such jurisdictions within the United States as any Holder of Transfer Restricted Securities covered by the Warrant Shelf Registration and, each underwriter of an underwritten offering of Transfer Restricted Securities shall reasonably request in writing a reasonable period of time prior to the time the Warrant Shelf Registration Statement is declared effective by the Commission, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such Holder or underwriter to consummate the disposition in each such jurisdiction of such Transfer Restricted Securities during the period the Warrant Shelf Registration Statement is required to remain effective pursuant to Section 2.1 hereof; provided, however, that Enterprises shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where they would not otherwise be required to qualify but for this Section 4(h), or (ii) take any action which would subject them to general service of process or taxation in any such jurisdiction where it is not then so subject; (i) Cooperate with the Holders of Transfer Restricted Securities and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold, which certificates shall not bear any restrictive legends whatsoever and shall be in a form eligible for deposit with The Depository Trust Company ("DTC"); and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request at least three business days prior to any sale of Transfer Restricted Securities in a firm commitment underwritten public offering; (j) Pay all Registration Expenses in connection with the registration requested pursuant to Section 2.1 hereof. Each Holder of Transfer Restricted Securities shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to, and all fees and other costs of counsel in connection with, the sale or disposition of such Holder's Transfer Restricted Securities pursuant to the Warrant Shelf Registration Statement; (k) Upon the occurrence of any event contemplated by Section 4(c)(v) or 4(c)(vi) above, as promptly as practicable, use its reasonable best efforts to prepare a supplement or post-effective amendment to the Warrant Shelf Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and, subject to Section 4(a) hereof, file such with the Commission so that, as thereafter delivered to the purchasers of Transfer Restricted Securities being sold thereunder, 9 such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (l) Not later than the effective date of the Warrant Shelf Registration Statement, (i) provide the registrar for the Transfer Restricted Securities with certificates for such securities in a form eligible for deposit with DTC and (ii) provide a CUSIP number for such securities; (m) Enter into an underwriting agreement in form, scope and substance as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or disposition of such Transfer Restricted Securities in any underwritten offering to be made of the Transfer Restricted Securities in accordance with this Agreement, and in such connection, if requested by any Holder of Transfer Restricted Securities or underwriter, (i) make such representations and warranties to the Holders of such Transfer Restricted Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings and as may be reasonably requested by them; (ii) obtain opinions of counsel reasonably satisfactory to the managing underwriters, if any, and the Majority Holders, covering (x) the matters and subject to the qualifications and exceptions customarily received by such managing underwriters requested in connection with a warrant shelf registration statement and (y) such other matters as may be reasonably requested by the managing underwriters, if any, or the Majority Holders; (iii) obtain "cold comfort" letters and updates thereof from Enterprises' independent certified public accountants (and, if necessary, independent certified public accountants of London Clubs, the Trust, any subsidiary of the Enterprises, London Clubs or the Trust or of any business acquired by Enterprises for which financial statements are, or are required to be, included in the Warrant Shelf Registration Statement) addressed to the underwriters, if any, and use reasonable efforts to have such letter addressed to the selling Holders of Transfer Restricted Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Transfer Restricted Securities, which agreement shall be in form, substance and scope customary for similar offerings; (v) if an underwriting agreement is entered into, cause it to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 5 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and (vi) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in number of the Transfer Restricted Securities being sold and the managing underwriters, if any. 10 The obligations of Enterprises under this paragraph (m) are subject to the Holders and underwriters providing representations, warranties and indemnifications customarily provided by such persons under such agreements, and the Holders entering into custody agreements and powers of attorney containing the representations, warranties and indemnifications customarily provided by such persons in connection with secondary offerings of securities. (n) Make available for inspection by representatives of the Holders of Transfer Restricted Securities, any underwriters participating in any such disposition pursuant to the Warrant Shelf Registration Statement, any Participating Broker-Dealer and any counsel or accountant retained by any of the foregoing (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of Enterprises reasonably necessary to the Inspectors to enable them to conduct any due diligence as is customary, and cause the officers, directors and employees of Enterprises to supply all information in each case reasonably requested by the Inspectors in connection therewith, and make such representatives of Enterprises available for discussion of such documents as shall be reasonably requested by the Initial Purchasers in connection therewith; provided, that records which Enterprises determines, in good faith, to be confidential and which Enterprises notifies the Inspectors are confidential shall not be disclosed by the Inspector unless (i) the disclosure of such records shall be necessary to avoid or correct a material misstatement or omission in the Warrant Shelf Registration Statement, (ii) the release of such records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or is otherwise required by law or (iii) the information contained in such records has been made generally available to the public (other than by a breach of these provisions by the Inspectors or any of their officers, employees or agents). Each Holder and each such Participating Broker-Dealer will be required to agree in writing that any such confidential information shall not be disclosed other than pursuant to clauses (i), (ii) or (iii) of the previous sentence; (o) otherwise materially comply with all material applicable rules and regulations of the Commission and make available to their security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder (i) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to an underwriter or to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to an underwriter or to underwriters in such an offering, commencing on the first day of the first fiscal quarter of Enterprises after the effective date of the Warrant Shelf Registration Statement, which statements shall cover such 12-month periods; (p) Use commercially reasonable efforts to cause all Transfer Restricted Securities to be listed on any securities exchange on which similar equity securities issued by Enterprises are then listed if requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Transfer Restricted Securities, if any, on which similar securities issued by Enterprises as applicable, are then listed; (q) Cooperate with the Holders of Transfer Restricted Securities to facilitate the timely preparation and delivery of certificates representing Transfer Restricted 11 Securities to be sold and not bearing any restrictive legends and registered in such names as the Holders may reasonably request at least two business days prior to the closing of any sale of Transfer Restricted Securities. Enterprises may require each seller of Transfer Restricted Securities as to which a registration is being effected to furnish to Enterprises such information regarding such seller as may be required by the staff of the Commission to be included in the Warrant Shelf Registration Statement and Enterprises may exclude from such registration the Transfer Restricted Securities of any seller who fails to furnish such information within a reasonable time (which amount of reasonable time shall be reasonably determined by Enterprises); provided, that Enterprises shall provide written notice to any such seller of any such request. Each Holder agrees that, upon receipt of any notice from Enterprises of the happening of any event or the discovery of any facts, each of the kind described in Section 4(c)(ii), 4(c)(iv), 4(c)(v), or 4(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Transfer Restricted Securities pursuant to the Warrant Shelf Registration Statement or Prospectus until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(k) hereof), and, if so directed by Enterprises, such Holder will deliver to Enterprises (at its expense) all copies in such Holder's possession, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities current at the time of receipt of such notice. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, custody agreements and other documents required under the terms of such underwriting agreements. 5. Indemnification; Contribution (a) Enterprises agrees to indemnify and hold harmless each Initial Purchaser, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter (any such Person being an "Underwriter") and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the Securities Act or Section 15 of the Exchange Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Warrant Shelf Registration Statement (or any amendment or supplement thereto) pursuant to which Transfer Restricted Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not 12 misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 5(d) below) any such settlement is effected with the written consent of Enterprises; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to Enterprises by the Holders, Initial Purchaser, Participating Broker-Dealer or Underwriter expressly for use in the Warrant Shelf Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). The foregoing indemnity with respect to any untrue statement contained in or any omission from any preliminary Prospectus shall not inure to the benefit to any Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter (or any person controlling any such person) from whom the person asserting such loss, liability, claim, damage or expense purchased Securities that are the subject thereof if (i) the untrue statement or omission contained in such preliminary Prospectus (excluding documents incorporated by reference) was corrected; (ii) such person was not sent or given a copy of the final Prospectus (excluding documents incorporated by reference) which corrected the untrue statement or omission at or prior to the written confirmation of the sale of such Securities to such person; and (iii) Enterprises satisfied its obligation pursuant to Section 4 of this Agreement to provide a sufficient number of copies of the final Prospectus to the Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter. (b) Each Holder, Initial Purchaser, Participating Broker-Dealer and Underwriter severally, but not jointly, agrees to indemnify and hold harmless Enterprises, the Initial Purchasers, the Participating Broker-Dealers, each Underwriter and the other selling Holders, and each of their respective directors and officers, and each Person, if any, who controls Enterprises, the Initial Purchasers, the Participating Broker-Dealers, any Underwriter or any 13 other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Warrant Shelf Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter furnished to Enterprises by such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter expressly for use in the Warrant Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter from the sale of Transfer Restricted Securities pursuant to such Warrant Shelf Registration Statement. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 5 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 5(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have 14 reimbursed such indemnified party in accordance with such request prior to the date of such settlement. Notwithstanding the immediately preceding sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, an indemnifying party shall not liable for any settlement of the nature contemplated by Section 5 (a) (ii) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent that it considers such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to date of such settlement. (e) If the indemnification provided for in this Section 5 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of Enterprises on the one hand and the Holders and the Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of Enterprises on the one hand and the Holders and the Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by Enterprises, the Holders or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Enterprises and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 5. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 5 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 5, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 15 For purposes of this Section 5, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each manager or director of Enterprises, and each Person, if any, who controls Enterprises within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as Enterprises. The Initial Purchasers' respective obligations to contribute pursuant to this Section 5 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint. 6. Assumption of Obligations. Enterprises hereby covenants to cause (i) any entity that enters into a supplemental Warrant Agreement pursuant to the terms of Section 11(m) of the Warrant Agreement to enter into a supplemental Warrant Registration Rights Agreement providing that such entity shall, with respect to any securities issued to holders of the Warrants or the Warrant Shares pursuant to such supplemental Warrant Agreement, assume all of the rights and obligations of Enterprises with respect to the Warrants and Warrant Shares under this Agreement and (ii) any other entity that issues any securities to the holders of the Warrants or the Warrant Shares pursuant to the terms of the Equity Participation Agreement to, with respect to all such securities, assume all of the rights and obligations of Enterprises with respect to the Warrants and Warrant Shares under this Agreement; provided that Enterprises shall cause any such entity to (i) cause to become effective under the Securities Act, to the extent legally possible, immediately prior to the execution of such supplemental Warrant Agreement or the consummation of the issuance of the securities described in clause (ii) above, a shelf registration statement covering (a) the offer and sale of the securities issued to holders of the Warrants and the Warrant Shares pursuant to such supplemental Warrant Agreement, (b) the offer and sale of the securities issued to holders of the Warrants and the Warrant Shares pursuant to clause (ii) above and (c) the issuance of any securities issuable upon the exercise thereof that were sold pursuant to any such shelf registration statement and (ii) maintain, on the same terms and conditions as Enterprises is required to under this Agreement, the effectiveness of any such shelf registration statement under the Securities Act in order to permit the Prospectus included therein to be lawfully delivered by the relevant entity to the Holders offering and selling Warrants or Warrant Shares or exercising the Warrants until the earlier of (i) the date on which (x) there are no Warrants outstanding and (y) all Warrant Shares have been sold pursuant to the Warrant Shelf Registration Statement or pursuant to Rule 144 under the Securities Act and (ii) the consummation of a Qualified Public Offering of an IPO Entity other than Enterprises. Upon the execution of a supplemental Warrant Registration Rights Agreement, the successor company shall mail to holders of Warrants a notice describing the supplemental Warrant Registration Rights Agreement. 7. Miscellaneous 7.1. No Inconsistent Agreements. Enterprises has not entered into and, after the date of this Agreement, will not enter into any agreement which is inconsistent with the rights 16 granted to the Holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of other issued and outstanding securities of Enterprises under any such agreements. 7.2. Amendments and Waivers. The provisions of this Agreement including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless Enterprises has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or departure. 7.3. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to Enterprises by means of a notice given in accordance with the provisions of this Section 7.3, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers, with a copy to Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California 90071-2007, Attention: Pamela B. Kelly, Esq.; and (b) if to Enterprises, initially at Enterprises' address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 7.3, with a copy to Skadden, Arps, Slate, Meagher & Flom L.L.P., 919 Third Avenue, New York, New York, Attention: Wallace L. Schwartz, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Warrant Agent under the Warrant Agreement, at the address specified in such Warrant Agreement. 7.4. Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms of the Purchase Agreement or the Warrant Agreement. If any transferee of any Holder shall acquire Transfer Restricted Securities, in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the 17 restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof. 7.5. Third Party Beneficiaries. The Initial Purchasers (even if the Initial Purchasers are not Holders of Transfer Restricted Securities) shall be third party beneficiaries to the agreements made hereunder between Enterprises, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. Each Holder of Transfer Restricted Securities shall be a third party beneficiary to the agreements made hereunder between Enterprises, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder. 7.6. Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, Enterprises acknowledges that any failure by Enterprises to comply with its obligations under Section 2.1 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which monetary damages would not be adequate, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce Enterprises' obligations under Section 2.1. 7.7. Restriction on Resales. Until the expiration of two years after the original issuance of the Securities, Enterprises will not, and will cause its "affiliates" (as such term is defined in Rule 144(a)(1) under the Securities Act) to not, resell any Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the Securities Act) that have been reacquired by any of them and shall immediately upon any purchase of any such Securities submit such Securities to the Warrant Agent for cancellation. 7.8. Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 7.9. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. 7.11. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 18 7.12. Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by Enterprises with respect to the Securities sold pursuant to the Purchase Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. ALADDIN GAMING ENTERPRISES, INC. By: /s/ Jack Sommer ------------------------ Name: Jack Sommer Title: President Confirmed and accepted as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED CREDIT SUISSE FIRST BOSTON CORPORATION CIBC OPPENHEIMER CORP. SCOTIA CAPITAL MARKETS (USA) INC. BY: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Gregory Margolies ---------------------------- Name: Gregory Margolies Title: Authorized Signatory As representative of the several Initial Purchasers. EX-4.3 12 EQUITY PARTICIPATION AGREEMENT ----------------------------------------------------------- EQUITY PARTICIPATION AGREEMENT among SOMMER ENTERPRISES, LLC, ALADDIN GAMING ENTERPRISES, INC., LONDON CLUBS NEVADA INC. and STATE STREET BANK AND TRUST COMPANY. ----------------------------------------------------------- EQUITY PARTICIPATION AGREEMENT This Equity Participation Agreement (this "Agreement"), dated as of February 26, 1998 is made by Sommer Enterprises, LLC, a Nevada limited liability company ("Sommer Enterprises"), Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Aladdin Enterprises"), London Clubs Nevada Inc., a Nevada corporation ("LCNI"), and State Street Bank and Trust Company, as warrant agent (the "Warrant Agent"), pursuant to the Warrant Agreement (as defined herein). WITNESSETH: WHEREAS, Sommer Enterprises, Aladdin Enterprises and LCNI are members of Aladdin Gaming Holdings, LLC, a Nevada limited liability company ("Gaming Holdings"), owning an aggregate of 97 percent of the issued and outstanding common membership interests of Gaming Holdings ("Holdings Common Shares") as of the date hereof; WHEREAS, on the date hereof Sommer Enterprises owns all of the issued and outstanding class A voting common stock of Aladdin Enterprises (the "Class A Common Stock"), and Aladdin Enterprises owns 25 percent of the issued and outstanding Holdings Common Shares; WHEREAS, on the date hereof (a) Aladdin Enterprises entered into a warrant agreement (the "Warrant Agreement") with the Warrant Agent and pursuant thereto issued to various persons (the "Warrantholders") warrants (the "Warrants") to purchase class B non-voting common stock of Aladdin Enterprises (the "Class B Common Stock" and, together with the Class A Common Stock, the "Common Stock") representing 40 percent of the Common Stock and (b) Aladdin Enterprises entered into a registration rights agreement in favour of the Warrantholders (the "Warrant Registration Rights Agreement"); WHEREAS, upon exercise of all of the Warrants, the Warrantholders will indirectly own, through their ownership of Class B Common Stock, an aggregate of 10 percent of the membership interests of Gaming Holdings; WHEREAS, the parties desire by this Agreement to set forth their agreement as to certain arrangements in respect of (a) an initial underwritten offering pursuant to which common shares of Aladdin Enterprises, Gaming Holdings, Aladdin Gaming, LLC, a Nevada limited liability company and a wholly owned subsidiary of Gaming Holdings, or a newly formed successor entity to any of them (as the case may be, the "IPO Entity") are sold to the public pursuant to a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), and become registered under Section 12(g) of the Securities 2 Exchange Act of 1934, as amended (an "IPO"), (b) the rights and obligations of the Warrantholders to participate in tag along arrangements among the members of Gaming Holdings, and (c) providing that Aladdin Enterprises does not become an Investment Company (as herein defined) prior to the IPO. THEREFORE, in consideration of the mutual covenants, agreements and promises made herein, the parties agree as follows: 1. (a) The parties shall not effect an IPO unless, prior to such IPO, Sommer Enterprises, LCNI and the Warrantholders each are given the right to hold an equity interest in the IPO Entity immediately prior to the IPO equal to their respective equity interests at such time in Gaming Holdings (whether such equity interests are held at such time directly or indirectly through Aladdin Enterprises), subject to any appropriate adjustments in respect of any built-in tax or other liabilities. The parties agree to use their reasonable best efforts when forming the IPO Entity (if applicable) and effecting the IPO such that the Warrantholders shall not recognize income or gain for federal tax purposes (other than as a result of any sale of shares held by them in such IPO). 3 (b) The parties agree that immediately prior to the IPO, they shall cause the IPO Entity (if not Aladdin Enterprises) to enter into a supplement to the Warrant Registration Rights Agreement and to assume all of the rights and obligations of Aladdin Enterprises thereunder with respect to the shares of stock of the IPO Entity to be owned by the Warrantholders to the same extent as Aladdin Enterprises obligations under the Warrant Registration Rights Agreement with respect to the Common Stock (defined thereunder as "Transfer Restricted Securities") in accordance with Section 6 of the Warrant Registration Rights Agreement. 2. Prior to any IPO, Sommer Enterprises, LCNI and Aladdin Enterprises agree that they shall not take or permit any action that would result in Aladdin Enterprises becoming an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended) (the "1940 Act") required to register under the 1940 Act ("Investment Company") and shall use commercially reasonable efforts to ensure that Aladdin Enterprises does not become an Investment Company. 3. (a) Aladdin Enterprises shall provide written notice to the Warrant Agent (a "Warrantholder Notice") within three days after receipt of any written 4 notice (a "Tag Along Notice") by Aladdin Enterprises pursuant to Section 8.4 of the Operating Agreement of Gaming Holdings (the "Holdings Operating Agreement"), and shall include a copy of the Tag Along Notice in the Warrantholder Notice. Aladdin Enterprises shall take no action under Section 8.4 of the Holdings Operating Agreement in respect of the Tag Along Notice until the expiration of ten days from the giving of the Warrantholder Notice (the "Warrantholder Tag Period"). (b) The Warrantholders who hold Common Stock at any time prior to the expiration of the Warrantholder Tag Period, or who give Aladdin Enterprises valid, irrevocable notice of exercise of Warrants together with payment of the exercise price prior to the expiration of the Warrantholder Tag Period (the Common Stock and Common Stock issued or to be issued following such Warrant exercise, collectively, "Tag Eligible Shares") may during the Warrantholder Tag Period by written notice from such Warrantholders to the Warrant Agent and from the Warrant Agent to Aladdin Enterprises (a "Tag Acceptance Notice") request that Aladdin Enterprises accept the offer contained in the Tag Along Notice in respect of all or part of the Holdings Common Shares held by Aladdin Enterprises which represent the indirect interest in 5 Gaming Holdings which correspond to the Tag Eligible Shares held by such Warrantholder. Any Tag Acceptance Notice shall be irrevocable and any notice received outside the Warrantholder Exercise Period shall be of no effect whatsoever. Sommer Enterprises shall not be required to give a Tag Acceptance Notice to Aladdin Enterprises in order to cause Aladdin Enterprises to accept the offer contained in the Tag Along Notice in respect of all or part of the Holdings Common Shares which correspond to the Common Stock held by Sommer Enterprises. (c) Aladdin Enterprises shall accept the offer in the Tag Along Notice for all of (but no more than) the Holdings Common Shares in respect of which Warrantholders ("Accepting Warrantholders") have caused the Warrant Agent to deliver a valid Tag Acceptance Notice within the Warrantholder Tag Period as well as any Holdings Common Shares which correspond to Common Stock held by Sommer Enterprises which Sommer Enterprises desires to be sold. If a Tag Acceptance Notice is not given in respect of any Tag Eligible Shares (other than Tag Eligible Shares held by Sommer Enterprises) within the Warrantholder Tag Period, Aladdin Enterprises shall be deemed to have been instructed not to accept the offer 6 in the Tag Along Notice in respect of the Holdings Common Shares corresponding to such Tag Eligible Shares. (d) If pursuant to Section 8.4 of the Holdings Operating Agreement Aladdin Enterprises sells all of the Holdings Common Shares which it was requested to sell pursuant to this Section 3, or which it attempted to sell for the benefit of Sommer Enterprises, (collectively, the "Participating Holdings Common Shares") the Accepting Warrantholders and Sommer Enterprises shall be allocated the full number of Holdings Common Shares that they requested be sold. If Aladdin Enterprises sells less than all Participating Holdings Common Shares, the Holdings Common Shares actually sold shall be allocated between each Accepting Warrantholder and Sommer Enterprises pro rata in proportion to the number of Participating Holdings Common Shares that Aladdin Enterprises was requested to sell for the benefit of each Accepting Warrantholder or attempted to sell for the benefit of Sommer Enterprises. (e) Upon receipt by Aladdin Enterprises of the purchase price in respect of a sale pursuant to Section 8.4 of the Holdings Operating Agreement, the parties agree that Aladdin Enterprises shall redeem Common Stock (in the case of Sommer Enterprises, first 7 redeeming Class B Common Stock) held by the Accepting Warrantholders and Sommer Enterprises which correspond to the Holdings Common Shares allocated to them pursuant to Section 3(d) in consideration for the payment by Aladdin Enterprises to the Warrant Agent (as agent for such Accepting Warrantholders) and Sommer Enterprises of their share of such purchase price (determined in proportion to the number of Holdings Common Shares allocated to them pursuant to Section 3(d)). 4. WARRANTHOLDER CONVERSION RIGHTS. Subject to compliance with the provisions of the Nevada Gaming Control Act (or any successor statute) and the rules and regulations promulgated thereunder, each Warrantholder shall have the right, exercisable upon written notice to Aladdin Enterprises accompanied by payment of any exercise price in respect of any Warrants held by such Warrantholder, to exchange its Warrants or Class B Common Stock for Holdings Common Shares in such number as shall result in such Warrantholder having a Percentage Interest (as defined in the Holdings Operating Agreement) equal to the percentage of the total Securities (defined as issued and outstanding Common Stock and all Common Stock issuable on the exercise of all Warrants) held by such Warrantholder applied to Aladdin Enterprises' 8 Percentage Interest, such right to be exercisable within twenty days after (and shall be deemed exercised immediately prior to) Aladdin Enterprises taking any of the following actions: (i) Any merger or consolidation involving Aladdin Enterprises, as a result of which the holders of Class B Common Stock will receive any consideration other than common equity securities of the IPO Entity or any holder of Class B Common Stock will receive, as a result of such transaction, any consideration different than that received by any other holder of the Common Stock; (ii) Any sale, lease, exchange, transfer or other disposition, directly or indirectly, in a single transaction or series of related transactions, of all or a substantial part of Aladdin Enterprises' assets, to or with any Person; (iii) Any transfer by Aladdin Enterprises of any of the Holdings Common Shares held by it as of the date hereof other than pursuant to Section 3; 9 (iv) Any recapitalization of Aladdin Enterprises by means of a redemption of shares or a distribution to stockholders, other than as permitted by the Warrant Agreement or in connection with the IPO; (v) Any voluntary dissolution or liquidation of Aladdin Enterprises; (vi) A repurchase or redemption of Common Stock from a stockholder of Aladdin Enterprises that is not pro rata among all stockholders of Aladdin Enterprises (except repurchases of the Common Stock held by an Accepting Warrantholder or Sommer Enterprises following the consummation of a "Tag-Along" sale in accordance with Section 3, or repurchases required as the result of a holder of Common Stock being found unsuitable by the Nevada gaming authorities); and (vii) Any issuance of Common Stock (including securities convertible into Common Stock) by Aladdin Enterprises to any Person other than (A) the Warrantholders upon exercise of the Warrants or (B) in connection with an issuance in which the proceeds thereof are 10 contributed to Gaming Holdings in exchange for a number of Holdings Common Shares, the fair market value of which is equal to such contribution. 5. AMENDMENT AND WAIVER. Any provision of this Agreement may be amended or waived only by an amendment or waiver in writing signed by the parties. 6. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 7. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit of the parties and their permitted assigns and nothing herein express or implied shall give or be construed to give to any person, other than the parties and such assigns, any legal or equitable rights hereunder. 8. NOTICES. All notices provided for in this Agreement shall be deemed to have been given when received and shall be in writing, duly signed by the party giving such notice, and shall be hand delivered, faxed or mailed by registered or certified mail or overnight courier service, as follows: 11 (a) if to Aladdin Enterprises or Sommer Enterprises: Aladdin Enterprises, LLC c/o Aladdin Holdings, LLC 2810 West Charleston Boulevard Suite 58 Las Vegas, Nevada 89102-1934 Telephone: 702-870-1234 Telecopier: 702-870-8733 Attention of Jack Sommer with a copy to: Sigmund Sommer Properties 280 Park Avenue New York, New York 10017 Telephone: 212-661-0700 Telecopier: 212-661-0844 Attention of Ronald Dictrow and Schreck Morris 300 South Fourth Street Suite 1200 Las Vegas, Nevada 89101 Telephone: 702-474-9400 Telecopier: 702-474-9422 Attention of Frank A. Schreck, Esq. and Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Telephone: 212-735-3000 Telecopier: 212-735-2000 Attention of Wallace L. Schwartz, Esq. 12 (b) if to LCNI: London Clubs Nevada, Inc. c/o London Clubs International, plc 10 Brick Street London W1Y 8HQ, England Telephone: 011-44-171-518-0000 Telecopier: 011-44-171-493-6981 Attention of Linda M. Lillis with a copy to: Ohrenstein & Brown, LLP 230 Park Avenue New York, New York 10169 Telephone: 212-682-4500 Telecopier: 212-557-0910 Attention of Peter J. Kiernan, Esq. and Lionel, Sawyer & Collins 300 South 4th Street Suite 1700 Las Vegas, Nevada 89101 Telephone: 702-383-8888 Telecopier: 702-383-8845 Attention of P. Gregory Giordano, Esq. (c) if to the Warrant Agent: State Street Bank and Trust Company Two International Place Boston, Massachusetts 02110 Telephone: Telecopier: Attention of Corporate Trust Administration with a copy to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Telephone: 213-485-1234 Telecopier: 213-891-8763 Attention of Pamela B. Kelly, Esq. 13 9. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. 10. APPLICABLE LAW AND JURISDICTION. This Agreement and the rights and obligations of the parties under this Agreement shall be interpreted and enforced in accordance with and governed by the laws of the State of Nevada without regard to the conflict laws of that State. 11. COMPLIANCE WITH GAMING LAWS. Notwithstanding any other provision of this Agreement, no shares or other equity securities or interest in any entity shall be issued, transferred or otherwise disposed of in any manner pursuant to this Agreement except in compliance with the provisions of the Nevada Gaming Control Act (or any successor statute) and the rules and regulations promulgated thereunder. 14 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the date first above written. SOMMER ENTERPRISES, LLC By: /s/ Jack Sommer ------------------------------- Name: Jack Sommer Title: Manager LONDON CLUBS NEVADA INC. By: /s/ Linda Lillis ------------------------------- Name: Linda Lillis Title: Assistant Secretary ALADDIN GAMING ENTERPRISES, INC. By: /s/ Jack Sommer ------------------------------- Name: Jack Sommer Title: President STATE STREET BANK AND TRUST COMPANY, as warrant agent. By: /s/ Ruth A. Smith ------------------------------- Name: Ruth A. Smith Title: Vice President 15 EX-10.1 13 INDENTURE DATED 2/26/98 ALADDIN GAMING HOLDINGS, LLC ALADDIN CAPITAL CORP. SERIES A AND SERIES B 13 1/2 % SENIOR DISCOUNT NOTES DUE 2010 INDENTURE Dated as of February 26, 1998 STATE STREET BANK AND TRUST COMPANY Trustee CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section 310 (a)(1)...............................................................................................7.10 (a)(2)...............................................................................................7.10 (a)(3)...............................................................................................N.A. (a)(4)...............................................................................................N.A. (a)(5)...............................................................................................7.10 (i)(b)...............................................................................................7.10 (ii)(c)..............................................................................................N.A. 311 (a)..................................................................................................7.11 (b)..................................................................................................7.11 (iii)(c).............................................................................................N.A. 312 (a)..................................................................................................2.05 (b)..................................................................................................13.03 (iv)(c)..............................................................................................13.03 313 (a)..................................................................................................7.06 (b)(2)...............................................................................................7.07 (v)(c)...............................................................................................7.06; 13.02 (vi)(d)..............................................................................................7.06 314 (a)..................................................................................................4.03; 13.02 (A)(b)...............................................................................................10.02 (c)(1)...............................................................................................13.04 (c)(2)...............................................................................................13.04 (c)(3)...............................................................................................N.A. (vii)(e).............................................................................................13.05 (f)..................................................................................................N.A. 315 (a)..................................................................................................7.01 (b)..................................................................................................7.05, 13.02 (A)(c)...............................................................................................7.01 (d)..................................................................................................7.01 (e)..................................................................................................6.11 316 (a)(last sentence)...................................................................................2.09 (a)(1)(A)............................................................................................6.05 (a)(1)(B)............................................................................................6.04 (a)(2)...............................................................................................N.A. (b)..................................................................................................6.07 (B)(c)...............................................................................................2.12 317(a)(1)............................................................................................6.08 (a)(2)...............................................................................................6.09 (b)..................................................................................................2.04 318 (a)..................................................................................................13.01 (b)..................................................................................................N.A. (c)..................................................................................................13.01
N.A. means not applicable *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS
Page ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1 Section 1.01. Definitions................................................................................1 Section 1.02. Other Definitions.........................................................................22 Section 1.03. Incorporation by Reference................................................................22 Section 1.04. Rules of Construction.....................................................................23 ARTICLE 2. THE NOTES.............................................................................................23 Section 2.01. Form and Dating...........................................................................23 Section 2.02. Execution and Authentication..............................................................24 Section 2.03. Registrar and Paying Agent................................................................29 Section 2.04. Paying Agent to Hold Money in Trust.......................................................29 Section 2.05. Holder Lists..............................................................................29 Section 2.06. Transfer and Exchange.....................................................................30 Section 2.07. Replacement Notes.........................................................................42 Section 2.08. Outstanding Notes.........................................................................42 Section 2.09. Treasury Notes............................................................................43 Section 2.10. Temporary Notes...........................................................................43 Section 2.11. Cancellation..............................................................................43 Section 2.12. Defaulted Interest........................................................................43 ARTICLE 3. REDEMPTION AND PREPAYMENT.............................................................................43 Section 3.01. Notices to Trustee........................................................................43 Section 3.02. Selection of Notes to Be Redeemed.........................................................44 Section 3.03. Notice of Redemption......................................................................44 Section 3.04. Effect of Notice of Redemption............................................................45 Section 3.05. Deposit of Redemption Price...............................................................45 Section 3.06. Notes Redeemed in Part....................................................................45 Section 3.07. Optional Redemption.......................................................................45 Section 3.08. Gaming Redemption.........................................................................46 Section 3.09. Mandatory Redemption......................................................................47 Section 3.10. Offer to Purchase by Application of Excess Proceeds.......................................47 ARTICLE 4. COVENANTS.............................................................................................48 Section 4.01. Payment of Notes..........................................................................48 Section 4.02. Maintenance of Office or Agency...........................................................48 Section 4.03. Reports...................................................................................49 Section 4.04. Compliance Certificate....................................................................49 Section 4.05. Taxes.....................................................................................50 Section 4.06. Stay, Extension and Usury Laws............................................................50 Section 4.07. Restricted Payments.......................................................................50 Section 4.08. Distribution and Other Payment Restrictions Affecting Restricted Subsidiaries.............54 Section 4.09. Limitations on Incurrence of Indebtedness and Issuance of Preferred Stock.................55 Section 4.10. Asset Sales...............................................................................58
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Section 4.11. Transactions with Affiliates..............................................................59 Section 4.12. Liens.....................................................................................60 Section 4.13. Line of Business..........................................................................60 Section 4.14. Corporate Existence.......................................................................60 Section 4.15. Offer to Repurchase Upon Change of Control................................................60 Section 4.16. Limitations on Issues and Sales of Capital Stock of Wholly Owned Restricted Subsidiaries..................................................................61 Section 4.17. Insurance.................................................................................61 Section 4.18. Limitations on Status as Investment Company...............................................62 Section 4.19. Gaming Approvals..........................................................................62 Section 4.20. Construction..............................................................................62 Section 4.21. Limitation on Use of Proceeds.............................................................62 Section 4.22. Restrictions on Activities of Capital.....................................................63 Section 4.23. Series A Preferred Interests..............................................................63 ARTICLE 5. SUCCESSORS............................................................................................63 Section 5.01. Merger, Consolidation, or Sale of Assets..................................................63 Section 5.02. Successor Corporation Substituted.........................................................64 ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................64 Section 6.01. Events of Default.........................................................................64 Section 6.02. Acceleration..............................................................................66 Section 6.03. Other Remedies............................................................................67 Section 6.04. Waiver of Past Defaults...................................................................67 Section 6.05. Control by Majority.......................................................................67 Section 6.06. Limitation on Suits.......................................................................67 Section 6.07. Rights of Holders of Notes to Receive Payment.............................................68 Section 6.08. Collection Suit by Trustee................................................................68 Section 6.09. Trustee May File Proofs of Claim..........................................................68 Section 6.10. Priorities................................................................................69 Section 6.11. Undertaking for Costs.....................................................................69 ARTICLE 7. TRUSTEE...............................................................................................69 Section 7.01. Duties of Trustee.........................................................................69 Section 7.02. Rights of Trustee.........................................................................71 Section 7.03. Individual Rights of Trustee..............................................................71 Section 7.04. Trustee's Disclaimer......................................................................71 Section 7.05. Notice of Defaults........................................................................72 Section 7.06. Reports by Trustee to Holders of the Notes................................................72 Section 7.07. Compensation and Indemnity................................................................72 Section 7.08. Replacement of Trustee....................................................................73 Section 7.09. Successor Trustee by Merger, etc..........................................................74 Section 7.10. Eligibility; Disqualification.............................................................74 Section 7.11. Preferential Collection of Claims Against issuers.........................................74 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................74 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..................................74 Section 8.02. Legal Defeasance and Discharge............................................................74
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Section 8.03. Covenant Defeasance.......................................................................75 Section 8.04. Conditions to Legal or Covenant Defeasance................................................75 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.................................................................76 Section 8.06. Repayment to Issuers......................................................................77 Section 8.07. Reinstatement.............................................................................77 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................77 Section 9.01. Without Consent of Holders of Notes.......................................................77 Section 9.02. With Consent of Holders of Notes..........................................................78 Section 9.03. Compliance with Trust Indenture Act.......................................................79 Section 9.04. Revocation and Effect of Consents.........................................................80 Section 9.05. Notation on or Exchange of Notes..........................................................80 Section 9.06. Trustee to Sign Amendments, etc...........................................................80 ARTICLE 10. COLLATERAL AND SECURITY..............................................................................80 Section 10.01. Pledge Agreements........................................................................80 Section 10.02. Authorization of Receipt of Funds by the Trustee Under the Pledge Agreements.............81 Section 10.03. Termination of Security Interest.........................................................81 ARTICLE 11. JOINT AND SEVERAL LIABILITY..........................................................................81 Section 11.01. Joint and Several Liability..............................................................81 ARTICLE 12. INTERCREDITOR AGREEMENT WITH LENDERS UNDER THE BANK CREDIT FACILITY..................................82 Section 12.01. Non-Petition Covenant....................................................................82 Section 12.02. Subordination Upon Substantive Consolidation.............................................83 Section 12.03. When Distribution Must Be Paid Over......................................................83 Section 12.04. Notice by Issuers........................................................................84 Section 12.05. Subrogation..............................................................................84 Section 12.06. Relative Rights..........................................................................84 Section 12.07. Subordination May Not Be Impaired........................................................84 Section 12.08. Distribution or Notice to Credit Agent...................................................85 Section 12.09. Rights of Trustee and Paying Agent.......................................................85 Section 12.10. Authorization to Effect Subordination....................................................85 Section 12.11. Requirement of Certain Provision in Senior Debt..........................................86 ARTICLE 13. MISCELLANEOUS........................................................................................86 Section 13.01. Trust Indenture Act Controls.............................................................86 Section 13.02. Notices..................................................................................86 Section 13.03. Communication by Holders of Notes with Other Holders of Notes............................87 Section 13.04. Certificate and Opinion as to Conditions Precedent.......................................87 Section 13.05. Statements Required in Certificate or Opinion............................................87 Section 13.06. Rules by Trustee and Agents..............................................................88 Section 13.07. No Personal Liability of Directors, Managers, Officers, Employees, Incorporators or Members................................................................88 Section 13.08. Governing Law............................................................................88
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Section 13.09. No Adverse Interpretation of Other Agreements............................................88 Section 13.10. Successors...............................................................................88 Section 13.11. Severability.............................................................................88 Section 13.12. Counterpart Originals....................................................................88 Section 13.13. Table of Contents, Headings, etc.........................................................89 Section 13.14. Contingent Guaranty......................................................................89 Section 13.15. Trustee's Execution of Other Agreements..................................................89
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EXHIBITS Exhibit A-1 FORM OF GLOBAL NOTE Exhibit A-2 FORM OF TEMPORARY REGULATION S GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION
v INDENTURE dated as of February 26, 1998, among Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), Aladdin Capital Corp., a Nevada corporation and a wholly owned subsidiary of Holdings ("Capital" and, together with Holdings, the "Issuers"), and State Street Bank and Trust Company, as trustee (the "Trustee"). The Issuers and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 13 1/2 % Series A Senior Discount Notes due 2010 (the "Series A Notes") and the 13 1/2 % Series B Senior Discount Notes due 2010 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "144A Global Note" means a global note in the form of Exhibit A-1 attached hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Accreted Value" means, (i) as of any date of determination prior to March 1, 2003, with respect to any Note, the sum of (a) the initial offering price (which shall be calculated by discounting the aggregate principal amount at maturity of such Note at a rate of 13 1/2 % per annum, compounded semi-annually on each March 1 and September 1 from March 1, 2003 to the date of issuance) of such Note and (b) the portion of the excess of the principal amount of such Note over such initial offering price which shall have been accreted thereon through such date, such amount to be so accreted on a daily basis at a rate of 13 1/2 % per annum of the initial offering price of such Note, compounded semi-annually on each March 1 and September 1 from the date of issuance of the Notes through the date of determination, computed on the basis of a 360-day year of twelve 30-day months and (ii) as of any date of determination on or after March 1, 2003, with respect to any Note, $1,000. "Acquired Indebtedness" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person and (ii) Indebtedness encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "AHL" means Aladdin Holdings, LLC, a Delaware limited liability company. "Aladdin" means the pending project to develop, construct, equip and operate the Aladdin Hotel & Casino, as described in the Offering Memorandum of the Issuers dated February 18, 1998, relating to the Units. "Aladdin Bazaar" means Aladdin Bazaar, LLC, a Nevada limited-liability company. "Aladdin Music" means Aladdin Music, LLC, a Nevada limited-liability company and a joint venture between the Company and Planet Hollywood International, Inc. "Aladdin Music Operating Agreement" means the Operating Agreement of Aladdin Music, as amended from time to time. "Aladdin Site" means the approximately 18-acre parcel of property located in Las Vegas, Nevada on which the Aladdin is to be constructed. "AMH" means Aladdin Music Holdings, LLC, a Nevada limited-liability company. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "Approved Plans and Specifications" shall mean all plans, specifications, design documents, schematic drawings and related items for the design, architecture and construction of the Aladdin, as delivered to the Trustee on the Issue Date, as the same may be (i) finalized in a manner that reflects a natural evolution of their status on the date hereof and in a manner consistent with the standards set forth in the Bank Credit Facility and (ii) amended in accordance with the Bank Credit Facility. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of Holdings and its Restricted Subsidiaries, taken as a whole, shall be governed by Sections 4.15 and/or 5.1 hereof and not by Section 4.10 hereof), (ii) an Event of Loss or (iii) the issuance or sale by Holdings or any of its Restricted Subsidiaries of Equity Interests of any of Holdings' Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $5.0 million or (b) for net proceeds in excess of $5.0 million. Notwithstanding the foregoing, none of the following items shall be deemed to be an Asset Sale: (i) a transfer of assets by Holdings to a Wholly Owned Subsidiary of Holdings or by a Wholly Owned Subsidiary to Holdings or to another Wholly Owned Subsidiary of Holdings, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary of Holdings to Holdings or to another Wholly Owned Subsidiary of Holdings, (iii) a Restricted Payment that is permitted by Section 4.7 hereof, (iv) the grant on or after the Issue Date by the Company to Aladdin Bazaar of a ground lease on the Desert Passage Site and, upon the subdivision of the Project Site, the transfer by the Company to Aladdin Bazaar of the fee interest in the Desert Passage Site, (v) the grant on or after the Issue Date of a ground lease on the Music Project Site by the Company to AMH and, upon satisfaction of the Music Project Financing, an Investment not to exceed $21.3 million plus the transfer of the Music Project Site, in each case by the Company to AMH and by AMH to Aladdin Music, (vi) the grant on or after the Issue Date of a ground lease relating to the Energy Plant Site by the Company to the Energy Provider, (vii) the transactions contemplated by the Theater Lease in effect on the Issue Date or as described in the Offering Memorandum of the Issuers dated February 18, 2 1998, relating to the Units, (viii) any licensing of trade names or trademarks in the ordinary course of business by Holdings or any of its Restricted Subsidiaries, (ix) leases of space in the Aladdin, in the ordinary course of business, and (x) (a) the transfer of the Aladdin Site and other assets of the Company as a result of the exercise of remedies in respect of the Deed of Trust or the other Lender security documents, including a foreclosure by the Lenders pursuant to the terms of the Deed of Trust or the acceptance by the Lenders of a transfer in lieu of foreclosure or other exercise of remedies and (b) the transfer of the Common Membership Interests as a result of the exercise of remedies by the Lenders in respect of the pledge of such Common Membership Interests pursuant to the Lenders' security documents. "Bank Completion Guaranty" means the Completion Guaranty dated as of the Issue Date, executed by the Trust, London Clubs and Bazaar Holdings in favor of the Administrative Agent and the Lenders. "Bank Construction Disbursement Account" means one or more accounts established pursuant to the Disbursement Agreement into which the proceeds under the Bank Credit Facility are funded and in which the Administrative Agent has a security interest. "Bank Credit Facility" means the Credit Agreement dated as of the Issue Date, among the Company and the lenders named therein for which The Bank of Nova Scotia is acting as Administrative Agent, Merrill Lynch Capital Corporation is acting as Syndication Agent, and Canadian Imperial Bank of Commerce, is acting as Documentation Agent, as such agreement may be amended, supplemented, extended, modified, renewed, replaced or refinanced, from time to time, including any agreement to renew, extend, refinance or replace all or any portion of such facility. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Bazaar Holdings" means Aladdin Bazaar Holdings, LLC, a Nevada limited-liability company. "Board of Managers" means (i) for so long as Holdings is a limited-liability company, the Board of Managers appointed pursuant to the Operating Agreement, or (ii) otherwise, the Board of Directors of Holdings. "Business Day" means any day other than a Legal Holiday. "Capital" has the meaning assigned to it in the preamble to this Indenture. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited-liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person (other than the Management Fee). 3 "Cash Equivalents" means (i) United States Dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. "Cedel" means Cedel Bank, SA. "Change of Control" means the occurrence of any of the following: (i) the sale, lease or transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of transactions, of all or substantially all of the assets of Holdings and its Subsidiaries, taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than to either of Principals, any Related Party or the IPO Entity, (ii) the adoption of a plan relating to the liquidation or dissolution of Holdings, (iii) the liquidation or dissolution of Holdings, (iv) prior to the consummation of a Qualified Public Offering, the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that the Trust, or the beneficiaries of the Trust (whether current or contingent) as of the date hereof which control AHL or Sommer Enterprises, and London Clubs cease to individually or collectively control, directly or indirectly, a majority of the voting power of Holdings, (v) after the consummation of a Qualified Public Offering, the IPO Entity becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by any person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 35% or more of the total voting power entitled to vote in the election of the Board of Managers, and, at such time, the Trust and London Clubs shall fail to collectively beneficially own, directly or indirectly, securities representing greater than the combined voting power of Holdings' Capital Stock as is beneficially owned by such person or group, (vi) the first day on which Holdings fails to own 100% of the issued and outstanding Equity Interests of the Company or Capital, or (vii) the first day on which a majority of the members of the Board of Managers are not nominees of the Trust, or the beneficiaries of the Trust (whether current or contingent) as of the date hereof which control AHL or Sommer Enterprises, or London Clubs or any Subsidiary of the Trust, or the beneficiaries of the Trust (whether current or contingent) as of the date hereof which control AHL or Sommer Enterprises, or London Clubs which is a member of Holdings. "Collateral" has the meaning set forth in the Pledge Agreements. "Commission" means the Securities and Exchange Commission. 4 "Common Membership Interests" means the common membership interests of the Company. "Company" means Aladdin Gaming, LLC, a Nevada limited-liability company, or any successor thereto. "Complex" means the Complex to be constructed in Las Vegas, Nevada, as described in the Offering Memorandum of the Issuers dated February 18, 1998, relating to the Units. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing Consolidated Net Income), plus (ii) provision for taxes based upon consolidated net income or net profits of such Person and its Restricted Subsidiaries for such period, to the extent such provision for taxes was deducted in computing Consolidated Net Income, plus (iii) Consolidated Interest Expense of such Person and its Restricted Subsidiaries for such period, to the extent such expenses were deducted in computing Consolidated Net Income plus (iv) Consolidated Depreciation and Amortization Expense of such Person for such period, to the extent such expenses were deducted in computing Consolidated Net Income plus (v) any other non-cash extraordinary and nonrecurring items decreasing such Consolidated Net Income for such period, minus (vi) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis for such Person and its Restricted Subsidiaries and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of a Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended or distributed, as applicable, to Holdings by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders. "Consolidated Depreciation and Amortization Expense" means with respect to any Person for any period, the total amount of depreciation and amortization expense and other non-cash expenses (excluding any non-cash expense that represents an accrual, reserve or amortization of a cash expenditure for a past, present or future period) of such Person and its Restricted Subsidiaries for such period on a consolidated basis as defined in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any person for any period, the sum of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income (including amortization of debt issuance costs and original issue discount and deferred financing fees, non-cash interest payments, the interest component of Capital Lease Obligations, and net payments (if any) pursuant to Hedging Obligations, excluding amortization of deferred financing fees), (ii) commissions, discounts and other fees and charges paid or accrued with respect to letters of credit and bankers' acceptance financing, (iii) the consolidated interest expense of such person and its Restricted Subsidiaries that was capitalized during such period and (iv) to the extent not included above, (a) the maximum amount of interest which would have to be paid by such Person or its Restricted Subsidiaries under a Guaranty of Indebtedness of any other Person if such Guaranty were called upon and (b) payment to London Clubs on the Issue Date of a fee equal to 1% of the amount of Indebtedness 5 supported and enhanced by the Keep-Well Agreement on the Issue Date and payment of an annual fee equal to 1.5% of the annual average Indebtedness outstanding under the Bank Credit Facility which is supported and enhanced by the Keep-Well Agreement, in each case as set forth in the London Clubs Purchase Agreement as in effect on the date of this Indenture. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided, that (i) the Net Income but not loss for such period of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends, if applicable, or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof in respect of such period, (ii) the Net Income of any Person acquired in a pooling of interests transaction shall not be included for any period prior to the date of such acquisition, (iii) the Net Income for such period of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends, if applicable, or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained or waived in writing) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its equity, (iv) the cumulative effect of a change in accounting principles shall be excluded, and (v) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded, whether or not distributed to Holdings or one of its Restricted Subsidiaries. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common equity holders of such Person and its consolidated Restricted Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred equity (other than Disqualified Stock), less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a consolidated Restricted Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments) and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Issuers. "Credit Agent" means, at any time, the then acting administrative agent as defined in and under the Bank Credit Facility, which initially shall be The Bank of Nova Scotia. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Deed of Trust" means the Deed of Trust to be executed by the Company in favor of the Administrative Agent for the benefit of the Lenders. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. 6 "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A-1 attached hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Desert Passage" means the pending project by Aladdin Bazaar to develop, construct and operate the Desert Passage, as described in the Offering Memorandum of the Issuers dated February 18, 1998, relating to the Units. "Desert Passage Site" means the 12.42-acre portion of the Project Site on which the Desert Passage is to be constructed. "Disbursement Agent" means The Bank of Nova Scotia, as disbursement agent under the Disbursement Agreement. "Disbursement Agreement" means the Disbursement Agreement among Holdings, the Company, The Bank of Nova Scotia, as Administrative Agent under the Bank Credit Facility, the Disbursement Agent, the Investment Intermediary and the Trustee. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require Holdings to repurchase or redeem such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that Holdings may not repurchase or redeem any such Capital Stock pursuant to such provisions prior to Holdings' compliance with Sections 4.10 or 4.15 hereof. "Employment Agreements" means, collectively, (i) the Employment & Consulting Agreement dated July 1, 1997, among Holdings, the Company and Richard J. Goeglein, (ii) the Employment Agreement dated July 28, 1997, among Holdings, the Company and James H. McKennon, (iii) the Employment Agreement dated July 28, 1997, among Holdings, the Company and Cornelius T. Klerk, (iv) the Employment Agreement dated August 19, 1997, among Holdings, the Company and Lee A. Galati (v) the Employment Agreement dated July 1, 1997, among Holdings, the Company and Jose A. Rueda and (vi) the GAI Consulting Agreement. "Energy Plant" means the pending project to develop, construct and operate an energy plant to provide electricity, chilled water and hot water to the Project. "Energy Plant Site" means the 0.65-acre portion of the Project Site on which the Energy Plant is to be constructed. "Energy Provider" means Northwind Aladdin, LLC, a Nevada limited-liability company. 7 "Enterprises" means Aladdin Gaming Enterprises, Inc., a Nevada corporation. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Event of Loss" means, with respect to any property or asset (tangible or intangible, real or personal) any of the following: (i) any loss, destruction or damage of such property or assets; (ii) any institution of any proceedings for the condemnation, seizure or taking of such property or asset or for the exercise of any right of eminent domain; (iii) any actual condemnation, seizure or taking by exercise of the power of eminent domain or otherwise of such property or asset, or confiscation of such property or asset or the requisition of the use of such property or asset; or (iv) any settlement in lieu of clauses (ii) or (iii) above. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Note Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Note Registration Rights Agreement. "Existing Indebtedness" means Indebtedness of Holdings and its Restricted Subsidiaries in existence on the date of this Indenture, until such amounts are repaid. "FF&E" means any furniture, fixtures, equipment and other personal property financed with the proceeds from the incurrence of Indebtedness pursuant to clause (viii) of the second paragraph under Section 4.09 hereof. "FF&E Financing" means the incurrence of Indebtedness, the proceeds of which are utilized solely to finance or refinance the acquisition of (or entry into a capital lease by Holdings or a Subsidiary of Holdings with respect to) FF&E. "Fixed Charge Coverage Ratio" means, with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the referent Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guaranty or redemption of Indebtedness, or such issuance or redemption of Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period. For purposes of making the computation referred to above, acquisitions, dispositions and discontinued operations (as determined in accordance with GAAP) that have been made by Holdings or any of its Restricted Subsidiaries, including all mergers, 8 consolidations and dispositions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be calculated on a pro forma basis assuming that all such acquisitions, dispositions, discontinued operations, mergers, consolidations (and the reduction of any associated fixed charge obligations resulting therefrom) had occurred on the first day of the four-quarter reference period. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense of such Person for such period and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guaranty or Lien is called upon) and (iv) the product of (a) to the extent such Person is not treated as (1) a pass-through entity or (2) a separate entity, in either case for United States federal income tax purposes, all dividend payments, whether or not in cash, on any series of Preferred Stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable (x) solely in Equity Interests of Holdings (other than Disqualified Stock) or (y) to Holdings or a Restricted Subsidiary of Holdings, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory income tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; provided, however, that dividends or distributions paid on the Series A Preferred Interests shall not be counted to the extent that interest payments on the Notes have been taken into account in determining such Fixed Charges. "Force Majeure Event" has the meaning ascribed thereto in the Noteholder Completion Guaranty. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. "GAI, LLC" means GAI, LLC, a Nevada limited-liability company. "GAI Consulting Agreement" means the Consulting Agreement dated as of July 1, 1997, between GAI, LLC and the Company. "Gaming Approval" means every license, finding of suitability, permit, authorization, registration or approval required to own, lease, operate or otherwise conduct the gaming activities of the Company or any of its Affiliates. "Gaming Authority" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States or foreign government, any state, province or any city or other political subdivision, whether now or hereafter existing, or any officer or official thereof, including without limitation, the Nevada Gaming Commission, the Nevada State Gaming Control Board, the Clark County Liquor and Gaming Licensing Board and any other agency with authority to regulate any gaming operation (or proposed gaming operation) owned, managed or operated by Holdings or any of its Subsidiaries. 9 "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A-1 or Exhibit A-2 attached hereto issued in accordance with Sections 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "Government Securities" means securities that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such Government Security or a specific payment of principal of or interest on any such Government Security held by such custodian for the account of the holder of such depository receipt; provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Security or the specific payment of principal of or interest on the Government Security evidenced by such depository receipt. "Guaranty" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, currency exchange or interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange or interest rates. "Holder" means a Person in whose name a Note is registered. "Holdings" has the meaning assigned to it in the preamble to this Indenture. "Holdings Common Membership Interest" means the common membership interests of Holdings. "Holdings Series A Preferred Interests" means Holdings' Series A Preferred Membership Interests issued to London Clubs, AHL or the Trust pursuant to the Operating Agreement in exchange for any payments required pursuant to the Keep-Well Agreement or the Bank Completion Guaranty where none of such parties is responsible for a default leading to such payment. "Holdings Series B Preferred Interests" means the Holdings' Series B Preferred Membership Interests issued to London Clubs, AHL or the Trust pursuant to the Operating Agreement in exchange for payments required pursuant to the Keep-Well Agreement or the Bank Completion Guaranty where one of such parties is responsible for a default leading to such payment. "IAI Global Note" means the global Note in the form of Exhibit A-1 attached hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of 10 and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "In Balance" shall have the meaning ascribed thereto in the Noteholder Completion Guaranty. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guaranty by such Person of any indebtedness of any other Person. Except as stated under the penultimate paragraph under Section 4.09 hereof, the amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Independent Construction Consultant" means Rider Hunt (NV), L.L.C. or any successor thereto acceptable to the Trustee. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of direct or indirect loans (including guarantees of indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If Holdings or any Subsidiary of Holdings sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of Holdings such that, after giving effect to any such sale or disposition, such Person is no longer a subsidiary of Holdings, Holdings shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. "IPO Entity" means Holdings, Enterprises or another entity which controls the Company. "Issue Date" means the date of this Indenture. 11 "Issuers" has the meaning assigned to it in the preamble to this Indenture. "Keep-Well Agreement" means the Keep-Well Agreement dated the Issue Date, executed by AHL, London Clubs and Bazaar Holdings in favor of the Administrative Agent under the Bank Credit Facility and the Lenders. "LCNI" means London Clubs Nevada Inc., a Nevada corporation. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York, the City of Boston, Massachusetts or the City of Las Vegas, Nevada or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Lenders" means the Lenders as defined in the Bank Credit Facility. "Letter of Transmittal" means the letter of transmittal to be prepared by the Issuers and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages then owing pursuant to Section 2.5 of the Note Registration Rights Agreement. "London Clubs" means London Clubs International, plc, a public limited company organized under the laws of England and Wales. "London Clubs Purchase Agreement" means the Purchase Agreement dated September 24, 1997, among London Clubs, LCNI, AHL, Sommer Enterprises, the Sommer Trust and the Company, as amended as of the date of this Indenture. "Management Fee" means the fees payable by the Company to London Clubs pursuant to the Salle Privee Management Agreement in consideration for services to be provided by London Clubs to the Company. "Minimum Aladdin Facilities" means, with respect to the Aladdin, at least 2,465 operating slot machines, 91 operating table games, an operating keno lounge, 1,870 restaurant seats, 1,750 usable parking spaces, 2,210 hotel rooms fit to receive guests, all banking, coin, security and other ancillary equipment and facilities necessary to operate the Aladdin on a 24 hour per day, seven days a week basis. "Minimum Desert Passage Facilities" means, with respect to the Desert Passage, at least 200,000 square feet of retail space, all necessary common areas and all appropriate points of direct access from the Desert Passage to the Aladdin and the exterior area surrounding the Aladdin. 12 "Mountain Spa" means the Mountain Spa development located in Las Vegas, Nevada. "Music Project" means the pending project by Aladdin Music to develop, construct and operate the Music Project, as described in the Offering Memorandum of the Issuers dated February 18, 1998, relating to the Units. "Music Project Financing" means the incurrence by Aladdin Music of Indebtedness, the proceeds of which are utilized solely to finance the development, construction and operation of the Music Project. "Music Project Site" means the 4.75-acre portion of the Project Site on which the Music Project is to be constructed. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends or distributions, as applicable, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities, by, or the extinguishment of any Indebtedness of, such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by Holdings or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting, investment banking fees and sales commissions, employee severance and termination costs, any trade payables or similar liabilities related to the assets sold and required to be paid by the seller as a result thereof and sales, finder's or broker's commissions), and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien (other than the Bank Credit Facility) on the asset or assets that are the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither of the Issuers nor any of their Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes being offered hereby) of the Issuers or any of their Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Issuers or any of their Restricted Subsidiaries. "Non-U.S. Person" means a Person who is not a U.S. Person. 13 "Note Construction Disbursement Account" means the Disbursement Account to be maintained by the Disbursement Agent and pledged to the Disbursement Agent for the benefit of the Trustee pursuant to the terms of the Disbursement Agreement into which approximately $37 million of the net proceeds of the Offering will be deposited. "Note Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Noteholder Completion Guaranty" means the Noteholder Completion Guaranty dated as of the Issue Date, executed by the Trust, London Clubs and Bazaar Holdings in favor of the Trustee. "Note Registration Rights Agreement" means the Note Registration Rights Agreement dated as of the Issue Date, among the Issuers and the Initial Purchasers. "Notes" has the meaning assigned to it in the preamble to this Indenture. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages, liquidated damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the offering of the Units by the Issuers and Enterprises. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of Holdings or Capital, as the case may be, by two Officers of Holdings or Capital, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of Holdings or Capital, that meets the requirements of Section 13.05 hereof. "On Schedule Certificate" shall have the meaning ascribed thereto in the Disbursement Agreement. "Operating" means, (i) with respect to the Aladdin, the first time that (a) all Gaming Approvals have been granted and are not then revoked or suspended, (b) all Liens (other than Permitted Liens) related to the development, construction, and equipping of the Aladdin have been paid or, if payment is not yet due or if such payment is contested in good faith by Holdings, either (1) sufficient funds remain in the Construction Disbursement Account to discharge such Liens or (2) such Liens have been bonded, (c) the Independent Construction Consultant, the general contractor and the architect of the Aladdin shall have delivered one or more certificates to the Trustee each certifying that the Aladdin is complete in all material respects in accordance with the Approved Plans and Specifications therefor and all applicable building laws, ordinances and regulations, (d) the Aladdin is in a condition (including installation of furnishings, fixtures and equipment) to receive guests in the ordinary course of business, (e) gaming and other operations in accordance with applicable law are open to the general public and are being conducted at the Aladdin with respect to at least the Minimum Aladdin Facilities, (f) a permanent or temporary certificate of occupancy has been issued for the Aladdin by the Clark County Building Department and (g) a notice of completion of the Aladdin has been duly recorded; and (ii) with respect to the Desert Passage, the first time that (a) the Desert Passage is in a condition (including installation of all furnishings, fixtures and equipment) to receive customers in the ordinary course of business, (b) retail 14 operations in accordance with applicable law are open to the general public and are being conducted at the Desert Passage with respect to at least the Minimum Desert Passage Facilities, (c) a temporary certificate of occupancy has been issued for the Desert Passage by the Clark County Building Department and (d) a notice of completion of the Desert Passage has been duly recorded. "Operating Agreement" means the Operating Agreement of Holdings, as amended from time to time. "Operating Deadline" means the date which is 28 months after the Issue Date; provided that, if a Force Majeure Event occurs, the Operating Deadline shall be extended for the amount of time that such Force Majeure Event exists but in no event shall the Operating Deadline be extended past the date which is 40 months after the Issue Date. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Issuers, any Subsidiary of the Issuers or the Trustee. "Parking Use Agreement" means the Common Parking Area Use Agreement dated as of the Issue Date, between the Company and Bazaar. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Cedel). "Participating Broker-Dealer" has the meaning set forth in the Note Registration Rights Agreement. "Permitted Investments" means (i) any Investments in Holdings or in a Wholly Owned Restricted Subsidiary of Holdings; (ii) any Investments in Cash Equivalents; (iii) Investments by Holdings or any Restricted Subsidiary of Holdings in a Person that is evidenced by Capital Stock if as a result of such Investment (a) such Person becomes a Wholly Owned Restricted Subsidiary of Holdings or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Holdings or a Wholly Owned Restricted Subsidiary of Holdings; (iv) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (v) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Holdings; (vi) Investments by Holdings or any of its Restricted Subsidiaries in an amount not to exceed $5.0 million in any Person that is engaged in a line of business permitted under Section 4.13 hereof; (vii) receivables owing to Holdings or any of its Restricted Subsidiaries if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as Holdings or any such Restricted Subsidiary deems reasonable under the circumstances; and (viii) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business. "Permitted Junior Securities" means securities of an Issuer authorized by an order or decree of a court of competent jurisdiction in connection with a reorganization that gave effect to (and states in such order or decree that effect has been given to) the subordination of such securities to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent 15 as, or to a greater extent than, the Notes are subordinated to Senior Debt; provided that all such Senior Debt is assumed by the reorganized entity and the rights of the holders of any such Senior Debt are not, without the consent of such holders, altered by such reorganization, which consent shall be deemed to have been given if the holders of such Senior Debt, individually or as a class, shall have approved such reorganization. "Permitted Liens" means (i) Liens in favor of Holdings or any of its Restricted Subsidiaries; (ii) Liens on property of a Person existing at the time such Person became a Restricted Subsidiary, is merged into or consolidated with or into Holdings or any Restricted Subsidiary of Holdings; provided, that such Liens were in existence prior to the contemplation of such acquisition, merger or consolidation and do not extend to any other assets other than those of the Person acquired by, merged into or consolidated with Holdings or any Restricted Subsidiary of Holdings; (iii) Liens on property existing at the time of acquisition thereof by Holdings or any Restricted Subsidiary of Holdings; provided that such Liens were in existence prior to the contemplation of such acquisition; (iv) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business or in the construction of the Aladdin; provided, however, that Holdings has obtained a title insurance endorsement insuring against losses arising therewith or if such Lien arises after completion of the Aladdin, Holdings has bonded within a reasonable time after becoming aware of the existence of such Lien; (v) Liens securing obligations in respect of this Indenture or the Notes; (vi) Liens existing on the Issue Date; (vii) (a) Liens for taxes, assessments or governmental charges or claims or (b) statutory Liens of landlords, and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business or in the construction of the Aladdin, in the case of each of (a) and (b), with respect to amounts that either (1) are not yet delinquent or (2) are being diligently contested in good faith by appropriate proceedings, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) easements, rights-of-way, navigational servitudes, restrictions, minor defects or irregularities in title and other similar charges or encumbrances which do not interfere in any material respect with the ordinary conduct of business of Holdings and its Restricted Subsidiaries; (ix) a leasehold mortgage in favor of a party financing the lessee of space within the Aladdin; provided that neither Holdings nor any of its Restricted Subsidiaries is liable for the payment of any principal of, or interest or premium on, such financing; (x) Liens created by the Reciprocal Easement Agreement; (xi) Liens created by the Disbursement Agreement; (xii) Liens to secure all Obligations under the Bank Credit Facility or the Rate Protection Agreement (as defined in the Bank Credit Facility), as applicable, incurred pursuant to clauses (i), (vii), (viii), (ix), (x) and (xvi) of the second paragraph of Section 4.09 hereof; (xiii) Liens to secure all Obligations under FF&E Financing incurred pursuant to clause (viii) and (x) of the second paragraph of Section 4.09 hereof; (xiv) Liens to secure Indebtedness permitted by clause (vi) of the second paragraph of Section 4.09 hereof; (xv) Liens incurred in connection with Hedging Obligations incurred pursuant to clause (vii) of the second paragraph under Section 4.09 hereof; (xvi) licenses of patents, trademarks and other intellectual property rights granted by Holdings or any of its Restricted Subsidiaries in the ordinary course of business; (xvii) any judgment attachment or judgment Lien not constituting an Event of Default; and (xviii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of such Unrestricted Subsidiaries. "Permitted Refinancing Indebtedness" means any Indebtedness of Holdings or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Holdings or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (i) the Accreted Value or principal amount, as the case may be, of such Permitted Refinancing Indebtedness does not exceed the Accreted Value or 16 principal amount, as the case may be, plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinate in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by Holdings or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, limited-liability company or partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Pledge Agreements" means, collectively, the L.L.C. Interest Pledge and Security Agreement dated as of the Issue Date, to be executed by Holdings in favor of the Trustee pursuant to which Holdings will pledge all Series A Preferred Interests to the Trustee for the benefit of the holders of the Notes and the Holdings Collateral Account Agreement dated as of the Issue Date, to be executed by Holdings in favor of the Disbursement Agent, as agent for the Trustee, pursuant to which Holdings will pledge all of the amounts in the Note Construction Disbursement Account to the Disbursement Agent, as agent for the Trustee, for the benefit of the holders of the Notes. "Preferred Stock" means any Equity Interest with preferential right of payment of dividends or distributions, as applicable, or upon liquidation, dissolution, or winding up. "Principals" means the Trust, or the beneficiaries of the Trust (whether current or contingent) as of the date hereof which control AHL or Sommer Enterprises, and London Clubs. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Project Site" means the approximately 35-acre parcel of property located in Las Vegas, Nevada on which the Complex is to be constructed. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Public Offering" means a public offering of common stock of any IPO Entity which is registered under the Securities Act and results in proceeds of at least $50.0 million; provided, that immediately prior to such public offering, London Clubs, the Trust, or the beneficiaries of the Trust (whether current or contingent) as of the date hereof which control AHL or Sommer Enterprises, and holders of the Warrants and Warrant Shares each hold, directly or indirectly, their respective equity interests in the IPO Entity; provided, further, that London Clubs, the Trust, or the beneficiaries (whether current or contingent) of the Trust as of the date hereof which control AHL or Sommer Enterprises, and holders of the Warrants and Warrants Shares will use their reasonable best efforts to effect such public offering such that the holders of the Warrants and Warrant Shares (x) will not recognize income gain or 17 loss for federal income tax purposes (other than as a result of a sale of their Warrant Shares in such public offering) and (y) will be subject to federal income tax in the same manner and at the same times as would have been the case if the Warrants were originally issued by the IPO Entity. "Reciprocal Easement Agreement" means the Construction, Operation and Reciprocal Easement Agreement dated as of the Issue Date, among the Company, Bazaar, Aladdin Music, as such agreement may be amended, supplemented, restated or otherwise modified from time to time. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "Regulation S Temporary Global Note" means a temporary global Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and the Regulation S Temporary Global Note Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Related Party" means, with respect to any Principal, any Subsidiary of such Principal. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Division of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the one-year restricted period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. 18 "Rule 904" means Rule 904 promulgated the Securities Act. "Salle Privee Management Agreement" means the Salle Privee Management Agreement dated the Issue Date, between the Company and London Clubs. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means (i) all Indebtedness outstanding on the date hereof or hereafter incurred, assumed or guaranteed under the Bank Credit Facility or any other arrangement with respect to the Bank Credit Facility with any Lender (or any Affiliate of a Lender) and permitted under this Indenture, including and together with any Hedging Obligations, and (ii) all Obligations arising under any of the foregoing (including interest, whether or not allowable in a bankruptcy, insolvency or similar proceeding, accruing on Indebtedness or any other Obligation incurred pursuant to the Bank Credit Facility or any other such arrangement after the filing of a petition initiating any proceeding under any bankruptcy, insolvency or similar law or which would have accrued but for such filing). Notwithstanding anything to the contrary in the foregoing, Senior Debt shall specifically not include any Indebtedness that is incurred in violation of this Indenture. "Separation Date" means the earliest to occur of: (i) September 1, 1998; (ii) the date on which a registration statement with respect to the Notes or a registration statement with respect to the Warrants and the Warrant Shares is filed with the Commission under the Securities Act; (iii) the occurrence of a Change of Control or a sale or recapitalization of Enterprises, Holdings or the Company occurs (a "Triggering Event"); (iv) 30 days after a Qualified Public Offering; (v) the occurrence of an Event of Default; or (vi) such earlier date as determined by Merrill Lynch & Co. in its sole discretion. "Series A Notes" has the meaning assigned to it in the preamble to this Indenture. "Series A Preferred Interests" means the Company's Series A Preferred Membership Interests. "Series B Notes" has the meaning assigned to it in the preamble to this Indenture. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Note Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary which would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Site Work Agreement" means the Site Work, Development and Construction Agreement dated as of the Issue Date, among the Company, Aladdin Bazaar and AHL. "Sommer Enterprises" means Sommer Enterprises, LLC, a Nevada limited-liability company. "Stated Maturity" means, with respect to any installment of interest or principal on any Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to 19 repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereto. "Subsidiary" means, with respect to any Person, (i) any corporation, association, or other business entity (other than a partnership) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (including an entity which is not treated as a separate entity for income tax purposes) (a) the sole general partner or the managing partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Tax Amount" means, with respect to any period, without duplication, the increase in the cumulative United States federal, state and local tax liability of holders of equity interests in Holdings or the Company (or, if such holder is a pass-through entity for United States income tax purposes, holders of its equity interests) in respect of their interests in Holdings or the Company for such period plus any additional amounts payable to such holders to cover taxes arising from ownership of such equity interests. "Theater Lease" means the lease of the Theater of the Performing Arts between the Company and Aladdin Music to be entered into prior to the opening of the Music Project. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Trust" means the Trust under Article Sixth u/w/o Sigmund Sommer. "Trustee" means the party named as such in the preamble to this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Units" means the units issued by the Issuers and Enterprises on the Issue Date, each consisting of $1,000 principal amount at maturity of Series A Notes and 10 Warrants to purchase 10 shares of Class B non-voting common stock, no par value, of Enterprises. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A-1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of Managers as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with Holdings or any Restricted Subsidiary of Holdings unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Holdings or such Restricted Subsidiary than those that might be obtained at the time from Persons who 20 are not Affiliates of Holdings; (c) is a Person with respect to which neither Holdings nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Holdings or any of its Restricted Subsidiaries; and (e) has at least one director on its Board of Managers or Board of Directors that is not a director or executive officer of Holdings or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Holdings or any of its Restricted Subsidiaries. Any such designation by the Board of Managers shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Holdings as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, Holdings shall be in default of such covenant). Notwithstanding the above, each of AMH and Aladdin Music shall be an Unrestricted Subsidiary until such time as it is designated to be a Restricted Subsidiary pursuant to the terms of the last sentence of this definition. The Board of Managers may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Holdings of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Warrant Registration Rights Agreement" means the Warrant Registration Rights Agreement dated as of the Issue Date, among Enterprises and the Initial Purchasers. "Warrants" means the warrants to purchase an aggregate of 2,215,000 shares of Class B non-voting common stock, no par value, of Enterprises, issued on the Issue Date as part of the Units. "Warrant Shares" means the shares of Class B non-voting common stock, no par value, of Enterprises issuable upon exercise of the Warrants. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years (calculated to the nearest one-twelfth) obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount or liquidation preference, as applicable, of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned 21 Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. "Working Capital Facility" means a credit facility pursuant to any agreement or agreements for the making of loans or advances on a revolving basis, the issuance of letters of credit and/or the creation of bankers' acceptances to fund the Company's general corporate requirements and any amendment, supplement, extension, modification, renewal, replacement or refinancing from time to time, including any agreement to renew, extend, refinance or replace all or any portion of such facility. SECTION 1.02. OTHER DEFINITIONS.
Defined in Term Section "Affiliate Transaction" 4.11 "Asset Sale Offer" 4.10 "Authentication Order" 2.02 "Benefitted Party" 10.01 "Change of Control Offer" 4.15 "Change of Control Payment" 4.15 "Change of Control Payment Date" 4.15 "Covenant Defeasance" 8.03 "DTC" 2.03 "Event of Default" 6.01 "Excess Proceeds" 4.10 "incur" 4.09 "Legal Defeasance" 8.02 "Note Obligations" 10.01 "Offer Amount" 3.10 "Offer Period" 3.10 "Payment Default" 6.01 "Paying Agent" 2.03 "Purchase Date" 3.10 "Registrar" 2.03 "Trustee" 8.05 "Restricted Payments" 4.07 "Warrant Endorsement" 2.02
SECTION 1.03. INCORPORATION BY REFERENCE. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: 22 "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Issuers and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES SECTION 2.01. FORM AND DATING. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 or Exhibit A-2 attached hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Issuers and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. 23 (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A-1 or Exhibit A-2 attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate and in accordance with the practices and procedures of the Depositary and the Trustee, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by the Issuers and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Issuers as required by Regulation S. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Cedel Bank. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers of each Issuer shall sign the Notes by manual or facsimile signature. The seal of each of the Issuers may be reproduced on the Notes and may be in facsimile form. 24 If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Issuers signed by two Officers of each Issuer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.06 hereof. The Trustee may appoint an authenticating agent acceptable to the Issuers to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuers. All Notes issued prior to the separation described below shall have printed or overprinted thereon the following (the "Warrant Endorsement"). THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT WITH THE NOTES UNTIL THE EARLIEST TO OCCUR OF (I) SEPTEMBER 1, 1998; (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT (III) THE OCCURRENCE OF A CHANGE OF CONTROL OR A SALE OR RECAPITALIZATION OF ENTERPRISES, HOLDINGS OR THE COMPANY OCCURS; (IV) 30 DAYS AFTER A QUALIFIED PUBLIC OFFERING; (V) THE OCCURRENCE OF AN EVENT OF DEFAULT; OR (VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION (THE DATE OF OCCURRENCE OF AN EVENT SPECIFIED IN CLAUSES (I) THROUGH (VI) BEING REFERRED TO AS THE "SEPARATION DATE"). PRIOR TO SUCH DATE, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000 PRINCIPAL AMOUNT OF NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF 10 WARRANTS FOR EACH $1,000 PRINCIPAL AMOUNT SO TRANSFERRED. Under the terms of the warrant agreement relating to the Warrants (the "Warrant Agreement"), the holder of this security may at any time on or after the Separation Date, at its option, by notice to the Trustee elect to separate or separately transfer the Notes and the Warrants represented hereby, in whole or in part, and shall thereafter surrender this security to the Trustee for the exchange of this security, in part, for such Warrant or Warrants and for a Note or Notes of a like aggregate principal amount and of authorized denominations not bearing this Warrant Endorsement; provided that no delay or failure on the part of the Trustee or the Warrant Agent to exchange this security for such Warrant or Warrants and Note or Notes shall affect the separation of such Notes and Warrants represented hereby or their separate transferability. Until such separation, the holder of this security is, for each $1,000 principal amount of Notes, also the record owner of 10 Warrants expiring March 1, 2010, each Warrant to purchase 1 share 25 of Class B non-voting Common Stock, no par value (the "Common Stock"), of Enterprises (subject to adjustment). Enterprises has deposited with the Trustee, as custodian for the Holder of the Notes bearing this Warrant Endorsement, a certificate or certificates for such Warrants to purchase an aggregate of 2,215,000 shares of Common Stock (subject to adjustment). Prior to the separation of the Notes and the Warrants as described above, record ownership of such Warrants is transferable only by the transfer of this Note on the Note register maintained by the Issuers pursuant to the Indenture. After such separation, ownership of a Warrant is transferable only by the transfer of the certificate representing such Warrant in accordance with the provisions of the Warrant Agreement. By accepting a security bearing this Warrant Endorsement, each holder of this security shall be bound by all of the terms and provisions of the Warrant Agreement (a copy of which is available on request to Enterprises or the Warrant Agent); provided, however, that no provision in this Indenture or in the Warrant Agreement shall impose any obligation on the Issuers with respect to the Warrants or the Warrant Agreement or on Enterprises with respect to the Notes or this Indenture. Election to Exercise. On or after the Warrant Exercise Commencement Date (as such term is defined in the Warrant Agreement), the Warrants may be exercised by obtaining from the Warrant Agent the required forms of election to exercise, declaration form and instructions for payment of the Exercise Price (as such term is defined in the Warrant Agreement), tendering the Exercise Price in accordance with the Warrant Agreement and complying with the other conditions to exercise contained in the Warrant Agreement. Upon receiving the required forms and payment of such Exercise Price, the Warrant Agent shall exercise such Warrants subject to, and in accordance with, the provisions of the Warrant Agreement. Election of Exchange. The undersigned registered holder of the security represented hereby irrevocably elects to separate its Notes and Warrants and to exchange this security for a new Note in the principal amount hereof and a Warrant certificate. The undersigned hereby irrevocably instructs the Trustee (A) to issue in the name of the undersigned registered holder a new Note not containing the above Warrant Endorsement in the principal amount equal to the principal amount hereof and (B) to deliver this security to the Warrant Agent pursuant to the provisions of the Warrant Agreement with instructions to issue in the name of the undersigned registered holder a Warrant certificate representing the number of Warrants equal to the number of Warrants represented by this security and to issue (1) a new Warrant certificate to replace the Warrant certificate held on deposit by the Warrant Agent equal to the difference between (x) the number of Warrants represented by the Warrant certificate so held on deposit and (y) the number of Warrants represented by this Security. 26 Dated: ---------------------- Name of Holder of this security: ---------------------- Address: ---------------------- ---------------------- Signature: ---------------------- Note: The above signature must correspond with the name as written upon the face of this security in every particular, without alteration or enlargement whatever and if the certificate representing any principal amount at maturity of this security or the associated Warrants is to be registered in a name other than that in which this security is registered. Signature Guaranteed: ---------------------- Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. Until any Note and the Warrant with which it is initially issued are separated or separately transferred pursuant to the terms of the Warrant Endorsement, the Trustee shall hold such Warrant as custodian on behalf of the Holder of such Note bearing such legends, and the Note and Warrant shall be accompanied by a Unit certificate which shall have printed or overprinted thereon the following. THIS GLOBAL UNIT IS COMPRISED OF THE ATTACHED GLOBAL NOTE AND GLOBAL WARRANT. THE GLOBAL UNIT, THE GLOBAL NOTE AND THE GLOBAL WARRANT ARE COLLECTIVELY REFERRED TO HEREIN AS THE "SECURITIES." THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS A NON-U.S. PERSON AS DEFINED IN RULE 904 UNDER THE SECURITIES ACT, (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH ALADDIN GAMING HOLDINGS, LLC, ALADDIN CAPITAL CORP. OR ALADDIN GAMING ENTERPRISES, INC. (COLLECTIVELY "THE ALADDIN PARTIES") OR ANY AFFILIATE OF THE ALADDIN PARTIES WAS THE OWNER OF THE SECURITIES (OR ANY PREDECESSOR OF THE SECURITIES) ONLY (A) TO THE ALADDIN PARTIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE 27 PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ALADDIN PARTIES', THE TRUSTEE'S AND THE WARRANT AGENT'S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THE GLOBAL NOTE AND THE GLOBAL WARRANT ARE COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THE SECURITIES ARE GLOBAL SECURITIES WITHIN THE MEANING OF THE INDENTURE AND THE WARRANT AGREEMENT AND ARE REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THE SECURITIES ARE NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE WARRANT AGREEMENT, AND NO TRANSFER OF THE SECURITIES (OTHER THAN A TRANSFER OF THE SECURITIES AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ALADDIN PARTIES OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE NOTES AND THE WARRANTS CONSTITUTING A PART OF THE UNITS WILL NOT BE SEPARATELY TRANSFERABLE UNTIL THE EARLIEST OF (I) SEPTEMBER 1, 1998, (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT, (III) THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE) OR A 28 SALE OR RECAPITALIZATION OF ENTERPRISES, ALADDIN GAMING HOLDINGS, LLC OR ALADDIN GAMING, LLC, A NEVADA LIMITED-LIABILITY COMPANY, OCCURS, (IV) 30 DAYS AFTER A QUALIFIED PUBLIC OFFERING (AS DEFINED IN THE INDENTURE) OCCURS, (V) THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE INDENTURE) OR (VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Issuers shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuers may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuers fail to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Issuers or any of their Subsidiaries may act as Paying Agent or Registrar. The Issuers initially appoint The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Issuers initially appoint the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Issuers shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Issuers in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Issuers or a Subsidiary) shall have no further liability for the money. If the Issuers or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuers, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Issuers shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Issuers shall otherwise comply with TIA ss. 312(a). 29 SECTION 2.06. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Issuers for Definitive Notes if (i) the Issuers deliver to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Issuers within 120 days after the date of such notice from the Depositary or (ii) the Issuers in their sole discretion determine that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and deliver a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Issuers for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.06 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Sections 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in 30 accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Issuers in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof. (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Note Registration Rights Agreement and the holder of the beneficial 31 interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Note Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Note Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar or the Issuers so request or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar or the Issuers, as applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Issuers shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: 32 (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Issuers or any of their Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuers shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. Without limiting, and in addition to the restrictions in, Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive 33 Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Note Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is eligible to participate in the Exchange Offer and is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Note Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Note Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar (although it will have no obligation to do so) or the Issuers so request or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar or the Issuers, as applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the 34 conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuers shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Issuers or any of their Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or 35 (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Note Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is eligible to participate in the Exchange Offer and is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Note Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Note Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar (although it shall have no obligation to do so) or the Issuers so request or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar or the Issuers, as applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased in accordance 36 with its standard operating procedures and practices the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased in accordance with its standard operating procedures and practices the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Issuers shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: 37 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Note Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is eligible to participate in the Exchange Offer and is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Note Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Note Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar (although it shall have no obligation to do so) or Issuers so requests, an Opinion of Counsel in a form reasonably acceptable to the Registrar or Issuers, as applicable, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Note Registration Rights Agreement, the Issuers shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 and an Officer's Certificate from the Issuers to the effect that an Exchange Offer in accordance with the Note Registration Rights Agreement has occurred, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the 38 principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that they are eligible to participate in the Exchange Offer and (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuers, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly in accordance with the practices and procedures of the Depositary and the Trustee, and the Issuers shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), 39 (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS." (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR OTHER NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON." (iv) Original Issue Discount Legend. Each Note shall bear a legend in substantially the following form: "FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.40 THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.60, THE ISSUE DATE IS FEBRUARY 26, 1998 AND THE YIELD TO MATURITY IS 15.06 % PER ANNUM." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has 40 been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note or on the schedule maintained by the Depositary in respect of such Global Note for such purposes, in accordance with the Applicable Procedures, by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement or on the schedule maintained by the Depositary in respect of such Global Note for such purposes, in accordance with the Applicable Procedures, shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Issuers' order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any documentary, stamp or other transfer tax or similar governmental charge payable in connection therewith (other than any such documentary, stamp or other transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.07, 3.10, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Issuers, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Issuers shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (c) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuers may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal 41 of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuers shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile (provided that the original is mailed by first class mail within two business days thereafter). SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or the Issuers and the Trustee (and the Issuers if they reasonably request) receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Issuers shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Issuers, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuers to protect the Issuers, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Issuers may charge for their expenses in replacing a Note. Every replacement Note is an obligation of the Issuers and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued and outstanding hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof and in accordance with its standard operating procedures and practices, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Issuers or an Affiliate of the Issuers holds the Note; however, Notes held by the Issuers or a Subsidiary of the Issuers shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Issuers, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. 42 SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuers, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuers, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES Until certificates representing Notes are ready for delivery, the Issuers may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Issuers considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Issuers at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Issuers. The Issuers may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Issuers default in a payment of interest on the Notes, they shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Issuers shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Issuers shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Issuers (or, upon the written request of the Issuers, the Trustee in the name and at the expense of the Issuers) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3. REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Issuers elect to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 37 days but not more than 60 days before a 43 redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the Accreted Value of Notes to be redeemed, (iv) the redemption price and (v) the amount of Liquidated Damages, if any. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed or purchased at any time, selection of Notes for redemption or purchase will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, provided that the Issuers shall notify the Trustee or any listing of the Notes on any national securities exchange or, if the Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate; provided, that no Notes of $1,000 or less shall be purchased or redeemed in part. Notices of redemption or purchase shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date or purchase date (except in the case of redemption required by any Gaming Authority, which may be less than 30 days) to each Holder of Notes to be redeemed or purchased at such Holder's registered address. Notices of redemption may not be conditional. If any Note is to be redeemed or purchased in part only, any notice of redemption or purchase that relates to such Note shall state the portion of the principal amount thereof to be redeemed or purchased. On and after the redemption or purchase date, interest and Liquidated Damages, if any, shall cease to accrete or accrue on Notes or portions thereof called for redemption or purchase. The Trustee shall promptly notify the Issuers in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. Subject to the provisions of Section 3.10 hereof, at least 30 days but not more than 60 days before a redemption date, the Issuers shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the Accreted Value of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in Accreted Value equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; 44 (f) that, unless the Issuers default in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Issuers' request, the Trustee shall give the notice of redemption in the Issuers' names and at their expense; provided, however, that the Issuers shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or prior to 10:00 a.m. (New York City time) on the redemption date, the Issuers shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Issuers any money deposited with the Trustee or the Paying Agent by the Issuers in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Issuers comply with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrete or accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after a record date for the payment of interest but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Issuers to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Issuers shall issue and, upon the Issuers' written request, the Trustee shall authenticate for the Holder at the expense of the Issuers a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in clause (b) of this Section 3.07 and in Section 3.08 hereof, the Notes shall not be redeemable at the option of the Issuers prior to March 1, 2003. Thereafter, the Notes shall be subject to redemption at the option of the Issuers, in whole or in part, upon not less than 30 nor more 45 than 60 days' notice, at the redemption prices (expressed as percentages of Accreted Value) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable date of redemption, if redeemed during the twelve-month period beginning on of the years indicated below:
Year Percentage - ---- ---------- 2003.............................................................. 106.75 % 2004.............................................................. 104.50 % 2005.............................................................. 102.25 % 2006 and thereafter............................................... 100.00 %
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, on or prior to March 1, 2001, the Issuers may redeem up to an aggregate of 35% of the Accreted Value of the Notes at a redemption price of 113 1/2 % of the Accreted Value thereof, plus Liquidated Damages, if any, thereon to the redemption date, with the proceeds of a Qualified Public Offering (which proceeds may be advanced or contributed to the Issuers by the IPO Entity); provided that at least 65% of the Accreted Value remains outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of such Qualified Public Offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. SECTION 3.08. GAMING REDEMPTION. (a) Notwithstanding any other provision of this Indenture, if any Gaming Authority requires that a holder or beneficial owner of Notes must be licensed, qualified or found suitable under any applicable gaming law and such holder or beneficial owner fails to apply for a license, qualification or finding of suitability within 30 days after being requested to do so by such Gaming Authority (or such lesser period that may be required by such Gaming Authority), or if such holder or beneficial owner is notified by such Gaming Authority that such holder or beneficial owner will not be so licensed, qualified or found suitable, the Issuers shall have the right, at their option, (i) to require that such holder or beneficial owner dispose of such holder's or beneficial owner's Notes within 30 days (or such earlier date as may be required by the applicable Gaming Authority) of (a) the termination of the period described above for such holder or beneficial owner to apply for a license, qualification or finding of suitability or (b) receipt of the notice from such Gaming Authority that such holder or beneficial owner will not be licensed, qualified or found suitable by such Gaming Authority or (ii) to call for redemption of the Notes of such holder or beneficial owner at a redemption price equal to the lesser of the price at which such holder or beneficial owner acquired such Notes and the Accreted Value thereof, together with, in either case, accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption or the date of the finding that such holder or beneficial owner will not be licensed, qualified or found suitable, which may be less than 30 days following the notice of redemption, if so ordered by such Gaming Authority or required by applicable gaming laws. (b) In connection with any redemption pursuant to this Section 3.08, and except as may be required by a Gaming Authority, the Issuers shall be required to comply with Sections 3.01 through 3.06 hereof. 46 SECTION 3.09. MANDATORY REDEMPTION. Except as set forth under 4.10 and 4.15 hereof, the Issuers shall not be required to make mandatory redemptions or sinking fund payments prior to maturity with respect to the Notes. SECTION 3.10. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Issuers shall be required to commence an Asset Sale Offer, they shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of not less than 30 nor more than 60 days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). Upon the termination of the Offer Period (the "Purchase Date"), the Issuers shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Issuers shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Issuers default in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Issuers, a depositary, if appointed by the Issuers, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; 47 (g) that Holders shall be entitled to withdraw their election if the Issuers, the depositary or the Paying Agent, as the case may be, receives, not later than two Business Days prior to the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter duly executed by the Holder setting forth the name of the Holder, the Accreted Value of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate Accreted Value of Notes surrendered by Holders exceeds the Offer Amount, the Issuers shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Issuers so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued replacement Notes equal in Accreted Value to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Issuers shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof properly tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes properly tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Issuers in accordance with the terms of this Section 3.10. The Issuers, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Issuers for purchase, and the Issuers shall promptly issue a new Note, and the Trustee, upon written request from the Issuers shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Issuers to the Holder thereof. Other than as specifically provided in this Section 3.10, any purchase pursuant to this Section 3.10 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Issuers shall pay or cause to be paid the Accreted Value of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Accreted Value, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Issuers or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Issuers in immediately available funds and designated for and sufficient to pay all Accreted Value, premium, if any, and interest then due. The Issuers shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Note Registration Rights Agreement. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuers shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and 48 demands to or upon the Issuers in respect of the Notes and this Indenture may be served. The Issuers shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Issuers may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuers of their obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Issuers shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Issuers hereby designate the Corporate Trust Office of the Trustee as one such office or agency of the Issuers in accordance with Section 2.03. SECTION 4.03. REPORTS. Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Issuers shall furnish to the Holders (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuers were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of Holdings and its consolidated Subsidiaries (provided that, prior to the time that the Issuers file such information with the Commission for public availability, showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of Holdings and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of Holdings and, subsequent to such time, showing such reasonable detail as required by the Commission) and, with respect to the annual information only, a report thereon by the Issuers' certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Issuers were required to file such reports, in each case within the time periods specified in the Commission's rules and regulations. In addition, following the consummation of the exchange offer contemplated by the Note Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, the Issuers shall file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Issuers shall, for so long as any Notes remain outstanding, furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Issuers shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Issuers and their Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Issuers have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her 49 knowledge the Issuers have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuers are taking or propose to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the Accreted Value of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Issuers are taking or propose to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03 above shall be accompanied by a written statement of the Issuers' independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Issuers have violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Issuers shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Issuers are taking or proposes to take with respect thereto. SECTION 4.05. TAXES. The Issuers shall pay, and shall cause each of their Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies of the Issuers or their Subsidiaries, as applicable, except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. The Issuers covenant (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuers (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. RESTRICTED PAYMENTS. (a) Prior to the date the Aladdin is Operating, except as permitted in clauses (iv), (v), (vi), (vii), (viii), (xi), (xii), (xiv), (xv), (xix), (xx), (xxi), (xxii) or (xxiv) of paragraph (c) below, Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend, if applicable, or make any other payment or distribution on account of Holdings' or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving either of the Issuers) or to the direct or indirect 50 holders of Holdings' or any of its Restricted Subsidiaries' Equity Interests in any capacity (other than dividends, if applicable, or distributions payable in Equity Interests (other than Disqualified Stock) of Holdings (or accretions thereon) or dividends, if applicable, or distributions payable to Holdings by a Wholly Owned Subsidiary of Holdings); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving either of the Issuers) any Equity Interests of Holdings or any Subsidiary of Holdings or any direct or indirect parent of Holdings or other Affiliate of Holdings (other than any such Equity Interests owned by Holdings or any Wholly Owned Subsidiary of Holdings); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is pari passu with or subordinated to the Notes (other than the Notes), except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"). (b) Following the date on which the Aladdin is Operating, subject to paragraph (c) below, Holdings shall not and shall not permit any of its Restricted Subsidiaries to make, directly or indirectly, any Restricted Payments unless, at the time of and after giving effect to such Restricted Payment: (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) Holdings would, at the time of such Restricted Payment, have a Fixed Charge Coverage Ratio for its most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Restricted Payment is proposed to be made of at least 2.25 to 1.0, determined on a pro forma basis after giving effect to such Restricted Payment as if it had been made at the beginning of such four quarter period; and (iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments (except as provided in the last sentence of paragraph (c) below) made by Holdings and its Restricted Subsidiaries after the Issue Date is less than the sum, without duplication, of (A) 50% of (1) the Consolidated Net Income of Holdings for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date on which the Aladdin becomes Operating to the end of Holdings' most recently ended fiscal quarter for which internal financial statements are available (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit) less (2) the amount paid or to be paid in respect of such period pursuant to clause (v) of paragraph (c) below, plus (B) 100% of the aggregate net cash proceeds received by Holdings since the Issue Date from capital contributions or the issue or sale of Equity Interests of Holdings (other than Disqualified Stock) or Disqualified Stock or debt securities of the Issuers that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Issuers and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), in any case other than (1) amounts received by Holdings pursuant to payments being made by any party in connection with its obligations under the Keep-Well Agreement or the Bank Completion Guaranty or (2) any amounts received by Holdings or deemed received by Holdings from a Restricted Subsidiary in connection with a conversion by Holdings to a corporation (other than amounts received by Holdings from a new issuance of Equity Interests of Holdings for cash), plus (C) to the extent not otherwise included in Holdings' Consolidated Net Income, 100% of the cash dividends, if applicable, or distributions or the amount of the cash principal and interest payments received since the Issue Date by Holdings or any Restricted Subsidiary from any Unrestricted Subsidiary or in respect of 51 any Restricted Investment (other than dividends, if applicable, or distributions to pay obligations of or with respect to such Unrestricted Subsidiary such as income taxes) until the entire amount of the Investment in such Unrestricted Subsidiary has been received or the entire amount of such Restricted Investment has been returned, as the case may be, and 50% of such amounts thereafter. In the event that the Issuers convert an Unrestricted Subsidiary to a Restricted Subsidiary, the Issuers may add back to this clause (iii) the aggregate amount of any Investment in such Subsidiary that was a Restricted Payment at the time of such Investment. (c) The provisions set forth in paragraph (b) above shall not prohibit (i) the payment of any dividend, if applicable, or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any pari passu or subordinated indebtedness of Holdings or Equity Interests of Holdings in exchange for, or out of the net cash proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of Holdings) of, other Equity Interests of Holdings (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (b)(iii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase, retirement or other acquisition of any pari passu or subordinated indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) any redemption required pursuant to Section 3.08 hereof; (v) for so long as Holdings or the Company is treated as a pass-through entity, or the Company is not treated as a separate entity, for United States federal income tax purposes (as evidenced by an opinion of counsel, subject to usual qualifications and in reliance on customary representations, at least annually), distributions to equity holders of Holdings or the Company, as applicable, in an amount not to exceed the Tax Amount for such period; provided, however, that (A) prior to any distributions of Tax Amounts, Holdings or the Company, as applicable, shall deliver an officers' certificate to the Trustee to the effect that Holdings or the Company, as applicable, is a limited-liability company taxable as a partnership or other substantially similarly treated pass-through entity, or the Company is not treated as a separate entity, for federal income tax purposes and (B) at the time of such distributions, the most recent audited financial statements of Holdings and the Company reflect that Holdings and the Company were each treated as a limited-liability company taxable as a partnership or other substantially similarly treated pass-through entity for federal income tax purposes for the period covered by such financial statements; (vi) the grant on or after the Issue Date by the Company to Aladdin Bazaar of a ground lease on the Desert Passage Site and, upon the subdivision of the Project Site, the transfer by the Company to Aladdin Bazaar of the fee interest in the Desert Passage Site; (vii) the grant on or after the Issue Date of a ground lease relating to the Energy Plant Site by the Company to the Energy Provider; (viii) the grant on or after the Issue Date of a ground lease on the Music Project Site by the Company to AMH and, upon consummation of the Music Project Financing, an Investment not to exceed $21.3 million plus the transfer of the Music Project Site, in each case by the Company to AMH and by AMH to Aladdin Music in exchange for preferred membership interests in Aladdin Music pursuant to the Aladdin Music Operating Agreement as in effect on the Issue Date; (ix) on and after September 1, 2003, payments of cash distributions on the Series A Preferred Interests by the Company to Holdings in an amount sufficient to enable Holdings to make payments required to be made in respect of the Notes in an amount not to exceed the amount payable thereunder in accordance with the terms thereof in effect on the Issue Date; (x) payment to London Clubs of the Management Fee pursuant to the Salle Privee Management Agreement as in effect on the Issue Date; (xi) payment to London Clubs on the Issue Date of a fee equal to 1% of the amount of Indebtedness supported and enhanced by the Keep-Well Agreement on the Issue Date and payment of an annual fee equal to 1.5% of the annual average Indebtedness outstanding under the Bank Credit Facility which is supported and enhanced by the Keep-Well Agreement, in each case as set forth in the London Clubs Purchase Agreement as in effect on the date hereof; (xii) payments or 52 distributions by the Company to Holdings to effect redemptions of the Series A Preferred Interests so long as Holdings utilizes the proceeds of such payments to make an offer to purchase the Notes as required under this Indenture or to redeem the Notes as permitted under this Indenture; (xiii) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Holdings or any of its Restricted Subsidiaries held by any member of Holdings' or any of its Restricted Subsidiaries' management pursuant to any management equity subscription agreement or stock option agreement, including, without limitation, pursuant to the exercise of puts of common membership interests of Holdings by employees of Holdings as set forth in any Employment Agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $2.0 million in the aggregate prior to the maturity of the Notes in any twelve-month period; (xiv) the payment of salary, bonus and other benefits payable pursuant to the Employment Agreements as amended from time to time; provided that any amendment to any Employment Agreement has been determined by the Management Committee to have been made in the ordinary course of business on terms customary in the hotel/casino business; (xv) the issuance of Holdings Series A Preferred Interests or Holdings Series B Preferred Interests and dividends, if applicable, and distributions thereon made pursuant to the Operating Agreement as in effect on the Issue Date in exchange for any payments required pursuant to the Keep-Well Agreement or the Bank Completion Guaranty; (xvi) intercompany payments between Holdings and its Wholly Owned Restricted Subsidiaries, including without limitation, debt repayments between or among Holdings and its Wholly Owned Restricted Subsidiaries; (xvii) following a Qualified Public Offering, dividends or common stock buybacks in an aggregate amount in any calendar year not to exceed 6% of the aggregate net proceeds received by the IPO Entity in connection with such Qualified Public Offering; (xviii) repurchases of Capital Stock of Holdings deemed to occur upon exercise of options to acquire Capital Stock of Holdings if such repurchased Capital Stock represents a portion of the exercise price of such options; (xix) payments by the Company to Holdings to enable Holdings to pay any Liquidated Damages on the Notes so long as Holdings utilizes the proceeds of such payments for the payment of such Liquidated Damages; (xx) retainer payments made pursuant to Section 4(a) of the GAI Consulting Agreement; (xxi) the payment of up to $3.0 million to the Trust to reimburse the Trust for development costs incurred by the Trust on behalf of the Company prior to the Issue Date and the payment of up to $0.9 million to reimburse the Trust for development costs incurred by the Trust on behalf of the Company after the Issue Date; (xxii) distributions to Holdings or Enterprises in an amount not to exceed the fees and expenses incurred in connection with the obligation to file and cause to become effective registration statements as required by the Note Registration Rights Agreement and the Warrant Registration Rights Agreement; (xxiii) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Holdings held by employees of Holdings or the Company pursuant to any stock ownership or option plan in effect from time to time; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $2.0 million in any twelve-month period; and (xxiv) cancellations or redemptions of Holdings Common Membership Interests held by GAI, LLC or any member of Holdings' management pursuant to adjustments to be made under the Operating Agreement as in effect on the Issue Date as a result of the exercise of Warrants; provided that no payments permitted by clauses (i)-(ix) and (xi)-(xxiv) above shall be made if a Default or an Event of Default shall have occurred and be continuing as a consequence thereof. Any payments made pursuant to clauses (ii), (iii), (v), (vi), (vii), (viii), (ix), (xi), (xii), (xiv), (xv), (xvi), (xviii), (xx), (xxi), (xxii) and (xxiv) of this paragraph shall not be taken into account for purposes of calculating the amount of Restricted Payments in clause (b)(iii) above and all payments made pursuant to the remaining clauses of this paragraph and under the definition of "Permitted Investments" shall be taken into account for purposes of such clause (b)(iii) above. 53 (d) The Board of Managers may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by Holdings and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under paragraph (b) above. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. (e) The amount of all Restricted Payments (other than cash and those Restricted Payments set forth in clauses (vi), (vii), (viii) and (xxiv) of paragraph (c) of this Section 4.07) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by Holdings or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Managers whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment, Holdings shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed. SECTION 4.08. DISTRIBUTION AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Restricted Subsidiary to (i) (a) pay dividends, if applicable, or make any other distributions to Holdings or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits or (b) pay any Indebtedness owed to Holdings or any of its Restricted Subsidiaries, (ii) make loans or advances to Holdings or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to Holdings or any of its Restricted Subsidiaries, except, in each case, for such encumbrances or restrictions existing under or by reason of (a) the Bank Credit Facility, as in effect as of the Issue Date, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings, are no more restrictive with respect to such dividend, if applicable, and other payment restrictions than those contained in the Bank Credit Facility as in effect on the Issue Date, (b) this Indenture and the Notes, (c) any instrument governing Indebtedness or Capital Stock of a Person acquired by Holdings or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, provided, further, that any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of any such instrument are no more restrictive, taken as a whole, than those contained in such instrument, (d) customary non-assignment provisions in leases entered into in the ordinary course of business, (e) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (iii) above on the property so acquired, (f) any agreement for the sale of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale, (g) applicable law or any applicable rule or order of any Gaming Authority, (h) Permitted Liens, (i) Permitted Refinancing 54 Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, (j) secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.12 hereof that limits or restricts the right of the debtor to dispose of the assets securing such Indebtedness, (k) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business, (l) rights of first refusal substantially of the type set forth in the Operating Agreement, (m) contractual restrictions in effect on the Issue Date and (n) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (b) and (d) through (n) above, provided, that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Board of Managers, no more restrictive with respect to such dividend, if applicable, and other payment restrictions than those contained in the dividend, if applicable, or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. SECTION 4.09. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. Except as provided in the following paragraph, Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness (including Acquired Indebtedness) or issue any shares of Disqualified Stock, and that Holdings shall not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock. Holdings and its Restricted Subsidiaries may incur the following Indebtedness or issue the following shares of Disqualified Stock: (i) the Company may incur Indebtedness under the Bank Credit Facility; provided that the aggregate principal amount of all Indebtedness outstanding under the Bank Credit Facility after giving effect to each such incurrence, including all Indebtedness incurred to refinance or replace any Indebtedness incurred pursuant to this clause (i), does not exceed $430.0 million less (a) the aggregate amount of all permanent principal repayments, optional or mandatory, made from time to time after the date hereof with respect to such Indebtedness (other than repayments made in connection with a refinancing thereof) and (b) permanent reductions in the available term Indebtedness under the Bank Credit Facility resulting from the application of Asset Sales proceeds; provided, further, that the maximum principal amount of Indebtedness that may be outstanding under the Bank Credit Facility pursuant to this clause (i) may be increased pursuant to the incurrence of Indebtedness thereunder for the purposes and subject to the maximum amounts and other limitations set forth in clauses (vii), (viii), (ix) and (xvi) of this paragraph; provided that for any amount of such Indebtedness incurred under this clause (i), the amount of Indebtedness permitted to be incurred under such other clause shall be correspondingly decreased; (ii) Holdings or any of its Restricted Subsidiaries may incur any Existing Indebtedness, including any Permitted Refinancing Indebtedness incurred to refinance or replace any such Indebtedness; 55 (iii) the Issuers may incur Indebtedness represented by the Notes; (iv) the Company may issue the Series A Preferred Interests to Holdings, which shall pledge such interests to the Trustee for the benefit of the Holders, and the Company may issue other shares of Preferred Stock so long as such Preferred Stock is junior to the Series A Preferred Interests, including any Preferred Stock issued in exchange therefor with terms no less favorable to the holders of the Notes than the Series A Preferred Interests; (v) Holdings may issue Holdings Series A Preferred Interests or Holdings Series B Preferred Interests pursuant to the terms of the Operating Agreement as in effect on the date hereof made in consideration of payments under the Keep-Well Agreement or the Bank Completion Guaranty; (vi) Holdings and its Restricted Subsidiaries may incur Indebtedness represented by Capital Lease Obligations incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of Holdings or such Restricted Subsidiary, in an aggregate principal amount, including any Permitted Refinancing Indebtedness incurred to refinance or replace any Indebtedness incurred pursuant to this clause (vi), not to exceed $10.0 million at any time outstanding; (vii) Holdings and its Restricted Subsidiaries may incur Hedging Obligations that are incurred (a) for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or (b) for the purpose of fixing or hedging currency exchange rate risk with respect to any currency exchange; provided, however, that the notional principal amount of any such Hedging Obligation does not exceed the principal amount of Indebtedness to which such Hedging Obligations relate; (viii) Holdings and the Company may incur the FF&E Financing; provided, however, that (a) the principal amount of such Indebtedness does not exceed the cost (including sales and excise taxes, installation and delivery charges and other direct costs of, and other direct expenses paid or charged in connection with, such purchase) of the FF&E purchased or leased with the proceeds thereof and (b) the aggregate principal amount of such Indebtedness, including any Permitted Refinancing Indebtedness incurred to refinance or replace any Indebtedness incurred pursuant to this clause (viii), does not exceed $80.0 million (including obligations characterized as operating leases or other off-balance sheet financing arrangements) outstanding at any time; (ix) to the extent that such incurrence does not result in incurrence by Holdings or any of its Restricted Subsidiaries of any obligation for the payment of borrowed money of others, Holdings or any of its Restricted Subsidiaries may incur Indebtedness solely in respect of performance bonds, standby letters of credit, bankers' acceptances or completion guarantees, provided, that such Indebtedness was incurred in the ordinary course of business of Holdings or any of its Restricted Subsidiaries and in an aggregate principal amount outstanding under this clause (ix) at any one time of not more than $10.0 million; (x) the incurrence by Holdings or any Restricted Subsidiary of (a) at any time prior to the Operating Deadline, additional Indebtedness under clause (i) or (viii) of this paragraph in an aggregate amount not to exceed $40.0 million, plus (b) after a default of the "In Balance" requirements of this Indenture and at any time prior to the Operating Deadline, additional Indebtedness under clause (i) or (viii) in an aggregate amount not to exceed $50.0 million 56 (provided that Indebtedness incurred pursuant to this clause (x)(b) is matched, dollar for dollar, by additional equity investments by the Principals or any Related Party); (xi) after the Aladdin is Operating, Holdings may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock if (a) the Fixed Charge Coverage Ratio for Holdings' most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.25 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom) as if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period; (xii) after the Aladdin is Operating, any Restricted Subsidiary of Holdings may incur Indebtedness (including Acquired Indebtedness) if the Fixed Charge Coverage Ratio for such Restricted Subsidiary's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred would have been at least 2.5 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom) as if the additional Indebtedness has been issued at the beginning of such four-quarter period; (xiii) Holdings and its Restricted Subsidiaries may incur Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, substitute or refund Indebtedness that was permitted to be incurred under clauses (ii), (v), (vii), (xi), (xii) and (xiii) of this Section 4.09; (xiv) after the Aladdin is Operating, intercompany Indebtedness between or among Holdings and any of its Wholly Owned Restricted Subsidiaries will be permitted; provided, however, that (a) if Holdings is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes and (b)(1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Holdings or a Wholly Owned Restricted Subsidiary thereof and (2) any sale or other transfer of any such Indebtedness to a Person that is neither Holdings nor a Wholly Owned Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by Holdings or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (xiv); (xv) after the Aladdin is Operating, the guaranty by Holdings or any Restricted Subsidiary of Indebtedness of Holdings or a Restricted Subsidiary that was permitted to be incurred by another provision of this Section 4.09 shall be permitted; (xvi) after the Aladdin is Operating, the Company may incur Indebtedness under any Working Capital Facility in an aggregate amount at any time outstanding not to exceed $20.0 million; and (xvii) Holdings and its Restricted Subsidiaries may incur Indebtedness in an aggregate principal amount outstanding not to exceed $10.0 million. For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Indebtedness permitted in clauses 57 of the second or third paragraph of this Section 4.09, the Issuers shall, in their sole discretion, classify such item of Indebtedness in any manner that complies with this Section 4.09 and such item of Indebtedness will be treated as having been incurred pursuant to only such clause or clauses. Accrual of interest, the accretion of the accreted value or principal and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this Section 4.09. Holdings shall not incur any Indebtedness that is contractually subordinated in right of payment to any other Indebtedness of Holdings unless such Indebtedness is also contractually subordinated in right of payment to Notes on substantially identical terms; provided, however, that no Indebtedness of Holdings shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of Holdings solely by virtue of being unsecured. SECTION 4.10. ASSET SALES Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale prior to the date the Aladdin is Operating. After the date the Aladdin is Operating, Holdings shall not and shall not permit any of its Restricted Subsidiaries to consummate an Asset Sale, unless (i) no Default or Event of Default exists or is continuing immediately prior to or after giving effect to such Asset Sale, (ii) Holdings or the Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Managers or the Board of Directors, as the case may be, and set forth in an Officers' Certificate delivered to the Trustee) of the assets sold or otherwise disposed of and (iii) at least 75% of the consideration therefor received by Holdings or such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided, however, that the amount of (a) any liabilities (as shown on Holdings' or such Restricted Subsidiary's most recent balance sheet (or the notes thereto)) of Holdings or such Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms expressly subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Holdings and such Restricted Subsidiary, as the case may be, from further liability and (b) any securities, notes or other obligations received by Holdings or such Restricted Subsidiary from such transferee that are within 20 days thereof converted by Holdings or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 180 days after the receipt of any Net Proceeds of any Asset Sale, Holdings or such Restricted Subsidiary, as the case may be, may apply such Net Proceeds (i) to the making of a capital expenditure or the acquisition of long-term tangible assets of Holdings or such Restricted Subsidiary used by or useful to Holdings or such Restricted Subsidiary in the line of business in which Holdings or such Restricted Subsidiary is permitted to be engaged pursuant to Section 4.13 hereof; or (ii) following the date on which the Aladdin is Operating, to a repayment of, or permanent reduction of commitments under Indebtedness of any Restricted Subsidiary, including without limitation, amounts available under the Bank Credit Facility. Pending the final application of any such Net Proceeds, Holdings or such Restricted Subsidiary may temporarily reduce revolving credit borrowings or invest in Cash Equivalents. Any Net Proceeds from Asset Sales that are not invested or applied as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings will be required to make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum Accreted Value of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the 58 date of purchase, which date shall be no less than 30 nor more than 60 days after the date of the Asset Sale Offer, in accordance with the procedures set forth in this Indenture; provided, however, that if any Restricted Subsidiary of Holdings receives proceeds from such Asset Sale, such Restricted Subsidiary shall redeem, or make available to the Company such Excess Proceeds so that the Company may redeem, an amount of Series A Preferred Interests sufficient for Holdings to utilize the proceeds from such redemption to make the Asset Sale Offer required by this provision. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, Holdings or the Restricted Subsidiary, as the case may be, may, subject to the provisions of this Indenture use any remaining Excess Proceeds for general corporate purposes. If the aggregate Accreted Value of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in the manner described under Section 3.02 hereof. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. SECTION 4.11. TRANSACTIONS WITH AFFILIATES. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to Holdings or such Restricted Subsidiary than those that would have been obtained in a comparable transaction by Holdings or such Restricted Subsidiary with an unrelated Person and (ii) Holdings delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above, (b) with respect to any Affiliate Transaction or series of Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Management Committee set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved unanimously by the Management Committee and (c) with respect to any Affiliate Transaction involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The foregoing provisions will not apply to any payments, transfers or dispositions pursuant to the following: (i) any employment, indemnification, noncompetition or confidentiality agreement entered into by Holdings or any of its Restricted Subsidiaries in the ordinary course of business on terms customary in the hotel/casino business; (ii) transactions between or among Holdings and any of its Restricted Subsidiaries; (iii) Restricted Payments permitted by Section 4.07 hereof; (iv) the Noteholder Completion Guaranty; (v) the Keep-Well Agreement; (vi) the Salle Privee Management Agreement; (vii) the Reciprocal Easement Agreement as in effect on the Issue Date; (viii) the Parking Use Agreement as in effect on the Issue Date; (ix) any amendments, modifications, restatements, renewals, supplements and replacements to the Reciprocal Easement Agreement or the Parking Use Agreement; provided, that the Board of Managers determines in good faith that any such amendment is not materially adverse to the Holders; (x) the Theater Lease; (xi) the payment by Aladdin Bazaar to the Company of up to $14.2 million pursuant to Section 4.5(a) of the Site Work Agreement, (xii) loans or advances to employees of Holdings or its Restricted Subsidiaries to fund the exercise price of options granted under employment agreements or stock option plans or agreements of Holdings or its Restricted Subsidiaries, in each case, as in effect on the Issue Date, not to exceed $0.5 million outstanding at any one time; and (xiii) the payment of reasonable fees to members of the Board of Managers or the Board of Directors, as the case may be, of Holdings or any of its Restricted Subsidiaries who are not employees of Holdings or any of its Restricted Subsidiaries. 59 SECTION 4.12. LIENS. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien on any asset owned as of the Issue Date or thereafter acquired, or any proceeds, income or profits therefrom, or assign or convey any right to receive income therefrom, unless the Notes are equally and ratably secured (except that Liens securing Indebtedness which is subordinated to the Notes shall not be permitted in any circumstances), except for (a) Liens securing the Notes; (b) Liens securing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens do not extend to or cover any property or assets of Holdings or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and (c) Permitted Liens. SECTION 4.13. LINE OF BUSINESS. For so long as any Notes are outstanding, Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business or activity other (i) than the gaming and hotel resort businesses and such business activities as are incidental or related thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including, without limitation, any entertainment, recreation, convention, trade show, meeting, retail or other activity or business designed to promote, market, support, develop, construct or enhance such business and (ii) the management of gaming activities at Mountain Spa. In addition, until the Aladdin is Operating, Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business, development or investment activity other than (i) at or in conjunction with the Complex and (ii) the management of gaming activities at Mountain Spa. SECTION 4.14. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Issuers shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) their limited-liability company or corporate existence, as applicable, and the corporate, limited-liability company, partnership or other existence of each of their Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Issuers or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Issuers and their Subsidiaries; provided, however, that the Issuers shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of their Subsidiaries, if the Board of Managers in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuers and their Subsidiaries, taken as a whole. SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder will have the right to require the Issuers to purchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash equal to 101% of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Issuers will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to purchase Notes on the date specified in such notice, which date shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the 60 "Change of Control Payment Date"), pursuant to the procedures required by this Indenture and described in such notice. The Issuers shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the purchase of the Notes as a result of a Change of Control. On the Change of Control Payment Date, the Issuers shall, to the extent permitted by law, (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the paying agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered and (iii) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officers' Certificate stating that such Notes or portions thereof have been tendered to and purchased by the Issuers. The paying agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail to each Holder (or cause to be transferred by book entry) a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Change of Control provisions described above will be applicable whether or not any other provisions of this Indenture are applicable. Except as described above with respect to a Change of Control, this Indenture does not contain provisions that permit the Holders to require that the Issuers purchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Issuers shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuers and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. SECTION 4.16. LIMITATIONS ON ISSUES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED RESTRICTED SUBSIDIARIES. Holdings (i) shall not, and shall not permit any of its Wholly Owned Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary of Holdings (other than the transfer of Common Membership Interests as a result of the exercise of remedies by the Lenders in respect of the pledge of such Common Membership Interests pursuant to the Lenders' security documents) to any Person (other than Holdings or a Wholly Owned Restricted Subsidiary of Holdings), unless (a) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.10 hereof and (ii) shall not permit any of its Wholly Owned Restricted Subsidiaries to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' or managers', as applicable, qualifying shares) to any Person other than to Holdings or a Wholly Owned Restricted Subsidiary of Holdings. SECTION 4.17. INSURANCE. Until the Notes have been paid in full, Holdings shall, and shall cause its Restricted Subsidiaries to, maintain insurance with responsible carriers against such risks and in such amounts as is customarily carried by similar businesses with such deductibles, retentions, self insured amounts and coinsurance provisions as are customarily carried by similar businesses of similar size, including, 61 without limitation, property and casualty, and shall have provided insurance certificates evidencing such insurance to the Trustee prior to the Issue Date and shall thereafter provide such certificates prior to the anniversary or renewal date of each such policy, which certificate shall expressly state the expiration date for each policy listed. SECTION 4.18. LIMITATIONS ON STATUS AS INVESTMENT COMPANY. Neither the Issuers nor their Restricted Subsidiaries shall become subject to registration as an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended), or from otherwise becoming subject to regulation under the Investment Company Act of 1940, as amended. SECTION 4.19. GAMING APPROVALS. Holdings shall, and shall cause its Subsidiaries to, use their best efforts to obtain and retain in full force and effect at all times all Gaming Approvals necessary for the operation of the Aladdin and the Music Project. SECTION 4.20. CONSTRUCTION. Holdings shall cause the Company to (i) (a) prosecute the construction of the Aladdin with due diligence and continuity, in an expeditious and first-class workmanlike manner, (b) until the Minimum Aladdin Facilities are completed, cause the Aladdin to be constructed, equipped and completed in compliance with the Approved Plans and Specifications in all material respects and (c) until the Minimum Aladdin Facilities are completed, correct or cause to be corrected as soon as possible any material departure or variation from the Approved Plans and Specifications not approved in writing by the Independent Construction Consultant, (ii) provide the expertise necessary to supervise performance of construction of the Aladdin at no cost to the Trustee, (iii) submit monthly requests for disbursements from the Noteholder Construction Disbursement Account and the Bank Construction Disbursement Account at the times and in the amounts necessary so that such amounts, together with all other sources for the funding of the Aladdin, are sufficient to cause the Minimum Aladdin Facilities to be completed by the Operating Deadline and (iv) until the Minimum Aladdin Facilities are completed, maintain the "In Balance" requirements of this Indenture. SECTION 4.21. LIMITATION ON USE OF PROCEEDS. Holdings shall (i) contribute on the Issue Date $115.0 million in cash to the Company in exchange for Series A Preferred Interests with an initial liquidation preference of $115.0 million, and shall cause the Company to deposit approximately $37 million of such proceeds in the Note Construction Disbursement Account disbursed only in accordance with the Disbursement Agreement and (ii) cause such amounts to be used to pay the costs incurred in connection with developing, financing, constructing, equipping or opening the Aladdin. In addition, if the Music Project Financing has not been consummated by February 28, 1999, Holdings shall cause the Company to expend up to $8.0 million to remodel the Theater. 62 SECTION 4.22. RESTRICTIONS ON ACTIVITIES OF CAPITAL. Capital may not hold any material assets, become liable for any obligations or engage in any business activities; provided that Capital may be a co-obligor of the Notes pursuant to the terms of this Indenture and may engage in any activities directly related thereto or necessary in connection therewith. SECTION 4.23. SERIES A PREFERRED INTERESTS. Holdings shall not permit the Company to amend the provisions of the Series A Preferred Interests in any manner that would be adverse to the Holders of the Notes. In addition, Holdings shall not permit the Company to authorize, create (by way of reclassification or otherwise) or issue any class or series of, or any obligation or security convertible or exchangeable into or evidencing a right to purchase shares of any class of, Capital Stock of the Company ranking senior to or on a parity with the Series A Preferred Interests. ARTICLE 5. SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS. Neither of the Issuers shall and Holdings shall not permit the Company to, consolidate or merge with or into (whether or not such entity is the surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions (other than (i) the transfer of the Aladdin Site and other assets of the Company as a result of the exercise of remedies in respect of the Deed of Trust and other Lender security documents, including a foreclosure by the Lenders pursuant to the terms of the Deed of Trust or the acceptance by the Lenders of a transfer in lieu of foreclosure or other exercise of remedies and (ii) the transfer of the Common Membership Interests as a result of the exercise of remedies by the Lenders in respect of the pledge of such Common Membership Interests pursuant to the Lenders' security documents) to, any Person unless (i) such Issuer or the Company is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than such Issuer or the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a Person organized or existing under the laws of the United States, any state thereof, or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than such Issuer or the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the obligations of such Issuer (but not the Company), under the Note Registration Rights Agreement, the Notes, this Indenture and the Pledge Agreements in form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; (iv) such transaction will not result in the loss or suspension or material impairment of any material Gaming Approval; (v) except in the case of a merger of such Issuer or the Company with or into a Wholly Owned Restricted Subsidiary of such Issuer, such Issuer or any Person formed by or surviving any such consolidation or merger (if other than such Issuer or the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made (a) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of such Issuer or the Company, as the case may be, immediately preceding the transaction and (b) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to (A) in the case of a merger of either of the Issuers, the Fixed Charge Coverage 63 Ratio test described above in clause (xi) of the second paragraph under Section 4.09 hereof and (B) in the case of a merger of the Company, the Fixed Charge Coverage Ratio test described above in clause (xii) of the second paragraph pursuant to Section 4.09 hereof; and (vi) such transaction would not require any Holder or beneficial owner of Notes (other than any Person acquiring such Issuer or the Company or its assets and any Affiliate thereof) to obtain a gaming license or be qualified or found suitable under the law of any applicable gaming jurisdiction; provided that such Holder or beneficial owner would not have been required to obtain a gaming license or be qualified or found suitable under the laws of any applicable gaming jurisdiction in the absence of such transaction. Notwithstanding the above, neither of the Issuers may consolidate or merge into the other prior to and in connection with a Qualified Public Offering. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Issuers in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Issuers are merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Issuers" shall refer instead to the successor corporation and not to the Issuers), and may exercise every right and power of the Issuers under this Indenture with the same effect as if such successor Person had been named as the Issuers herein; provided, however, that the predecessor Issuers shall not be relieved from the obligation to pay the Accreted Value of and interest on the Notes except in the case of a sale of all of the Issuers' assets that meets the requirements of Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Issuers default for 30 days or more in the payment when due of interest on, or Liquidated Damages, if any, with respect to, the Notes; (b) the Issuers default in payment when due of the Accreted Value of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Issuers fail to comply with any of the provisions of Sections 4.07, 4.09, 4.10, 4.15, 4.21, 4.22 or 5.01 hereof; (d) the Issuers fail for 30 days after written notice by the Trustee or the Holders of at least 25% in aggregate Accreted Value of the Notes then outstanding voting as a single class to comply with any of their other agreements in this Indenture or the Notes; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Holdings or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Holdings or any of its Restricted Subsidiaries), whether such Indebtedness now exists or is created after the Issue Date, 64 which default (a) is caused by a failure to pay when due principal of or premium, if any, or interest on such Indebtedness (other than the Bank Credit Facility) prior to the later of (1) 60 days after such default and (2) the expiration of the grace period provided in such Indebtedness (a "Payment Default") which Payment Default, together with all other Payment Defaults, exceeds $1.0 million or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (f) Holdings or any of its Restricted Subsidiaries fail to pay final judgments aggregating in excess of $10.0 million, which judgments remain unpaid, undischarged and unstayed for a period of more than 60 days; (g) Holdings or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a trustee in bankruptcy of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, (v) generally is not able to pay its debts as they become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against Holdings or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints trustee in bankruptcy of Holdings or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of Holdings or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of Holdings or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; (i) a default occurs by each of the Trust, London Clubs and Bazaar Holdings in the performance of their material obligations set forth in the Keep-Well Agreement, which default remains uncured for 180 days, or a default occurs by AHL, London Clubs and Bazaar Holdings in the 65 performance of their material obligations set forth in the Noteholder Completion Guaranty or there is a repudiation by each of them of their respective obligations under the Keep-Well Agreement, which has not been ratified and reaffirmed within 180 days, or the Noteholder Completion Guaranty; (j) Holdings breaches any material representation or warranty set forth in either of the Pledge Agreements or a default occurs by Holdings in the performance of any material covenant set forth in either of such agreements or there is repudiation by Holdings of its obligations under either of such agreements or the unenforceability of either of such agreements against Holdings for any reason; (k) a termination occurs of the Bank Credit Facility (other than pursuant to a refinancing thereof in accordance with its terms and with the terms of clause (i) under the second paragraph under Section 4.09 hereof) or there is a repudiation of the Lenders obligations thereunder, including without limitation, the withdrawal of the proceeds of the Term B Loans and Term C Loans from the Bank Construction Disbursement Account, in each case prior to the date the Aladdin is Operating (except for disbursements in accordance with the Disbursement Agreement); (l) (i) the Desert Passage fails to be Operating on or prior to 90 days after the date the Aladdin becomes Operating and (ii) at any time thereafter and prior to the date on which the Desert Passage becomes Operating, the Company's Fixed Charge Coverage Ratio for its most recently ended four full fiscal quarters (or such lesser number of quarters as have ended after the Aladdin became Operating) for which internal financial statements are available is not at least 1.75 to 1.0; (m) after the Aladdin becomes Operating, there is a revocation, termination, suspension or other cessation of effectiveness of any Gaming Approval, which results in the cessation or suspension of gaming operations at the Aladdin for a period of more than 90 days; (n) the Aladdin fails to be Operating by the Operating Deadline; (o) there is a transfer of the Aladdin Site as a result of the exercise of remedies in respect of the Deed of Trust, including a foreclosure by the Lenders pursuant to the terms of the Deed of Trust or the acceptance by the Lenders of a deed in lieu of foreclosure; and (p) there is a transfer of the Common Membership Interests as a result of the exercise of remedies by the Lenders in respect of the pledge of such Common Membership Interests pursuant to the Lender's security documents. SECTION 6.02. ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to either of the Issuers, any Significant Subsidiary of either of the Issuers or any group of Significant Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee (upon receipt of actual knowledge thereof) or the Holders of at least 25% in Accreted Value of the then outstanding Notes may declare the Accreted Value of Notes (together with all amounts outstanding thereunder) to be due and payable immediately. Upon any such declaration, the Accreted Value of the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to either of the Issuers, any Significant Subsidiary of the Issuers or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate 66 Accreted Value of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after March 1, 2006 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuers with the intention of avoiding payment of the premium that the Issuers would have had to pay if the Issuers then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes, this Indenture or, subject to the provisions thereof, the Pledge Agreements and the Noteholder Completion Guaranty. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate Accreted Value of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes held by a non-consenting Holder (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in Accreted Value of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority of the aggregate Accreted Value of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture, the Pledge Agreements or the Notes only if: 67 (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in Accreted Value of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in Accreted Value of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents and take such actions (including sitting on a committee of creditors) as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Issuers (or any other obligor upon the Notes), their creditors or their property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any 68 such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for Accreted Value, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for Accreted Value, premium and Liquidated Damages, if any and interest, respectively; and Third: to the Issuers or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in Accreted Value of the then outstanding Notes. ARTICLE 7. TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. 69 (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Sections 6.04 or 6.05 hereof. (iv) the Trustee shall not be charged with notice or knowledge of any event or matter (including the occurrence of a default or event of default) the occurrence of which would require it to take action or omit to take action hereunder unless such event or matter is actually known to a Responsible Officer of the Trustee or unless written notice thereof (making reference to this Indenture or the Notes) has been received by the Trustee at its Corporate Trust Office. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuers. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) Unless otherwise expressly provided, the Trustee shall not have any responsibility for the contents of reports referred to in Section 4.03. 70 SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document reasonably believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care and without negligence or wilful misconduct. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture; provided that the Trustee's conduct does not constitute wilful misconduct, negligence or bad faith. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuers shall be sufficient if signed by an Officer of the Issuers. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuers or any Affiliate of the Issuers with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuers' use of the proceeds from the Notes or any money paid to the Issuers or upon the Issuers' direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. 71 SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Issuers and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Issuers shall promptly notify the Trustee if the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Issuers shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Issuers shall indemnify the Trustee, its officers, directors, employees and agents against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Issuers (including this Section 7.07) and defending itself against any claim (whether asserted by the Issuers or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Issuers promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuers shall not relieve the Issuers of their obligations hereunder, except to the extent the Issuers are prejudiced by such failure. The Issuers shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Issuers shall pay the reasonable fees and expenses of such counsel. The Issuers need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld. The Issuers need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. The obligations of the Issuers under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. 72 To secure the Issuers' payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuers. The Holders of Notes of a majority in Accreted Value of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuers in writing. The Issuers may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuers shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in Accreted Value of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuers. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or the Holders of Notes of at least 10% in Accreted Value of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this 73 Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuers' obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Issuers may, at the option of their Board of Managers or Board of Directors, as the case may be, evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Sections 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuers shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Issuers shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all their other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Issuers, shall execute proper instruments acknowledging 74 the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the Accreted Value of, premium and Liquidated Damages, if any, and interest on such Notes when such payments are due, (b) the Issuers' obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuers' obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Issuers may exercise their option under this Section 8.02 notwithstanding the prior exercise of their option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuers shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23 and 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuers may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Sections 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the Accreted Value of, premium, Liquidated Damages, if any, and interest on the outstanding Notes on the stated maturity date or on the applicable redemption date, as the case may be, and must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under 8.02 hereof, the Issuers shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Issuers have received from, or there has been published by, the United States Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable U.S. 75 federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel in the United States shall confirm that the Holders of the outstanding Notes shall not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under 8.03 hereof, the Issuers shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes shall not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Section 6.1(g) or 6.1(h) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than this Indenture) to which the Issuers or any of their Subsidiaries is a party or by which the Issuers or any of their Subsidiaries is bound; (f) after the passage of 91 days following the deposit (or, with respect to any deposit transferred for the benefit of any person who may be deemed to be an "insider" of the Issuers under 11 U.S.C. ss. 101(31), after the passage of one year following such transfer), such deposit will not be subject to avoidance under 11 U.S.C. ss. 547 if the Issuers were subsequently to become the subject of a case under title 11 of the United States Bankruptcy Code; (g) the Issuers shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Issuers with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuers or others; and (h) the Issuers shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (which opinion may be subject to customary exclusions, qualifications and assumptions) in the United States each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuers acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 76 The Issuers shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of or required to be deducted or paid on behalf of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuers from time to time upon the request of the Issuers any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO ISSUERS. Any money deposited with the Trustee or any Paying Agent, or then held by the Issuers, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Issuers on their request or (if then held by the Issuers) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of Issuers as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense and option of the Issuers cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Issuers. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Sections 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers' obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Sections 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Sections 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Issuers make any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Issuers shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Issuers and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: 77 (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Issuers' obligations to the Holders of the Notes by a successor to the Issuers pursuant to Article 5 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; or (e) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; Upon the request of the Issuers accompanied by a resolution of their Board of Managers or Board of Directors, as the case may be, authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of any documents described in Section 7.02 hereof and requested pursuant thereto, the Trustee shall join with the Issuers in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Issuers and the Trustee may amend or supplement this Indenture (including Sections 3.10, 4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in Accreted Value of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the Accreted Value of, premium and Liquidated Damages, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in Accreted Value of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Issuers accompanied by a resolution of their Board of Managers or Board of Directors, as applicable, authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of any documents described in Section 7.02 hereof and required pursuant thereto, the Trustee shall join with the Issuers in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. 78 It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Issuers shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuers to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate Accreted Value of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Issuers with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the Accreted Value of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the Accreted Value of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.10, 4.10 and 4.15 hereof or amend or modify the calculation of the Accreted Value so as to reduce the amount of the Accreted Value of the Notes; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of Accreted Value of, premium and Liquidated Damages, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate Accreted Value of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of Accreted Value of or premium and Liquidated Damages, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (except a payment required by Sections 4.10 and 4.15 hereof; or (h) make any change in Sections 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. 79 SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuers in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Issuers may not sign an amendment or supplemental Indenture until their Board of Managers or Board of Directors, as the case may be, approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10. COLLATERAL AND SECURITY SECTION 10.01. PLEDGE AGREEMENTS. The due and punctual payment of the Accreted Value of, premium and interest and Liquidated Damages, if any, on the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on any overdue Accreted Value of, premium and interest and Liquidated Damages, if any (to the extent permitted by law), on the Notes and performance of all other obligations of the Issuers to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, shall be secured as provided in the Pledge Agreements which Holdings has entered into simultaneously with the execution of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Pledge Agreements (including, without limitation, the provisions providing for foreclosure) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs the Trustee or the Disbursement Agent, as the case may be, to enter into the Pledge Agreements and to perform their respective obligations and exercise their respective rights thereunder in accordance therewith. 80 SECTION 10.02. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE PLEDGE AGREEMENTS. The Trustee is authorized to receive any funds for the benefit of the Holders of Notes distributed under the Pledge Agreements, and to make further distributions of such funds to the Holders of Notes according to the provisions of this Indenture. SECTION 10.03. TERMINATION OF SECURITY INTEREST. Upon the payment in full of all Obligations of the Issuers under this Indenture and the Notes, or upon Legal Defeasance, the Trustee shall, at the request of the Issuers, deliver a certificate to the Disbursement Agent stating that such Obligations have been paid in full, and release and instruct the Disbursement Agent to release the Liens pursuant to this Indenture and the Pledge Agreements. ARTICLE 11. JOINT AND SEVERAL LIABILITY SECTION 11.01. JOINT AND SEVERAL LIABILITY. (a) Notwithstanding any contrary provision contained in this Indenture or the Notes, the representations, warranties, covenants, agreements and obligations of the Issuers, and either of them, contained in the Indenture and the Notes shall be deemed joint and several. Any waiver including, without limitation, any suretyship waiver, made by either Issuer in this Indenture or the Notes shall be deemed to be made also by the other Issuer and references in any such waiver to either Issuer shall be deemed to include the other Issuer and each of them. (b) Notwithstanding any contrary provision contained in this Indenture or the Notes, this Indenture and the Notes shall be deemed to include, without limitation, the following waivers: Until all obligations of the Issuers to the Holders under or in respect of the Notes are paid in full and discharged, each of the Issuers hereby waives and relinquishes all rights and remedies accorded by applicable law specifically to sureties or guarantors with respect to the joint and several liabilities of the Issuers hereunder and agrees not to assert or take advantage of any such rights or remedies, including, without limitation, (a) any right to require the Trustee or any of the Holders (each a "Benefited Party") to proceed against either of the Issuers or any other Person or to proceed against or exhaust any security held by a Benefited Party at any time or to pursue any other remedy in the power of a Benefited Party before proceeding against such Issuer or other Person, (b) any defense based upon an election of remedies by a Benefited Party, including, without limitation, an election to proceed by non-judicial rather than judicial foreclosure, which destroys or otherwise impairs the subrogation rights of either Issuer, the right of either Issuer to proceed against the other Issuer or any other Person for reimbursement, or both, (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal, (d) any duty on the part of a Benefited Party to disclose to either Issuer any facts a Benefited Party may now or hereafter know about either of the Issuers or any other Person, regardless of whether a Benefited Party has reason to believe that any such facts materially increase the risk beyond that which such Issuer intends to assume, or has reason to believe that such facts are unknown to such Issuer, or has a reasonable opportunity to communicate such facts to the either Issuer, because each Issuer acknowledges that each Issuer is fully responsible for being and keeping informed of the financial condition of each of the Issuers or any other Person and of all circumstances bearing on the risk of non- 81 payment of any Note Obligations, (e) any defense based upon any borrowing or grant of a security interest by the other Issuer under Section 364 of the Bankruptcy Law and (f) any claim or other rights which it may now or hereafter acquire against the other Issuer or any other Person that arises from the existence of performance of each Issuer of its obligations under this Indenture or the Notes, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy by a Benefited Party against the other Issuer or any collateral which a Benefited Party now has or hereafter acquires, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including, without limitation, the right to take or receive from either of the Issuers or any other Person, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. No failure or delay on the Trustee's part in exercising any power, right or privilege under this Indenture shall impair or waive one such power, right or privilege. Each of the Issuers acknowledges and agrees that any nonrecourse or exculpation provided for in this Indenture or the Notes, or any other provision of this Indenture or the Notes, limiting the Benefited Parties' recourse to specific collateral, or limiting the Benefited Parties' right to enforce a deficiency judgment against the Issuers, shall have absolutely no application to the Issuers' liability under this Indenture or the Notes. (c) In the event of any inconsistency between the provisions of this Section 11 and the corresponding provisions of this Indenture or the Notes, the provisions of this Indenture shall govern. ARTICLE 12. INTERCREDITOR AGREEMENT WITH LENDERS UNDER THE BANK CREDIT FACILITY SECTION 12.01. NON-PETITION COVENANT. Each Holder, by accepting the Note or Notes issued to it, covenants and agrees that, prior to the payment in full in cash of all outstanding amounts under the Bank Credit Facility, neither it nor the Trustee shall (a) institute against, or join any other Person in instituting against, the Company any involuntary bankruptcy, reorganization, arrangement, insolvency or liquidation case under the laws of the United States or any state of the United States or (b) in any voluntary or involuntary bankruptcy case of the Company, seek a substantive consolidation of the estate of the Company with the estates of Holdings and/or Capital. Notwithstanding the preceding paragraph, each Holder shall be entitled in any such consolidated case arising without violation of the preceding paragraph by such Holder or by Holders of at least 25% of the Accreted Value of the then outstanding Notes, to exercise all rights available to such Holder, as creditors or otherwise, and the Lenders under the Bank Credit Facility, and any agent on their behalf, by accepting the benefits of this Article 12 agree that they shall be prohibited from contesting any action of the Holders in any such case which is not in violation of this Article 12 and from seeking an equitable subordination of the Holders' claims. The foregoing restrictions shall not restrict or limit in any manner the exercise of any rights and remedies the Holders or the Trustee may have against Holdings whether or not the estate of Holdings is substantively consolidated with the estate of the Company in a bankruptcy case. 82 SECTION 12.02. SUBORDINATION UPON SUBSTANTIVE CONSOLIDATION. Notwithstanding Section 12.01 hereof (and without limitation of any other rights or remedies of any holder of Senior Debt), upon any substantive consolidation of the estate of the Company with the estates of Holdings and/or Capital in any bankruptcy, reorganization, insolvency, receivership or similar case relating to the Company or its property, the Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes and all Obligations with respect thereto, including recission claims, are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full in cash of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. In the event of any such substantive consolidation of the estate of the Company with the estates of Holdings and/or Capital: (1) holders of Senior Debt shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before Holders of the Notes shall be entitled to receive any payment with respect to the Notes or any Obligations with respect thereto, including recission claims (except that Holders may receive (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof); (2) until all Obligations with respect to Senior Debt (as provided in subsection (1) above) are paid in full in cash, any distribution to which Holders would be entitled but for this Article 12 shall be made to holders of Senior Debt (except that Holders of Notes may receive (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear. SECTION 12.03. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes, including recission claims, at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 12.02 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or the Credit Agent under the Bank Credit Facility or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution in cash to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 12, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 12, except if such payment is made as a result of the willful misconduct or negligence of the Trustee. 83 SECTION 12.04. NOTICE BY ISSUERS. The Issuers shall promptly (and the Credit Agent or other representative of the Senior Debt may) notify the Trustee and the Paying Agent of any facts known to the Issuers (or known to the Credit Agent or other representative of the Senior Debt), as applicable, that would cause a payment of any Obligations with respect to the Notes to violate this Article 12, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 12. SECTION 12.05. SUBROGATION. After all Senior Debt is paid in full in cash and until the Notes are paid in full, the Holders shall be subrogated (equally and ratably with all other Indebtedness of the substantively consolidated entity pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt. A distribution made under this Article 12 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Issuers and Holders, a payment by the Issuers on the Notes. SECTION 12.06. RELATIVE RIGHTS. This Article 12 defines the relative rights of Holders and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Issuers and the Holders, the obligation of the Issuers, which is absolute and unconditional, to pay Accreted Value of and interest on the Notes in accordance with their terms; (2) affect the relative rights of the Holders and creditors of the Issuers other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Issuers fail because of this Article 12 to pay the Accreted Value of or interest on a Note on the due date, such failure is still a Default or Event of Default. SECTION 12.07. SUBORDINATION MAY NOT BE IMPAIRED. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Issuers or any Holder or any act by any holder of such Senior Debt taken in good faith and not in violation of the provisions of this Indenture or by the failure of the Issuers or any Holder to comply with this Indenture. Except as set forth in Section 10.22 of the Bank Credit Facility, the holders of Senior Debt may extend, renew, modify or amend the terms of the Senior Debt or any security therefor and release, sell or exchange such security and otherwise deal freely with the Issuers, all without affecting the liabilities and obligations of the parties to this Indenture or the Holders. The subordination provisions of this Article 12 are solely for the benefit of the holders from time to time of Senior Debt and may not be rescinded, canceled, amended or modified in any way other than any amendment or modification that 84 would not adversely affect the rights of any holder of Senior Debt or any amendment or modification that is consented to by each holder of Senior Debt that would be adversely affected thereby. The subordination provisions of this Article 12 shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Senior Debt is, pursuant to applicable law, avoided, recovered or rescinded or must otherwise be restored or returned by any holder of Senior Debt, whether as a "voidable preference," "fraudulent conveyance," "fraudulent transfer," or otherwise, all as though such payment or performance had not been made. SECTION 12.08. DISTRIBUTION OR NOTICE TO CREDIT AGENT. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to the Credit Agent. Upon any payment or distribution of assets of the Issuers or any substantively consolidated entity referred to in this Article 12, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Credit Agent or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Issuers, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. SECTION 12.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 12 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 12. Only the Issuers or the Credit Agent may give the notice. Nothing in this Article 12 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 12.10. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 12, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Credit Agent (or other representative of the Senior Debt) is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. 85 SECTION 12.11. REQUIREMENT OF CERTAIN PROVISION IN SENIOR DEBT. Notwithstanding any other provision of Article 12 hereof, the provisions of this Article 12 shall apply only for the benefit of Senior Debt which contains a provision that is substantially similar to Section 10.22 of the Bank Credit Facility. ARTICLE 13. MISCELLANEOUS SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall control. SECTION 13.02. NOTICES. Any notice or communication by the Issuers or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address as follows: If to the Issuers: Aladdin Gaming Holdings, LLC Aladdin Capital Corp. c/o: Aladdin Gaming, LLC 3667 Las Vegas Boulevard South Las Vegas, Nevada 89109 Telecopier No.: (702) 736-7107 Attention: Chief Executive Officer With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates 919 Third Avenue New York, New York 10022 Telecopier No. (212) 735-3000 Attention: Wallace L. Schwartz, Esq. If to the Trustee: State Street Bank and Trust Company Two International Place Boston, Massachusetts 02110 Telecopier No.: (617) 664-5371 Attention: Corporate Trust Department The Issuers or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications. 86 All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Issuers mail a notice or communication to Holders, they shall mail a copy to the Trustee and each Agent at the same time. SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Issuers, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Issuers to the Trustee to take any action under this Indenture, the Issuers shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 87 (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 13.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, MANAGERS, OFFICERS, EMPLOYEES, INCORPORATORS OR MEMBERS. No director, manager, officer, employee, incorporator or member of the Issuers shall have any liability for any obligations of the Issuers under the Notes or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 13.08. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuers or their Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. SUCCESSORS. All agreements of the Issuers in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 88 SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 13.14. CONTINGENT GUARANTY Notwithstanding any other provision of this Indenture, the Company shall not be prevented from entering into a Contingent Guaranty of Performance and Completion substantially in the form of Exhibit E hereto. SECTION 13.15. TRUSTEE'S EXECUTION OF OTHER AGREEMENTS On the Issue Date, the Trustee shall execute and deliver the Disbursement Agreement and the Engagement Letter with Rider Hunt (NV) LLC. Dated as of February 26, 1998 ALADDIN GAMING HOLDINGS, LLC By: /s/ Richard Goeglein ------------------------- Name: Richard Goeglein Title: Chief Executive Officer/ President Dated as of February 26, 1998 ALADDIN CAPITAL CORP. By: /s/ Richard Goeglein ------------------------- Name: Richard Goeglein Title: Chief Executive Officer/ President Dated as of February 26, 1998 STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/ Ruth A. Smith ------------------------- Name: Ruth A. Smith Title: Vice President 89 EXHIBIT A-1 (Face of Note) FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.40, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.60, THE ISSUE DATE IS FEBRUARY 26, 1998 AND THE YIELD TO MATURITY IS 15.06 % PER ANNUM. 13 1/2% [Series A] [Series B] Senior Discount Notes due 2010 No. ____ Cusip No. ____ $ ___ ALADDIN GAMING HOLDINGS, LLC AND ALADDIN CAPITAL CORP. promises to pay to or registered assigns, the principal sum of Dollars on March 1, 2010 Interest Payment Dates: March 1 and September 1 Record Dates: February 15 and August 15 Dated: __________, ____ ALADDIN GAMING HOLDINGS, LLC By: ---------------------- Name: Title: ALADDIN CAPITAL CORP. By: ----------------------- Name: Title: This is one of the [Global] Notes referred to in the within-mentioned Indenture: STATE STREET BANK AND TRUST COMPANY, as Trustee By:_____________________________________ A-1-1 (Back of Note) 13 1/2% [Series A] [Series B] Senior Discount Notes due 2010 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO A-1-2 ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), and Aladdin Capital Corp., a Nevada corporation ("Capital" and, together with Holdings, the "Issuers"), promise to pay interest on the Accreted Value of this Note at the rate and times and in the manner specified below and shall pay the Liquidated Damages payable pursuant to Section 2.5 of the Note Registration Rights Agreement referred to below. No interest will accrue on the Notes until March 1, 2003, but the Accreted Value will increase (representing amortization of original issue discount) between the date of original issuance and March 1, 2003, on a semi-annual bond equivalent basis using a 360-day year comprised of twelve 30-day months, such that the Accreted Value will be equal to the full principal amount at maturity of the Notes on March 1, 2003. Beginning on March 1, 2003, cash interest on the Notes will accrue at the rate of 13 1/2% per annum until maturity. The Issuers will pay cash interest and Liquidated Damages semi-annually on March 1 and September 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Cash interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from March 1, 2003. The Issuers shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, in accordance with the Indenture; they shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time at the same rate to the extent lawful in accordance with the Indenture. Cash interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Issuers will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the February 15 or August 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to Accreted Value, premium and Liquidated Damages, if any, and interest at the office or agency of the Issuers maintained for such purpose within or without the City and State of New York, or, at the option of the Issuers, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that all payments with respect to at least $1.0 million in aggregate principal amount at maturity of Notes, the Holders of which have given wire transfer instructions to Holdings, will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. A-1-3 3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers or any of their Subsidiaries may act in any such capacity. 4. INDENTURE. The Issuers issued the Notes under an Indenture dated as of February 26, 1998 (the "Indenture"), between the Issuers and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general obligations of the Issuers limited to $221.5 million in aggregate principal amount at maturity, plus amounts, if any, issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5 and Paragraph 6 thereof, the Notes shall not be redeemable at the option of the Issuers prior to March 1, 2003. Thereafter, the Notes shall be subject to redemption at the option of the Issuers, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of Accreted Value) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable date of redemption, if redeemed during the twelve-month period beginning on March 1 of the years indicated below:
Year Percentage - ---- ---------- 2003 ....................... 106.75% 2004 ....................... 104.50% 2005 ....................... 102.25% 2006 and thereafter ........ 100.00%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, on or prior to March 1, 2001, the Issuers may redeem up to an aggregate of 35% of the Accreted Value of the Notes at a redemption price of 113 1/2% of the Accreted Value thereof, plus Liquidated Damages, if any, thereon to the redemption date, with the proceeds of a Qualified Public Offering (which proceeds may be advanced or contributed to the Issuers by the IPO Entity); provided that at least 65% of the Accreted Value remains outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of such Qualified Public Offering. 6. GAMING REDEMPTION. Notwithstanding the provisions of subparagraph (a) of Paragraph 5 above, if any Gaming Authority requires that a holder or beneficial owner of Notes must be licensed, qualified or found suitable under any applicable gaming law and such holder or beneficial owner fails to apply for a license, qualification or finding of suitability within 30 days after being requested to do so by such Gaming Authority (or such lesser period that may be required by such Gaming Authority), or if such holder or beneficial owner is notified by such Gaming Authority that such holder or beneficial owner will not be so licensed, qualified or found suitable, the Issuers shall have the right, at their option, (i) to require that such holder or beneficial owner dispose of such holder's or beneficial owner's Notes within 30 days (or such earlier date as may be required by the applicable A-1-4 Gaming Authority) of (a) the termination of the period described above for such holder or beneficial owner to apply for a license, qualification or finding of suitability or (b) receipt of the notice from such Gaming Authority that such holder or beneficial owner will not be licensed, qualified or found suitable by such Gaming Authority or (ii) to call for redemption of the Notes of such holder or beneficial owner at a redemption price equal to the lesser of the price at which such holder or beneficial owner acquired such Notes and the Accreted Value thereof, together with, in either case, accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption or the date of the finding that such holder or beneficial owner will not be licensed, qualified or found suitable, which may be less than 30 days following the notice of redemption, if so ordered by such Gaming Authority or required by applicable gaming laws. 7. MANDATORY REDEMPTION. Except as set forth in Paragraph 8 below, the Issuers, the Issuers shall not be required to make mandatory redemptions or sinking fund payments prior to maturity with respect to the Notes. 8. REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require the Issuers to purchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a price in cash equal to 101% of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase. Within 10 days following any Change of Control, the Issuers shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If Holdings or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings shall commence an offer to all Holders (an "Asset Sale Offer") pursuant to Section 4.10 of the Indenture to purchase the maximum Accreted Value of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date fixed for the closing of such offer in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, Holdings or the Restricted Subsidiary, as the case may be, may, subject to the provisions of the Indenture, use any remaining Excess Proceeds for general corporate purposes. If the aggregate Accreted Value of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in accordance with Section 3.02 of the Indenture. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from Holdings prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 9. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee A-1-5 may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuers need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in Accreted Value of the Notes then outstanding voting as a single class, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in Accreted Value of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Issuers' obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages, if any, with respect to, the Notes; (ii) default in payment when due of the Accreted Value of or premium, if any, on the Notes, (iii) failure by the Issuers to comply with Section 4.07, 4.09, 4.10, 4.15, 4.21, 4.22, or 5.01 of the Indenture; (iv) failure by the Issuers for 30 days after written notice to comply with any of their agreements in the Indenture or the Notes; (v) default under certain other agreements relating to Indebtedness of the Issuers which default (a) is caused by failure to pay when due principal of or premium, if any, or interest on such Indebtedness (other than the Bank Credit Facility) prior to the later of (1) 60 days after such default and (2) the expriation of the grace period provided in such Indebtedness (a "Payment Default") which Payment Default, together with all other Payment Defaults, exceeds $1.0 million or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (vi) certain final judgments for the payment of money aggregating in excess of $10.0 million that remain undischarged for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to Holdings or any of its Significant Subsidiaries; (viii) a default by each of the Trust, London Clubs and Bazaar Holdings in the performance of their material obligations set forth in the Keep-Well Agreement, which default remains uncured for 180 days, or default by AHL, London Clubs and Bazaar Holdings in the performance of their material obligations set forth in the Noteholder Completion Guaranty or repudiation by each of them of their respective obligations under the Keep-Well Agreement, which has not been ratified and reaffirmed within 180 days, or the Noteholder Completion Guaranty; (ix) Holdings breaches any material representation or warranty set forth in either of the Pledge Agreements or default by Holdings in the performance of any material covenant set forth in either of such agreements or repudiation by Holdings of its obligations under either of such agreements or the unenforceability of either of such agreements against Holdings for any reason; (x) the termination of the A-1-6 Bank Credit Facility (other than pursuant to a refinancing thereof in accordance with its terms and with the terms of clause (i) under the second paragraph under Section 4.09 of the Indenture or the repudiation of the Lenders obligations thereunder, including without limitation, the withdrawal of the proceeds of the Term B Loans and Term C Loans from the Bank Construction Disbursement Account, in each case prior to the date the Aladdin is Operating (except for disbursements in accordance with the Disbursement Agreement); (xi) (a) a failure of the Desert Passage to be Operating on or prior to 90 days after the date the Aladdin becomes Operating and (b) at any time thereafter and prior to the date on which the Desert Passage becomes Operating, the Company's Fixed Charge Coverage Ratio for its most recently ended four full fiscal quarters (or such lesser number of quarters as have ended after the Aladdin became Operating) for which internal financial statements are available is not at least 1.75 to 1.0; (xii) after the Aladdin becomes Operating, revocation, termination, suspension or other cessation of effectiveness of any Gaming Approval, which results in the cessation or suspension of gaming operations for a period of more than 90 days at the Aladdin; (xiii) the failure of the Aladdin to be Operating by the Operating Deadline; (xiv) the transfer of the Aladdin Site as a result of the exercise of remedies in respect of the Deed of Trust, including a foreclosure by the Lenders pursuant to the terms of the Deed of Trust or the acceptance by the Lenders of a deed in lieu of foreclosure; and (xv) the transfer of the Common Membership Interests as a result of the exercise of remedies by the Lenders in respect of the pledge of such Common Membership Interests pursuant to the Lender's security documents. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in Accreted Value of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in Accreted Value of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate Accreted Value of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Issuers are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuers are required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 14. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuers or their Affiliates, and may otherwise deal with the Issuers or their Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, manager, officer, employee, incorporator or member of the Issuers, as such, shall not have any liability for any obligations of the Issuers under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 16. SECURITY. The due and punctual payment of the Accreted Value of, premium and interest and Liquidated Damages, if any, on the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on any overdue Accreted Value of, premium and interest and Liquidated Damages, if any (to the extent permitted by law), on the Notes and performance of all other obligations A-1-7 of the Issuers to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, shall be secured as provided in the Pledge Agreements which Holdings has entered into simultaneously with the execution of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Pledge Agreements (including, without limitation, the provisions providing for foreclosure) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs the Trustee or the Disbursement Agent, as the case may be, to enter into the Pledge Agreements and to perform their respective obligations and exercise their respective rights thereunder in accordance therewith. 17. INTERCREDITOR AGREEMENT. The Holders, while free to exercise their rights and remedies against Holdings, are prohibited, for so long as any portion of the Bank Credit Facility is outstanding, from initiating or intervening in an insolvency proceeding of the Company and from seeking a substantive consolidation of Holdings, the Company and/or Capital. In addition, in the event of a substantive consolidation of Holdings, the Company and/or Capital, the Holders (i) will not be entitled to receive any cash or other payments (other than securities subordinated to the prior payment in full of the Bank Credit Facility to the same extent of the Notes) in respect of the Notes until the Bank Credit Facility has been indefeasibly paid in full in cash and (ii) will be required to turn over to the Lenders under the Bank Credit Facility any payments received in violation of such provisions. 18. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 19. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 20. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Note Registration Rights Agreement dated as of February 26, 1998, between the Issuers and the parties named on the signature pages thereof (the "Note Registration Rights Agreement"). 21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 22. WARRANT ENDORSEMENT. THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT WITH THE NOTES UNTIL THE EARLIEST TO OCCUR OF (I) SEPTEMBER 1, 1998; (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT; A-1-8 (III) THE OCCURRENCE OF A CHANGE OF CONTROL OR A SALE OR RECAPITALIZATION OF ENTERPRISES, HOLDINGS OR THE COMPANY OCCURS; (IV) 30 DAYS AFTER A QUALIFIED PUBLIC OFFERING; (V) THE OCCURRENCE OF AN EVENT OF DEFAULT; OR (VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION (THE DATE OF OCCURRENCE OF AN EVENT SPECIFIED IN CLAUSES (I) THROUGH (VI) BEING REFERRED TO AS THE "SEPARATION DATE"). PRIOR TO SUCH DATE, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000 PRINCIPAL AMOUNT OF NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF 10 WARRANTS FOR EACH $1,000 PRINCIPAL AMOUNT SO TRANSFERRED. Under the terms of the warrant agreement relating to the Warrants (the "Warrant Agreement"), the holder of this security may at any time on or after the Separation Date, at its option, by notice to the Trustee elect to separate or separately transfer the Notes and the Warrants represented hereby, in whole or in part, and shall thereafter surrender this security to the Trustee for the exchange of this security, in part, for such Warrant or Warrants and for a Note or Notes of a like aggregate principal amount and of authorized denominations not bearing this Warrant Endorsement; provided that no delay or failure on the part of the Trustee or the Warrant Agent to exchange this security for such Warrant or Warrants and Note or Notes shall affect the separation of such Notes and Warrants represented hereby or their separate transferability. Until such separation, the holder of this security is, for each $1,000 principal amount of Notes, also the record owner of 10 Warrants expiring March 1, 2010, each Warrant to purchase 1 share of Class B non-voting Common Stock, no par value (the "Common Stock"), of Enterprises (subject to adjustment). Enterprises has deposited with the Trustee, as custodian for the Holder of the Notes bearing this Warrant Endorsement, a certificate or certificates for such Warrants to purchase an aggregate of 2,215,000 shares of Common Stock (subject to adjustment). Prior to the separation of the Notes and the Warrants as described above, record ownership of such Warrants is transferable only by the transfer of this Note on the Note register maintained by the Issuers pursuant to the Indenture. After such separation, ownership of a Warrant is transferable only by the transfer of the certificate representing such Warrant in accordance with the provisions of the Warrant Agreement. By accepting a security bearing this Warrant Endorsement, each holder of this security is bound by all of the terms and provisions of the Warrant Agreement (a copy of which is available on request to Enterprises or the Warrant Agent). Election to Exercise. On or after the Warrant Exercise Commencement Date (as such term is defined in the Warrant Agreement), the Warrants may be exercised by obtaining from the Warrant Agent the required forms of election to exercise, declaration form and instructions for payment of the Exercise Price (as such term is defined in the Warrant Agreement). Upon receiving the required forms and payment of such Exercise Price, the Warrant Agent shall exercise such Warrants in accordance with the provisions of the Warrant Agreement. Election of Exchange. The undersigned registered holder of the security represented hereby irrevocably elects to separate its Notes and Warrants and to exchange this security for a new Note in the principal amount hereof and a Warrant certificate. The undersigned hereby irrevocably instructs the Trustee (A) to issue in the name of the undersigned registered holder a new Note not containing the above Warrant Endorsement in the principal amount A-1-9 equal to the principal amount hereof and (B) to deliver this security to the Warrant Agent pursuant to the provisions of the Warrant Agreement with instructions to issue in the name of the undersigned registered holder a Warrant certificate representing the number of Warrants equal to the number of Warrants represented by this security and to issue (1) a new Warrant certificate to replace the Warrant certificate held on deposit by the Warrant Agent equal to the difference between (x) the number of Warrants represented by the Warrant certificate so held on deposit and (y) the number of Warrants represented by this Security. Dated: ______________________ Name of Holder of this security: ______________________ Address: ______________________ ______________________ Signature: ______________________ Note: The above signature must correspond with the name as written upon the face of this security in every particular, without alteration or enlargement whatever and if the certificate representing any principal amount at maturity of this security or the associated Warrants is to be registered in a name other than that in which this security is registered. Signature Guaranteed: ______________________ Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Note Registration Rights Agreement. Requests may be made to: Aladdin Gaming Holdings, LLC Aladdin Capital Corp. c/o Aladdin Gaming Holdings, LLC 3667 Las Vegas Boulevard South Las Vegas, Nevada 89109 Attention: Corporate Secretary A-1-10 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - ------------------------------------------------------------------------------ (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Print or type assignee's name, address and zip code) and irrevocably appoint _____________________________________________________ to transfer this Note on the books of the Issuers. The agent may substitute another to act for him. - ----------------------------------------------------------------------------- Date: ------------- Your Signature: --------------------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Issuers pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: / / Section 4.10 / / Section 4.15 If you want to elect to have only part of the Note purchased by the Issuers pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________ Date: Your Signature: ------------- ------------------------------ (Sign exactly as your name appears on the Note) Tax Identification No: ----------------------- Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-12 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1) The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Amount of Accreted Value of decrease in Amount of increase this Global Note Signature of Accreted Value in Accreted Value following such authorized officer of of decrease (or of Trustee or Note Date of Exchange this Global Note this Global Note increase) Custodian ---------------- ---------------- ------------------ ----------------- ------------------
- ----------------- 1 This should be included only if the Note is issued in global form. A-1-13 EXHIBIT A-2 (Face of Regulation S Temporary Global Note) FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS $519.40, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $480.60, THE ISSUE DATE IS FEBRUARY 26, 1998 AND THE YIELD TO MATURITY IS 15.06 % PER ANNUM. 13 1/2% [Series A] [Series B] Senior Discount Notes due 2010 No. ____ Cusip No. ____ $__________ ALADDIN GAMING HOLDINGS, LLC AND ALADDIN CAPITAL CORP. promises to pay to or registered assigns, the principal sum of Dollars on March 1, 2010 Interest Payment Dates: March 1 and September 1 Record Dates: February 15 and August 15 Dated: __________, ____ ALADDIN GAMING HOLDINGS, LLC By:________________________ Name: Title: ALADDIN CAPITAL CORP. By:_________________________ Name: Title: This is one of the [Global] Notes referred to in the within-mentioned Indenture: STATE STREET BANK AND TRUST COMPANY, as Trustee By:___________________________________ A-2-1 (Back of Regulation S Temporary Global Note) 13 1/2% [Series A] [Series B] Senior Discount Notes due 2010 [Insert the Regulation S Temporary Global Note Legend, if applicable pursuant to the provisions of the Indenture THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR OTHER NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.] [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED A-2-2 INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), and Aladdin Capital Corp., a Nevada corporation ("Capital" and, together with Holdings, the "Issuers"), promise to pay interest on the Accreted Value of this Note at the rate and times and in the manner specified below and shall pay the Liquidated Damages payable pursuant to Section 2.5 of the Note Registration Rights Agreement referred to below. No interest will accrue on the Notes until March 1, 2003, but the Accreted Value will increase (representing amortization of original issue discount) between the date of original issuance and March 1, 2003, on a semi-annual bond equivalent basis using a 360-day year comprised of twelve 30-day months, such that the Accreted Value will be equal to the full principal amount at maturity of the Notes on March 1, 2003. Beginning on March 1, 2003, cash interest on the Notes will accrue at the rate of 13 1/2% per annum until maturity. The Issuers will pay cash interest and Liquidated Damages semi-annually on March 1 and September 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Cash interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from March 1, 2003. [The Issuers shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, in accordance with the Indenture; they shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time at the same rate to the extent lawful in accordance with the Indenture. Cash interest will be computed on the basis of a 360-day year of twelve 30-day months. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. A-2-3 2. METHOD OF PAYMENT. The Issuers will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the February 15 or August 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to Accreted Value, premium and Liquidated Damages, if any, and interest at the office or agency of the Issuers maintained for such purpose within or without the City and State of New York, or, at the option of the Issuers, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that all payments with respect to at least $1.0 million in aggregate principal amount at maturity of Notes, the Holders of which have given wire transfer instructions to Holdings, will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers or any of their Subsidiaries may act in any such capacity. 4. INDENTURE. The Issuers issued the Notes under an Indenture dated as of February 26, 1998 (the "Indenture"), between the Issuers and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general obligations of the Issuers limited to $221.5 million in aggregate principal amount at maturity, plus amounts, if any, issued to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5 and Paragraph 6 thereof, the Notes shall not be redeemable at the option of the Issuers prior to March 1, 2003. Thereafter, the Notes shall be subject to redemption at the option of the Issuers, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of Accreted Value) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable date of redemption, if redeemed during the twelve-month period beginning on March 1 of the years indicated below:
Year Percentage ---- ---------- 2003........................................................ 106.75% 2004........................................................ 104.50% 2005........................................................ 102.25% 2006 and thereafter......................................... 100.00%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, on or prior to March 1, 2001, the Issuers may redeem up to an aggregate of 35% of the Accreted Value of A-2-4 the Notes at a redemption price of 113 1/2% of the Accreted Value thereof, plus Liquidated Damages, if any, thereon to the redemption date, with the proceeds of a Qualified Public Offering (which proceeds may be advanced or contributed to the Issuers by the IPO Entity); provided that at least 65% of the Accreted Value remains outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of such Qualified Public Offering. 6. GAMING REDEMPTION. Notwithstanding the provisions of subparagraph (a) of Paragraph 5 above, if any Gaming Authority requires that a holder or beneficial owner of Notes must be licensed, qualified or found suitable under any applicable gaming law and such holder or beneficial owner fails to apply for a license, qualification or finding of suitability within 30 days after being requested to do so by such Gaming Authority (or such lesser period that may be required by such Gaming Authority), or if such holder or beneficial owner is notified by such Gaming Authority that such holder or beneficial owner will not be so licensed, qualified or found suitable, the Issuers shall have the right, at their option, (i) to require that such holder or beneficial owner dispose of such holder's or beneficial owner's Notes within 30 days (or such earlier date as may be required by the applicable Gaming Authority) of (a) the termination of the period described above for such holder or beneficial owner to apply for a license, qualification or finding of suitability or (b) receipt of the notice from such Gaming Authority that such holder or beneficial owner will not be licensed, qualified or found suitable by such Gaming Authority or (ii) to call for redemption of the Notes of such holder or beneficial owner at a redemption price equal to the lesser of the price at which such holder or beneficial owner acquired such Notes and the Accreted Value thereof, together with, in either case, accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption or the date of the finding that such holder or beneficial owner will not be licensed, qualified or found suitable, which may be less than 30 days following the notice of redemption, if so ordered by such Gaming Authority or required by applicable gaming laws. 7. MANDATORY REDEMPTION. Except as set forth in Paragraph 8 below, the Issuers, the Issuers shall not be required to make mandatory redemptions or sinking fund payments prior to maturity with respect to the Notes. 8. REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require the Issuers to purchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a price in cash equal to 101% of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase. Within 10 days following any Change of Control, the Issuers shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If Holdings or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings shall commence an offer to all Holders (an "Asset Sale Offer") pursuant to Section 4.10 of the Indenture to purchase the maximum Accreted Value of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date fixed for the closing of such offer in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, Holdings or the Restricted Subsidiary, as the case may be, may, subject to the provisions of the Indenture, use any remaining Excess Proceeds for general corporate purposes. If the aggregate Accreted Value of Notes surrendered by Holders thereof exceeds A-2-5 the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in accordance with Section 3.02 of the Indenture. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from Holdings prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 9. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuers need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the one-year period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in Accreted Value of the Notes then outstanding voting as a single class, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in Accreted Value of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Issuers' obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages, if any, with respect to, the Notes; (ii) default in payment when due of the Accreted Value of or premium, if any, on the Notes, (iii) failure by the Issuers to comply with Section 4.07, 4.09, 4.10, 4.15, 4.21, 4.22, or 5.01 of the Indenture; (iv) failure A-2-6 by the Issuers for 30 days after written notice to comply with any of their agreements in the Indenture or the Notes; (v) default under certain other agreements relating to Indebtedness of the Issuers which default (a) is caused by failure to pay when due principal of or premium, if any, or interest on such Indebtedness (other than the Bank Credit Facility) prior to the later of (1) 60 days after such default and (2) the expriation of the grace period provided in such Indebtedness (a "Payment Default") which Payment Default, together with all other Payment Defaults, exceeds $1.0 million or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (vi) certain final judgments for the payment of money aggregating in excess of $10.0 million that remain undischarged for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to Holdings or any of its Significant Subsidiaries; (viii) a default by each of the Trust, London Clubs and Bazaar Holdings in the performance of their material obligations set forth in the Keep-Well Agreement, which default remains uncured for 180 days, or default by AHL, London Clubs and Bazaar Holdings in the performance of their material obligations set forth in the Noteholder Completion Guaranty or repudiation by each of them of their respective obligations under the Keep-Well Agreement, which has not been ratified and reaffirmed within 180 days, or the Noteholder Completion Guaranty; (ix) Holdings breaches any material representation or warranty set forth in either of the Pledge Agreements or default by Holdings in the performance of any material covenant set forth in either of such agreements or repudiation by Holdings of its obligations under either of such agreements or the unenforceability of either of such agreements against Holdings for any reason; (x) the termination of the Bank Credit Facility (other than pursuant to a refinancing thereof in accordance with its terms and with the terms of clause (i) under the second paragraph under Section 4.09 of the Indenture or the repudiation of the Lenders obligations thereunder, including without limitation, the withdrawal of the proceeds of the Term B Loans and Term C Loans from the Bank Construction Disbursement Account, in each case prior to the date the Aladdin is Operating (except for disbursements in accordance with the Disbursement Agreement); (xi) (a) a failure of the Desert Passage to be Operating on or prior to 90 days after the date the Aladdin becomes Operating and (b) at any time thereafter and prior to the date on which the Desert Passage becomes Operating, the Company's Fixed Charge Coverage Ratio for its most recently ended four full fiscal quarters (or such lesser number of quarters as have ended after the Aladdin became Operating) for which internal financial statements are available is not at least 1.75 to 1.0; (xii) after the Aladdin becomes Operating, revocation, termination, suspension or other cessation of effectiveness of any Gaming Approval, which results in the cessation or suspension of gaming operations for a period of more than 90 days at the Aladdin; (xiii) the failure of the Aladdin to be Operating by the Operating Deadline; (xiv) the transfer of the Aladdin Site as a result of the exercise of remedies in respect of the Deed of Trust, including a foreclosure by the Lenders pursuant to the terms of the Deed of Trust or the acceptance by the Lenders of a deed in lieu of foreclosure; and (xv) the transfer of the Common Membership Interests as a result of the exercise of remedies by the Lenders in respect of the pledge of such Common Membership Interests pursuant to the Lender's security documents. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in Accreted Value of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in Accreted Value of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate Accreted Value of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the A-2-7 Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Issuers are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuers are required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 14. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuers or their Affiliates, and may otherwise deal with the Issuers or their Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, manager, officer, employee, incorporator or member of the Issuers, as such, shall not have any liability for any obligations of the Issuers under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 16. SECURITY. The due and punctual payment of the Accreted Value of, premium and interest and Liquidated Damages, if any, on the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on any overdue Accreted Value of, premium and interest and Liquidated Damages, if any (to the extent permitted by law), on the Notes and performance of all other obligations of the Issuers to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, shall be secured as provided in the Pledge Agreements which Holdings has entered into simultaneously with the execution of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Pledge Agreements (including, without limitation, the provisions providing for foreclosure) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs the Trustee or the Disbursement Agent, as the case may be, to enter into the Pledge Agreements and to perform their respective obligations and exercise their respective rights thereunder in accordance therewith. 17. INTERCREDITOR AGREEMENT. The Holders, while free to exercise their rights and remedies against Holdings, are prohibited, for so long as any portion of the Bank Credit Facility is outstanding, from initiating or intervening in an insolvency proceeding of the Company and from seeking a substantive consolidation of Holdings, the Company and/or Capital. In addition, in the event of a substantive consolidation of Holdings, the Company and/or Capital, the Holders (i) will not be entitled to receive any cash or other payments (other than securities subordinated to the prior payment in full of the Bank Credit Facility to the same extent of the Notes) in respect of the Notes until the Bank Credit Facility has been indefeasibly paid in full in cash and (ii) will be required to turn over to the Lenders under the Bank Credit Facility any payments received in violation of such provisions. 18. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 19. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). A-2-8 20. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Note Registration Rights Agreement dated as of February 26, 1998, between the Issuers and the parties named on the signature pages thereof (the "Note Registration Rights Agreement"). 21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 22. WARRANT ENDORSEMENT. THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT WITH THE NOTES UNTIL THE EARLIEST TO OCCUR OF (I) SEPTEMBER 1, 1998; (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANTS AND THE WARRANT SHARES IS FILED WITH THE COMMISSION UNDER THE SECURITIES ACT (III) THE OCCURRENCE OF A CHANGE OF CONTROL OR A SALE OR RECAPITALIZATION OF ENTERPRISES, HOLDINGS OR THE COMPANY OCCURS; (IV) 30 DAYS AFTER A QUALIFIED PUBLIC OFFERING; (V) THE OCCURRENCE OF AN EVENT OF DEFAULT; OR (VI) SUCH EARLIER DATE AS DETERMINED BY MERRILL LYNCH & CO. IN ITS SOLE DISCRETION (THE DATE OF OCCURRENCE OF AN EVENT SPECIFIED IN CLAUSES (I) THROUGH (VI) BEING REFERRED TO AS THE "SEPARATION DATE"). PRIOR TO SUCH DATE, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000 PRINCIPAL AMOUNT OF NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF 10 WARRANTS FOR EACH $1,000 PRINCIPAL AMOUNT SO TRANSFERRED. Under the terms of the warrant agreement relating to the Warrants (the "Warrant Agreement"), the holder of this security may at any time on or after the Separation Date, at its option, by notice to the Trustee elect to separate or separately transfer the Notes and the Warrants represented hereby, in whole or in part, and shall thereafter surrender this security to the Trustee for the exchange of this security, in part, for such Warrant or Warrants and for a Note or Notes of a like aggregate principal amount and of authorized denominations not bearing this Warrant Endorsement; provided that no delay or failure on the part of the Trustee or the Warrant Agent to exchange this security for such Warrant or Warrants and Note or Notes shall affect the separation of such Notes and Warrants represented hereby or their separate transferability. Until such separation, the holder of this security is, for each $1,000 principal amount of Notes, also the record owner of 10 Warrants expiring March 1, 2010, each Warrant to purchase 1 share of Class B non-voting Common Stock, no par value (the "Common Stock"), of Enterprises (subject to adjustment). Enterprises has deposited with the Trustee, as custodian for the Holder of the Notes bearing this Warrant Endorsement, a certificate or certificates for such Warrants to purchase an aggregate of 2,215,000 shares of Common Stock (subject to adjustment). Prior to the separation of the Notes and the A-2-9 Warrants as described above, record ownership of such Warrants is transferable only by the transfer of this Note on the Note register maintained by the Issuers pursuant to the Indenture. After such separation, ownership of a Warrant is transferable only by the transfer of the certificate representing such Warrant in accordance with the provisions of the Warrant Agreement. By accepting a security bearing this Warrant Endorsement, each holder of this security is bound by all of the terms and provisions of the Warrant Agreement (a copy of which is available on request to Enterprises or the Warrant Agent). Election to Exercise. On or after the Warrant Exercise Commencement Date (as such term is defined in the Warrant Agreement), the Warrants may be exercised by obtaining from the Warrant Agent the required forms of election to exercise, declaration form and instructions for payment of the Exercise Price (as such term is defined in the Warrant Agreement). Upon receiving the required forms and payment of such Exercise Price, the Warrant Agent shall exercise such Warrants in accordance with the provisions of the Warrant Agreement. Election of Exchange. The undersigned registered holder of the security represented hereby irrevocably elects to separate its Notes and Warrants and to exchange this security for a new Note in the principal amount hereof and a Warrant certificate. The undersigned hereby irrevocably instructs the Trustee (A) to issue in the name of the undersigned registered holder a new Note not containing the above Warrant Endorsement in the principal amount equal to the principal amount hereof and (B) to deliver this security to the Warrant Agent pursuant to the provisions of the Warrant Agreement with instructions to issue in the name of the undersigned registered holder a Warrant certificate representing the number of Warrants equal to the number of Warrants represented by this security and to issue (1) a new Warrant certificate to replace the Warrant certificate held on deposit by the Warrant Agent equal to the difference between (x) the number of Warrants represented by the Warrant certificate so held on deposit and (y) the number of Warrants represented by this Security. Dated: ______________________ Name of Holder of this security: ______________________ Address: ______________________ ______________________ Signature: ______________________ Note: The above signature must correspond with the name as written upon the face of this security in every particular, without alteration or enlargement whatever and if the certificate representing any principal amount at maturity of this security or the associated Warrants is to be registered in a name other than that in which this security is registered. Signature Guaranteed: ______________________ Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-2-10 The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Note Registration Rights Agreement. Requests may be made to: Aladdin Gaming Holdings, LLC Aladdin Capital Corp. c/o Aladdin Gaming Holdings, LLC 3667 Las Vegas Boulevard South Las Vegas, Nevada 89109 Attention: Corporate Secretary A-2-11 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Print or type assignee's name, address and zip code) and irrevocably appoint _____________________________________________________ to transfer this Note on the books of the Issuers. The agent may substitute another to act for him. - ------------------------------------------------------------------------------ Date: ------------------- Your Signature: ------------------------------------------ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-2-12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Issuers pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: / / Section 4.10 / / Section 4.15 If you want to elect to have only part of the Note purchased by the Issuers pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________ Date: Your Signature: ------------- ------------------------------- (Sign exactly as your name appears on the Note) Tax Identification No: ------------------------ Signature Guarantee. Note: Signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-2-13 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Regulation S Temporary Global Note, have been made:
Amount of Accreted Value of decrease in Amount of increase this Global Note Signature of Accreted Value in Accreted Value following such authorized officer of of decrease (or of Trustee or Note Date of Exchange this Global Note this Global Note increase) Custodian ---------------- ---------------- ------------------ ----------------- ------------------
A-2-14 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Aladdin Gaming Holdings, LLC Aladdin Capital Corp. c/o: Aladdin Gaming, LLC 3667 Las Vegas Boulevard South Las Vegas, Nevada 89109 State Street Bank and Trust Company Two International Place Boston, Massachusetts 02110 Attn: Corporate Trust Division Re: ___% Senior Discount Notes due 2010 Reference is hereby made to the Indenture, dated as of February __, 1998 (the "Indenture"), between Aladdin Gaming Holdings, LLC and Aladdin Capital Corp., as issuers (the "Issuers"), and State Street Bank and Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the Accreted Value of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. / / Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. / / Check if Transferee will take delivery of a beneficial interest in the Temporary Regulation S Global Note, the Regulation S Global Note or a Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the B-1 Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. / / Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) / / such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) / / such Transfer is being effected to the Issuers or a subsidiary thereof; or (c) / / such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) / / such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the B-2 Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. / / Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a) / / Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) / / Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) / / Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers. --------------------------------------- [Insert Name of Transferor] By:____________________________________ Name: Title: Dated: __________,____ B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP ), or (ii) / / Regulation S Global Note (CUSIP ), or (iii) / / IAI Global Note (CUSIP ); or (b) / / a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP ), or (ii) / / Regulation S Global Note (CUSIP ), or (iii) / / IAI Global Note (CUSIP ); or (iv) / / Unrestricted Global Note (CUSIP ); or (b) / / a Restricted Definitive Note; or (c) / / an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Aladdin Gaming Holdings, LLC and Aladdin Capital Corp. c/o: Aladdin Gaming, LLC 3667 Las Vegas Boulevard South Las Vegas, Nevada 89109 State Street Bank and Trust Company Two International Place Boston, Massachusetts 02110 Re: ___% Senior Discount Notes due 2010 (CUSIP______________) Reference is hereby made to the Indenture, dated as of February __, 1998 (the "Indenture"), between Aladdin Gaming Holdings, LLC and Aladdin Capital Corp., as issuers (the "Issuers"), and State Street Bank and Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the Accreted Value of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a) / / Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) / / Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with C-1 the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) / / Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) / / Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a) / / Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) / / Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] / / 144A Global Note, / / Regulation S Global Note, / / IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers. ----------------------------------- [Insert Name of Owner] By: _______________________________ Name: Title: Dated: __________, ____ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Aladdin Gaming Holdings, LLC and Aladdin Capital Corp. c/o: Aladdin Gaming, LLC 3667 Las Vegas Boulevard South Las Vegas, Nevada 89109 State Street Bank and Trust Company Two International Place Boston, Massachusetts 02110 Attn: Corporate Trust Division Re: 13 1/2% Senior Discount Notes due 2010 Reference is hereby made to the Indenture, dated as of February 26, 1998 (the "Indenture"), between Aladdin Gaming Holdings, LLC and Aladdin Capital Corp., as issuers (the "Issuers"), and State Street Bank and Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) / / a beneficial interest in a Global Note, or (b) / / a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Issuers or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has D-1 furnished on its behalf by a U.S. broker-dealer) to you and to the Issuers a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Issuers such certifications, legal opinions and other information as you and the Issuers may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Issuers are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ------------------------------------------ [Insert Name of Accredited Investor] By: _______________________________ Name: Title: Dated: ___________, ____ D-2 EXHIBIT E FORM OF CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION THIS CONTINGENT GUARANTY OF PERFORMANCE AND COMPLETION, dated as of __________, 1998 is made by LONDON CLUBS INTERNATIONAL PLC, a company registered in England and Wales under company number 2862479 ("London Clubs"), THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER or, in the event of the dissolution thereof, the remaindermen thereof (the "Trust") and ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company ("ABH"; ABH, the Trust and London Clubs are individually called a "Guarantor" and collectively called the "Guarantors"), in favor of ___________ as Agent (the "Agent") for [the parties set forth on Schedule A-1 hereto (the ___________ Contingent Guarantors")] (the "Agent"). WITNESSETH: WHEREAS, Fleet Bank, NA has agreed to lend to Aladdin Bazaar, LLC ("Aladdin Bazaar") sufficient funds to permit the construction of the Dessert Passage and carpark (the "Mall Project") adjacent to the improvements (the "Fleet Loan") and the Trust will act as a guarantor of the Fleet Loan; and WHEREAS, the Contingent Guarantors have agreed to provide a limited guaranty of certain of the Trust's obligations under the Fleet Loan (the "Additional Guaranty") which Additional Guaranty requires the Contingent Guarantors to make payments in the event, among others, that the Improvements are no completed on a timely basis; WHEREAS, it is in the best interest of the Guarantors to promote and induce Aladdin Bazaar to construct the Mall Project adjacent to the Improvements and (ii) the Contingent Guarantors to provide the Additional Guaranty, in connection therewith; and WHEREAS, pursuant to that certain credit agreement, dated February 26, 1998 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Credit Agreement"), among Aladdin Gaming, LLC, a Nevada limited liability company (the "Borrower"), the various lending institutions (individually a "Lender" and collectively the "Lenders") as are, or may from time to time become, parties thereto and The Bank of Nova Scotia ("Scotiabank") as the Administrative Agent for the Lenders, Merrill Lynch Capital Corporation ("Merrill Lynch") as the Syndication Agent for the Lenders, Canadian Imperial Bank of Commerce as the Documentation Agent for the Lenders, and Scotiabank and Merrill Lynch as Arrangers, the Lenders have extended Commitments to make Loans to the Borrower and to issue Letters of Credit for the account of the Borrower; and WHEREAS, pursuant to that certain indenture, dated February 26, 1998 (the "Indenture") among the State Street bank and Trust Company (the "Discount Note Indenture Trustee"), Aladdin Gaming Holdings, LLC ("Holdings") and Aladdin Capital Corp., the Discount Notes were issued and the proceeds thereof, together with the proceeds the Loans under the Credit Agreement were advanced E-1 to the Borrower pursuant to the terms of that certain Disbursement Agreement dated February 26, 1998 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Disbursement Agreement") among the Borrower, Holdings, Scotiabank, as the Administrative Agent, the Discount Note Indenture Trustee and Scotiabank, as the Disbursement Agent, and initial Securities Intermediary; and WHEREAS, as a condition precedent to the effectiveness of the Credit Agreement, the Guarantors delivered a Guaranty of Performance and Completion dated February 26, 1998 (the "Completion Guaranty") in favor of each of the Administrative Agent and the Lenders and certain subsidiaries of London Clubs (the "Subsidiary Guarantors") agreed to guarantee fully and unconditionally the payment of London Clubs' obligations under the Completion Guaranty pursuant to a separate guaranty agreement of even date herewith (the "Subsidiary Bank Guaranty"; together with the Completion Guaranty, collectively, the "Bank Guaranty"); and WHEREAS, as a condition precedent to the effectiveness of the Indenture and the issuance of the Discount Notes, the Guarantors delivered a Guaranty of Performance and Completion dated February 26, 1998 (the "Guaranty of Performance and Completion") and the Subsidiary Guarantors agreed to guarantee fully and unconditionally the payment of London Clubs' obligations under the Guaranty of Performance and Completion pursuant to a separate guaranty agreement dated February 26,1998 (the "Subsidiary Guaranty"; together with the Guaranty of Performance and Completion, the "Noteholder Completion Guaranty"); and WHEREAS, as a condition precedent to the effectiveness of the Additional Guaranty, the Guarantors are required to execute and deliver a Guaranty of Performance and Completion the "Contingent Guaranty of Performance and Completion" and the Subsidiary Guarantors have agreed to guarantee fully and unconditionally the payment of London Clubs' obligations under the Contingent Guaranty of Performance and Completion pursuant to a separate guaranty agreement of even date herewith (the "Contingent Subsidiary Guaranty"; together with this Contingent Guaranty of Performance and Completion, the "Contingent Completion Guaranty"); and WHEREAS, the Guarantors have duly authorized the execution, delivery and performance of this Contingent Guaranty of Performance and Completion and the Subsidiary Guarantors have duly authorized the execution, delivery and performance of the Contingent Subsidiary Guaranty; and WHEREAS, it is in the best interests of the Guarantors to execute this Contingent Guaranty of Performance and Completion and the Subsidiary Guarantors to execute the Contingent Subsidiary Guaranty inasmuch as the Guarantors and the Subsidiary Guarantors will derive substantial direct and indirect benefits from the proceeds of the Additional Guaranty. NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and in order to induce the Agent to enter into the Additional Guaranty, the Guarantors agree, for the benefit of theAgent and the Contingent Guarantors, as follows: 1. Definitions. Capitalized terms not otherwise defined in this Contingent Completion Guaranty shall have the meanings set forth in Appendix A hereto. As used herein, the following terms shall have the meanings set forth below. E-2 "Accreted Value" shall have the meaning ascribed to it in the Indenture. "Additional Amounts" is defined in Section 15(a)(iii). "Additional Guaranty" is defined in the second recital. "Agent" is defined in the preamble. "Bank Guaranty" is defined in the seventh recital. "Bankruptcy Code" shall mean Title 11 of the United States Code as amended from time to time. "Change Order" shall have the meaning ascribed to it in the Credit Agreement as in effect on the Effective Date. "Commitment" shall have the meaning ascribed to it in the Credit Agreement as in effect on the Effective Date. "Completion" shall have the meaning ascribed to it in the Credit Agreement as in effect on the Effective Date. "Consolidated Intangibles" means, at a particular date, all assets of a Guarantor and its consolidated Subsidiaries, determined on a consolidated basis, that would, in conformity with GAAP, as applicable, be classified as intangible assets, including, without limitation, unamortized debt discount and expense, unamortized organization and reorganization expense, costs in excess of the fair market value of acquired companies, patents, trade or service marks, franchises, trade names, goodwill and, from and after March 30, 1997, the amount of all write-ups in the book value of assets resulting from any revaluation thereof. "Consolidated Tangible Assets" means, at a particular date, the amount equal to (a) the amount which would be included as assets on the consolidated balance sheet of a Guarantor and its consolidated Subsidiaries as at such date in accordance with GAAP, minus (b) Consolidated Intangibles. "Construction Benchmark Schedule" means the schedule attached hereto as Schedule 7. "Contingent Completion Guaranty" is defined in the eighth recital. "Contingent Guarantor" is defined in the preamble. "Contingent Subsidiary Guaranty" is defined in the eighth recital. "Credit Agreement" is defined in the fourth recital. "Discount Notes" means the 13 1/2% Senior Discount Notes due 2010 issued pursuant to the Indenture. "Dormant Subsidiary" means any Subsidiary of a Guarantor which has no operating assets or property and conducts no business. E-3 "Enforcement Costs" means all reasonable out-of-pocket costs and expenses of the Agent in connection with the enforcement of the rights and remedies of the Agent under this Contingent Completion Guaranty and any amendment, waiver or consent relating hereto including, without limitation, reasonable attorneys' fees and costs and expenses, court costs and filing fees in addition to all other amounts due hereunder whether or not such Enforcement Costs are incurred in one or more proceedings. "Failure to Enforce" is defined in Section 3(a). "Fleet Loan" is defined in the third recital. "GAAP" means the generally accepted accounting principles as in effect from time to time in the United Kingdom with respect to London Clubs and in the United States with respect to the other Guarantors, as the case may be. "Guaranteed Obligations" means the obligations of the Guarantors under Section 2. "Guarantor" is defined in the preamble. "Guaranty Deposit Account" is defined in Section 4(a). "Imposition" shall have the meaning ascribed to it in the Credit Agreement as in effect on the Effective Date. "Improvement" shall have the meaning ascribed to it in the Credit Agreement as in effect on the Effective Date. "In Balance" shall have the meaning ascribed to it in the Credit Agreement as in effect on the Effective Date. "Indenture" is defined in the third recital. "Insolvency Proceeding" means any case or proceeding, voluntary or involuntary, under the Bankruptcy Code, or any similar existing or future law of any jurisdiction, foreign, state or federal, relating to bankruptcy, insolvency, reorganization or relief of debtors. "Leases" means, collectively, all agreements relating to the use, occupancy and possession of space with respect to the Main Project entered into by the Borrower and a tenant from time to time. "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of a Guarantor and its Subsidiaries taken as a whole. "Material Subsidiary" means each of the Subsidiaries of London Clubs that are party to that certain Subsidiary Guaranty dated as of June 30, 1997 guaranteeing the obligations of London Clubs under the Note Agreements. Each Material Subsidiary of London Clubs as of the date hereof is listed on Schedule 1 hereof. "Minimum Aladdin Facilities" has the meaning ascribed to it in the Indenture as in effect on February 26, 1998. E-4 "Note Agreements" means the several identical Note Purchase Agreements dated as of June 30, 1997 among London Clubs and the purchasers named therein relating to London Clubs' $50,000,000 aggregate principal amount of 7.74% Guaranteed Senior Notes due 2004 and as the same may be modified by amendments that would not, in the aggregate, have the effect of making London Clubs' obligations thereunder materially more onerous (it being understood and agreed that any amendment, supplement or modification that increases the amount of the obligations of London Clubs thereunder shall be deemed material). "Noteholder Completion Guaranty" is defined in seventh recital "Noteholders" means the holders of the Discount Notes. "NRS" is defined in Section 4(a). "Subsidiary Bank Guaranty" is defined in the sixth recital. "Subsidiary Guarantors" is defined in the sixth recital. "Subsidiary Guaranty" is defined in the seventh recital. "Taxes" is defined in Section 15(a). "Tax Refund" is defined in Section 15(c). "Tenant Improvements" means (i) the portion of the Work to be performed by or on behalf of the Borrower in the interior of the Casino pursuant to a Lease to adapt the same for the initial use and occupancy by the tenant under such Lease or (ii) if a tenant under a Lease undertakes to complete the work to the portion of the Main Project covered by such Lease, any allowances or payments advanced to such Person by the Borrower. "Work" means the demolition work and the rehabilitation and/or construction, equipping and completion of the Main Project to be performed by the Borrower in accordance with the Plans and Specifications, the Reciprocal Easement Agreement and the Site Work Agreement. 2. Guaranty of Completion and Performance. The Guarantors, jointly and severally, absolutely, unconditionally and irrevocably, on the terms and subject to the conditions set forth herein, covenant and guarantee to the Agent (for the benefit of the Contingent Guarantors) and covenants and agrees to make any and all payments to or on behalf of the Borrower as may be necessary in order to permit and assure that: (i) the Borrower shall (A) prosecute the Work and the construction of the Improvements and the Tenant Improvements to Completion with due diligence and continuity, in an expeditious and first-class workmanlike manner, (B) cause the Work to be performed and the Improvements and the Tenant Improvements to be constructed, equipped and completed in compliance with the Plans and Specifications in all material respects and in compliance in all material respects with the provisions of the Reciprocal Easement Agreement, the Site Work Agreement, all Environmental Laws and all Legal Requirements, and (C) correct or cause to be corrected as soon as possible any material defect in the E-5 Work, the Improvements and/or the Tenant Improvements (including, without limitation, any material defect in workmanship or quality of construction or materials) or any material departure or variation from the Plans and Specifications, the requirements of the Reciprocal Easement Agreement and/or the Site Work Agreement not made pursuant to Change Orders approved in writing by the Construction Consultant and the Administrative Agent in accordance with the Credit Agreement and the Disbursement Agreement; and (ii) the Borrower shall punctually pay, discharge and/or contribute, as appropriate, (A) any and all costs, expenses and liabilities incurred by the Borrower for or in connection with the performance of the Work and the Completion of the Improvements and the Tenant Improvements in accordance with the Plans and Specifications, (B) all claims and demands for labor, materials and services incurred by the Borrower for or in connection with the performance of the Work and the Completion of the Improvements and the Tenant Improvements and in connection with cost overruns of any type, in each case which are or may become due and payable, or, if unpaid, are or may become Liens on the portion of the Site owned by the Borrower, (C) all payments to be made or Work to be performed by the Borrower under Leases for Tenant Improvements or under the Reciprocal Easement Agreement or the Site Work Agreement, (D) Impositions and premiums for insurance prior to the Completion of the Improvements and the Tenant Improvements, (E) all amounts which the Borrower may be required to pay from time to time in order to keep the Main Project Budget In Balance, and (F) all amounts needed to cause the Work to be performed within the Construction Benchmark Schedule; and (iii) the Borrower shall perform the Work and complete construction of the required Minimum Aladdin Facilities on schedule and in accordance with the Plans and Specifications Lien-free other than Permitted Liens and the portion of the Site owned by the Borrower shall be and remain free and clear of all Liens arising from the furnishing of materials, labor or services for or in connection with the performance of the Work and the Completion of the Improvements and the Tenant Improvements; and (iv) the Borrower shall provide the expertise necessary to supervise performance of the Work and Completion of the Improvements and the Tenant Improvements at no cost to the Agent, and (v) in the event the Guarantors hereunder shall fail or refuse to pay and/or perform the Guaranteed Obligations under this Contingent Completion Guaranty, theAgent (in addition to any other rights and remedies afforded by applicable law) may pay and/or perform the Guaranteed Obligations on behalf of the Guarantors hereunder in which case the Guarantors, upon demand by the Agent, shall pay any and all costs, expenses and liabilities for such costs and expenses in connection with the performance of the Work and Completion of the Improvements and the Tenant Improvements, or cause any Lien in connection with the performance of the Work or the Completion of the Improvements and/or Tenant Improvements or any claim or demand for the payment of the cost of the performance of the Work and Completion of the Improvements and the Tenant Improvements to be bonded, discharged, released or paid, and shall reimburse the Agent for all sums paid and all costs, expenses or liabilities incurred by the Agent in connection therewith; and (vi) the Guarantors shall pay the Enforcement Costs. 3. Restrictions on Exercise of Rights and Remedies by the Agent. (a) Except as expressly set forth in this Section 3(a), the Guarantors shall have no obligation to pay and/or perform any of the Guaranteed Obligations and the Agent covenants and agrees not to E-6 demand payment and/or performance of any of the Guaranteed Obligations or exercise any rights, remedies or options under this Contingent Completion Guaranty or commence any enforcement proceedings hereunder during any period that the Bank Guaranty or Noteholder Completion Guaranty is in effect and the Guarantors have not been released in writing by the Lenders or the Discount Note Indenture Trustee, respectively; provided, however, the Agent shall be permitted to demand payment and/or performance of the Guaranteed Obligations and exercise all rights, remedies and options and commence enforcement proceedings under this Contingent Completion Guaranty pursuant to this Section 3(a): (i) at any time prior to Completion and from and after the date on which all of the indebtedness evidenced by the Indenture and the Discount :Notes has been indefeasibly paid in full and the Discount Note Indenture Trustee has released the Guarantors in writing from their obligations under this Noteholder Completion Guaranty; (ii) at any time after the date on which all of the following events have occurred and are continuing: (A) the Contingent Guarantors fully funded their obligations under the Additional Guaranty; and (B) the Guarantors have defaulted in their Guaranteed Obligations owing to the Discount Note Indenture Trustee and the Noteholders under the Noteholder Completion Guaranty, and the Discount Note Indenture Trustee (or in accordance with the terms of the Indenture, Noteholders holding at last 25% of the aggregate Accreted Value of the Discount Notes) has or have failed to actively enforce the Noteholder Completion Guaranty and to use reasonable efforts to pursue their remedies under the Noteholder Completion Guaranty (a "Failure to Enforce") and such Failure to Enforce has continued for 180 calendar days in the aggregate (which shall be extended for the number of days during which a Force Majeure Event and/or an Insolvency Proceeding of the Borrower which impairs the Discount Note Indenture Trustee or the Noteholders directly from enforcing the Noteholder Completion Guaranty has occurred and is continuing, which such extension shall terminate upon the filing by the Discount Note Indenture Trustee or the requisite Noteholders of any action against the Guarantors under the Noteholder Completion Guaranty to enforce the obligations of the Guarantors thereunder which are susceptible of performance notwithstanding such Insolvency Proceeding); and (C) the Work which has been substantially completed in accordance with the Plans and Specifications on the date in question has not progressed to the stage of completion set forth for such date (subject to any extensions based upon Force Majeure Events or an Insolvency Proceeding of the Borrower which impairs the Discount Note Indenture Trustee or the Noteholders directly or indirectly from enforcing the Noteholder Completion Guaranty, which such extension shall terminate upon the filing by the Discount Note Indenture Trustee or the requisite Noteholders of any action against the Guarantors under the Noteholder Completion Guaranty to enforce the obligations of the Guarantors thereunder which are susceptible of performance notwithstanding such Insolvency Proceeding) in the Construction Benchmark Schedule. The Discount Note Indenture Trustee and the Noteholders shall be third party beneficiaries of this Section 3 (b) and shall have all rights at law and equity to the enforcement thereof. (b) Notwithstanding anything to the contrary in this Contingent Completion Guaranty, performance in all material respects of the obligations of the Guarantors under Section 2 of the Bank Guaranty or the E-7 Noteholder Completion Guaranty shall be deemed to be performance of the Guaranteed Obligations hereunder and performance in all material respects of the Guaranteed Obligations of the Guarantors hereunder shall be deemed to be performance of the corresponding obligations under the Bank Guaranty or the Noteholder Completion Guaranty. (c) As a material inducement to the Lenders and the Discount Note Indenture Trustee to consent to the delivery of this Contingent Completion Guaranty by the Guarantors, the Agent covenants and agrees that (i) the right of the Agent to demand payment and/or performance of the Guaranteed Obligations, to exercise any rights, remedies and options and/or to commence enforcement proceedings under this Contingent Completion Guaranty shall be subject in all events to the delivery of a written notice to the Administrative Agent and Discount Note Indenture Trustee no later than 10 Business Days prior to the making of such demand for payment and/or performance, exercise of rights, remedies and options, or commencement of enforcement proceedings, as applicable, (ii) the Lenders and the Discount Note Indenture Trustee shall have all rights at law and equity including, without limitation, the right to seek an injunction or other extraordinary remedy to prevent or prohibit the making of any demand for payment and/or performance, exercise of rights, remedies and options, or commencement of enforcement proceedings by the Agent which is in contravention of Section 3(a), and (iii) this Contingent Completion Guaranty shall not be amended, modified, and/or amended and restated without the prior written consent of the Administrative Agent and Discount Note Indenture Trustee in Administrative Agent in their sole discretion provided that the consent of the Administrative Agent and Discount Note Indenture Trustee shall not be required in connection with corrective amendments required to be made to this Contingent Completion Guaranty as and when corresponding amendments are made to the Bank Guaranty or the Noteholder Completion Guaranty. The Administrative Agent and the Discount Note Indenture Trustee (on behalf of the Noteholders shall be third party beneficiaries of this Section 3(c) and shall have all rights at law and equity to the enforcement hereof. 4. Payment Provisions. Subject to Nevada Gaming Laws (once the Borrower has been licensed), all payments required to be made by the Guarantors pursuant to Section 2 hereof shall be deemed to be capital contributions to the Borrower and shall be made subject to the following terms: (a) The Guarantors shall make cash payments in the amounts required under Section 2 hereof into an interest-bearing deposit account designated and controlled exclusively by the Agent (the "Guaranty Deposit Account") in which the Agent is hereby granted a security interest. The Guaranty Deposit Account is intended to be a "deposit account" for the purposes of Nevada Revised Statutes ("NRS") 40.430.4(g) and Section 9301(g) of the California Uniform Commercial Code. Such funds shall be held in the Guaranty Deposit Account as collateral for the Guaranteed Obligations of the Guarantors under this Contingent Completion Guaranty and shall be applied to payment of the Guaranteed Obligations. (b) The cash payments into the Guaranty Deposit Account and the funds therein for the purpose of paying the Guaranteed Obligations under this Contingent Completion Guaranty shall be free and clear of any third party claims thereto, including any claims by the Borrower or Holding as a third party beneficiary under this Contingent Completion Guaranty. The Guarantors and the Agent specifically agree that the Borrower and Holdings are not intended third party beneficiaries to this Contingent Completion Guaranty and that neither the Borrower, Holdings, nor any other Person which is not party to this Contingent Completion Guaranty (other than successors and assigns of each of the Agent) shall have any rights under this Contingent Completion Guaranty. E-8 5. Continuation of Guaranty. In the event that the Trust is in default under the Additional Guaranty this Contingent Completion Guaranty shall remain in full force and effect. Subject to the provisions of Section 11 hereof, upon the indefeasible payment and performance of the Guaranteed Obligations by the Guarantors, this Contingent Completion Guaranty shall terminate. 6. Proof of Damages. If the Guarantors shall at any time or from time to time fail to perform or comply with any of the Guaranteed Obligations contained herein, then in each such case (i) it shall be assumed conclusively without necessity of proof that such failure by the Guarantors was the sole and direct cause of the Agent failing to receive such payment when due (to the extent of the failure of the Guarantors to perform the Guaranteed Obligations contained herein) irrespective of any other contributing or intervening cause whatsoever, and (ii) the Guarantors further irrevocably waive to the fullest extent permitted by law any right or defense the Guarantors may have to cause the Agent to prove the cause or amount of such damages or to mitigate the same. 7. Rights of the Agent. To the extent permitted by the Nevada Gaming Laws, each Guarantor authorizes the Agent in its sole discretion to perform any or all of the following acts during such time as the Agent has the right to demand payment and performance of the Guaranteed Obligations, all without notice to the Guarantors (but with notice being given to the Administrative Agent and Discount Note Indenture Trustee as required by Section 3(c) of this Contingent Completion Guaranty) and without affecting the payment and performance of the Guaranteed Obligations by the Guarantors: (a) The Agent may take and hold security for the Guaranteed Obligations and for the Trust's obligations under the Additional Guaranty, accept additional or substituted security for any of the foregoing, and subordinate, exchange, enforce, waive, release, compromise, fail to perfect and sell or otherwise dispose of any such security. (b) The Agent may direct the order and manner of any sale of all or any part of any security now or later to be held for this Contingent Completion Guaranty and may also bid at any such sale. (c) The Agent may substitute, add or release any one or more Guarantors or endorsers. (d) The Agent may release the Trust of their liability for its obligations under the Additional Guaranty. (e) The Agent may extend other credit to the Trust, their Affiliates and any of the Guarantors or their respective Affiliates and may take and hold security for the credit so extended, all without affecting the Guarantors' liability under this Contingent Completion Guaranty. (f) The Agent may advance additional funds to Trust, the Guarantors and their respective Affiliates for any purpose. 8. Contingent Completion Guaranty to be Absolute. The Guarantors expressly agree that for as long as the obligations of the Guarantors under the Bank Guaranty, the Noteholder Completion Guaranty and the Guaranteed Obligations hereunder remain unperformed, the Guarantors shall not be released from the Guaranteed Obligations hereunder by or because of: (a) Any act or event which might otherwise discharge, reduce, limit or modify the Guaranteed Obligations; E-9 (b) Any waiver, extension, modification, forbearance, delay or other act or omission of the Agent, or any failure to proceed promptly or otherwise as against the Trust, any Guarantor or any security; or (c) Any action, omission or circumstance which might increase the likelihood that the Guarantors may be called upon to perform under this Contingent Completion Guaranty or which might affect the rights or remedies of the Guarantors as against the Trust in its capacity as obligor under the Additional Guaranty or any Guarantor; or (d) Any dealings occurring at any time between the Borrower, the Trust, the Lenders, the Discount Note Indenture Trustee, the Agent, the Noteholders or the Guarantors with respect to amendments to the Bank Guaranty, the Credit Agreement, the other Loan Documents, the Loans, the Noteholder Completion Guaranty, the Indenture, the Discount Notes, the Additional Guaranty or otherwise, as the case may be. The Guarantors hereby expressly waive and surrender any defense to their liability under this Contingent Completion Guaranty based upon any of the foregoing acts, omissions, agreements, waivers or matters. 9. Guarantors' Waivers. The Guarantors waive: (a) All statutes of limitations as a defense to any action or proceeding brought against the Guarantors by the Agent, to the fullest extent permitted by law; (b) Any right they may have to require the Agent to proceed against the Trust or to pursue any other remedy in their power to pursue; (c) Any defense based on any claim that the Guaranteed Obligations exceed or are more burdensome than those of the Trust under the Additional Guaranty; (d) Any defense based on: (i) any legal disability of the Trust, (ii) any discharge, modification, impairment or limitation of the liability of the Trust under the Additional Guaranty or the Guarantors under the Additional Guaranty from any cause, whether consented to by the Agent or arising by operation of law or from any Insolvency Proceeding, (iii) the Guarantors' rights under NRS 104.3605, the Guarantors specifically agreeing that this clause (iii) shall constitute a waiver of discharge under NRS 104.3605; (e) Any defense based on any action taken or omitted (other than gross negligence or willful misconduct) by the Agent in any Insolvency Proceeding involving the Trust, including any election to have a claim allowed as being secured, partially secured or unsecured, any extension of credit by the Agent to the Trust in any Insolvency Proceeding, and the taking and holding by the Agent of any security for any such extension of credit; (f) All presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Contingent Completion Guaranty and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind; E-10 (g) Any defense based on or arising out of any defense that the Trust may have to the payment or performance of their obligations under the Additional Guaranty or any portion of such obligations; and (h) Any defense or benefit based on NRS 40.430 and judicial decisions relating thereto and NRS 40.451 et seq. and judicial decisions relating thereto, the Guarantors agreeing that the waiver in this clause (h) is intended to take advantage of the two (2) waivers permitted by NRS 40.495 (1) and (2) to the maximum extent permitted. 10. Waivers of Subrogation and Other Rights. (a) Upon the occurrence of any event of default hereunder, the Agent in its sole discretion, without prior notice to or consent of the Guarantors, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security, if any, for the obligations under the Additional Guaranty, in the case of the Trust, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) make any accommodation with the Trust or any Guarantor, or (iv) exercise any other remedy against the Trust or any Guarantor or any security. No such action by the Agent shall release or limit the liability of the Guarantors, who shall remain liable under this Contingent Completion Guaranty after the action, even if the effect of the action is to deprive the Guarantors of any subrogation rights, rights of indemnity, or other rights to collect reimbursement for any sums paid to the Agent, whether contractual or arising by operation of law or otherwise. The Guarantors expressly waive any defenses or benefits that may be derived from NRS Section 40.451, et seq. and judicial decisions relating thereto, or comparable provisions of Nevada law which are comparable to California Civil Procedure Sections 580a, 580b, 580d, or 726 or comparable provisions of the laws of any other jurisdiction, and all other suretyship defenses they otherwise might or would have under Nevada law or other applicable law. The Guarantors expressly agree that under no circumstances shall they be deemed to have any right, title, interest or claim in or to any real or personal property, if any, to be held by the Agent or any third party after any foreclosure or transfer in lieu of foreclosure of any security for the Guaranteed Obligations or the obligations under the Additional Guaranty. For purposes of this Section 10, references to the Trust are made with respect to the Trust in its capacity as obligor under the Additional Guaranty. (b) Regardless of whether the Guarantors may have made any payments to the Agent under this Contingent Completion Guaranty, the Guarantors hereby waive: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement from the Trust for any sums paid to the Agent, whether contractual or arising by operation of law (including the Bankruptcy Code) or otherwise, (ii) all rights to enforce any remedy that the Agent may have against the Trust or any other Person, and (iii) all rights to participate in any security now or later to be held by the Agent for the obligations under the Additional Guaranty. The waivers given in this Section 10(b) shall be effective until the obligations under the Additional Guaranty have been indefeasibly paid and performed in full. (c) The Guarantors understand and acknowledge that if the Agent forecloses judicially or nonjudicially against any real property or personal security, if any, for the Guaranteed Obligations or the obligations under the Additional Guaranty, that foreclosure could impair or destroy any ability that the Guarantors may have to seek reimbursement, contribution or indemnification from the Borrower, Holdings or the Trust or others based on any right the Guarantors may have of subrogation, reimbursement, contribution or indemnification for any amounts paid by the Guarantors under this Contingent Completion Guaranty. The Guarantors further understand and acknowledge that in the absence of this Section 10, such potential impairment or destruction of the Guarantors' rights, if any, E-11 may entitle the Guarantors to assert a defense to this Contingent Completion Guaranty. By executing this Contingent Completion Guaranty, the Guarantors freely, irrevocably and unconditionally: (i) waive and relinquish that defense and agree that the Guarantors will be fully liable under this Contingent Completion Guaranty even though the Agent may foreclose judicially or nonjudicially against any real property security, if any, for the obligations under the Additional Guaranty; (ii) agree that the Guarantors will not assert that defense in any action or proceeding which the Agent may commence to enforce this Contingent Completion Guaranty; and (iii) acknowledge and agree that this waiver is a material part of the consideration which they are receiving for entering into the transactions contemplated hereby. 11. Revival and Reinstatement. If the Agent is required to pay, return or restore to any of the Guarantors any amounts previously paid with respect to the Guaranteed Obligations because of any Insolvency Proceeding of any of the Guarantors, any stop notice or any other reason, the Guaranteed Obligations shall be reinstated and revived and the rights of the Agent shall continue with regard to such amounts, as though they had never been paid. 12. Representations and Warranties. Each Guarantor hereby represents and warrants unto the Agent as follows: (a) The most recent audited consolidated balance sheet of London Clubs and ABH and their respective consolidated Subsidiaries (in the case of ABH, as of December 31, 1996 and in the case of London Clubs, as of March 30, 1997) and the related consolidated statements of earnings and stockholders' equity (or profit and loss in the case of London Clubs) and of cash flows for the fiscal year ended on such date, reported on by such Guarantor's independent public accountants, copies of which have heretofore been furnished to the Agent, are complete and correct and present fairly (or give a true and fair view of in the case of London Clubs) the consolidated financial condition of such Guarantor and its consolidated Subsidiaries as at such date, and the results of their operations (or consolidated profit and loss in the case of London Clubs) and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of such Guarantor and its consolidated Subsidiaries as at September 30, 1997 and the related unaudited consolidated statements of earnings and of cash flows for the nine-month period (or, in the case of London Clubs, six month period) ended on such date, certified by a Authorized Representative of such Guarantor, are complete and correct and present fairly (or give a true and fair view of in the case of London Clubs) the consolidated financial condition of such Guarantor and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the nine-month period (or, in the case of London Clubs, six-month period) then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP or UK GAAP, as applicable, applied consistently throughout the periods involved (except as approved by such accountants or Authorized Representative, as the case may be, and as disclosed therein). (b) Since December 31, 1996, in the case of ABH and since March 30, 1997 in the case of the Trust, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. (c) Each of such Guarantor and its Subsidiaries (a) is duly organized, and, to the extent applicable, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or other power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) to the extent applicable, is duly qualified as a foreign corporation or company or trust and in good standing, E-12 under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) by Opening Date, is in compliance with all material Legal Requirements except where failure to comply with any of the foregoing could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect. (d) Each of such Guarantors has the corporate or other power and authority, and the legal right, to make, deliver and perform this Contingent Completion Guaranty and to provide the undertakings hereunder and has taken all necessary corporate or other action to authorize the execution, delivery and performance of this Contingent Completion Guaranty. No consent or authorization of, filing with or other act by or in respect of, any Governmental Instrumentality or any other Person is required to be obtained or made, as the case may be, by such Guarantor in connection with this Contingent Completion Guaranty or with the execution, delivery, performance, validity or enforceability of this Contingent Completion Guaranty by or against such Guarantor, except as has been obtained and remains in full force and effect on the date hereof, other than certain Nevada Gaming Laws approvals, as applicable. This Contingent Completion Guaranty has been duly executed and delivered on behalf of such Guarantor. This Contingent Completion Guaranty constitutes a legal, valid and binding obligation of such Guarantor enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (e) Each Subsidiary Guarantor has the corporate power and authority, and the legal right, to make, deliver and perform the Contingent Subsidiary Guaranty and to provide the undertakings thereunder and has taken all necessary corporate action to authorize the execution, delivery and performance of the Contingent Subsidiary Guaranty. No consent or authorization of, filing with or other act by or in respect of, any Governmental Instrumentality or any other Person is required to be obtained or made, as the case may be, by such Subsidiary Guarantor in connection with the Contingent Subsidiary Guaranty or with the execution, delivery, performance, validity or enforceability of the Contingent Subsidiary Guaranty by or against such Subsidiary Guarantor, except as has been obtained and remains in full force and effect on the date hereof, other than certain Nevada Gaming Laws approvals, as applicable. The Contingent Subsidiary Guaranty has been duly executed and delivered on behalf of each Subsidiary Guarantor. The Contingent Subsidiary Guaranty constitutes a legal, valid and binding obligation of each Subsidiary Guarantor enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (f) The execution, delivery and performance of this Contingent Completion Guaranty by the Guarantors and the execution, delivery and performance by the Subsidiary Guarantors of the Contingent Subsidiary Guaranty will not (i) violate any Legal Requirement or obligation of such Guarantor or Subsidiary Guarantor, (ii) result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any such Legal Requirement or obligation or (iii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree or ruling of any court, arbitrator or Governmental Instrumentality applicable to such Guarantor or Subsidiary Guarantor. (g) Schedule 2 contains (except as noted therein) complete and correct lists of each of London Clubs' and ABH's Subsidiaries (other than Dormant Subsidiaries), showing, as to each E-13 Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by such Guarantor and each other Subsidiary of such Guarantor. All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 2 as being owned by such Guarantor and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by such Guarantor or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 2). Each Subsidiary identified in Schedule 2 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the business, assets, debt service capacity, property or financial condition, operations or prospects of such Subsidiary. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. No Subsidiary identified in Schedule 2 is a party to, or otherwise subject to any legal restriction or any agreement (other than this Contingent Completion Guaranty, the agreements listed on Schedule 2, restrictions imposed by and approvals required under the Nevada gaming Laws and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to its Guarantor parent or any of such Guarantor's Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. (h) Except as disclosed in Schedule 3 there are no actions, suits or proceedings pending or, to the knowledge of any Guarantor, threatened against or affecting such Guarantor or any Subsidiary or any property of such Guarantor or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Instrumentality that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither any Guarantor nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Instrumentality or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Instrumentality, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (i) Each Guarantor and its Subsidiaries have filed all material tax returns that are required to have been filed in any jurisdiction, and have paid all material taxes shown to be due and payable on such returns and all other material taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the non-payment of which could not reasonably be expected to have a Material Adverse Effect or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which such Guarantor or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. Each Guarantor knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of each Guarantor and its Subsidiaries in respect of governmental or other taxes for all fiscal periods are adequate. (j) Each Guarantor and its Subsidiaries have adequate and appropriate insurance with respect to their respective properties and businesses against such casualties and contingencies, of such E-14 types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance) to the extent this is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated, except where the failure to so maintain insurance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (k) Each of London Clubs, ABH and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in clause (a) hereof or purported to have been acquired by such Guarantor or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Contingent Completion Guaranty. All leases that individually or in the aggregate are material are valid and subsisting and are in full force and effect in all material respects. (l) Except as disclosed in Schedule 4, (i) each Guarantor and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are material, without known conflict with the rights of others; (ii) to the best knowledge of each Guarantor, no product or such Guarantor infringes in any material respect on any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (iii) to the best knowledge of each Guarantor, there is no material violation by any Person of any right of such Guarantor or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by such Guarantor or any of its Subsidiaries. (m) Except as described therein, Schedule 5 sets forth a complete and correct list of all outstanding Indebtedness of each of London Clubs and ABH and its Subsidiaries as of September 30, 1997, since which date there has been no material changes in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of such Guarantor or its Subsidiaries. Neither any such Guarantor nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of such Guarantor or such Subsidiary and no event or condition exists with respect to any Indebtedness of any such Guarantor or any Subsidiary in an aggregate principal amount in excess of $1,500,000 that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. Except as disclosed in Schedule 5, neither any such Guarantor nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 14(a), as applicable. (n) Neither any Guarantor nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, or the Federal Power Act, as amended. E-15 (o) Neither any Guarantor nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against such Guarantor or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. (p) Each Guarantor's ownership interest in the Borrower as of the date hereof is set forth on Schedule 6. (q) London Clubs has delivered to the Administrative Agent and Discount Note Indenture Trustee true, correct and complete copies of all material documents, instruments, opinions and certificates with respect to the Existing Senior Debt. 13. Affirmative Covenants. Until all of the Guaranteed Obligations have been indefeasibly paid and performed, each Guarantor (other than London Clubs) agrees as follows: (a) (i) ABH shall furnish to the Agent: (A) as soon as available, but in any event within 120 days after the end of each fiscal year of ABH, a copy of the consolidated and consolidating balance sheet of ABH and its consolidated Subsidiaries as at the end of such year and the related consolidated and consolidating statements of earnings and stockholders' equity and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by independent certified public accountants of nationally recognized standing; and (B) as soon as available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of ABH, (x) the unaudited consolidated and consolidating balance sheet of ABH and its consolidated Subsidiaries as at the end of such quarter and in comparative form the figures for the end of the previous fiscal year, (y) the unaudited consolidated and consolidating statement of earnings of ABH and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, and in comparative form the figures for the previous year and (z) the consolidated and consolidating statement of cash flows of ABH and its consolidated Subsidiaries for the portion of the fiscal year through the end of such quarter, and in comparative form the figures for the previous year, certified by an Authorized Representative of ABH as being fairly stated in all material respects when considered in relation to the consolidated and consolidating financial statements of ABH and its consolidated Subsidiaries (subject to normal year-end audit adjustments); all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). (ii) The Trust shall furnish the Agent all financial information that the Trust is providing to any other creditor in connection with the Main Project, the Mall Project, and/or the Music Project. E-16 (b) Each Guarantor shall furnish to the Agent, within thirty days after the same are sent, copies of all financial statements and reports which such Guarantor sends to its stockholders, and, within thirty days after the same are filed, copies of all financial statements and reports which such Guarantor may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Instrumentality. Each Guarantor shall furnish to the Agent with reasonable promptness such additional financial and other information as the Agent may from time to time reasonably request. (c) ABH shall keep true and correct books of records and account in conformity with GAAP and all Legal Requirements and permit the Agent: (i) No Event of Default - if no event of default under this Contingent Completion Guaranty, the Noteholder Completion Guaranty or the Bank Guaranty then exists, at the expense of the Agent and upon reasonable prior notice to such Guarantor, to visit the principal executive office of such Guarantor and to discuss the affairs, finances and accounts of such Guarantor and its Subsidiaries with such Guarantor's officers, all at such reasonable times and as often as may be reasonably requested in writing; and (ii) Event of Default - if an event of default under this Contingent Completion Guaranty, the Noteholder Completion Guaranty or the Bank Guaranty then exists, at the expense of such Guarantor to visit and inspect any of the offices of properties of such Guarantor or any Subsidiary, to examine their respective books and records and to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants, all at such reasonable times and as often as may be requested. A Guarantor shall not be under any obligation under this Contingent Completion Guaranty to provide information pursuant to the last sentence of Section 13(b) or pursuant to this Section 13(c) if disclosure of such information, on the written advice of such Guarantor's counsel provided to such Guarantor, would be prohibited by law or by decree of any Governmental Instrumentality or arbitral body or by the terms of any obligation of confidentiality contained in any agreement binding upon such Guarantor and not entered into in contemplation of this Section 13(c). (d) ABH shall promptly give notice to the Agent of: (i) any breach by ABH of any of the Guaranteed Obligations; (ii) any (a) default or event of default under any material obligation of ABH or any of its Subsidiaries or (b) litigation, investigation or proceeding which may exist at any time between ABH or any of its Subsidiaries and any Governmental Instrumentality, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (iii) any material litigation or proceeding affecting ABH or any of its Subsidiaries; and (iv) any development or other event which could reasonably be expected to have a Material Adverse Effect. E-17 Each notice pursuant to this clause (d) shall be accompanied by a statement of an Authorized Representative of ABH setting forth details of the occurrence referred to therein and stating what action ABH or any of its Subsidiaries proposes to take with respect thereto. (e) ABH will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (f) Each Guarantor will and will cause each of its Subsidiaries to maintain, with institutions it reasonably believes to be financially sound insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or similar business and similarly situated. (g) Each Guarantor will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in reasonably good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent a Guarantor from discontinuing the operation and maintenance of or the liquidation of any Dormant Subsidiary and shall not prevent a Guarantor or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and such Guarantor has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (h) Each Guarantor will and will cause each of its Subsidiaries to file all material tax returns required to be filed in any jurisdiction and to pay and discharge all material taxes, assessments, governmental charges, or levies shown to be due and payable on such returns and all other taxes imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of such Guarantor or any Subsidiary, provided that neither a Guarantor nor any Subsidiary need to pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by such Guarantor or such Subsidiary on a timely basis in good faith in appropriate proceedings and such Guarantor or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of such Guarantor or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. (i) Each Guarantor will at all times preserve and keep in full force and effect its corporate or other existence. ABH will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (other than Dormant Subsidiaries or unless merged into ABH or a Subsidiary) and all licenses, consents, certificates and authorizations of ABH and its Subsidiaries unless, in the good-faith judgment of ABH, the termination of or failure to preserve and keep in full force and effect E-18 such corporate existence, licenses, consents, certificates and authorizations could not, individually or in the aggregate, have a Material Adverse Effect. (j) Each Guarantor will, and will cause each of its Subsidiaries to, keep proper books of record and account in accordance with GAAP as applied in the jurisdiction of its incorporation as such Guarantor may deem appropriate from time to time. (k) Neither ABH nor any of its Subsidiaries will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by ABH and its Subsidiaries would be materially changed from the general nature of the business engaged in by ABH and its Subsidiaries as of the date hereof. 14. Negative Covenants. At all times prior to indefeasible payment and performance of the Guaranteed Obligations by the Guarantors hereunder: (a) ABH will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset except: (i) any Lien arising by operation of law (except for real property taxes) which secures amounts not more than 45 days overdue or, if so overdue, are being contested on a timely basis in good faith and in appropriate proceedings; (ii) any Lien imposed on ABH or any of its Subsidiaries in relation to its purchase of goods, products or supplies in the ordinary course of business; (iii) any rights of set-off in the normal course of trading or of any bank or financial institution or combination of accounts arising in favor of such bank or financial institution as a result of the day-to-day operation of banking arrangements, including, without limitation, rights of set-off granted to such bank or financial institution in respect of the issuance of letters of credit, or as a result of any currency or interest rate hedging operations carried out in the ordinary course of business, in each case, provided that there is no agreement to confer a security interest; (iv) statutory Liens of landlords, Liens over goods or documents of title arising in the ordinary course of documentary credit transactions and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business; (v) Liens for taxes, assessments or other governmental charges which are not yet due and payable; (vi) Liens incurred or deposits made in the ordinary course of business (A) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (B) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than capital leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; E-19 (vii) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of business of ABH and its Subsidiaries, provided that such Liens do not, in the aggregate, materially detract from the value of such property; (viii) any Lien not otherwise permitted by clauses (i) through (vii) above, provided that on the date any Indebtedness secured by any such Lien, is created, incurred, assumed or guaranteed by ABH or any of its Subsidiaries, and immediately after giving effect thereto and to the concurrent retirement of any other Indebtedness, the sum of (A) the aggregate principal amount of all Indebtedness secured by Liens pursuant to this clause (viii) plus (B) all unsecured Indebtedness of ABH and its Subsidiaries that is senior in any respect in right of payment to the obligations of ABH hereunder, does not exceed 25% of the Consolidated Tangible Assets of ABH as of such date. (b) ABH will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any secured or unsecured Indebtedness that is senior in any respect in right of payment to the Guaranteed Obligations of ABH hereunder (excluding any Indebtedness secured by Liens pursuant to clauses (i) through (vii) of Section 14(a) hereof but including any Indebtedness secured by Liens pursuant to clause (viii) of Section 14(a) hereof) if the aggregate amount of all such senior Indebtedness described in this clause (b) would exceed 25% of the Consolidated Tangible Assets of ABH as of such date. 15. Payments Free and Clear of Taxes, etc. Each Guarantor hereby agrees that: (a) All payments by such Guarantor hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by the Agent's net income or receipts (such non-excluded items being called "Taxes"). In the event that any withholding or deduction from any payment to be made by a Guarantor hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then such Guarantor will (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and (iii) pay to the Agent such additional amount or amounts ("Additional Amounts") as are necessary to ensure that the net amount actually received will equal the full amount that would have been received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against the Borrower or the Agent with respect to any payment received hereunder, the Agent may pay such Taxes and the Guarantor will promptly pay such Additional Amounts (including any penalties, interest or expenses ) as are necessary in order that the net amount received after the payment of such Taxes (including any Taxes on such Additional Amounts) shall equal the amount that would have been received had no such Taxes been asserted. E-20 (b) If the Guarantor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Guarantor shall indemnify the Borrower, the Agent for any incremental Taxes, interest or penalties that may become payable by the Borrower, the Agent as a result of any such failure. (c) In the event that an Additional Amount is paid by a Guarantor for the account of the Agent and the Agent is entitled to a refund of the Tax (a "Tax Refund") to which such payment is attributable, then the Agent shall take all reasonable steps which are necessary to obtain such Tax Refund, including filings such forms, certificates, documents, applications or returns as may be required to obtain such Tax Refund. If the Agent subsequently receives such a Tax Refund, then the Agent shall reimburse such amount. (d) Without prejudice to the survival of any other agreement of the Guarantors hereunder, the agreements and obligations of the Guarantors contained in this Section 15 shall survive the payment in full of the obligations under the Additional Guaranty. 16. Judgment. Each Guarantor hereby agrees that: (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in United States Dollars into another currency, such Guarantor agrees, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase United States Dollars with such other currency on the Business Day preceding that on which final judgment is given. (b) The obligation of each Guarantor in respect of any sum due from it hereunder shall, notwithstanding any judgment in a currency other than United States Dollars, be discharged only to the extent that on the Business Day following receipt by the Agent of any sum adjudged to be so due in such other currency the Agent may, in accordance with normal banking procedures, purchase United States Dollars with such other currency; in the event that the United States Dollars so purchased are less that the sum originally due to the Agent in United States Dollars, the Guarantor, as a separate obligation and notwithstanding any such judgment, shall indemnify and hold harmless the Agent and such holder against such loss, and if the United States Dollars so purchased exceed the sum originally due to the Agent in United States Dollars, the Agent shall remit to such Guarantor such excess. 17. Breaches by Any Guarantor. If, at any time that the Agent has the right to demand payment and performance of the Guaranteed Obligations in accordance with Section 3(a) of this Contingent Completion Guaranty and, prior to the indefeasible payment and performance thereof, any of the Guarantors breaches the Guaranteed Obligations (after the expiration of applicable grace, notice and/or cure periods), then, at the option of the Agent, an event of default shall exist under this Contingent Completion Guaranty and the Agent, without any further notice to any of the Guarantors or any other Person, shall be entitled to exercise all rights and remedies available hereunder but only to the extent permitted under Section 3(a) hereof, and at law and equity. E-21 18. Miscellaneous Provisions. (a) This Contingent Completion Guaranty shall be binding upon the Guarantors and their permitted successors, transferees and assigns and shall inure to the benefit of and be enforceable by the Agent and its respective successors, transferees and assigns; provided, however, that the Guarantors may not assign any of their Guaranteed Obligations hereunder without the prior written consent of the Agent, and the Agent may not assign this Contingent Completion Guaranty or any of its rights, remedies or options hereunder without the prior written consent of the Administrative Agent and Discount Note Indenture Trustee in their sole discretion. The Lenders and the Discount Note Indenture Trustee shall be third party beneficiaries of this Section 18(a) and shall have all rights at law and equity to the enforcement hereof. (b) No amendment to or waiver of any provision of this Contingent Completion Guaranty, nor consent to any departure by any Guarantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Agent and, with respect to amendments, consented to by the Administrative Agent and Discount Note Indenture Trustee in their sole discretion, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (c) All notices and other communications hereunder to the Guarantors shall be in writing (including telefacsimile) and mailed or telecopied or delivered to them, addressed to them at the address set forth below their signatures hereto or at such other addresses as shall be designated by such Guarantor in a written notice to the Agent at the address set forth below their signatures hereto complying as to delivery with the terms of this Section. All such notices and other communications shall, when mailed or telecopied, respectively, be effective when deposited in the mails or transmitted, addressed as aforesaid. All notices to the Administrative Agent under this Contingent Completion Guaranty shall be addressed to The Bank of Nova Scotia, One Liberty Plaza, New York, New York 10006, Attention: ________________, Facsimile No. (212) 225-5090. All Notices to the Discount Note Indenture Trustee shall be addressed to State Street Bank and Trust Company, Corporate Trust Division, Two International Place, Boston, Massachusetts 02110, Attn: Aladdin Notes. (d) No failure on the part of the Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. (e) Section captions used in this Contingent Completion Guaranty are for convenience of reference only, and shall not affect the construction of this Contingent Completion Guaranty. (f) Wherever possible each provision of this Contingent Completion Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Contingent Completion Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Contingent Completion Guaranty. (g) THIS CONTINGENT COMPLETION GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS CONTINGENT COMPLETION GUARANTY, AND THE ADDITIONAL GUARANTY (IF APPLICABLE) CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF. E-22 (h) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS CONTINGENT COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT OR THE GUARANTORS SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT, AT THE OPTION OF THE AGENT, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY, IF ANY, MAY BE FOUND. THE GUARANTORS HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE GUARANTORS FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE GUARANTORS HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE GUARANTORS HAVE OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO THEMSELVES OR THEIR PROPERTY, THE GUARANTORS HEREBY IRREVOCABLY WAIVE SUCH IMMUNITY IN RESPECT OF THE GUARANTEED OBLIGATIONS UNDER THIS CONTINGENT COMPLETION GUARANTY, AND THE ADDITIONAL GUARANTY. (i) THE GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS CONTINGENT COMPLETION GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT OR THE GUARANTORS. THE GUARANTORS ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT TO ENTER INTO THE ADDITIONAL GUARANTY. (j) Limitation on Liability. Notwithstanding anything to the contrary in this Contingent Completion Guaranty, it is understood that no claim shall be made by the Agent or any of its affiliates against the Guarantors or any of their affiliates, directors, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any breach or wrongful conduct (whether or not the claim therefor is based on contract, tort or duty imposed by law), in connection with, arising out of or in any way related to the transactions contemplated by this Contingent Completion Guarantee or any act or omission or event occurring in connection therewith. E-23 (k) No Restriction on Rights and Remedies of Administrative Agent, Lenders and Discount Note Indenture Trustee. Notwithstanding anything to the contrary in this Contingent Completion Guaranty, the Agent on its own behalf covenants and agrees that this Contingent Completion Guaranty and the rights, remedies and options of the Agent hereunder in no way restrict the rights and remedies of the (i) Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents including, without limitation, the right to commence and prosecute to completion of enforcement of any or all of the Loan Documents, (ii) the Discount Note Indenture Trustee under the Indenture. The Agent on its own behalf agrees that no Person shall have any right whatsoever to interpose a right of offset, defense, claim or counterclaim with respect to any enforcement of one or more of the Loan Documents based upon a claim that the Agent has the right to performance of the Guaranteed Obligations before such enforcement can be commenced or prosecuted or judgment thereon can be executed by or on behalf of the Lenders or the Discount Note Indenture Trustee. The Lenders and the Discount Note Indenture Trustee shall be third party beneficiaries of this Section 18(k) and shall have all rights at law and equity to the enforcement hereof. (I) Notwithstanding anything to the contrary in this contingent completion Guaranty, in the event that the Trust has been indefeasibly released from its obligations under the Additional Guaranty, all rights of the Agent, as agent for the Contingent Guarantors, any have hereunder will terminate. E-24 IN WITNESS WHEREOF, the Guarantors have caused this Contingent Completion Guaranty to be duly executed and delivered by their officers thereunto duly authorized as of the date first above written. ALADDIN BAZAAR HOLDINGS, LLC By: Title: Address: Attention: Telecopy: THE TRUST UNDER ARTICLE SIXTH UNDER THE WILL OF SIGMUND SOMMER By: Title: Address: Attention: Telecopy: LONDON CLUBS INTERNATIONAL PLC By: Title: Address: 10 Brick Street London WI Y 8HQ England Attention: Telecopy: [Agent] By: Title: Address: Attention: Telecopy: E-25 EX-10.2 14 NOTE REGISTRATION AGREEMENT DATED 2/26/98 _______________________________________ Note Registration Rights Agreement Dated As of February 26, 1998 among Aladdin Gaming Holdings, LLC and Aladdin Capital Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. ___________________________________________ NOTE REGISTRATION RIGHTS AGREEMENT This Note Registration Rights Agreement (the "Agreement") is made and entered into this 26th day of February, 1998, among Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), Aladdin Capital Corp., a Nevada corporation ("Capital" and, together with Holdings, the "Issuers"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement, dated February 18, 1998, among the Issuers, Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Enterprises" and, together with the Issuers, the "Aladdin Parties"), Aladdin Holdings, LLC, a Delaware limited liability company ("AHL"), the Trust under Article Sixth u/w/o Sigmund Sommer (the "Trust"), London Clubs International, plc, a United Kingdom public limited company ("London Clubs" and, together with the Aladdin Parties, AHL and the Trust, the "Venture Parties") and the Initial Purchasers (the "Purchase Agreement"), which provides for, among other things, the sale by the Aladdin Parties to the Initial Purchasers of Units consisting in the aggregate of $221.5 million principal amount at maturity of the Issuers' 13-1/2% Senior Discount Notes due 2010 (the "Securities") and Warrants to purchase an aggregate of 2,215,000 shares of Class B non-voting common stock of Enterprises. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "AHL" shall have the meaning set forth in the preamble. "Aladdin Parties" shall have the meaning set forth in the preamble. "Capital" shall have the meaning set forth in the preamble. "Closing Date" shall mean the Closing Time as defined in the Purchase Agreement. "Consummate" means, with respect to an Exchange Offer, the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Securities to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 2.1 hereof and (iii) the delivery by the Issuers to the Trustee under the Indenture of Exchange Securities in the same aggregate accreted value as the aggregate accreted value of Securities that were tendered by Holders thereof pursuant to the Exchange Offer. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Issuers, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York. "Enterprises" shall have the same meaning set forth in the preamble. "Exchange Offer" shall mean the exchange offer by the Issuers of Exchange Securities for Transfer Restricted Securities pursuant to Section 2.1 hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. "Exchange Period" shall have the meaning set forth in Section 2.1 hereof. "Exchange Securities" shall mean the 13-1/2% Senior Discount Notes due 2010, issued by the Issuers under the Indenture containing terms identical to the Securities in all material respects (except for references to certain interest rate provisions, liquidated damages, restrictions on transfers and restrictive legends), to be offered to Holders in exchange for Transfer Restricted Securities pursuant to the Exchange Offer. "Holder" shall mean an Initial Purchaser, for so long as it owns any Transfer Restricted Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Transfer Restricted Securities under the Indenture and each Participating Broker-Dealer that holds Exchange Securities for so long as such Participating Broker-Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities. "Holdings" shall have the same meaning set forth in the preamble. "Indenture" shall mean the Indenture relating to the Securities, dated as of February 26, 1998, between the Issuers and State Street Bank and Trust Company, as 2 trustee, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof. "Initial Purchaser" or "Initial Purchasers" shall have the meaning set forth in the preamble. "Issuers" shall have the meaning set forth in the preamble. "London Clubs" shall have the same meaning set forth in the preamble. "Majority Holders" shall mean the Holders of a majority of the aggregate accreted value of the outstanding Transfer Restricted Securities; provided that whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Issuers or any Affiliate (as defined in the Indenture) of the Issuers shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount. "Participating Broker-Dealer" shall mean any of Merrill Lynch Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. and any other broker-dealer which makes a market in the Securities and exchanges Transfer Restricted Securities in the Exchange Offer for Exchange Securities. "Person" shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a governmental agency or body or political subdivision thereof. "Private Exchange" shall have the meaning set forth in Section 2.1 hereof. "Private Exchange Securities" shall have the meaning set forth in Section 2.1 hereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Transfer Restricted Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Issuers with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any 3 "qualified independent underwriter" (and its counsel) that is required to be retained by any holder of Transfer Restricted Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Transfer Restricted Securities and any filings with the NASD), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, except for such expenses incurred by Holders, underwriters or their respective counsel, (iv) all fees and expenses incurred in connection with the listing if any, of any of the Transfer Restricted Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for any of the Venture Parties and of the independent public accountants of any of the Venture Parties, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance and (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, but excluding, except as otherwise expressly provided in clauses (i) through (vii) above, (a) the fees and expenses of the Initial Purchasers in connection with the Exchange Offer or the Shelf Registration, including fees and expenses of counsel to the Initial Purchasers in connection therewith, and (b) underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Transfer Restricted Securities by a Holder. "Registration Statement" shall mean any registration statement of the Issuers which covers any of the Exchange Securities or Transfer Restricted Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Rule 144" shall mean Rule 144 promulgated under the 1933 Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the 1933 Act. "Rule 144A" shall mean Rule 144A promulgated under the 1933 Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. "SEC" shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission. 4 "Securities" shall have the meaning set forth in the preamble. "Shelf Registration" shall mean a registration effected pursuant to Section 2.2 hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Issuers pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Transfer Restricted Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Transfer Restricted Securities" shall mean the Securities and, if issued, the Private Exchange Securities; provided, however, that each Security and, if issued, each Private Exchange Security, shall continue to be a Transfer Restricted Security until (i) the date on which such security has been exchanged by a Person other than a broker-dealer for an Exchange Security in the Exchange Offer, (ii) following the exchange by a Participating Broker-Dealer in the Exchange Offer of a Security for an Exchange Security, the date on which such Exchange Security is sold to a purchaser who receives from such Participating Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Security has been effectively registered under the 1933 Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the 1933 Act. "Trust" shall have the meaning set forth in the preamble. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "Venture Parties" shall have the meaning set forth in the preamble. 2. Registration Under the 1933 Act. 2.1. Exchange Offer. The Issuers shall, for the benefit of the Holders, at the Issuers' cost, (A) prepare and, as soon as practicable but not later than 45 days following the Closing Date, file with the SEC an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Transfer Restricted Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) use their reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act on or prior to 150 days from the Closing Date, (C) use their reasonable best efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use their reasonable best efforts to cause the Exchange Offer to be consummated on or prior to 30 business days following the date on which the Exchange Offer Registration Statement was declared effective by the SEC. The Exchange Securities will be issued under the Indenture. 5 Upon the effectiveness of the Exchange Offer Registration Statement, the Issuers shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Transfer Restricted Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Issuers within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Transfer Restricted Securities acquired directly from the Issuers for its own account, (c) acquired the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) and to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and under state securities or blue sky laws. In connection with the Exchange Offer, the Issuers shall: (a) mail or cause to be mailed as promptly as reasonably practicable to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Exchange Offer open for acceptance for a period of not less than 30 calendar days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the "Exchange Period"); (c) utilize the services of the Depositary for the Exchange Offer; (d) permit Holders to withdraw tendered Transfer Restricted Securities at any time prior to 5:00 p.m. (Eastern Time), on the second to last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Transfer Restricted Securities delivered for exchange, and a statement that such Holder is withdrawing such Holder's election to have such Securities exchanged; (e) notify each Holder that any Transfer Restricted Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (f) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution and determine upon advice of external counsel that it is ineligible to participate in the Exchange Offer, as soon as practicable upon receipt by the Issuers of a written request from such Initial Purchaser, the Issuers shall issue and deliver to such Initial Purchaser in exchange (the "Private Exchange") for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Issuers, that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Securities (the "Private Exchange Securities"). 6 The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from such qualification and shall provide that the Exchange Securities shall not be subject to the transfer restrictions set forth in the Indenture but that the Private Exchange Securities shall be subject to such transfer restrictions. The Indenture or such indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter. The Private Exchange Securities shall be of the same series as, and the Issuers shall use commercially reasonable efforts to have the Private Exchange Securities bear the same CUSIP number as, the Exchange Securities. The Issuers shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities. As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Issuers shall: (i) accept for exchange all Transfer Restricted Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto; (ii) accept for exchange all Securities properly tendered pursuant to the Private Exchange; (iii) deliver to the Trustee for cancellation all Transfer Restricted Securities so accepted for exchange; and (iv) cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Transfer Restricted Securities so accepted for exchange in a principal amount equal to the principal amount of the Transfer Restricted Securities of such Holder so accepted for exchange. Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Transfer Restricted Securities surrendered in exchange therefor or, if no interest has been paid on the Transfer Restricted Securities, from the date of original issuance. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Transfer Restricted Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Transfer Restricted Securities exchanged in the Exchange Offer shall have made customary representations in connection therewith, including that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it 7 shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities, and shall have made such other representations as may be reasonably necessary under applicable SEC rules, policy, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to the Exchange Offer or the Private Exchange which, in the Issuers' judgment, would reasonably be expected to impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange. The Issuers shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Transfer Restricted Securities in the Exchange Offer. 2.2. Shelf Registration. If (i) the Issuers are not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer as contemplated in Section 2.1 because the Exchange Offer is not permitted by applicable law or by SEC rules or regulations or applicable interpretations thereof by the staff of the SEC or (ii) any Holder of Transfer Restricted Securities (having a reasonable basis to do so) notifies the Issuers prior to the 20th day following consummation of the Exchange Offer that (A) it is prohibited by law or SEC policy from participating in the Exchange Offer or (B) it may not resell the Securities acquired by it in the Exchange Offer to the public without delivering a Prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) it is a Participating Broker-Dealer and owns Securities acquired directly from the Issuers or an affiliate of the Issuers, then in case of each of clauses (i) and (ii) the Issuers shall, at their cost: (a) Use their reasonable best efforts to file with the SEC on or prior to 45 days after the earlier of (x) the date on which the Issuers determine or receive notice from the SEC that the Exchange Offer Registration Statement cannot be filed as a result of clause (i) above and (y) the date on which the Issuers receive the notice specified in clause (ii) above, (such earlier date, the "Filing Deadline"), a Shelf Registration Statement relating to the offer and sale of the Transfer Restricted Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement, and use their reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the SEC on or prior to the later of (x) 90 days after the Filing Deadline for the Shelf Registration Statement and (y) 150 days after the Closing Date. (b) Use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years (or nine months in the case of a Shelf Registration Statement relating only to Private Exchange Securities) from the date the Shelf Registration Statement is declared effective by the SEC, or for such shorter period that will terminate when all Transfer 8 Restricted Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Transfer Restricted Securities (the "Effectiveness Period"). (c) Notwithstanding any other provisions hereof, use their reasonable best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. The Issuers shall not permit any securities other than Transfer Restricted Securities to be included in the Shelf Registration Statement. The Issuers further agree, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Transfer Restricted Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. 2.3. Expenses. The Issuers shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to, and fees and other costs of counsel in connection with, the sale or disposition of such Holder's Transfer Restricted Securities pursuant to the Shelf Registration Statement. 2.4. Effectiveness. An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Transfer Restricted Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Transfer Restricted Securities pursuant to such Registration Statement may legally resume. 2.5. Interest. The Issuers shall notify the Trustee within five business days after each and every date on which an event occurs in respect of which liquidated damages are required to be paid. All accrued liquidated damages shall be paid on or before the applicable semiannual interest 9 payment date by wire transfer of immediately available funds or by federal funds check as set forth in the Indenture. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of liquidated damages with respect to such Transfer Restricted Securities will cease. 3. Registration Procedures. In connection with the obligations of the Issuers with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Issuers shall: (a) prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Issuers, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Transfer Restricted Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein and (iv) shall comply in all material respects with the requirements of Regulation S-T under the 1933 Act; (b) use their reasonable best efforts to prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and use their reasonable best efforts to cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the 1933 Act and comply with the provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof (including sales by any Participating Broker-Dealer); (c) in the case of a Shelf Registration, (i) notify each Holder of Transfer Restricted Securities, at least three business days prior to filing, that a Shelf Registration Statement with respect to the Transfer Restricted Securities is being filed and advising such Holders that the distribution of Transfer Restricted Securities will be made in accordance with the method selected by the Majority Holders participating in the Shelf Registration; (ii) furnish to each Holder of Transfer Restricted Securities and to each underwriter of an underwritten offering of Transfer Restricted Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, a reasonable number of copies of all exhibits in order to facilitate the public sale or other disposition of the Transfer Restricted Securities; and (iii) consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offering and sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; 10 (d) use their reasonable best efforts to register or qualify the Transfer Restricted Securities under all applicable state securities or "blue sky" laws of such jurisdictions in the United States as any Holder of Transfer Restricted Securities covered by a Registration Statement and, in the case of a Shelf Registration Statement, each underwriter of an underwritten offering of Transfer Restricted Securities shall reasonably request in writing a reasonable period of time prior to the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition or exchange in each such jurisdiction of such Transfer Restricted Securities owned by such Holder; provided, however, that the Issuers shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where they would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject them to general service of process or taxation in any such jurisdiction where they are not then so subject; (e) upon receiving notice of any of the following events, notify promptly each Holder of Transfer Restricted Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Issuers that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below and, if requested by such Holder or Participating Broker-Dealer, confirm such notice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Transfer Restricted Securities covered thereby, the representations and warranties of the Issuers contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading in any material respect, (vi) of the receipt by the Issuers of any notification with respect to the suspension of the qualification of the Transfer Restricted Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction or the initiation of any proceeding for such purpose and (vii) of any determination by the Issuers that a posteffective amendment to such Registration Statement would be appropriate; (f) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution" which section shall be reasonably acceptable to Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that holds Transfer Restricted Securities acquired for its own account 11 as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the Participating Broker-Dealers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Transfer Restricted Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Issuers the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "If the exchange offeree is a broker-dealer holding Transfer Restricted Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Transfer Restricted Securities pursuant to the Exchange Offer;" and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Transfer Restricted Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and (B) in the case of any Exchange Offer Registration Statement, the Issuers agree to deliver to the Initial Purchasers on behalf of the Participating Broker-Dealers, if requested by any such Initial Purchaser, upon the Consummation of the Exchange Offer (i) an opinion of counsel or opinions of counsel reasonably satisfactory to the Initial Purchasers covering (x) the matters and subject to the qualfications and exceptions customarily received by such Initial Purchasers requested in connection with the Exchange Offer Registration Statement and (y) such other matters as may be reasonably requested, (ii) officers' certificates substantially in the form customarily delivered in a public offering of debt securities and (iii) a comfort letter or comfort letters in customary form to the extent permitted by Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accountants (or if such a comfort letter is not permitted, an agreed upon procedures letter in customary form) from the Issuers' independent certified public accountants and the independent certified accountants of London Clubs (and, if necessary, independent certified public accountants of the Trust, any subsidiary of the Issuers, 12 London Clubs or the Trust or of any business acquired by the Issuers for which financial statements are, or are required to be, included in the Registration Statement); (g) (i) in the case of an Exchange Offer, furnish counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the Holders of Transfer Restricted Securities copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; (h) make commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as reasonably practicable; (i) in the case of a Shelf Registration, furnish to each Holder of Transfer Restricted Securities, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested); (j) in the case of a Shelf Registration, cooperate with the selling Holders of Transfer Restricted Securities to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of Transfer Restricted Securities; (k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(v) and 3(e)(vii) hereof, as promptly as practicable after the occurrence of such an event, use their reasonable best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Transfer Restricted Securities or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified. At such time as such public disclosure is otherwise made or the Issuers determine that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Issuers agree promptly to notify each Holder of such determination and to furnish each Holder such number of copies of the Prospectus as amended or supplemented, as such Holder may reasonably request; (l) in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide a reasonable number of copies of such document to the Initial Purchasers on 13 behalf of such Holders; and make representatives of the Issuers as shall be reasonably requested by the Holders of Transfer Restricted Securities, or the Initial Purchasers on behalf of such Holders, available for discussion of such document; (m) obtain a CUSIP number for all Exchange Securities, Private Exchange Securities or Transfer Restricted Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Securities, Private Exchange Securities or the Transfer Restricted Securities, as the case may be, in a form eligible for deposit with the Depositary; (n) (i) cause the Indenture to be qualified under the TIA in connection with the registration of the Exchange Securities or Transfer Restricted Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use their reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (o) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Transfer Restricted Securities, and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, if requested by (x) any Initial Purchaser, in the case where an Initial Purchaser holds Securities acquired by it as part of its initial distribution and (y) any other Holder of Securities covered thereby: (i) make such representations and warranties to the Holders of such Transfer Restricted Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them; (ii) obtain opinions of counsel to the Issuers and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Transfer Restricted Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters (provided that such opinion may be subject to customary qualifications and exceptions); (iii) obtain "cold comfort" letters and updates thereof from the Issuers' independent certified public accountants and the independent certified public accountants of London Clubs (and, if necessary, independent certified public accountants of the Trust, any subsidiary of the Issuers, London Clubs or the Trust or of any business acquired by the Issuers for which financial statements are, or 14 are required to be, included in the Registration Statement) addressed to the underwriters, if any, and use reasonable efforts to have such letter addressed to the selling Holders of Transfer Restricted Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Transfer Restricted Securities, which agreement shall be in form, substance and scope customary for similar offerings; (v) if an underwriting agreement is entered into, cause it to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 4 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and (vi) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Transfer Restricted Securities being sold and the managing underwriters, if any. The obligations of the Issuers under this paragraph (o) are subject to the Holders and underwriters providing representations, warranties and indemnifications customarily provided by such persons under such agreements, and the Holders entering into custody agreements and powers of attorney containing the representations, warranties and indemnifications customarily provided by such persons in connection with secondary offerings of securities. The above shall be done at each closing under any underwriting or similar agreement as and to the extent required thereunder; (p) in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available for inspection by representatives of the Holders of the Transfer Restricted Securities, any underwriters participating in any disposition pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and any counsel or accountant retained by any of the foregoing (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Issuers reasonably necessary to the Inspectors to enable them to conduct any due diligence as is customary, and cause the respective officers, directors, employees, and any other agents of the Issuers to supply all information reasonably requested by the Inspectors in connection therewith, and make such representatives of the Issuers available for discussion of such documents as shall be reasonably requested by the Initial Purchasers in connection 15 therewith; provided that records which the Issuers determine, in good faith, to be confidential and which the Issuers notify the Inspectors are confidential shall not be disclosed by the Inspector unless: (i) the disclosure of such records shall be necessary to avoid or correct a material misstatement or omission in such Registration Statement, (ii) the release of such records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or is otherwise required by law or (iii) the information contained in such records has been made generally available to the public (other than by a breach of these provisions by the Inspectors or any of their officers, employees or agents). Each Holder and each such Participating Broker-Dealer will be required to agree in writing that any such confidential information shall not be disclosed other than pursuant to clauses (i), (ii) or (iii) of the previous sentence. (q) (i) in the case of an Exchange Offer Registration Statement, a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to any Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and to counsel to the Holders of Transfer Restricted Securities and to make such changes in any such document prior to the filing thereof which the Initial Purchasers or counsel to the Holders of Transfer Restricted Securities may reasonably request if the Issuers, acting reasonably and in good faith, deem such changes to be reasonable, and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities and counsel to the Holders of Transfer Restricted Securities shall not have previously been advised and furnished a copy of or to which the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities or counsel to the Holders of Transfer Restricted Securities shall reasonably object if the Issuers, acting reasonably and in good faith, deem such objection to be reasonable, and make the representatives of the Issuers available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and (ii) in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Transfer Restricted Securities, to the Initial Purchasers, to counsel for the Holders and to the underwriter or underwriters of an underwritten offering of Transfer Restricted Securities, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request if the Issuers, acting reasonably and in good faith, deem such changes to be reasonable, and not file any such document in a form to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities, counsel for the Holders of Transfer Restricted Securities or any underwriter shall not have previously been advised and furnished a copy of or to which the Majority Holders, the Initial Purchasers of behalf of the Holders of Transfer Restricted Securities, counsel to the Holders of Transfer Restricted Securities or any underwriter shall reasonably object if the Issuers, acting reasonably and in good faith, deem such objection to be reasonable, and make the representatives of the Issuers available for discussion of such document as shall be reasonably requested by the Holders of Transfer 16 Restricted Securities, the Initial Purchasers on behalf of such Holders, counsel for the Holders of Transfer Restricted Securities or any underwriter. (r) in the case of a Shelf Registration, use their commercially reasonable efforts to cause all Transfer Restricted Securities to be listed on any securities exchange on which similar debt securities issued by the Issuers are then listed if requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Transfer Restricted Securities, if any; (s) in the case of a Shelf Registration, use their reasonable best efforts to cause the Transfer Restricted Securities to be rated by the appropriate rating agencies, if so requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Transfer Restricted Securities, if any; (t) otherwise materially comply with all material applicable rules and regulations of the SEC and make available to their security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; (u) cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD); and (v) upon consummation of an Exchange Offer or a Private Exchange, obtain any customary opinion of counsel to the Issuers addressed to the Trustee for the benefit of all Holders of Transfer Restricted Securities participating in the Exchange Offer or Private Exchange, and which includes an opinion that the issuance of the Exchange Securities or the Private Exchange Securities, as applicable, has been duly authorized by the Issuers and, when the Exchange Securities or the Private Exchange Securities have been duly executed, authenticated and issued in accordance with the Indenture as contemplated by this Agreement, shall constitute legal, valid and binding obligations of the Issuers, enforceable against the Issuers in accordance with its respective terms (with customary exceptions, qualifications and assumptions). The Issuers may require each seller of Transfer Restricted Securities as to which a registration is being effected to furnish to the Issuers such information regarding such seller as may be required by the staff of the SEC to be included in a Registration Statement and the Issuers may exclude from such registration the Transfer Restricted Securities of any seller who fails to furnish such information within a reasonable time (which amount of reasonable time shall be reasonably determined by the Issuers); provided, that the Issuers shall provide written notice to any such seller of any such request. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Issuers of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to a Registration Statement until such 17 Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Issuers, such Holder will deliver to the Issuers (at its expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities current at the time of receipt of such notice. In the event that the Issuers fail to use their reasonable best efforts to effect the Exchange Offer or file any Shelf Registration Statement and maintain the effectiveness of any Shelf Registration Statement as provided herein, the Issuers shall not without the consent of the Majority Holders file any Registration Statement with respect to any securities (within the meaning of Section 2(1) of the 1933 Act) of the Issuers other than Transfer Restricted Securities. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Transfer Restricted Securities included in such offering and shall be acceptable to the Issuers. No Holder of Transfer Restricted Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 4. Indemnification; Contribution (a) The Issuers agree to indemnify and hold harmless each Initial Purchaser, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter (any such Person being an "Underwriter") and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or Section 15 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Exchange Securities or Transfer Restricted Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any 18 litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Issuers; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Issuers by the Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). The foregoing indemnity with respect to any untrue statement contained in or any omission from any preliminary Prospectus shall not inure to the benefit of any Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter (or any person controlling any such person) from whom the person asserting such loss, liability, claim, damage or expense purchased Securities that are the subject thereof if (i) the untrue statement or omission contained in such preliminary Prospectus (excluding documents incorporated by reference) was corrected; (ii) such person was not sent or given a copy of the final Prospectus (excluding documents incorporated by reference) which corrected the untrue statement or omission at or prior to the written confirmation of the sale of such Securities to such person; and (iii) the Issuers satisfied their obligation pursuant to Section 3 of this Agreement to provide a sufficient number of copies of the final Prospectus to the Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter. (b) Each Holder, Initial Purchaser, Participating Broker-Dealer and Underwriter severally, but not jointly, agrees to indemnify and hold harmless the Issuers, the Initial Purchasers, the Participating Broker-Dealers, each Underwriter and the other selling Holders, and each of their respective directors and officers, and each Person, if any, who controls the Issuers, the Participating Broker-Dealers, the Initial Purchasers, any Underwriter or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter furnished to the Issuers by such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter expressly for use in the 19 Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder, Initial Purchaser, Participating Broker-Dealer or Underwriter from the sale of Transfer Restricted Securities pursuant to such Registration Statement. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. Notwithstanding the immediately preceding sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, an indemnifying party shall not be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent that it considers such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement. 20 (e) (i) If the indemnification provided for in this Section 4(a) is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Issuers on the one hand and the Holders and the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. (ii) If the indemnification provided for in this Section 4(b) is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the such indemnifying party on the one hand and each of the other Holders, Participating Broker-Dealers, Underwriters and the Initial Purchasers and the Issuers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of the Issuers, the Holders, Participating Broker-Dealers, Underwriters and the Initial Purchasers, as applicable, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Issuers, the Holders, Participating Broker-Dealers, Underwriters and the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuers, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 4, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 21 No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each manager or director of the Issuers, and each Person, if any, who controls the Issuers within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Issuers. The Initial Purchasers' respective obligations to contribute pursuant to this Section 7 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A to the Purchase Agreement and not joint. 5. Miscellaneous 5.1. Rule 144 and Rule 144A. For so long as the Issuers are subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Issuers covenant that they will file the reports required to be filed by them under the 1933 Act and Section 13(a) or l5-(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder. If the Issuers cease to be so required to file such reports, the Issuers covenant that they will upon the request of any Holder of Transfer Restricted Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and they will take such further action as any Holder of Transfer Restricted Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Transfer Restricted Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Transfer Restricted Securities, the Issuers will deliver to such Holder a written statement as to whether they have complied with such requirements. 5.2. No Inconsistent Agreements. The Issuers have not entered into and the Issuers will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Issuers' other issued and outstanding securities under any such agreements. 5.3. Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionairres, powers of attorney, indemnities, underwriting agreements, lock-up letters, 22 custody agreements and other documents required under the terms of such underwriting agreements. 5.4. Amendments and Waivers. The provisions of this Agreement including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Issuers have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or departure. 5.5. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Issuers by means of a notice given in accordance with the provisions of this Section 5.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers, with a copy to Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California 90071-2007, Attention: Pamela B. Kelly, Esq.; and (b) if to the Issuers, initially at the Issuers' addresses set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 5.4, with a copy to Skadden, Arps, Slate, Meagher & Flom L.L.P. & Affiliates, 919 Third Avenue, New York, New York, Attention: Wallace Schwartz, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture, at the address specified in such Indenture. 5.6. Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities, in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof. 23 5.7. Third Party Beneficiaries. The Initial Purchasers (even if the Initial Purchasers are not Holders of Transfer Restricted Securities) shall be third party beneficiaries to the agreements made hereunder between the Issuers, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. Each Holder of Transfer Restricted Securities shall be a third party beneficiary to the agreements made hereunder between the Issuers, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder. 5.8. Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, the Issuers acknowledge that any failure by the Issuers to comply with their obligations under Sections 2.1 through 2.4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which monetary damages would not be adequate, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers' obligations under Sections 2.1 through 2.4 hereof. 5.9. Restriction on Resales. Until the expiration of two years after the original issuance of the Securities the Issuers will not, and will cause their "affiliates" (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and shall immediately upon any purchase of any such Securities submit such Securities to the Trustee for cancellation. 5.10. Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 5.11. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 5.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. 5.13. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 24 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. ALADDIN GAMING HOLDINGS, LLC By: /s/ Richard Goeglein ------------------------------- Name: Richard Goeglein Title: Chief Executive Officer/President ALADDIN CAPITAL CORP. By: /s/ Richard Goeglein ------------------------------- Name: Richard Goeglein Title: Chief Executive Officer/President Confirmed and accepted as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED CREDIT SUISSE FIRST BOSTON CORPORATION CIBC OPPENHEIMER CORP. SCOTIA CAPITAL MARKETS (USA) INC. BY: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Gregory Margolies ---------------------------- Name: Gregory Margolies Title: Authorized Signatory EX-10.7 15 SUBSIDIARY GUARANTY SUBSIDIARY GUARANTY THIS SUBSIDIARY GUARANTY, dated as of February 26, 1998 (this "GUARANTY") and granted by each of the guarantors listed on the signature pages hereof (the "GUARANTORS"), in favor of State Street Bank and Trust Company (the "Discount Note Indenture Trustee"), for the benefit of the Noteholders (as hereinafter defined) and their respective successors, transferees and assigns. W I T N E S S E T H: WHEREAS, pursuant to a Credit Agreement, dated as of even date herewith (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "CREDIT AGREEMENT"), among Aladdin Gaming, LLC, a Nevada limited-liability company (the "BORROWER"), the various lending institutions (individually a "LENDER" and collectively the "LENDERS") as are, or may from time to time become, parties thereto and The Bank of Nova Scotia ("Scotiabank") as Administrative Agent for the Lenders, Merrill Lynch Capital Corporation ("Merrill Lynch") as the Syndication Agent for the Lenders, CIBC Oppenheimer Corp., as the Documentation Agent for the Lenders, and Scotiabank and Merrill as Arrangers, the Lenders have extended Commitments to make Loans to the Borrower and to issue Letters of Credit for the account of the Borrower; and WHEREAS, the Discount Note Indenture Trustee, Aladdin Gaming Holdings, LLC and Aladdin Capital Corp. have entered into an indenture (the "INDENTURE") dated as of even date herewith; and WHEREAS, certain 131/2 % Senior Discount Notes due 2010 (the "Discount Notes") will be issued pursuant to the Indenture; and WHEREAS, as Aladdin Bazaar Holdings, LLC, a Nevada limited-liability company ("ABH"), London Clubs International PLC, a company registered in England and Wales under company no. 2862479 ("LCI") and the Trust under Article Sixth U/W/O Sigmund Sommer (the "TRUST"; the Trust, ABH and LCI are collectively called the "NOTEHOLDER COMPLETION GUARANTORS") have agreed to provide certain undertakings for the benefit of the Discount Note Indenture Trustee pursuant to a Guaranty of Performance and Completion, dated as of even date herewith (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "NOTEHOLDER COMPLETION GUARANTY"); and WHEREAS, as the Guarantors are required to execute and deliver this Guaranty of the obligations of LCI under the Noteholder Completion Guaranty; and WHEREAS, the Guarantors have duly authorized the execution, delivery and performance of this Guaranty; and WHEREAS, it is in the best interest of the Guarantors to execute this Guaranty inasmuch as the Guarantors will derive substantial direct and indirect benefits from the transactions contemplated hereby. NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantors agree, in favor of the Discount Note Indenture Trustee for the benefit of the Noteholders, as follows: 1. DEFINITIONS. Capitalized terms used herein but not otherwise defined shall have the meanings assigned thereto in Appendix A attached hereto. As a used herein, the following terms have the meanings set forth below. "MATERIAL ADVERSE EFFECT" means, as the context may require, (i) a materially adverse effect on the ability of a Guarantor to perform in all material respects its obligations hereunder or (ii) irrespective of the effect on such Guarantor or if the ability of any Guarantor to perform any obligation is not at issue, a material impairment of the validity or enforceability of, or a material impairment of the rights, remedies or benefits available to the Discount Note Indenture Trustee under this Guaranty. "NOTEHOLDER" means the duly registered holder of a Discount Note. 2. GUARANTY. 2A. OBLIGATIONS GUARANTEED. In consideration of the Noteholders entering into and performing their obligations under or in connection with the Indenture (a copy of which each Guarantor acknowledges receiving), the Guarantors hereby jointly and severally guarantee, irrevocably, absolutely and unconditionally, the due, full and prompt payment in the manner specified in the Noteholder Completion Guaranty of any and all obligations, indebtedness or liabilities (including fees and out of pocket expenses) now or hereafter due and payable by LCI under the Noteholder Completion Guaranty, any and all other obligations, indebtedness or liabilities now or hereafter incurred by LCI pursuant to any waiver, modification, 2 amendment or change of any provision of the Noteholder Completion Guaranty and all reasonable attorneys' fees, costs and expenses of collection incurred in connection therewith and in connection with the enforcement of this Guaranty, including without limitation fees, costs and expenses incurred in any insolvency or bankruptcy case or proceeding and (b) the due, prompt and faithful performance of, and compliance with, all other undertakings of LCI contained in the Noteholder Completion Guaranty. 2B. CHARACTER OF GUARANTY. This Guaranty constitutes a primary obligation of each Guarantor, is a guaranty of payment and not a guaranty of collection and, accordingly, the Guarantors waive any right to require that any action be brought against LCI or any other Person or to require that resort be had to any direct or indirect security. The Discount Note Indenture Trustee may, at its option, proceed against the Guarantors, or any of them, in the first instance to collect money or otherwise enforce the Noteholder Completion Guaranty, the payment and performance of which is guaranteed hereby, whether or not there exists an event of default, without first proceeding against LCI or any other Person, and without first resorting to any direct or indirect security or to any other remedies, including, by way of example but not of limitation, any right of set-off at the same or at different times, as the Discount Note Indenture Trustee may deem advisable, and the liability of the Guarantors hereunder shall in no way be affected or impaired by any acceptance by the Discount Note Indenture Trustee of any direct or indirect security for, or other guarantees of, any indebtedness, liability or obligation of LCI, or by any failure, delay, neglect or omission by the Discount Note Indenture Trustee to realize upon or protect any such indebtedness, liability or obligation of LCI, or by any failure, delay, neglect or admission by the Discount Note Indenture Trustee to realize upon or protect any such indebtedness, liability or obligation, or any notes or other instruments evidencing the same or any direct or indirect security therefore or by any approval, consent, waiver, or other action taken, or omitted to be taken, by the Discount Note Indenture Trustee. In the event that the Discount Note Indenture Trustee is required to repay or return any amount previously paid to it, the payment of which amount is guaranteed under the provisions hereof, then, immediately upon such repayment or return, this Guaranty shall be reinstated with respect to such amount, in full force and effect, as though such payment to such Person had not been made. 2C. PARTICULAR AGREEMENTS BY THE GUARANTORS. The Guarantors hereby agree that the Discount Note Indenture Trustee from time to time, before or after any default by LCI, with or without any further notice to or assent from the Guarantors 3 may, without in any manner affecting the liability of the Guarantors, to the full extent permitted by law and upon such terms and conditions as the Discount Note Indenture Trustee may agree to: extend in whole or in part (by renewal or otherwise), modify, change, compromise or release any indebtedness, liability or obligation of LCI or any other Person under the Noteholder Completion Guaranty or of any other Person secondarily or otherwise liable for any indebtedness, liability or obligation of LCI or any other such Person, or waive any default with respect thereto, or waive, modify, amend or change any provision of the Noteholder Completion Guaranty; sell, release, surrender, modify, impair, exchange, substitute or extend the duration or the time for the performance or payment of any and all property and rights of any nature and from whomsoever received, held by, or on behalf of, the Discount Note Indenture Trustee as direct or indirect security for the payment or performance of any indebtedness, liability or obligation of LCI, or of any other Person primarily or secondarily or otherwise liable for any indebtedness, liability or obligation under the Noteholder Completion Guaranty; and settle, adjust or compromise any claim of the Discount Note Indenture Trustee against LCI or any other Person primarily or secondarily or otherwise liable for any indebtedness, liability of obligation under the Noteholder Completion Guaranty. The Guarantors hereby ratify and confirm any such extension, renewal, change, release, waiver, surrender, exchange, modification, amendment, impairment, substitution, settlement, adjustment or compromise and agree that the same shall be binding upon the Guarantors, and hereby waive any and all defenses, counterclaims or offsets which the Guarantors might or could have by reason thereof, it being understood that the Guarantors shall at all times be bound by this Guaranty and remain liable to the Discount Note Indenture Trustee hereunder to the extent that any obligation of LCI to the Discount Note Indenture Trustee under the Noteholder Completion Guaranty, or any obligation of the Guarantors to the Discount Note Indenture Trustee hereunder, shall remain outstanding. 2D. WAIVER BY GUARANTORS. The Guarantors hereby unconditionally waive: notice of acceptance of this Guaranty by the Discount Note Indenture Trustee or of the creation, renewal or accrual of any liability of LCI, present or future, of the reliance of the Discount Note Indenture Trustee upon this Guaranty (it being understood that every indebtedness, liability and obligation of LCI to the Discount Note Indenture Trustee created pursuant to the Noteholder Completion Guaranty shall conclusively be presumed to have been created, contracted or incurred in reliance upon the execution of this Guaranty); demand of payment by the Discount Note Indenture Trustee from LCI or any other Person indebted in any manner on or for any of the indebtedness, liabilities or obligations hereby guaranteed; presentment for payment by the Discount Note Indenture Trustee of any 4 instrument of LCI or any other Person, protest thereof, and notice of its dishonor to any party hereto and to the Guarantors; notice of any breach or default by LCI with respect to any of its obligations under the Noteholder Completion Guaranty, or any other notice that may be required, by statute, rule of law or otherwise, to preserve the rights of the Discount Note Indenture Trustee against any of the Guarantors; any right to the enforcement, assertion, exercise or exhaustion by the Discount Note Indenture Trustee of any right, power, privilege or remedy conferred in the Noteholder Completion Guaranty or otherwise; any requirement of diligence on the part of the Discount Note Indenture Trustee; any requirement to mitigate damages resulting from any default under the Noteholder Completion Guaranty; any notice of any transfer, exchange or other disposition by the Discount Note Indenture Trustee of any right, title or interest in or to any Discount Note; any release of any Guarantor from its obligations hereunder resulting from any loss by it of its rights of subrogation hereunder and any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety or which might otherwise limit recourse against any Guarantor. 2E. EXPENSES. The Guarantors agree to pay and save the Discount Note Indenture Trustee harmless against any liability for the payment of all reasonable out-of-pocket expenses arising in connection with the transactions contemplated hereby, including all attorneys' fees, costs and expenses of collection incurred in connection therewith and in evaluation in connection with any controversy or potential controversy and in enforcing its rights and remedies under this Guaranty, any registration tax incurred in connection with the registration or filing of the Guaranty or any judgment with respect thereto, and all document production and duplication charges and the fees and expenses of any special counsel engaged by the Discount Note Indenture Trustee in connection with any subsequent proposed modification of, or proposed waiver or consent under, this Guaranty, whether or not such proposed modification shall be effected, or proposed waiver or consent granted. 3. CHARACTER OF OBLIGATIONS OF THE GUARANTORS. 3A. IRREVOCABILITY. The obligations of the Guarantors under this Guaranty are primary, irrevocable, absolute, unconditional and continuing under any and all circumstances and no such obligation shall be to any extent or in any way discharged, impaired or otherwise affected, except by performance in full thereof. 3B NO REDUCTION OR DEFENSE. The obligations of the Guarantors under this Guaranty, and the rights of the Discount Note Indenture Trustee to enforce such 5 obligations by any proceedings, whether by action at law, suit in equity or otherwise, shall not be subject to any reduction, limitation, impairment or termination, whether by reason of any claim of any character whatsoever or otherwise, including, without limitation, claims of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense, deferment, deduction, diminution, abatement, suspension, set-off, counterclaim, recoupment or termination whatsoever. Without limiting the generality of the foregoing, the obligations of the Guarantors shall not be discharged, impaired, released or in any way affected by: (a) any default, failure or delay, wilful or otherwise, in the performance of any obligations by LCI or any other Person; (b) any creditors' rights, bankruptcy, receivership or other insolvency proceeding of LCI or the Guarantors or any merger, consolidation, reorganization, dissolution, liquidation or winding up or change in corporate constitution or corporate identity or loss of corporate identity of LCI or the Guarantors; (c) impossibility or illegality of performance on the part of LCI under the Noteholder Completion Guaranty; (d) the invalidity, irregularity or unenforceability of the Noteholder Completion Guaranty or any documents referred to therein or herein; (e) in respect of LCI or the Guarantors, any change of circumstances, whether or not foreseen or foreseeable, whether or not imputable to LCI or the Guarantors, or other impossibility of performance through fire, explosion, accident, labor disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotions, acts of God or the public enemy, delays or failure of suppliers or carriers, inability to obtain materials or any other causes affecting performance, or any other force majeure, whether or not beyond the control of LCI or the Guarantors and whether or not of the kind hereinbefore specified; (f) any attachment, claim, demand, charge, lien, order, process, encumbrance or any other happening or event or reason, similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, expenses, indebtedness, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against any Person or any claims, demands, charges, liens, or encumbrances of any nature, foreseen or unfore- 6 seen, incurred by any Person, or against any sums payable under this Guaranty, so that such sums would be rendered inadequate or would be unavailable to make the payments herein provided; (g) any order, judgment, decree, ruling or regulation (whether or not valid) of any court of any nation or of any political subdivision thereof or any body, agency, department, official or administrative or regulatory agency of any nation or any political subdivision thereof or any other action, happening, event or reason whatsoever which shall delay, interfere with, hinder or prevent, or in any way adversely affect, the performance by LCI of any of its respective obligations under the Noteholders Completion Guaranty; (h) any amendment of or change in, or termination or waiver of, any of the Noteholders Completion Guaranty; (i) any waiver of the payment, performance or observance of any of the obligations, conditions, covenants or agreements contained in the Noteholder Completion Guaranty, or any other waiver, consent, extension, indulgence, compromise, settlement, release or other action or inaction under or in respect of the Noteholder Completion Guaranty; (j) any failure, omission or delay on the part of the Discount Note Indenture Trustee to enforce, assert or exercise any right, power or remedy conferred on it in this Guaranty; (k) any merger or consolidation of LCI or any Guarantor into or with any other corporation, or any sale, lease or transfer of any of the assets of LCI or any Guarantor to any other Person; (l) any change in the ownership of any shares of capital stock of LCI, or any change in the corporate relationship between LCI and any Guarantor, or any termination of such relationship; or (m) any other occurrence, circumstance, happening or event whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or unforeseen, and any other circumstance which might otherwise constitute a legal or equitable defense or discharge of the liabilities of a Guarantor or surety or which might otherwise limit recourse against any Guarantor. 7 3C. FULL RECOURSE OBLIGATIONS. Subject to the provisions of Section 3E, the obligations of each Guarantor set forth herein constitute full recourse obligations of such Guarantor, enforceable against it to the full extent of all its assets and properties. 3D. EFFECT OF BANKRUPTCY PROCEEDINGS, ETC. (a) This Guaranty shall continue to be effective or be automatically reinstated, as the case may be, if at any time any payment made by any Person on account of any of the sums due under the Noteholder Completion Guaranty pursuant to the terms thereof is rescinded or must otherwise be restored or returned by the Discount Note Indenture Trustee upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of LCI or any other Person, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to LCI or other Person or any substantial part of its property, or otherwise, all as though such payment had not been made. (b) If an even permitting the acceleration of the maturity of the obligations of LCI under the Noteholder Completion Guaranty shall at any time have occurred and be continuing, and such acceleration shall at such time be prevented by reason of the pendency against LCI or any other Person of any case or proceeding contemplated by the preceding paragraph (a) then, for the purpose of defining the obligations of the Guarantors under this Guaranty, the maturity of obligations of LCI under the Noteholder Completion Guaranty shall be deemed to have been accelerated with the same effect as if an acceleration had occurred in accordance with the terms of the Noteholder Completion Guaranty and the Guarantors shall forthwith pay all amounts due under the Noteholder Completion Guaranty upon acceleration of such obligations and any other amounts guaranteed hereunder without further notice or demand. 3E. MAXIMUM LIABILITY. Notwithstanding any other provision hereof, the liability of any Guarantor hereunder shall not exceed the greater of 95% of the Adjusted Net Worth (as defined below) of such Guarantor as of the date hereof and 95% of the Adjusted Net Worth of such Guarantor on the date on which payment under this Guaranty is sought. As used herein, the term "Adjusted Net Worth" of a Guarantor means the excess of (i) the amount of the fair saleable value of the assets of such Guarantor determined in accordance with applicable laws governing determinations of solvency over (ii) the amount of all liabilities of such Guarantor, including 8 contingent liabilities (but excluding contingent liabilities of such Guarantor as a Guarantor hereunder), determined in accordance with such laws. 3F. CONTRIBUTION AMONG GUARANTORS. To the extent that any Guarantor has paid more than is proportionate share of the guaranteed obligations paid by all Guarantors, such Guarantor shall be entitled to seek and receive contribution from any other Guarantor to the extent that such other Guarantor has paid less than its proportionate share of the guaranteed obligations so paid. This contribution obligation may not be enforced against any Guarantor until all the obligations guaranteed hereby have been paid in full and such Guarantor's obligations with respect thereto, together with all of its other obligations hereunder, may not exceed its maximum liability under Section 3E. 4. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants to the Discount Note Indenture Trustee that: 4A. ORGANIZATION. It is duly organized and validly existing under the laws of the jurisdiction in which it is incorporated and has the corporate power to own and operate its property and to carry on its business as now being conducted and is qualified to do business in each jurisdiction in which it is necessary, except where the failure to so qualify would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect or a material adverse effect on the ability of such Guarantor to perform its obligations hereunder. Each Guarantor possesses all necessary licenses, permits, consents and similar official authorizations which it requires for its business except where the absence thereof would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or a material adverse effect on the ability of such Guarantor to perform its obligations hereunder. 4B. POWERS AND AUTHORITY. It has the corporate power and authority to enter into and perform, and has taken all necessary action to duly authorize the entry into, performance and delivery of, this Guaranty and the transactions contemplated hereby. 4C. ACTIONS PENDING. (a) There is no action, suit, investigation or proceeding pending or, to the knowledge of such Guarantor, threatened against or affecting such Guarantor or any properties or rights of such Guarantor in or before any court, arbitrator or administra- 9 tor or Governmental Instrumentality which, if adversely determined, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or a material adverse effect on the ability of such Guarantor to perform its obligations hereunder. (b) Such Guarantor is not in default under any term of any agreement or instrument to which it is a party or by which it or any of its properties are bound, or any order, judgment, decree or ruling of any court, arbitrator, administrator or Governmental Instrumentality, or in violation of any applicable law, ordinance, sale or regulation (including without limitation Environmental Laws) of any Governmental Instrumentality, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the ability of such Guarantor to perform its obligations hereunder. 4D. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery and performance by the Guarantor of this Guaranty will not contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Guarantor under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, memorandum or articles of association, any other material agreement or instrument to which the Guarantor is bound or by which the Guarantor or any of its properties may be bound or affected conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Instrumentality applicable to the Guarantor or violate any provision of any statute or other rule or regulation of any Governmental Instrumentality applicable to the Guarantor. 4E. GOVERNMENTAL CONSENT. Neither the nature of the Guarantor nor any of its businesses or properties, nor any relationship between the Guarantor or any of its Subsidiaries or any other Person, nor any circumstance in connection with the entry into, performance, validity and enforceability of the Guaranty and the transactions contemplated hereby is such as to require any authorization, consent, approval, exemption or other action by or notice to or filing, registration or declaration with, any court or administrative body or other Governmental Instrumentality in connection with the execution and delivery of this Guaranty, or fulfillment of or compliance with the terms and provisions hereof. 4F. LEGAL VALIDITY. This Guaranty constitutes the legal, valid and binding obligation of each Guarantor, enforceable against each Guarantor in accordance with 10 its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5. ENTIRE AGREEMENT; WAIVERS. Each Guarantor hereby agrees that this instrument contains the entire agreement between the parties and that there is and can be no other oral or written agreement or understanding whereby the provisions of this instrument have been or can be terminated, affected, varied, waived, amended or modified in any manner, unless the same be set forth and consented to in writing by the Discount Note Indenture Trustee. 6. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the Guarantors and their permitted successors, transferees and assigns and inure to the benefit of the Discount Note Indenture Trustee. This Guaranty shall without further consent of the Guarantors, pass to, and may be relied upon and enforced by, any successor or assignee of the Discount Note Indenture Trustee and any permitted transferee of any Note. 7. JURISDICTION; SERVICE OF PROCESS. EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH THEREOF, BROUGHT BY THE DISCOUNT NOTE INDENTURE TRUSTEE AGAINST THE GUARANTOR OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY THE DISCOUNT NOTE INDENTURE TRUSTEE IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY AS THE DISCOUNT NOTE INDENTURE TRUSTEE MAY IN ITS SOLE DISCRETION ELECT, AND, BY THE EXECUTION AND DELIVER OF THIS GUARANTY, IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH SUCH COURT; AND AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL, TO THE EXTENT PERMITTED BY LAW, CONSTITUTE ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, WITHOUT LIMITING THE FOREGOING, EACH GUARANTOR HEREBY APPOINTS, IN THE CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OF OR IN THE STATE OF NEW YORK, CT CORPORATION, WITH OFFICES ON THE DATE HEREOF 11 AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 TO RECEIVE, FOR IT AND ON ITS BEHALF, SERVICE OF PROCESS IN THE STATE OF NEW YORK WITH RESPECT THERETO, PROVIDED EACH GUARANTOR MAY APPOINT ANY OTHER PERSON, REASONABLY ACCEPTABLE TO THE DISCOUNT NOTE INDENTURE TRUSTEE, WITH OFFICES IN THE STATE OF NEW YORK TO REPLACE SUCH AGENT FOR SERVICE OF PROCESS UPON DELIVERY TO THE ADMINISTRATIVE AGENT OF A REASONABLY ACCEPTABLE AGREEMENT OF SUCH NEW AGENT AGREEING SO TO ACT. IN ADDITION, EACH GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, BROUGHT IN THE SAID COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF THE DISCOUNT NOTE INDENTURE TRUSTEE TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES, IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER SUCH GUARANTOR, IN SUCH OTHER JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. 8. NOTICES. All notices and communications provided for hereunder shall be in writing and sent by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or by registered or certified mail with return receipt requested (postage prepaid), or by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to the Discount Note Indenture Trustee Party to such Person at State Street Bank & Trust Company, Two International Place, Boston, MA 02110, Attn: Corporate Trust Department, or at such other address as such Person shall have specified to each Guarantor in writing, or (ii) if to the Guarantor, to the Guarantor at c/o London Clubs International PLC, 10 Brick Street, London WIY 8HO with a copy to LCI to the same address, or at such other address as 12 each Guarantor shall have specified to the the Discount Note Indenture Trustee in writing. (iii) Notices under this Section 8 will be deemed given only when actually received. 9. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT HERETO. 10. SUBROGATION. Each Guarantor irrevocably and unconditionally hereby waives (until the obligations guaranteed hereunder shall have been indefeasibly paid in full) all rights it may have to be subrogated to the rights of the Discount Note Indenture Trustee, and all other remedies that it may have against LCI, in respect of which any payment is made hereunder. If any amount shall be paid to the Guarantors on account of any such subrogation rights or other remedy, notwithstanding the waiver thereof, such amount shall be received in trust for the benefit of the Discount Note Indenture Trustee and shall forthwith be paid to the Discount Note Indenture Trustee to be credited and applied upon the obligations guaranteed hereby, whether matured or unmatured, in accordance with the terms hereof. Each Guarantor agrees that its obligations under this Section 10 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of LCI is rescinded or must be otherwise restored by the Discount Note Indenture Trustee, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. 11. PAYMENTS FREE AND CLEAR OF TAXES, ETC. Each Guarantor hereby agrees that: (a) All payments by such Guarantor hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by the Discount Note Indenture Trustee's net income or receipts (such non-excluded items being called "TAXES"). In the event that any withholding or deduction from any payment to be made by a Guarantor hereun- 13 der is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then such Guarantor will (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to the Discount Note Indenture Trustee an official receipt or other documentation satisfactory to the Discount Note Indenture Trustee evidencing such payment to such authority; and (iii) pay to the Discount Note Indenture Trustee such additional amount or amounts ("ADDITIONAL AMOUNT") as is necessary to ensure that the net amount actually received by the Discount Note Indenture Trustee will equal the full amount the Discount Note Indenture Trustee would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against any the Discount Note Indenture Trustee with respect to any payment received by the Discount Note Indenture Trustee hereunder, the Discount Note Indenture Trustee may pay such Taxes and the Guarantor will promptly pay such Additional Amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by the Discount Note Indenture Trustee after the payment of such Taxes (including any Taxes on such Additional Amounts) shall equal the amount the Discount Note Indenture Trustee would have received had not such Taxes been asserted. (b) If the Guarantor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Discount Note Indenture Trustee the required receipts or other required documentary evidence, the Guarantor shall indemnify the Discount Note Indenture Trustee for any incremental Taxes, interest, or penalties that may become payable by the Discount Note Indenture Trustee as a result of any such failure. (c) In the event that an Additional Amount is paid by a Guarantor for the account of the Discount Note Indenture Trustee and the Discount Note Indenture Trustee is entitled to a refund of the Tax (a "Tax Refund") to which such payment is 14 attributable, then the Discount Note Indenture Trustee shall take all reasonable steps which are necessary to obtain such Tax Refund, including filing such forms, certificates, documents, applications or returns as may be required to obtain such Tax Refund. If the Discount Note Indenture Trustee subsequently receives such a Tax Refund, then the Discount Note Indenture Trustee shall reimburse such amount. (d) Without prejudice to the survival of any other agreement of the Guarantors hereunder, the agreements and obligations of the Guarantors contained in this SECTION 11 shall survive the payment in full of the obligations owing under the Noteholder Completion Guaranty. 12. JUDGMENT. Each Guarantor hereby agrees that: (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in United States Dollars into another currency, such Guarantor agrees, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Discount Note Indenture Trustee could purchase United States Dollars with such other currency on the Business Day preceding that on which final judgment is given. (b) The obligation of each Guarantor in respect of any sum due from it to the Discount Note Indenture Trustee hereunder shall, notwithstanding any judgment in a currency other than United States Dollars, be discharged only to the extent that on the Business Day following receipt by the Discount Note Indenture Trustee of any sum adjudged to be so due in such other currency the Discount Note Indenture Trustee may, in accordance with normal banking procedures, purchase United States Dollars with such other currency; in the event that the United States Dollars so purchased are less than the sum originally due to the Discount Note Indenture Trustee in United Stated Dollars, the Guarantor, as a separate obligation and notwithstanding any such judgment, shall indemnify and hold harmless the Discount Note Indenture Trustee against such loss, and if the United States Dollars so purchased exceed the sum originally due to the Discount Note Indenture Trustee in United States Dollars, the Discount Note Indenture Trustee shall remit to such Guarantor such excess. 13. NO WAIVER. No delay on the part of the Discount Note Indenture Trustee in exercising any rights hereunder or failure to exercise the same shall operate as a waiver of such rights; no notice to or demand on the Guarantors shall be deemed to 15 be a waiver of the obligation of the Guarantors or of the rights of the Discount Note Indenture Trustee to take further action without notice or demand as provided herein. 14. HEADINGS. The descriptive heading of the several paragraphs of this Guaranty are inserted for convenience only and do not constitute a part of this Guaranty. 15. COUNTERPARTS. This Guaranty may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Guaranty to produce or account for more than one such counterpart. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained herein or made in writing by or on behalf of the Guarantors in connection herewith shall survive the execution and delivery of this Guaranty. 17. SEVERABILITY. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 18. TERM OF GUARANTY. This Guaranty and all covenants and agreements of the Guarantors contained herein shall continue in full force and effect and shall not be discharged until such time as all of the obligations guaranteed hereby and any other independent payment obligations of the Guarantors hereunder shall be paid and performed in full and all of the agreements of the Guarantors hereunder shall be duly paid and performed in full. 19. WAIVER OF JURY TRIAL. THE GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE DISCOUNT NOTE INDENTURE TRUSTEE. THE GUARANTORS ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE DISCOUNT NOTE INDENTURE TRUSTEE ENTERING INTO THE INDENTURE. 16 20. RIGHTS OF LENDERS. This Subsidiary Guaranty shall be binding upon the Guarantors and their permitted successors, transferees and assigns and shall inure to the benefit of and be enforceable by the Discount Note Indenture Trustee and its respective successors, transferees and assigns; PROVIDED, HOWEVER, that the Guarantors may not assign any of their Guaranteed Obligations hereunder without the prior written consent of the Discount Note Indenture Trustee, and the Discount Note Indenture Trustee may not assign this Subsidiary Guaranty or any of its rights, remedies or options hereunder without the prior written consent of the Administrative Agent in its sole discretion. The Lenders shall be third party beneficiaries of this SECTION 20 and shall have all rights at law and equity to the enforcement hereof. 17 IN WITNESS whereof the Guarantors have caused this Guaranty to be executed as a deed the day and year first above written. EXECUTED AS A DEED by ) LONDON CLUBS HOLDINGS LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) LONDON CLUBS MANAGEMENT LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) THE SPORTSMAN CLUB LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) RITZ CLUB (LONDON) LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) GOLDEN NUGGET CLUB LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) LES AMBASSADEURS CLUB LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) RENDEZVOUS CLUB (LONDON) LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) 18 PALM BEACH CLUB LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) SIX HAMILTON PLACE LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) BURLINGTON STREET SERVICES LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) ZEALCASTLE LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) CORBY LEISURE RETAIL ) Director DEVELOPMENTS LIMITED ) acting by two Directors ) Director/Secretary or a Director and the Secretary ) EXECUTED AS A DEED by ) UNITLAW TRADING LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) LONDON PARK TOWER CLUB LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) PUBLICACE LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary 19 EXECUTED AS A DEED by ) LOMASBOND PROPERTIES LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) LONDON CLUBS (OVERSEAS) LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary EXECUTED AS A DEED by ) DECBURY LIMITED ) Director acting by two Directors ) or a Director and the Secretary ) Director/Secretary 20 APPENDIX A To Subsidiary Guaranty DEFINITIONS DEFINED TERMS. The following terms (whether or not italicized) when used in the Subsidiary Guaranty, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "ABH" means Aladdin Bazaar Holdings, LLC, a Nevada limited-liability company. "ADDITIONAL CONTRACT CERTIFICATE" means an Additional Contract Certificate substantially in the form of EXHIBIT Y to the Credit Agreement. "ADMINISTRATIVE AGENT" is defined in the PREAMBLE of the Credit Agreement and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to SECTION 9.4 of the Credit Agreement. "AFFECTED LENDER" is defined in CLAUSE(A) of SECTION 4.11 of the Credit Agreement. "AFFILIATE" means, relative to any Person, any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (EXCLUDING, HOWEVER, any trustee under, or any committee with responsibility for administering, any Plan). With respect to any Lender, Approved Fund, or Issuer, a Person shall be deemed to be "controlled by" another Person if such other Person possesses, directly or indirectly, power to vote 51% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors, managing general partners or managers, as the case may be. With respect to all other Persons, a Person shall be deemed to be "controlled by" another Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors, managing general partners or managers, as the case may be; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. A-1 "AFFILIATE TRANSACTION" is defined in SECTION 7.2.13 of the Credit Agreement. "AGENT" means the Administrative Agent, the Syndication Agent and/or the Documentation Agent, as the context may require. "AHL" means Aladdin Holdings, LLC, a Delaware limited liability company. "AHL PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed and delivered by an Authorized Representative of AHL pursuant to CLAUSE (D) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT E-2 to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "ALADDIN BAZAAR" means Aladdin Bazaar, LLC, a Delaware limited liability company. "ALADDIN MUSIC" means Aladdin Music, LLC, a Nevada limited-liability company. "ALADDIN PARTIES" means, collectively, the Borrower, Holdings, Capital, Enterprises, Sommer Enterprises, AHL, Aladdin Music, AMH, ABH and the Trust. "ALTERNATE BASE RATE" means, on any date and relative to all Base Rate Loans, a fluctuating rate of interest per annum (rounded upward, if necessary, to the next highest 1/16 of 1%) equal to the higher of (a) the Base Rate in effect on such day; and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. A-2 "AMH" means Aladdin Music Holdings, LLC, a Nevada limited-liability company. "AMH PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed and delivered by an Authorized Representative of AMH pursuant to CLAUSE (G) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT E-3 to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "APPLICABLE BASE RATE MARGIN" means, (w) relative to any Term B Loan and Term C Loan, the proceeds of which on any date are being held in the Bank Proceeds Account, 1.00% PER ANNUM, (x) relative to any Term B Loan, the proceeds of which on any date have been advanced to the Borrower from the Bank Proceeds Account, 2.50% PER ANNUM, (y) relative to any Term C Loan, the proceeds of which on any date have been advanced to the Borrower from the Bank Proceeds Account, 3.00% PER ANNUM and (z) relative to any Term A Loan, (1) on any date prior to the date which is six months after the Conversion Date, 2.00% PER ANNUM and (2) on any date from and after the date which is six months after the Conversion Date, the PER ANNUM percentage set forth below opposite the Total Debt to EBITDA Ratio set forth in the Current Compliance Certificate: Total Debt to EBITDA Ratio Applicable Base Rate Margin -------------------------------- --------------------------- > or equal to 4.0:1 1.75% > or equal to 3.5:1 and < 4.0:1 1.50% > or equal to 3.0:1 and < 3.5:1 1.00% > or equal to 2.5:1 and < 3.0:1 0.75% < 2.5:1 0.50% "APPLICABLE LIBO RATE MARGIN" means, (w) relative to any Term B Loan and Term C Loan, the proceeds of which on any date are being held in the Bank Proceeds Account, 2.00% PER ANNUM, (x) relative to any Term B Loan, the proceeds of which on any date have been advanced to the Borrower from the Bank Proceeds Account, 3.50% PER ANNUM, (y) relative to any Term C Loan, the proceeds of which on any date have been advanced to the Borrower from the Bank Proceeds Account, A-3 4.00% PER ANNUM and (z) relative to any Term A Loan, (1) on any date prior to the date which is six months after the Conversion Date, 3.00% PER ANNUM and (2) on any date from and after the date which is six months after the Conversion Date, the PER ANNUM percentage set forth below opposite the Total Debt to EBITDA Ratio set forth in the Current Compliance Certificate: Total Debt to EBITDA Ratio Applicable LIBO Rate Margin -------------------------------- --------------------------- > or equal to 4.0:1 2.75% > or equal to 3.5:1 and < 4.0:1 2.50% > or equal to 3.0:1 and < 3.5:1 2.00% > or equal to 2.5:1 and < 3.0:1 1.75% < 2.5:1 1.50% "APPLICABLE PERCENTAGE" means the percentage of Direct Costs actually paid or payable by the Borrower to the Design/Builder pursuant to the Design/Build Contract or, if applicable, to a Contractor or Subcontractor pursuant to a Contract after taking into account the Retainage Amount. "APPROVED EQUIPMENT FUNDING COMMITMENT" means, collectively, (x) the GECC Commitment and (y) any replacement of the GECC Commitment from an institutional or other lender approved by the Administrative Agent in its reasonable discretion if (1) such commitment is in form and substance reasonably satisfactory to the Administrative Agent and does not include any material conditions to funding that are not included in the GECC Commitment and (2) the lender providing such commitment executes an intercreditor agreement substantially similar to the GECC Intercreditor Agreement. "APPROVED FUND" means, relative to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "APPURTENANT RIGHTS" means (x) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to the A-4 Site or the Improvements, including the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to the Site and (y) all permits, licenses and rights, whether or not of record, appurtenant to the Site. "ARCHITECT OF RECORD" means ADP/FD of Nevada, Inc. "ARCHITECT'S AGREEMENT" means, collectively, the agreements pursuant to which architects, engineers and other design professionals have agreed with the Borrower to provide services in connection with the Main Project. "ARCHITECT'S CLOSING CERTIFICATE" means a closing certificate in the form of EXHIBIT Q-3 to the Credit Agreement. "ARRANGER" means Scotiabank or Merrill Lynch. "ARRANGERS' FEE LETTER" means the confidential letter agreement, dated December 4, 1997, among the Borrower, the Sponsors and the Arrangers. "ASSIGNEE LENDER" is defined in SECTION 10.11.1 of the Credit Agreement. "ASSIGNMENT OF CONTRACTS" means an assignment of any and all contracts, agreements, proposals, Permits (to the extent such Permits are assignable), approvals (to the extent such approvals are assignable), Plans and Specifications pertaining to the Hotel/Casino Component, whether now existing or subsequently entered into by the Borrower, including the Approved Equipment Funding Commitments and the rights of the Borrower thereunder, management contracts, the Contracts, development rights, consents (to the extent assignable), architectural, engineering and leasing documents and such other documents as may be designated by the Administrative Agent. Such Assignment of Contracts shall include appropriate continuation agreements by the Contractors and/or Subcontractors thereunder. "AUTHORIZED REPRESENTATIVE" means, relative to any Person, those of its officers or managing members (in the case of a limited liability company) whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders in a certificate of such Person delivered to the Administrative Agent. "AVAILABLE FUNDS" means, from time to time, the sum of (u) the aggregate of the unutilized Commitments (EXCLUDING, HOWEVER, the Commitments of all Defaulting Lenders) under the Bank Credit Facility, PLUS (v) the aggregate of the A-5 amounts on deposit in the Borrower's Funds Account, the Construction Note Disbursement Account and all Anticipated Earnings thereon, PLUS (w) the aggregate of the amounts on deposit in the Guaranty Deposit Account, the Cash Management Account, the Bank Proceeds Account, the Loss Proceeds Account and the Interest Payment Account, PLUS (x) so long as (1) no default under the Site Work Agreement and the Mall Project Loan and no Default under the Credit Agreement have occurred and are continuing at the relevant time of computation, (2) advances of the Mall Project Loan have commenced on or before June 30, 1998 and have continued in accordance with the approved draw schedule for the Mall Project Loan, (3) advances of the Mall Project Loan to reimburse the Borrower in accordance with the Site Work Agreement are made within 45 days after the Construction Consultant and the Owner Representative have approved the work to be completed by the Borrower pursuant to the Site Work Agreement, the aggregate amounts payable to the Borrower by Aladdin Bazaar pursuant to Section 4.5 of the Site Work Agreement, PLUS (y) the lesser of (1) the aggregate of the amounts available to be drawn under all Approved Equipment Funding Commitments and (2) the aggregate amount of Remaining Costs on the date of calculation for the Equipment Component (as in effect from time to time), PLUS (z) the aggregate amount of Main Project Costs which the Design/Builder and/or Fluor have agreed or confirmed in writing, to the reasonable satisfaction of the Disbursement Agent, that they are responsible for paying (on a timely basis relative to the Main Project's cash needs) from their own funds but which they have not yet paid. "BANK CREDIT FACILITY" means the Term A Loan Commitment, the Term B Loan Commitment and the Term C Loan Commitment. "BANK PROCEEDS ACCOUNT" means the account established by the Borrower with the Disbursement Agent pursuant to the Borrower Collateral Account Agreement into which the proceeds of the Loans shall be deposited by the Administrative Agent from time to time. "BASE RATE" means, at any time, the rate of interest then most recently established by the Administrative Agent in New York, New York as its base rate for U.S. dollars loaned in the United States. The Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. "BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. A-6 "BOARD OF MANAGERS" means (x) for so long as the Borrower is a limited-liability company, the Board of Managers appointed pursuant to the Organizational Documents of the Borrower or (y) otherwise, the Board of Directors of the Borrower. "BORROWER" is defined in the PREAMBLE of the Credit Agreement. "BORROWER COLLATERAL ACCOUNT AGREEMENT" means, on any date, the Borrower Collateral Account Agreement, as originally in effect on the Closing Date, among the Borrower, the Disbursement Agent and the Investment Intermediary and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "BORROWER COMMON MEMBERSHIP INTEREST" means a Common Share as defined in the Organizational Documents of the Borrower. "BORROWER PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed and delivered by an Authorized Representative of the Borrower pursuant to CLAUSE (F) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT E-1 to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "BORROWER SERIES A PREFERRED MEMBERSHIP INTERESTS" means the Series A Preferred Shares as defined in the Organizational Documents of the Borrower. "BORROWER'S CLOSING CERTIFICATE" means a closing certificate in the form of EXHIBIT Q-1 to the Credit Agreement. "BORROWER'S COMPLETION CERTIFICATE" means a certificate in the form of EXHIBIT S-1 to the Credit Agreement. "BORROWER'S FINAL COMPLETION CERTIFICATE" means a certificate in the form of EXHIBIT U-1 to the Credit Agreement. "BORROWER'S FUNDS ACCOUNT" is defined in the Borrower Collateral Account Agreement. A-7 "BORROWING" means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period made by all Lenders required to make such Loans on the same Business Day and pursuant to the same Borrowing Request in accordance with SECTION 2.1 of the Credit Agreement. "BORROWING REQUEST" means a Loan request and certificate duly executed by an Authorized Representative of the Borrower substantially in the form of EXHIBIT L-1 to the Credit Agreement. "BUILDING DEPARTMENT" means the Clark County Building Department. "BUSINESS DAY" means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in Las Vegas, Nevada or New York, New York; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day described in CLAUSE (A) on which dealings in Dollars are carried on in the London interbank eurodollar market. "CAPITAL" means Aladdin Capital Corp., a Nevada corporation. "CAPITAL EXPENDITURES" means, for any period, the aggregate amount of all expenditures (other than any residual purchase payments under the FF&E Leases) of the Borrower and the other Aladdin Parties for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures. "CAPITAL STOCK" means, relative to any Person, any and all shares, interests (including Membership Interests), participations or other equivalents (however designated, whether voting or non-voting) of such Person's capital, whether now outstanding or issued after the Effective Date. "CAPITALIZED LEASE LIABILITY" means, relative to any Person, any monetary obligation of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as a capitalized lease, and, for purposes of this Agreement and each other Loan Document, the amount of such obligation A-8 shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a premium or a penalty. "CARPARK" is defined in CLAUSE (B) of the FOURTH RECITAL of the Credit Agreement. "CASH CONTRIBUTIONS TO CAPITAL" means optional contributions (other than Cash Equity Contributions as defined in the Keep-Well Agreement), including to cure a Default that would otherwise exist under the Loan Documents, made by the Sponsors in cash to the Borrower, which contributions were (x) not made as a loan, (y) made in exchange for Borrower Series A Preferred Membership Interests and (z) made on terms and conditions satisfactory to the Administrative Agent as determined on good faith in its sole discretion. "CASH EQUIVALENT INVESTMENT" means, at any time, (u) United States Dollars, (v) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (w) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (x) repurchase obligations with a term of not more than seven days for underlying securities of the types described in ITEM (V) and (W) entered into with any financial institution meeting the qualifications specified in ITEM (W), (y) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (z) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in ITEMS (W)-(Y) of this definition. "CASINO" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit Agreement. "CERCLA" is defined in CLAUSE (A) of the definition of "Environmental Law". A-9 "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "CHANGE IN CONTROL" means at any time, (a) the failure of the Trust or the beneficiaries or remaindermen of the Trust to (i) directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), all of (A) the Membership Interests of AHL not otherwise owned by GW Vegas, LLC on the Effective Date or (B) following the dissolution of the Trust and AHL, the Membership Interests of Sommer Enterprises not otherwise owned by Ronald B. Dictrow on the Effective Date or (ii) otherwise have the ability to elect the managers of (A) AHL or (B) following the dissolution of the Trust and AHL, Sommer Enterprises; (b) the failure of AHL or following the dissolution of the Trust and AHL, the beneficiaries or remaindermen of the Trust to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), 98.66% of the Membership Interests of Sommer Enterprises or otherwise have the ability to elect the managers of Sommer Enterprises; (c) the failure of Sommer Enterprises to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), 47.00% of the Membership Interests of Holdings (except that (v) on the Opening Date, the percentage interest of Sommer Enterprises in the Holdings Common Membership Interests may be increased by 0.5% provided that the percentage interest of LCNI therein is decreased by a corresponding amount (w) in the event of a default by London Clubs in payment of its share of amounts due under the Keep-Well Agreement, the percentage interest of Sommer Enterprises in the Holdings Common Membership Interests may be increased by 1, 1.5 or 2 times (depending on whether London Clubs is in default for 30 Business Days, 45 Business Days or 60 Business Days from the date of such default, respectively) MULTIPLIED BY a dilution fraction (the "DILUTION FRACTION"), the numerator of which is the delinquent contribution and the denominator of which is A-10 $200,000,000 provided that the percentage interest of LCNI therein is decreased by a corresponding amount, (x) in the event of a default by AHL in its share of amounts due under the Keep-Well Agreement, the percentage interest of LCNI in the Holdings Common Membership Interests may be increased by 1, 1.5 or 2 times (depending on whether AHL is in default for 30 Business Days, 45 Business Days or 60 Business Days from the date of such default, respectively) MULTIPLIED BY the Dilution Fraction provided that the percentage interest of Sommer Enterprises therein is decreased by a corresponding amount), (y) in the event of any vesting of any unvested Membership Interests in Holdings pursuant to an Employment Agreement, Sommer Enterprises may be diluted thereby and (z) upon the exercise of the Warrants, the dilutive effect of such exercise directly and indirectly on the Membership Interests in Holdings) or otherwise for Sommer Enterprises and LCNI to have the ability to elect the board of managers of Holdings or for either of them to have the ability individually or collectively to elect the board of managers of Holdings; (d) except for Capital Stock of Enterprises issued in connection with the exercise of Warrants, the failure of Sommer Enterprises to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), all of the Capital Stock of Enterprises or otherwise have the ability to elect the members of the Board of Directors of Enterprises; (e) the failure of Enterprises to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), at least 25% of the Membership Interests of Holdings (except for any adjustments upon the exercise of any Warrants) or individually or collectively with Sommer Enterprises and LCNI to have the ability to elect the managing member of Holdings; (f) the failure of Holdings to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), all of the Borrower Common Membership Interests or otherwise to have the ability to elect the managing member of the Borrower; A-11 (g) the failure of Holdings to directly own, free and clear of all Liens (other than Liens in favor of the Discount Note Indenture Trustee for the benefit of the Discount Noteholders), the Borrower Series A Preferred Membership Interests unless the failure to own the Borrower Series A Preferred Membership Interests results from the exercise by the Discount Note Indenture Trustee of the Lien in favor of the Discount Note Indenture Trustee for the benefit of the Discount Noteholders; (h) the failure of Holdings to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), all of the Capital Stock of Capital or otherwise have the ability to elect all of the members of the Board of Directors of Capital; (i) the failure of the Borrower to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), all of the Membership Interests of AMH or otherwise to have the ability to elect the managing member of AMH; (j) the failure of AMH to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), at least 49% of the Membership Interests of Aladdin Music or otherwise to have the ability to elect the managing member of Aladdin Music; (k) the failure of LCNI to directly own, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), at least 25.0% of the Holdings Common Membership Interests (except that (v) on the Opening Date, the percentage interest of LCNI in the Holdings Common Membership Interests may be decreased by 0.5% provided that the percentage interest of Sommer Enterprises therein is increased by a corresponding amount (w) in the event of a default by Sommer Enterprises in payment of its share of amounts due under the Keep-Well Agreement, the percentage interest of LCNI in the Holdings Common Membership Interests may be increased by 1, 1.5 or 2 times (depending on whether Sommer Enterprises is in default for 30 Business Days, 45 A-12 Business Days or 60 Business Days from the date of such default, respectively) MULTIPLIED BY the Dilution Fraction, provided that the percentage interest of Sommer Enterprises therein is decreased by a corresponding amount, (x) in the event of a default by LCNI in payment of its share of amounts due under the Keep-Well Agreement, the percentage interest of Sommer Enterprises in the Holdings Common Membership Interests may be increased by 1, 1.5 or 2 times (depending on whether LCNI is in default for 30 Business Days, 45 Business Days or 60 Business Days from the date of such default, respectively) MULTIPLIED BY the Dilution Fraction provided that the percentage interest of LCNI is decreased by a corresponding amount) and (y) in the event of any vesting of unvested membership interests in Holdings pursuant to an Employment Agreement, LCNI may be diluted thereby and (z) upon the exercise of the Warrants, the dilutive effect of such exercise directly and indirectly on the Membership Interest of Holdings) or otherwise for LCNI and Sommer Enterprises to have the ability to elect the board of managers of Holdings; (l) until such time as London Clubs has paid and performed, in all material respects, its obligations under the Completion Guaranty and the Keep-Well Agreement (or the Completion Guaranty and the Keep-Well Agreement have expired or terminated), the failure of London Clubs to directly own all of the Capital Stock of London Clubs Holdings or otherwise have the ability to elect all members of the Board of Directors of London Clubs Holdings; (m) the failure of London Clubs to own directly or indirectly all of the Capital Stock of LCNI or otherwise have the ability to elect all members of the Board of Directors of LCNI; or (n) any "Change of Control" under (and as defined in) the Discount Note Indenture. "CHANGE ORDER" means, at any time, an adjustment made to the Guaranteed Maximum Price or the Design/Build Contract Time with respect to changes in the Work which increase or decrease the time of performance or the actual cost to the Design/Builder of the Work. "CIBC" is defined in the PREAMBLE of the Credit Agreement. A-13 "CLARK COUNTY CODE" is defined in CLAUSE (B) of SECTION 7.1.19 of the Credit Agreement. "CLOSING" is defined in SECTION 5.1 of the Credit Agreement. "CLOSING DATE" means the Business Day, if any, prior to the Term B and Term C Loan Commitment Termination Date, on which the conditions in ARTICLE V of the Credit Agreement are satisfied. "CODE" means the Internal Revenue Code of 1986, and the regulations thereunder, in each case as amended, reformed or otherwise modified from time to time. "COMMITMENT" means, as the context may require, a Term A Loan Commitment, a Term B Loan Commitment, a Term C Loan Commitment or a Letter of Credit Commitment made by a Lender under the Credit Agreement. "COMMITMENT AMOUNT" means, as the context may require, the Term A Loan Commitment Amount, the Term B Loan Commitment Amount, the Term C Loan Commitment Amount or the Letter of Credit Commitment Amount. "COMMITMENT LETTER" means the Commitment Letter, dated December 4, 1997, between the Arrangers, the Borrower and the Sponsors as thereafter from time to time amended. "COMMITMENT TERMINATION DATE" means, as the context may require, the Term A Loan Commitment Termination Date or the Term B Loan and Term C Loan Commitment Termination Date. "COMMITMENT TERMINATION EVENT" means (a) the occurrence of any Event of Default described in CLAUSES (A) through (E) of SECTION 8.1.10 of the Credit Agreement; or (b) the occurrence and continuance of any other Event of Default and either (x) the declaration of all or any portion of the Loans to be immediately due and payable pursuant to SECTION 8.3 of the Credit Agreement or (y) the giving of notice by the A-14 Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated. "COMMON PARKING AREA USE AGREEMENT" means the Common Parking Area Use Agreement to be entered into between the Borrower and Aladdin Bazaar in form and substance satisfactory to the Administrative Agent determined in good faith in its sole discretion, and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "COMPLETION" means that each of the following has occurred: (a) the construction of the Hotel/Casino and any Tenant Improvements have been completed substantially in accordance with the Credit Agreement, the Plans and Specifications, the provisions of the Reciprocal Easement Agreement applicable to the Hotel/Casino and all of the other Operative Documents to the extent that the development, construction, use or operation of the Hotel/Casino are affected thereby, except for the Main Project Punchlist Items applicable to the Hotel/Casino, and in substantial compliance with all Legal Requirements pertaining to the construction of the Hotel/Casino so as to allow the Hotel/Casino to be utilized for its intended purpose; (b) reasonable and safe means of access and facilities necessary for the use and occupancy of the Hotel/Casino have been installed and are operational including corridors, elevators, stairways, heating, ventilation, air conditioning, sanitary, water and electrical facilities and all security systems and life safety systems required by the Plans and Specifications, the Reciprocal Easement Agreement, the other Operative Documents and all Legal Requirements and that the Borrower has made arrangements (from the Energy Project or an alternative source) to obtain reliable electrical and other utility services at appropriate levels required to start up, operate and maintain the Hotel/Casino in a safe, efficient and reliable manner; and (c) there are no outstanding claims or Liens by any Contractor or Subcontractor or any other Person against any portion of the Hotel/Casino Component except for Permitted Liens and Permitted Encumbrances. A-15 "COMPLETION CERTIFICATE" means, collectively, the Borrower's Completion Certificate and the Construction Consultant's Completion Certificate in the form of EXHIBITS S-1 and S-2 to the Credit Agreement, respectively. "COMPLETION DATE" means the date on which Completion occurs but in no event shall the Completion Date extend beyond the Outside Completion Deadline, time being of the essence as to the Borrower. "COMPLETION GUARANTOR" means, jointly and severally, each of London Clubs, ABH and the Trust. "COMPLETION GUARANTY" means, on any date, the Guaranty of Performance and Completion, as originally in effect on the Closing Date, by the Completion Guarantors in favor of the Lenders substantially in the form of EXHIBIT C to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "COMPLEX" is defined in the FOURTH RECITAL of the Credit Agreement and is more fully described in EXHIBIT N-2 to the Credit Agreement. "COMPLIANCE CERTIFICATE" means a certificate duly completed and executed by an Authorized Representative of the Borrower substantially in the form of EXHIBIT R to the Credit Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time, together with such changes thereto as the Administrative Agent may from time to time reasonably request for the purpose of monitoring the Borrower's compliance with the financial covenants contained in the Credit Agreement. "CONSENT" means a consent, substantially in the form of EXHIBIT I to the Credit Agreement, to the collateral assignment by the Borrower of the Main Project Documents. "CONSTRUCTION BENCHMARK SCHEDULE" means the schedule for construction and completion of each Construction Component, the Main Project as a whole and the other work that the Borrower is required to perform pursuant to the Operative Documents in substantially the form of EXHIBIT X-1 to the Credit Agreement (as amended from time to time in accordance with the terms of the Credit Agreement) which (w) shall demonstrate that Substantial Completion will occur on or before the Outside Completion Deadline, (x) includes a statement from the Owner Representa- A-16 tive and the Design/Builder that the Construction Benchmark Schedule is realistic and can be adhered to (subject to Force Majeure Events) in completing the Main Project in accordance with the Plans and Specifications, (y) shows on a monthly basis the anticipated progress of the Work and other activities pertaining to the construction of the Hotel/Casino Component, the Energy Project Component and Theater renovations, and (z) the Construction Consultant has reviewed and certified in the Construction Consultant's Closing Certificate that the statement from the Owner Representative in ITEM (X) is reasonable and that it is appropriate for the Administrative Agent to rely thereon and on the other schedules and benchmarks set forth in the Construction Benchmark Schedule. "CONSTRUCTION COMPONENT" means the Hotel/Casino Component, the Energy Project Component or the Equipment Component. "CONSTRUCTION CONSULTANT" means Rider Hunt (NV), L.L.C. or any other Person designated from time to time by the Administrative Agent to serve as the Construction Consultant under the Credit Agreement and the Disbursement Agreement. "CONSTRUCTION CONSULTANT ENGAGEMENT AGREEMENT" means the Engagement Letter, dated as of January 28, 1998, by and among the Construction Consultant, the Borrower, the Administrative Agent, the Disbursement Agent and the Discount Note Indenture Trustee. "CONSTRUCTION CONSULTANT'S CLOSING CERTIFICATE" means a closing certificate in the form of EXHIBIT Q-2 to the Credit Agreement. "CONSTRUCTION CONSULTANT'S COMPLETION CERTIFICATE" means a certificate in the form of EXHIBIT S-2 to the Credit Agreement. "CONSTRUCTION CONSULTANT'S FINAL COMPLETION CERTIFICATE" means a certificate in the form of EXHIBIT U-2 to the Credit Agreement. "CONSTRUCTION CONSULTANT'S REPORT" means a report of the Construction Consultant delivered to the Disbursement Agent and the Administrative Agent pursuant to SECTION 3.1.10 of the Disbursement Agreement which shall include an analysis of the Plans and Specifications, the Main Project Budget, the Construction Benchmark Schedule, the Contracts, to the extent available, the construction and renovation of the Theater the construction of the Energy Project to be performed by A-17 the Energy Provider under the Energy Project Ground Lease and the Energy Project Development Agreement, and all other reports submitted to the Administrative Agent and stating, among other things, that (x) the Construction Consultant has reviewed the Main Project Documents, the Plans and Specifications, and other material information deemed necessary by the Construction Consultant for the purpose of evaluating whether the Main Project can be constructed and completed in the manner contemplated by the Operative Documents and (y) based on its review of such information, the Construction Consultant is of the opinion that the Main Project can be constructed in the manner contemplated by the Operative Documents and, in particular, that the Main Project can be constructed and completed in accordance with the Main Project Documents and the Plans and Specifications within the parameters set by the Construction Benchmark Schedule and the Main Project Budget. Such report shall contain an analysis reasonably satisfactory to the Administrative Agent demonstrating the adequacy of the Main Project Budget to complete the Main Project (and any improvements to be completed by the Borrower pursuant to the Reciprocal Easement Agreement) in accordance with the Construction Benchmark Schedule, confirmation that the Construction Benchmark Schedule is realistic, and verifying that the information delivered by the Borrower relating to the Complex and any improvements to be completed by the Borrower pursuant to the Reciprocal Easement Agreement are accurate. "CONSTRUCTION EXPENSES" means all Main Project Costs, EXCLUDING, HOWEVER, Pre-Opening Expenses, Debt Service due and payable after the Conversion Date and Issuance Fees and Expenses. "CONSTRUCTION NOTE DISBURSEMENT ACCOUNT" is defined in the Holdings Collateral Account Agreement. "CONTINGENT LIABILITY" means, relative to any Person, any agreement, undertaking or arrangement by which such Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby. A-18 "CONTINUATION/CONVERSION NOTICE" means a notice of continuation or conversion and certificate duly executed by an Authorized Representative of the Borrower substantially in the form of EXHIBIT M to the Credit Agreement. "CONTRACT" means any contract entered into from time to time by the Borrower with any Contractor for performance of services or sale of goods or services in connection with the design, engineering, installation, construction, operation or maintenance of the Main Project, including all warranties and guarantees. "CONTRACT AMENDMENT CERTIFICATE" means a Contract Amendment Certificate substantially in the form of EXHIBIT Z to the Credit Agreement. "CONTRACTOR" means any architect, consultant, designer, contractor, subcontractor, supplier, laborer or any other Person engaged by the Borrower in connection with the design, engineering, installation and construction of the Main Project (EXCLUDING, HOWEVER, the Design/Builder). "CONTROLLED GROUP" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "CONVERSION DATE" means the date on which either of the following first occurs: (a) the relevant Governmental Instrumentality issues a Main Project Certificate of Occupancy (which must include appropriate parking facilities) and operating permit for the Energy Project; or (b) the Administrative Agent and the Construction Consultant determine that Completion of the Main Project has occurred. A-19 "CREDIT EXTENSION" means, as the context may require, (a) the making of a Loan by a Lender; or (b) the issuance of any Letter of Credit, or the extension of any Stated Expiry Date of any existing Letter of Credit, by an Issuer. "CREDIT EXTENSION REQUEST" means, as the context may require, any Borrowing Request or Letter of Credit Issuance Request. "CURRENT COMPLIANCE CERTIFICATE" means the Compliance Certificate most recently delivered by the Borrower to the Administrative Agent pursuant to CLAUSE (D) of SECTION 7.1.1 of the Credit Agreement. Changes in the Applicable Base Rate Margin or Applicable LIBO Rate Margin resulting, after the Conversion Date, from a change in the Total Debt to EBITDA Ratio shall become effective upon delivery by the Borrower to the Administrative Agent of a new Compliance Certificate pursuant to CLAUSE (D) of SECTION 7.1.1 of the Credit Agreement. If the Borrower shall fail to deliver a Compliance Certificate within the number of days after the end of any Fiscal Quarter as required pursuant to CLAUSE (D) of SECTION 7.1.1 of the Credit Agreement (without giving effect to any grace period), the Applicable Base Rate Margin or Applicable LIBO Rate Margin, as the case may be, from and including the first day after the date on which such Compliance Certificate was required to be delivered to but not including the date the Borrower delivers to the Administrative Agent a Compliance Certificate shall conclusively equal the highest Applicable Base Rate Margin or Applicable LIBO Rate Margin, as the case may be, set forth in the definition of such term. "DEBT SERVICE" means all principal repayments or interest and other amounts payable or accrued from time to time under any Loan Document or the Approved Equipment Funding Commitments. "DEED OF TRUST" means, on any date, the Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing in the form of EXHIBIT B to the Credit Agreement, as originally in effect on the date on which it is recorded, made by the Borrower, as trustor, to the trustee named therein, for the benefit of the Administrative Agent and the Lenders, as beneficiaries covering the Site and as A-20 thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "DEFAULT" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "DEFAULTING LENDER" means any Lender with respect to which a Lender Default is in effect. "DESERT PASSAGE" is defined in CLAUSE (B) of the FOURTH RECITAL of the Credit Agreement. "DESIGN/BUILD CONTRACT" means, on any date, the Design/Build Contract, as originally in effect on the Closing Date, between the Borrower and the Design/Builder and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "DESIGN/BUILD CONTRACT TIME" is defined in SECTION 14.1 of the Design/Build Contract. "DESIGN/BUILDER" means Fluor Daniel, Inc., a California corporation. "DESIGN/BUILDER CONSENT AND ACKNOWLEDGMENT" means the Consent and Acknowledgment by the Design/Builder in favor of the Lenders and the Administrative Agent dated as of the Closing Date. "DESIGN/BUILD FINAL COMPLETION" means "FINAL COMPLETION" as defined in SECTION 31.9 of the General Conditions annexed to the Design/Build Contract as ATTACHMENT D. "DEVELOPMENT AGREEMENT" means, on any date, the Aladdin Hotel & Casino Agreement, dated March 18, 1997, among Holdings, Aladdin Management Corporation and the County of Clark, as assigned by Holdings and Aladdin Management Corporation to the Borrower, and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. A-21 "DIRECT COSTS" means all Main Project Costs expended or incurred by the Borrower for labor, services, materials, tools, utilities, equipment, fixtures and furnishings in connection with the construction of the Main Project all as set forth on the Main Project Budget. "DISBURSEMENT AGENT" means Scotiabank, in its capacity as the disbursement agent under the Disbursement Agreement and its successors in such capacity. "DISBURSEMENT AGREEMENT" means, on any date, the Disbursement Agreement, as originally in effect on the Closing Date, among the Borrower, Holdings, the Administrative Agent, the Discount Note Indenture Trustee, the Disbursement Agent, the Servicing Agent and the Investment Intermediary and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "DISCLOSURE SCHEDULE" means the Disclosure Schedule attached to the Credit Agreement as SCHEDULE I, as it may be amended, supplemented, amended and restated or otherwise modified from time to time by the Borrower with the written consent of the Administrative Agent and the Required Lenders. "DISCOUNT NOTE" means the 131/2% Series A and B Senior Discount Notes due 2010 of Holdings and Capital issued on the Closing Date for gross proceeds of $115,000,000. "DISCOUNT NOTE INDENTURE" means, on any date, the Indenture relating to the Discount Notes, as originally in effect on the Effective Date, among Holdings, Capital and the Discount Note Indenture Trustee and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "DISCOUNT NOTE INDENTURE TRUSTEE" means State Street Bank and Trust Company, in its capacity as the indenture trustee for the Discount Noteholders under the Discount Note Indenture. "DISCOUNT NOTE OFFERING CIRCULAR" means the offering memorandum, dated February 14, 1998, with respect to the units, consisting of the Discount Notes offered by Holdings and Capital and the Warrants offered by Enterprises. A-22 "DISCOUNT NOTE PURCHASE AGREEMENT" means the Purchase Agreement with respect to the Discount Notes and Warrants, dated as of February 18, 1998, among Holdings, Capital, Enterprises, AHL, the Trust and Merrill Lynch and First Boston (as representatives of the several initial purchasers). "DISCOUNT NOTEHOLDER" means the duly registered holder of a Discount Note. "DOCUMENTATION AGENT" is defined in the PREAMBLE of the Credit Agreement. "DOLLAR" and the symbol "$" mean lawful money of the United States. "DOWNGRADED LENDER" is defined in CLAUSE (B) of SECTION 4.11 of the Credit Agreement. "EBITDA" means, for the Borrower only, for any applicable period, the sum (without duplication) of (a) Net Income for such period, PLUS (b) the amount deducted by the Borrower, in determining Net Income for such period, representing (i) Interest Expense of the Borrower; PLUS (ii) the amount deducted, in determining Net Income, of all federal, state and local income taxes (whether paid in cash or deferred) of the Borrower or, if the Borrower is treated as a A-23 pass-through entity or is not treated as a separate entity for United States federal income tax purposes, the amount of Restricted Payments made by the Borrower in accordance with CLAUSE (C) of SECTION 7.2.6 of the Credit Agreement, subject to the terms of the Credit Agreement; PLUS (iii) depreciation of assets of the Borrower; PLUS (iv) amortization; PLUS (v) the amount of Cash Equity Contributions (as defined in the Keep-Well Agreement); PLUS (vi) the amount of Cash Contributions to Capital; PROVIDED, HOWEVER, that in computing EBITDA for purposes of determining the "Total Debt to EBITDA Ratio" in CLAUSE (H)(I)(B) of SECTION 7.2.6 of the Credit Agreement or the amount of "Excess Cash Flow", the "Applicable Base Rate Margin" or the "Applicable LIBO Rate Margin", SUBCLAUSES (B)(V) and (B)(VI) shall be excluded from such computation; PROVIDED FURTHER, HOWEVER, that in computing EBITDA for any period commencing on the Conversion Date and ending as of the close of any Fiscal Quarter on or prior to the first anniversary of the Conversion A-24 Date, EBITDA for such period shall equal the product of (x) the sum of the amounts determined pursuant to CLAUSES (A) and (B) for such period MULTIPLIED BY (y) a fraction, the numerator of which is equal to 365 and the denominator of which is equal to the number of days that have elapsed in such period. "EFFECTIVE DATE" means the date the Credit Agreement becomes effective pursuant to SECTION 10.8 thereof. "EMPLOYMENT AGREEMENT" means, collectively, (u) the Amended Employment and Consulting Agreement among Holdings, the Borrower and Richard J. Goeglein effective January 1, 1997, (v) the Amended Employment Agreement among Holdings, the Borrower and James H. McKennon effective April 15, 1997, (w) the Amended Employment Agreement among Holdings, the Borrower and Cornelius T. Klerk effective July 1, 1997, (x) the Amended Employment Agreement among Holdings, the Borrower and Lee A. Galati effective July 1, 1997, (y) the Amended Employment Agreement among Holdings, the Borrower and Jose A. Rueda effective July 1, 1997 and (z) the Amended Consulting Agreement between GAI, LLC, Holdings and the Borrower effective January 1, 1997. "ENERGY PROJECT" is defined in CLAUSE (E) of the FOURTH RECITAL of the Credit Agreement. "ENERGY PROJECT COMMITMENT" means the commitment (as set forth in the letter agreement, dated October 21, 1997, between the Energy Project Provider and AHL) of the Energy Project Provider to enter into the Energy Project Ground Lease, the Energy Project Development Agreement and the Energy Project Service Agreement. "ENERGY PROJECT COMPLETION" means that (a) the construction of the Energy Project has been completed substantially in accordance with the Energy Project Ground Lease and the provisions of the Reciprocal Easement Agreement applicable to the Energy Project except for any punchlist items applicable to the Energy Project and in substantial compliance with all Legal Requirements pertaining to the construction of the Energy Project so as to allow the Energy Project to be utilized for its intended purposes; A-25 (b) reasonable and safe means of access and facilities necessary for the use and operation of the Energy Project have been installed and are operational; (c) the Borrower has certified to the Administrative Agent that (1) arrangements have been made to obtain reliable electric and other utility services at the appropriate levels required for the operation of the Hotel/Casino and, to the extent applicable, other parts of the Complex that are subject to the Energy Service Agreement, (2) all other conditions precedent in the Energy Project Ground Lease relating to construction, installation, start-up and test activities have been satisfied in all material respects, and (3) there are no outstanding claims or Liens by any contractor or subcontractor or any other Person against any portion of the Energy Project Component except for Permitted Liens and Permitted Encumbrances. "ENERGY PROJECT COMPONENT" means the portion of the Complex described in EXHIBIT N-9 to the Credit Agreement. "ENERGY PROJECT DEVELOPMENT AGREEMENT" means, on any date, the Development Agreement, as originally in effect on the Closing Date, between the Borrower and the Energy Project Provider and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "ENERGY PROJECT EASEMENTS" means the easements appurtenant, easements in gross, license agreements and other right running for the benefit of the Energy Project Provider and/or appurtenant to the Energy Project Ground Lease, including those certain easements and licenses described in each Title Policy. "ENERGY PROJECT GROUND LEASE" means, on any date, the Ground Lease, as originally in effect on the Effective Date, between the Borrower and the Energy Project Provider and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "ENERGY PROJECT GUARANTOR" means Unicom Corporation, an Illinois corporation. A-26 "ENERGY PROJECT GUARANTY" means the Guaranty, dated as of December 3, 1997, executed by the Energy Project Guarantor to and for the benefit of the Borrower and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "ENERGY PROJECT PROVIDER" means Northwind Aladdin, LLC, a Nevada limited-liability company. "ENERGY PROJECT SERVICE AGREEMENT" means, on any date, the Energy Services Agreement, as originally in effect on the Effective Date, between the Borrower and the Energy Project Provider and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "ENTERPRISES" means Aladdin Gaming Enterprises, Inc., a Nevada corporation. "ENTERPRISES PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed and delivered by an Authorized Representative of Enterprises pursuant to CLAUSE (E) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT E-4 to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "ENVIRONMENTAL CLAIM" means any and all obligations, liabilities, losses, administrative, regulatory or judicial actions, suits, demands, decrees, claims, liens, judgments, warning notices, notices of noncompliance or violation, investigations, proceedings, removal or remedial actions or orders, or damages (foreseeable and unforeseeable, including consequential and punitive damages), penalties, fees, out-of-pocket costs, expenses, disbursements, attorneys' or consultants' fees, relating in any way to any Environmental Law or any Permit issued under any such Environmental Law including (x) any and all Claims by Governmental Instrumentalities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (y) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Substances or arising from alleged injury or threat of injury to health, safety or the environment. A-27 "ENVIRONMENTAL CONSULTANT" means ERM-Northeast, Inc., or any other Person designated from time to time by the Administrative Agent in its sole discretion to serve as the Environmental Consultant. "ENVIRONMENTAL INDEMNITY" means, on any date, the Environmental Indemnity Agreement, as originally in effect on the Effective Date, from the Borrower, the Trust and London Clubs for the benefit of the Administrative Agent on behalf of the Lenders in the form of EXHIBIT K to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "ENVIRONMENTAL LAW" means any of: (a) the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.) ("CERCLA"); (b) the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET SEQ.) ("CLEAN WATER ACT" OR "CWA"); (c) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, ET SEQ.) ("RCRA"); (d) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, ET SEQ.); (e) the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.); (f) the Emergency Planning and Community Right to Know Act (42 U.S.C. Section 11001, ET SEQ.); (g) the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136, ET SEQ.) ("FIFRA"); (h) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486); A-28 (i) the Safe Drinking Water Act (42 U.S.C. Sections 300f, ET SEQ.) ("SDWA"); (j) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C. Sections 1201, ET SEQ.); (k) the Toxic Substances Control Act (15 U.S.C. Section 2601, ET SEQ.) ("TSCA"); (l) the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, ET SEQ.) ("HMTA"); (m) the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. Section 7901, ET SEQ.) ("UMTRCA"); (n) the Occupational Safety and Health Act (29 U.S.C. Section 651, ET SEQ.) ("OSHA"); (o) the Nevada Hazardous Materials law (NRS Chapter 459); (p) the Nevada Solid Waste/Disposal of Garbage or Sewage law (NRS 444.440 to 444.650, inclusive); (q) the Nevada Water Controls/Pollution law (NRS Chapter 445A); (r) the Nevada Air Pollution law (NRS Chapter 445B); (s) the Nevada Cleanup of Discharged Petroleum law (NRS 590.700 to 590.920, inclusive); (t) the Nevada Control of Asbestos law (NRS 618.750 to 618.850); A-29 (u) the Nevada Appropriation of Public Waters law (NRS 533.324 to 533.4385, inclusive); (v) the Nevada Artificial Water Body Development Permit law (NRS 502.390); (w) the Nevada Protection of Endangered Species, Endangered Wildlife Permit (NRS 503.585) and Endangered Flora Permit law (NRS 527.270); and (x) all other Federal, state and local Legal Requirements which govern Hazardous Substances, and the regulations adopted and publications promulgated pursuant to all such foregoing laws; in each case as amended by an amendment thereto or succeeded by a successor law, statute or regulation thereto. "ENVIRONMENTAL MATTER" means any: (a) release, emission, entry or introduction into the air including the air within buildings and other natural or man-made structures above ground; (b) discharge, release or entry into water including into any river, watercourse, lake or pond (whether natural or artificial or above ground or which joins or flows into any such water outlet above ground) or reservoir, or the surface of the riverbed or of other land supporting such waters, ground waters, sewer or the sea; (c) deposit, disposal, keeping, treatment, importation, exportation, production, transportation, handling, processing, carrying, manufacture, collection, sorting or presence of any Hazardous Substance (including, in the case of waste, any substance which constitutes a scrap material or an effluent or other unwanted surplus substance arising from the application of any process or activity (including making it reusable or reclaiming substances from it) and any substance or article which is required to be disposed of as being broken, worn out, contaminated or otherwise spoiled); A-30 (d) nuisance, noise, defective premises, health and safety at work, industrial illness, industrial injury due to environmental factors, environmental health problems (including asbestosis or any other illness or injury caused by exposure to asbestos) or genetically modified organisms; (e) conservation, preservation or protection of the natural or man-made environment or any living organisms supported by the natural or man-made environment; or (f) other matter howsoever directly affecting the environment or any aspect of it. "EQUIPMENT COMPONENT" means the equipment, fixtures and other items described in EXHIBIT N-10 to the Credit Agreement. "EQUITY INTEREST" means, relative to any Person, Capital Stock and all warrants, options or other rights to acquire Capital Stock (EXCLUDING, HOWEVER, any debt security that is convertible into, or exchangeable for, Capital Stock) of such Person. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections thereto. "ERISA PLAN" means any employee benefit plan (x) maintained by the Borrower or any member of the Controlled Group, or to which the Borrower or any member of the Controlled Group contributes or is obligated to contribute, for its employees and (y) covered by Title IV of ERISA or to which Section 412 of the Code applies. "EVENT OF DEFAULT" is defined in SECTION 8.1 of the Credit Agreement. "EVENT OF LOSS" means, relative to any property or asset (tangible or intangible, real or personal), (x) any loss, destruction or damage of such property or asset, (y) any actual condemnation, seizure or taking by exercise of the power of eminent domain or otherwise of all or a part of such property or asset, or confiscation A-31 of all or a part of such property or asset or the requisition of the use of all or a part of such property or asset or (z) any settlement in lieu of ITEM (Y). "EXCESS CASH FLOW" means, for any Fiscal Quarter, the excess (if any), of (a) EBITDA for such Fiscal Quarter OVER (b) the sum (during such Fiscal Quarter) of (i) Interest Expense of the Borrower actually paid in cash by the Borrower; PLUS (ii) scheduled payments, to the extent actually made, of the principal amount of the Loans pursuant to SECTION 3.1.1 of the Credit Agreement and scheduled payments, to the extent actually made, with respect to the FF&E Financing; PLUS (iii) the amount of all federal, state and local income taxes (whether paid in cash or deferred) of the Borrower paid in cash by the Borrower or, if the Borrower is treated as a pass-through entity or is not treated as a separate entity for A-32 United States federal income tax purposes, the amount of Restricted Payments made in cash by the Borrower in accordance with CLAUSE (C) of SECTION 7.2.6 of the Credit Agreement, subject to the terms thereof; PLUS (iv) the amount of all Restricted Payments on the Borrower Series A Preferred Membership Interests made in accordance with CLAUSE (D) of SECTION 7.2.6 of the Credit Agreement; PLUS (v) Capital Expenditures actually made or reserved by the Borrower. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXISTING INDEBTEDNESS" means Indebtedness of the Borrower in existence on the Effective Date (after giving effect to payment of Indebtedness that is being discharged and retired on the Closing Date, including all Indebtedness to be Paid) and identified in ITEM (B) OF SECTION 7.2.2 ("Existing Indebtedness") of the Disclosure Schedule. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate PER ANNUM equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published A-33 for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "FEE LETTER" means, the Arrangers' Fee Letter or the Scotiabank Fee Letter. "FF&E" means all furnishings, fixtures and equipment other than the Specified Equipment and the Gaming Equipment. "FF&E FINANCING" means the incurrence of Indebtedness, the proceeds of which are utilized solely to finance or refinance the acquisitions of (or the incurrence of Capitalized Lease Liabilities by the Borrower with respect to) the Gaming Equipment and the Specified Equipment. "FF&E LEASE" means one or more leases entered into by the Borrower giving rise to synthetic lease liabilities to one or more lessors (the "FF&E LESSORS") covering a portion of the FF&E, the Specified Equipment and/or the Gaming Equipment. "FF&E LEASE DOCUMENT" means the FF&E Lease and any other document executed and delivered by the Borrower and the FF&E Lessors in connection therewith, as the same may be amended, supplemented, amended and restated, replaced or otherwise modified from time to time in accordance with the terms of the Credit Agreement. "FF&E LESSOR" is defined in the definition of "FF&E Lease". "FF&E RESERVE" is defined in SECTION 7.1.3 of the Credit Agreement. "FINAL COMPLETION" means that (r) Design/Build Final Completion shall have occurred, (s) Energy Project Completion shall have occurred, (t) Theater Renovation Completion shall have occurred, (u) all other construction work with respect to the Main Project shall have been substantially completed in accordance A-34 with the Main Project Document applicable thereto so as to allow such improvements to be utilized for their intended purposes and in substantial compliance with all Legal Requirements applicable thereto, (v) each of the Hotel Casino, the Energy Project and the Theater shall have received a permanent Main Project Certificate of Occupancy from the Building Department and the Energy Project shall have received all Permits required by the Governmental Instrumentality having or asserting jurisdiction over the operation of the Energy Project (and a copy of each such certificate shall have been delivered to the Administrative Agent), (w) a Notice of Completion shall have been posted with respect to Hotel/Casino, the Energy Project and the Theater, as required, and recorded in the Office of the County, (x) the Borrower shall have delivered to the Administrative Agent its Final Completion Certificate certifying to the extent set forth therein that all Main Project Punchlist Items have been completed, (y) the Construction Consultant shall have delivered to the Administrative Agent its Final Completion Certificate in which it verifies the statements in items (r), (s), (t), (u), (v), and (w) and certifies that it is appropriate for the Administrative Agent to rely on the Final Completion Certificate of the Borrower delivered to the Administrative Agent pursuant to ITEM (X) and (z) the Mall Project Parcel and the Music Project Parcel shall be separate legal parcels in accordance with SECTION 7.1.19 of the Credit Agreement. "FINAL COMPLETION CERTIFICATE" means a Borrower's Final Completion Certificate or a Construction Consultant's Final Completion Certificate in the form of EXHIBIT U-1 or EXHIBIT U-2 to the Credit Agreement. "FINAL COMPLETION DATE" means the date on which Final Completion occurs. "FINAL PLANS AND SPECIFICATIONS" means, relative to any particular portion of the Work or other improvement, Plans and Specifications for such portion which (x) have received final approval from all Governmental Instrumentalities required to approve such Plans and Specifications prior to completion of the Work or improvements and (y) contain sufficient specificity to permit the completion of such portion of the Work or other improvements. "FISCAL QUARTER" or "FQ" means a calendar quarter ending on the last day of March, June, September or December; references to a FQ with a following number (E.G., FQ1) refer to the number of Fiscal Quarters then to have elapsed in whole or in part since the Conversion Date. A-35 "FISCAL YEAR" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (E.G., the "1998 Fiscal Year") refer to the Fiscal Year ending on December 31 of such calendar year. "FLEET COMMITMENT" means, on any date, the Commitment Letter, as originally in effect on the Effective Date, between Fleet National Bank and Aladdin Bazaar and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms thereof. "FLUOR" means Fluor Corporation, a California corporation. "FLUOR GUARANTY" means, on any date, the Fluor Guaranty, as originally in effect on the Effective Date, by Fluor in favor of the Borrower and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "FORCE MAJEURE EVENT" means any event which is defined as "Force Majeure" in the Design/Build Contract and/or that causes a delay in the construction of the Main Project and is outside the Borrower's control but only to the extent (a) such event does not arise out of (w) the negligence, willful misconduct or inefficiencies of the Borrower, (x) late performance by the Design/Builder or the Architect of Record, (y) any cause or circumstance resulting in delays, stoppage or any other interference with the construction of the Main Project caused by the insolvency, bankruptcy or any lack of funds by the Borrower, any other Project Party, the Energy Provider, the Energy Project Guarantor and/or the Architect of Record or (z) delays, stoppage or other interference with the construction of the Main Project caused by the insolvency, bankruptcy or any lack of funds by Aladdin Bazaar, Aladdin Music and/or the construction contractors and project architects with respect to the Mall Project, the Music Project and/or the Energy Project; and (b) such event consists of an act of God (such as tornado, flood, hurricane, etc.), fires and other casualties; strikes, lockouts or other labor disturbances (except to the extent taking place at the Site only); riots, insurrections or civil commotions; embargos, shortages or unavailability of materials, supplies, labor, A-36 equipment and systems that first arise after the Effective Date, but only to the extent caused by another act, event or condition covered by this CLAUSE (B); sabotage; vandalism; the requirements of law, statutes, regulations and other Legal Requirements enacted after the Effective Date (unless the Borrower should, in the exercise of due diligence and prudent judgment, have anticipated such enactment); orders or judgments; or any similar types of events; PROVIDED, HOWEVER, that (x) the Borrower has sought to mitigate the impact of the delay, (y) any delay resulting from the foregoing shall not exceed 365 days and (z) the period during which a Force Majeure Event exists shall commence on the date that the Borrower has given the Administrative Agent written notice describing in reasonable detail the event which constitutes a Force Majeure Event and the Administrative Agent has confirmed the existence of such Force Majeure Event on the date of such notice and shall end on the date that such Force Majeure Event no longer exists, whether or not notice is given to the Administrative Agent, as determined by the Construction Consultant. "F.R.S. BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in SECTION 1.4 of the Credit Agreement. "GAI, LLC" means GAI, LLC, a Nevada limited-liability company. "GAMING EQUIPMENT" means the gaming equipment and gaming devices which are regulated gaming devices under any Nevada Gaming Law (such as slot machines, cashless wagering systems and associated equipment) together with all improvements and/or additions thereto financed by the $20,000,000 term loan facility under the GECC Commitment. "GAMING LICENSE" means any and all duly issued and valid licenses, approvals, regulations, findings of suitability and authorizations relating to gaming at the Hotel/Casino under the Nevada Gaming Laws or required by the Nevada Gaming Authorities or necessary for the operation of gaming at the Hotel/Casino. "GECC" means General Electric Capital Corporation. A-37 "GECC COMMITMENT" means the commitment of GECC to enter into a $60,000,000 synthetic lease facility and a $20,000,000 term loan facility pursuant to that certain commitment letter, dated as of January 23, 1998, between the Borrower and GECC. "GECC INTERCREDITOR AGREEMENT" means the Intercreditor Agreement to be entered into between GECC and the Administrative Agent, initially in the form approved by the Administrative Agent determined in good faith in its sole discretion, and as from time to time thereafter amended, supplemented, amended and restated or otherwise modified. "GOVERNMENTAL INSTRUMENTALITY" means any national, state or local government (whether domestic or foreign), any political subdivision thereof or any other governmental, quasi governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau or entity (including the Nevada Gaming Authorities, any zoning authority, the Federal Deposit Insurance Corporation, the Comptroller of the Currency or the F.R.S. Board, any central bank or any comparable authority) or any arbitrator with authority to bind a party at law. "GROUND LEASE" means, collectively, the Mall Project Ground Lease, the Music Project Ground Lease and the Energy Project Ground Lease. "GUARANTEED MAXIMUM PRICE" means the total costs payable by the Borrower to the Design/Builder for the Work, which costs shall not exceed $267,000,000, except as adjusted in accordance with the Credit Agreement and the Design/Build Contract. "GUARANTY DEPOSIT ACCOUNT" is defined in the Borrower Collateral Account Agreement. "HAZARDOUS SUBSTANCES" means (statutory acronyms and abbreviations having the meaning given them in the definition of "Environmental Laws") substances defined as "hazardous substances," "pollutants" or "contaminants" in Section 101 of the CERCLA; those substances defined as "hazardous waste," "hazardous materials" or "regulated substances" by the RCRA; those substances designated as a "hazardous substance" pursuant to Section 311 of the CWA; those substances defined as "hazardous materials" in Section 103 of the HMTA; those substances regulated as a hazardous chemical substance or mixture or as an imminently hazardous chemical substance or mixture pursuant to Sections 6 or 7 of the TSCA; those A-38 substances defined as "contaminants" by Section 1401 of the SDWA, if present in excess of permissible levels; those substances regulated by the Oil Pollution Act; those substances defined as a pesticide pursuant to Section 2(u) of the FIFRA; those substances defined as a source, special nuclear or by-product material by Section 11 of the AEA; those substances defined as "residual radioactive material" by Section 101 of the UMTRCA; those substances defined as "toxic materials" or "harmful physical agents" pursuant to Section 6 of the OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part 261.3; those substances defined as hazardous waste constituents in 40 C.F.R. Part 260.10, specifically including Appendices VII and VIII of Subpart D of 40 C.F.R. Part 261; those substances designated as hazardous substances in 40 C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous substances or hazardous materials in 49 C.F.R. Part 171.8; those substances regulated as hazardous materials, hazardous substances or toxic substances in 40 C.F.R. Part 1910; those substances defined as hazardous materials, hazardous substances or toxic substances in any other Environmental Laws; and those substances defined as hazardous materials, hazardous substances or toxic substances in the regulations adopted and publications promulgated pursuant to said laws, whether or not such regulations or publications are specifically referenced herein. "HEDGING LIABILITY" means, relative to any Person, any liability of such Person under any currency exchange agreement, interest rate swap agreement, interest rate cap agreement or interest rate collar agreement, or any other agreement designed to protect such Person against fluctuations in interest rates or currency exchange rates including the Rate Protection Agreement. "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "HOLDINGS" means Aladdin Gaming Holdings, LLC, a Nevada limited-liability company. "HOLDINGS COLLATERAL ACCOUNT AGREEMENT" means, on any date, the Holdings Collateral Account Agreement, as originally in effect on the Closing Date, between Holdings, the Investment Intermediary and the Disbursement Agent, for the benefit of the Discount Note Indenture Trustee, and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. A-39 "HOLDINGS COMMON MEMBERSHIP INTEREST" means a Common Share as defined in the Organizational Documents of Holdings. "HOLDINGS PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed and delivered by an Authorized Representative of Holdings pursuant to CLAUSE (A) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT E-5 to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "HOLDINGS SERIES A PREFERRED MEMBERSHIP INTERESTS" means the Series A Preferred Shares as defined in the Organizational Documents of Holdings and issued to LCNI or Sommer Enterprises pursuant thereto in consideration for any payments to the Borrower required by London Clubs, the Trust or AHL pursuant to the Keep-Well Agreement, the Completion Guaranty or the Noteholder Completion Guaranty, as the case may be, when such payments are Cash Equity Contributions (as defined in the Keep-Well Agreement). "HOLDINGS SERIES B PREFERRED MEMBERSHIP INTERESTS" means the Series B Preferred Shares as defined in the Organizational Documents of Holdings and issued to LCNI or Sommer Enterprises pursuant thereto in consideration for any payments to the Borrower required by London Clubs, the Trust or AHL pursuant to the Keep-Well Agreement when such payments are Cash Equity Contributions (as defined in the Keep-Well Agreement). "HOTEL" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit Agreement. "HOTEL/CASINO" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit Agreement. "HOTEL/CASINO COMPONENT" means the portion of the Complex described in EXHIBIT N-8 to the Credit Agreement. "HOTEL/CASINO COMPONENT FUNDING SOURCE" means the Land Equity, the London Clubs Contribution, the proceeds of the Borrower Series A Preferred Membership Interests, the Loans, the Approved Equipment Funding Commitments, the amounts payable to the Borrower by Aladdin Bazaar pursuant to Section 4.5 A-40 of the Site Work Agreement, together with any amounts payable under the Completion Guaranty from time to time. "IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or certification of any independent public accountant as to any financial statement of the Borrower, any other Aladdin Party, LCNI, London Clubs Holdings or London Clubs, any qualification or exception to such opinion or certification (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Borrower to be in default of any of its obligations under SECTION 7.2.4 of the Credit Agreement. "IMPOSITION" means any real estate tax, payment in lieu of taxes or other assessment levied, assessed or imposed against the portion of the Site owned by the Borrower, and any water rates, sewer rentals or other governmental, municipal or public dues, charges or impositions, of every nature and to whomever assessed, that may now or hereafter be levied or assessed upon the portion of the Site owned by the Borrower, or upon the rents, issues, income, proceeds or profits thereof, whether the Imposition is levied directly or indirectly against such portion of the Site owned by the Borrower or as excise taxes or income taxes. "IMPROVEMENT" means any building, structure or other improvements to be located or constructed on the Main Project Parcel. "IN BALANCE" will be deemed to exist when (x) the Unallocated Contingency Balance equals or exceeds the Required Minimum Contingency, (y) after giving effect to the requested Credit Extension, the Available Funds allocated to each Line Item Category equals or exceeds for such Line Item Category the aggregate of (1) the costs required to complete such Line Item Category, (2) the Retainage Amount to be paid to Persons who have supplied labor or materials in connection A-41 with such Line Item Category and (3) the amount required to pay interest and all other amounts due under the Credit Agreement and the Approval Equipment Funding Commitments at the maximum rate of interest set forth in the Main Project Budget through the Conversion Date and (z) the Guaranteed Maximum Price remains in effect. "INCLUDING" and "INCLUDE" means including, without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of EJUSDEM GENERIS shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "INDEBTEDNESS" means, relative to any Person, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit (or reimbursement agreements in respect thereof), whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined; (e) net liabilities of such Person under all Hedging Liabilities; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness A-42 (EXCLUDING, HOWEVER, prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (g) all Contingent Liabilities of such Person in respect of any of the foregoing. For all purposes of this Agreement, (x) the Indebtedness of any Person shall include the proportion of Indebtedness of any partnership in which such Person is a general partner or joint venturer with liability for the entire indebtedness of the joint venture and (y) the amount of any Indebtedness outstanding as of any date shall be (1) the accredited value thereof, in the case of Indebtedness issued with original issue discount and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "INDEBTEDNESS TO BE PAID" means the Indebtedness identified in ITEM 5.1.10 on the DISCLOSURE SCHEDULE. "INDEMNIFIED LIABILITY" is defined in SECTION 10.4 of the Credit Agreement. "INDEMNIFIED PARTY" is defined in SECTION 10.4 of the Credit Agreement. "INDEPENDENT CONSULTANT" means the Construction Consultant, the Insurance Consultant, the Environmental Consultant or their successors engaged pursuant to the Credit Agreement. "INDIRECT COST" means any Main Project Cost which is not a Direct Cost, including appraisal fees, the Term A Loan Commitment Fee, the Term B and Term C Loan Commitment Fee, the fees set forth in the Fee Letters, interest on the Loans prior to the Conversion Date, brokers' commissions, fees of the Independent Consultants, insurance during construction, surety bond premiums, cost of surveys, Impositions during construction, title examination and title insurance premiums, recording expenses in connection with the Deed of Trust and other Security Documents and fees and disbursements of the attorneys for the Administrative Agent. A-43 "INSTRUMENT" means any contract, agreement, indenture, mortgage, deed of trust, document or writing (whether by formal agreement, letter or otherwise) under which any obligation is evidenced, assumed or undertaken, or any Lien (or right or interest therein) is granted or perfected. "INSURANCE CONSULTANT" means Sedgwick of Tennessee, Inc. or its successor appointed pursuant to SECTION 9.8 of the Credit Agreement. "INSURANCE REQUIREMENT" means any provisions of any insurance policy covering or applicable to the Borrower, the Main Project or any portion thereof, all requirements of the issuer of any such policy and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any body exercising similar functions) applicable to or affecting the Main Project or any portion thereof, any use or condition thereof or the Borrower. "INTEREST COVERAGE RATIO" means, at the close of any Fiscal Quarter, the ratio computed for the period consisting of such Fiscal Quarter (or such shorter portion of any Fiscal Quarter after the occurrence therein of the Conversion Date and each of the three immediately prior Fiscal Quarters (or such lesser number of Fiscal Quarters to have closed since the Conversion Date) of: (a) EBITDA for such period TO (b) Interest Expense of the Borrower for such period; PROVIDED, HOWEVER, that in computing the Interest Coverage Ratio for any such period ending on or prior to the first anniversary of the Conversion Date, the amount determined pursuant to CLAUSE (B) shall equal the product of (x) the Interest Expense for such period MULTIPLIED BY (y) a fraction, the numerator of which is equal to 365 and the denominator of which is equal to the number of days that have elapsed in such period. "INTEREST EXPENSE" means, for any period, the aggregate cash interest expense (net of cash interest income) of the Borrower (including, to the extent the Borrower has any Contingent Liability in respect of such interest expense, the interest expense of other Persons) for such period, as determined in accordance with A-44 GAAP, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense, but EXCLUDING, HOWEVER, deferred financing costs and other non-cash interest expense. "INTEREST PAYMENT ACCOUNT" means the account established by the Borrower with the Disbursement Agent pursuant to the Borrower Collateral Account Agreement into which the proceeds of the Loans shall be deposited by the Administrative Agent from time to time. "INTEREST PERIOD" means, relative to any LIBO Rate Loan, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to SECTION 2.3 or SECTION 2.4 of the Credit Agreement and shall end on (but exclude) the day which numerically corresponds to such date one, two, three, six or, if then generally available from all Lenders, twelve months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in its relevant notice pursuant to SECTION 2.3 or SECTION 2.4 of the Credit Agreement; PROVIDED, HOWEVER, that (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates, (1) in the case of Term A Loans made or maintained as LIBO Rate Loans, occurring on more than eight different dates, (2) in the case of Term B Loans made or maintained as LIBO Rate Loans, occurring on more than four different dates, and (3) in the case of Term C Loans made or main- A-45 tained as LIBO Rate Loans, occurring on more than four different dates; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (c) no Interest Period for any Loan may end later than the Stated Maturity Date for such Loan. "INVESTMENT" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (including Affiliates) (EXCLUDING, HOWEVER, commission, travel, petty cash and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person incurred in connection with loans or advances described in CLAUSE (A); (c) any ownership or similar interest held by such Person in any other Person; and (d) any other item that is or would be classified as an investment on a balance sheet of such Person prepared in accordance with GAAP. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment. If Holdings or any Subsidiary of Holdings sells, assigns, transfers or otherwise disposes of any Equity Interests of any direct or indirect A-46 Subsidiary of Holdings such that, after giving effect thereto, such Person is no longer a Subsidiary of Holdings, Holdings or such Subsidiary shall be deemed to have made an Investment on the date of such sale, assignment, transfer or other disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold, assigned, transferred or otherwise disposed of in an amount determined as provided in CLAUSE (D) of SECTION 7.2.6 of the Credit Agreement. "ISSUANCE FEE OR EXPENSE" means any fee or expense incurred by the Borrower in connection with the raising of debt or equity to finance the Main Project which is paid on or before the Closing Date as more fully set forth on SCHEDULE IX to the Credit Agreement. "ISSUER" means Scotiabank in its capacity as issuer of the Letters of Credit. At the request of Scotiabank, another Lender or an Affiliate of Scotiabank may issue one or more Letters of Credit under the Credit Agreement. "KEEP-WELL AGREEMENT" means, on any date, the Keep-Well Agreement, as originally in effect on the Closing Date, by the Sponsors and ABH in favor of the Lenders substantially in the form of EXHIBIT D to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "KNOWLEDGE" of any Obligor means, at any time and relative to any matter, knowledge which the Authorized Representatives of such Obligor would have after inquiring of the current employees of such Obligor and its Subsidiaries who would reasonably be expected to have knowledge regarding such matter, whether or not such Authorized Representatives actually made inquiry of such employees. "LAND EQUITY" is defined in CLAUSE (A) of the FIFTH RECITAL of the Credit Agreement. "LCNI" means London Clubs Nevada Inc., a Nevada corporation. "LCNI PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed and delivered by an Authorized Representative of LCNI pursuant to CLAUSE (B) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT E-6 to the Credit Agreement and as A-47 thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "LEGAL REQUIREMENT" means, relative to any Person or property, all laws (including Nevada Gaming Laws, if applicable), statutes, codes, regulations, rules, acts, ordinances, permits, licenses, authorizations, directions and requirements of all Governmental Instrumentalities, departments, commissions, boards, courts, authorities, agencies, officials and officers, and any deed restrictions or other requirements of record, applicable to such Person or such property, or any portion thereof or interest therein or any use or condition of such property or any portion thereof or interest therein (including those relating to zoning, planning, subdivision, building, safety, health, use, environmental quality and other similar matters). "LENDER" is defined in the PREAMBLE of the Credit Agreement and, in addition, shall include any commercial bank or other financial institution that becomes a Lender pursuant to SECTION 10.11.1 of the Credit Agreement. "LENDER ASSIGNMENT AGREEMENT" means a lender assignment agreement substantially in the form of EXHIBIT H to the Credit Agreement. "LENDER DEFAULT" means (x) the refusal (which has not been retracted) of a Lender to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under SECTION 2.6.1 of the Credit Agreement or (y) a Lender having notified the Administrative Agent or the Borrower that it does not intend to comply with its obligations under SECTION 2.3 or under SECTION 2.6.1 of the Credit Agreement, in either case, as a result of the appointment of a receiver or conservator with respect to such Lender at the direction or request of any regulatory agency or authority. "LENDER'S ENVIRONMENTAL LIABILITY" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and consultants' and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against any Lender or any of such Lender's parent and subsidiary corpora- A-48 tions, and their Affiliates, shareholders, directors, officers, employees, and agents in connection with or arising from: (a) any Hazardous Substances on, in, under or affecting all or any portion of any property of the Borrower, any of the Borrower's Subsidiaries or Aladdin Bazaar, the groundwater thereunder, or any surrounding areas thereof to the extent caused by Releases from the Borrower, any of the Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar or any of their respective properties; (b) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in SECTION 6.12 of the Credit Agreement; (c) any violation or claim of violation by the Borrower, any of the Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar of any Environmental Laws; or (d) the imposition of any Lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Substances by the Borrower, any of the Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar, or in connection with any property owned or formerly owned by the Borrower, any of the Borrower's Subsidiaries, any other Aladdin Party or Aladdin Bazaar, as the case may be. "LENDER'S TAX" is defined in SECTION 4.6 of the Credit Agreement. "LETTER OF CREDIT" is defined in SECTION 2.1.2 of the Credit Agreement. "LETTER OF CREDIT COMMITMENT" means, (x) relative to an Issuer, such Issuer's obligation to issue Letters of Credit pursuant to SECTION 2.1.2 of the Credit Agreement and (y) relative to each Lender (other than the Issuer) that has a Term A Loan Commitment, the obligation of such Lender to participate in Letters of Credit pursuant to SECTION 2.6.1 of the Credit Agreement. A-49 "LETTER OF CREDIT COMMITMENT AMOUNT" means, on any date, a maximum amount of $20,000,000, as such amount may be permanently reduced from time to time pursuant to SECTION 2.2 of the Credit Agreement. "LETTER OF CREDIT DISBURSEMENT" is defined in SECTION 2.6.2 of the Credit Agreement. "LETTER OF CREDIT DISBURSEMENT DATE" is defined in SECTION 2.6.2 of the Credit Agreement. "LETTER OF CREDIT ISSUANCE REQUEST" means a Letter of Credit request and certificate duly executed by an Authorized Representative of the Borrower substantially in the form of EXHIBIT L-2 to the Credit Agreement. "LETTER OF CREDIT OUTSTANDINGS" means, on any date, an amount equal to the sum of (a) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, PLUS (b) the then aggregate amount of all unpaid and outstanding Letter of Credit Reimbursement Obligations. "LETTER OF CREDIT REIMBURSEMENT OBLIGATION" is defined in SECTION 2.6.3 of the Credit Agreement. "LETTER OF CREDIT STATED EXPIRY DATE" is defined in SECTION 2.6 of the Credit Agreement. "LIBO RATE" means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rate PER ANNUM at which Dollar deposits in immediately available funds are offered to the Administrative Agent in the London, England interbank market as at or about 11:00 a.m. London, England time two Business Days prior to the beginning of such Interest A-50 Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of the LIBO Rate Loans and for a period approximately equal to such Interest Period. "LIBO RATE LOAN" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula: LIBO Rate LIBO Rate = ------------------------------- (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect, and the applicable rates furnished to and received by the Administrative Agent from the Lenders, two Business Days before the first day of such Interest Period. "LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of or including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. "LIEN" means, relative to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest therein). A-51 "LINE ITEM" means each of the individual line items set forth in the Main Project Budget. "LINE ITEM CATEGORY" means each of the following line item categories of the Main Project Budget: (a) Construction Costs; (b) Indirect Costs; (c) Indirect Fees; (d) General FF&E; (e) Gaming Equipment; (f) Owner FF&E; (g) Theming; (h) Project Contingency; (i) Mall Project Reimbursement; (j) Capitalized Interest; (k) Fees/Other Expenses; (l) Retirement of Existing Debt; (m) Retirement of Partnership Debt; (n) Pre-Opening Expenses; (o) Working Capital; A-52 (p) Investment in Aladdin Music; and (i) Land/Infrastructure Contract. "LOAN" means a Term A Loan, a Term B Loan or a Term C Loan of any type. "LOAN DOCUMENT" means, collectively, the Credit Agreement, the Notes, the Letters of Credit, each Pledge Agreement, each Rate Protection Agreement, each Borrowing Request, each Letter of Credit Issuance Request, the Security Agreement, the Keep-Well Agreement, the Completion Guaranty, the GECC Intercreditor Agreement, the Trademark Security Agreement, the Deed of Trust, the Disbursement Agreement, the Mall Project Completion Assignment, the Fee Letters, the Environmental Indemnity, the Assignment of Contracts, the Borrower Collateral Account Agreement, the Holding Collateral Account Agreement, the Servicing and Collateral Account Agreement, the Design/Builder Consent and Acknowledgment and any other agreement, certificate, document or Instrument delivered in connection with the Credit Agreement and such other agreements, whether or not specifically mentioned herein or therein. "LONDON CLUBS" means London Clubs International, plc, a company registered in England and Wales. "LONDON CLUBS CONTRIBUTION" means the $50,000,000 cash contribution by London Clubs indirectly through London Clubs Holding and LCNI in consideration for Common Membership Interests in Holdings. "LONDON CLUBS HOLDINGS" means London Clubs Holdings, Ltd., a company registered in England and Wales. "LONDON CLUBS PARTIES" means, collectively, London Clubs and LCNI. "LONDON CLUBS PURCHASE AGREEMENT" means the Amended and Restated Purchase Agreement, dated the Effective Date, among London Clubs, LCNI, AHL, Sommer Enterprises, the Trust, Holdings and the Borrower as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, A-53 amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "LOSS PROCEEDS" is defined in SECTION 7.1.20 of the Credit Agreement. "LOSS PROCEEDS ACCOUNT" is defined in the Borrower Collateral Account Agreement. "MAIN PROJECT" is defined in CLAUSE (A) of the FOURTH RECITAL of the Credit Agreement. "MAIN PROJECT BUDGET" means a budget in substantially the form of EXHIBIT X-2 to the Credit Agreement (as amended from time to time in accordance with SECTION 7.2.18 of the Credit Agreement) which shall include (w) a breakdown of all Direct Costs and Indirect Costs by Line Item Categories, together with a schedule of costs by trades and Main Project Costs (including Main Project Costs incurred prior to, as well as after, the Effective Date, the Pre-Opening Expenses, the Issuance Fees or Expenses, Debt Service and initial working capital required to operate the Main Project on and after the Opening Date) which (1) are to be paid from the Hotel/Casino Component Funding Sources and (2) are to be constructed and paid for by the Borrower pursuant to the Site Work Agreement for improvements to the Mall Project, (x) a schedule setting forth the FF&E which is to be purchased from the proceeds of the Loans (which FF&E shall not include any Gaming Equipment and/or Specified Equipment), (y) a drawdown schedule for Advances necessary to achieve Final Completion and such other information relative to such Main Project Costs and the funding thereof as the Administrative Agent may reasonably require and (z) a balanced statement of sources and uses of proceeds (and any other funds necessary to complete the Main Project), broken down by Construction Component and Line Item. The Main Project Costs shall not exceed $724,000,000. "MAIN PROJECT BUDGET/SCHEDULE AMENDMENT CERTIFICATE" means a Main Project Budget/Schedule Amendment Certificate substantially in the form of EXHIBIT X-3 to the Credit Agreement. "MAIN PROJECT CERTIFICATE OF OCCUPANCY" means a permanent or temporary certificate of occupancy, in either case, for the portion of the Main Project specified in such certificate of occupancy issued by the Building Department pursuant to applicable Legal Requirements which permanent or temporary certificate of occupancy shall permit such portion of the Main Project to be used for its intended A-54 purposes, shall be in full force and effect and, in the case of a temporary certificate of occupancy, if such temporary certificate of occupancy shall provide for an expiration date, any Main Project Punchlist Items which must be completed in order for such temporary certificate of occupancy to be renewed or extended shall be completed no later than 15 days prior to the applicable expiration date. "MAIN PROJECT COSTS" means all costs incurred or to be incurred in accordance with the Main Project Budget in connection with the development, design, engineering, procurement, installation, construction, Final Completion and opening of the Main Project, including: (a) all costs incurred under the Design/Build Contract and the Contracts; (b) interest accruing under the Credit Agreement, the other Loan Documents and the Approved Equipment Funding Commitments prior to the Conversion Date; (c) reasonable financing and closing costs related to the Main Project until the Conversion Date, including insurance costs (including, with respect to directors and officers insurance, costs relating to such insurance extending beyond the Conversion Date), guarantee fees, legal fees and costs and expenses, financial advisory fees and expenses, technical fees and expenses (including fees and expenses of the Construction Consultant, the Environmental Consultant and the Insurance Consultant), commitment fees, management fees, agency fees (including fees and expenses of the Disbursement Agent and the Administrative Agent), interest, taxes (including value-added tax and Restricted Payments made in accordance with CLAUSE (C) of SECTION 7.2.6 of the Credit Agreement) and other out-of-pocket expenses payable by the Borrower under all documents related to the financing and construction of the Main Project until the Conversion Date; (d) the costs of acquiring Permits for the Main Project prior to the Final Completion Date (including Permits required for the operation of the Main Project subsequent to the Final Completion Date); A-55 (e) costs incurred in settling insurance claims in connection with Events of Loss and collecting Loss Proceeds; (f) amounts due under the Energy Project Service Agreement prior to the Conversion Date; and (g) without duplication, working capital costs. "MAIN PROJECT DOCUMENT" means, collectively, the Design/Build Contract, the Fluor Guaranty, the Contracts, the Energy Project Service Agreement, the Energy Project Ground Lease, the Mall Project Ground Lease, the Music Project Ground Lease, the Theater Lease (if entered into), the Reciprocal Easement Agreement, the Common Parking Area Use Agreement, the Site Work Agreement, the Project Management Agreement, the Development Agreement or any other document or agreement entered into on, prior to or after the Effective Date, relating to the development, construction, maintenance or operation of the Main Project (other than the Loan Documents and the Discount Note Trust Indenture), as the same may be amended from time to time in accordance with the terms and conditions of the Credit Agreement and thereof. "MAIN PROJECT EASEMENT" means any easement appurtenant, easement in gross, license agreement or other right running for the benefit of the Borrower or appurtenant to the Main Project Parcel, including those easements and licenses described in the Reciprocal Easement Agreement and each Title Policy. "MAIN PROJECT INTENDED USE" means each intended use of the Main Project, as more particularly set forth on EXHIBIT O to the Credit Agreement. "MAIN PROJECT PARCEL" means the portion of the Site described on EXHIBIT N-3 to the Credit Agreement together with the Main Project Easements. "MAIN PROJECT PUNCHLIST COMPLETION CERTIFICATE" means the Main Project Punchlist Completion Certificate substantially in the form of EXHIBIT V to the Credit Agreement. "MAIN PROJECT PUNCHLIST ITEM" means any minor or insubstantial detail of construction or mechanical adjustment, the non-completion of which, when all such A-56 items are taken together, will not interfere in any material respect with the use or occupancy of any portion of the Main Project for its intended purposes or the ability of the owner of the Main Project or the Energy Project Provider, as applicable, to perform work that is necessary or desirable to prepare such portion of the Main Project for such use or occupancy; PROVIDED, HOWEVER, that, in all events, "MAIN PROJECT PUNCHLIST ITEMS" shall include the items set forth in the punchlist to be delivered by the Borrower in connection with Substantial Completion (as defined in the Design/Build Contract) and all items that are listed on the "punchlists" furnished by the Building Department, the Nevada Department of Transportation or the Clark County Department of Public Works in connection with, or after, the issuance of a temporary Main Project Certificate of Occupancy for the portion of the Main Project covered thereby as those that must be completed in order for the Building Department to issue a permanent Main Project Certificate of Occupancy. "MAIN PROJECT SECURITY" means all real and personal property which is subject or is intended to become subject to the security interests or liens granted by any of the Operative Documents. "MAJOR CONTRACTOR" means a Contractor who is party to a Material Main Project Document. "MALL PROJECT" is defined in CLAUSE (B) of the FOURTH RECITAL of the Credit Agreement. "MALL PROJECT COMPLETION ASSIGNMENT" means, on any date, the Mall Project Completion Assignment, as originally in effect on the Closing Date, from Holdings in favor of the Lenders substantially in the form of EXHIBIT G to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "MALL PROJECT EASEMENT" means any easement appurtenant, easement in gross, license agreement or other right running for the benefit of Aladdin Bazaar or appurtenant to the Mall Project Parcel, including those certain easements and licenses described in the Reciprocal Easement Agreement and each Title Policy. "MALL PROJECT GROUND LEASE" means, on any date, the Lease, as originally in effect on the Effective Date, between the Borrower and Aladdin Bazaar and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. A-57 "MALL PROJECT PARCEL" means the portion of the Site described on EXHIBIT N-4 to the Credit Agreement, together with the Mall Project Easements. "MALL PROJECT PARCEL CREATION DATE" means the date on which the Mall Project Parcel is created in accordance with CLAUSE (B) of SECTION 7.1.19 of the Credit Agreement. "MANDATORY PREPAYMENT" is defined in CLAUSE (C) of SECTION 3.1.1 of the Credit Agreement. "MATERIAL ADVERSE EFFECT" means (x) a material adverse effect on the financial condition, business, property, prospects of the Borrower or on its ability to perform in all material respects its obligations under any Operative Document to which it is a party, (y) a material adverse effect on the financial condition, business, property, prospects and ability of any other Project Party to perform in all material respects its obligations under any Operative Document to which it is a party or (z) a material impairment of the validity or enforceability of, or a material impairment of the rights, remedies or benefits available to the Administrative Agent, the Issuer or the Lenders under the Credit Agreement or any other Operative Document; PROVIDED, HOWEVER, that whenever the term "Material Adverse Effect" is used in a representation or warranty made by the Borrower, such representation or warranty as it relates to CLAUSE (Y) above shall be deemed to have been made to the Borrower's Knowledge. "MATERIAL MAIN PROJECT DOCUMENT" means the Mall Project Ground Lease, the Music Project Ground Lease, the Reciprocal Easement Agreement, the Site Work Agreement, the Common Parking Area Use Agreement, the Energy Project Ground Lease, the Energy Project Service Agreement, the Theater Lease, the Design/Build Contract, the Fluor Guaranty, the Project Management Agreement, the Development Agreement any other material agreement, certificate, document or Instrument delivered in connection with or by the Borrower and any other Person to any Material Main Project document and such other agreements, whether or not specifically mentioned herein or therein and, without duplication, any Main Project Document with a total contract amount in excess of $2,500,000. "MEMBERSHIP INTEREST" means, relative to any Person which is a limited liability company, a membership interest or a limited liability company interest, as the case may be, of such Person. "MERRILL LYNCH" is defined in the PREAMBLE of the Credit Agreement. A-58 "MINIMUM FIXED CHARGE COVERAGE RATIO" means, as of the close of any Fiscal Quarter, commencing with the close of the Fiscal Quarter in which the Conversion Date occurs, the ratio computed for the period consisting of such Fiscal Quarter (or such shorter period of any Fiscal Quarter after the occurrence therein of the Conversion Date and each of the three immediately prior Fiscal Quarters (or such lesser number of Fiscal Quarters to have closed since the Conversion Date) of: (a) EBITDA (for all such Fiscal Quarters or such shorter period, as the case may be and determined for any period ending on or prior to the first anniversary of the Conversion Date, consistently with the proviso to the definition of "EBITDA"); TO (b) the sum (for all such Fiscal Quarters or such shorter period, as the case may be) of (i) Interest Expense; PLUS (ii) scheduled principal repayments of the Loans pursuant to CLAUSES (B) and (C) of SECTION 3.1.1 of the Credit Agreement after giving effect to any reductions in such scheduled principal repayments attributable to any optional or mandatory prepayments of the Loans and scheduled payments made with respect to the FF&E Financing; PLUS (iii) the amount of all federal, state and local income taxes (whether paid in cash or deferred) of the Borrower paid by the Borrower or, if the Borrower is treated as a pass-through entity or is not treated as a separate entity for United States federal income tax purposes, the amount of Restricted Payments made by the Borrower in accordance with CLAUSE (C) of SECTION 7.2.6 of the Credit Agreement, subject to the terms thereof, in each case, in cash during such Fiscal Quarters; PLUS A-59 (iv) Restricted Payments of the types described in CLAUSE (D) of SECTION 7.2.6 of the Credit Agreement made in cash during such Fiscal Quarters; PLUS (v) Capital Expenditures of the Borrower actually made or reserved during all such Fiscal Quarters pursuant to SECTION 7.2.7 of the Credit Agreement; PROVIDED, HOWEVER, that in computing the Minimum Fixed Charge Coverage Ratio for any such period ending on or prior to the first anniversary of the Conversion Date, the amount determined pursuant to CLAUSE (B) shall equal the product of (x) the sum of the amounts determined pursuant to CLAUSE (B) for such period MULTIPLIED BY (y) a fraction, the numerator of which is equal to 365 and the denominator of which is equal to the number of days that have elapsed in such period. "MOODY'S" means Moody's Investors Service, Inc., a Delaware corporation, or any successor thereto. "MUSIC INVESTMENT PREPAYMENT" is defined in CLAUSE (D) of SECTION 3.1.1 of the Credit Agreement. "MUSIC PROJECT" is defined in CLAUSE (C) of the FOURTH RECITAL of the Credit Agreement. "MUSIC PROJECT EASEMENT" means any easement appurtenant, easement in gross, license agreement or other right running for the benefit of Aladdin Music or appurtenant to the Music Project Parcel, including those certain easements and licenses described in the Reciprocal Easement Agreement and each Title Policy. "MUSIC PROJECT GROUND LEASE" means, on any date, the Lease, as originally in effect on the Effective Date, between the Borrower and Aladdin Music and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "MUSIC PROJECT PARCEL" means the portion of the Site described on EXHIBIT N-5 to the Credit Agreement, together with the Music Project Easements. A-60 "MUSIC PROJECT PARCEL CREATION DATE" means the date on which the Music Project Parcel is created in accordance with CLAUSE (C) of SECTION 7.1.19 of the Credit Agreement. "NET DISTRIBUTION AMOUNT" means, for any period, the amount of fees paid to AMH under any keep-well agreement relating to the Music Project and then paid as distributions in cash to the Borrower by AMH to the extent permitted thereunder. "NET INCOME" means, for any period, the aggregate of all amounts (including extraordinary losses) which, in accordance with GAAP, would be included in determining net income on the financial statements of the Borrower for such period (EXCLUDING, HOWEVER, (x) all amounts in respect of any extraordinary gains and any non-cash income and (y) net income of any Subsidiary, other than any Net Distribution Amount paid in cash to the Borrower during such period). "NET WORTH" means the net worth of the Borrower determined in accordance with GAAP. "NEVADA GAMING AUTHORITY" means the Nevada Gaming Commission, the Nevada State Gaming Control Board or the Clark County Liquor and Gaming Licensing Board. "NEVADA GAMING LAW" means the Nevada Gaming Control Act, as codified in Chapter 463 of the NRS, as amended from time to time, and the regulations of the Nevada Gaming Commission promulgated thereunder, as amended from time to time, and Clark County Code Sections 8.04.010 to 8.04.310 and 8.20.010 to 8.20.580, as amended from time to time. "NON-DEFAULTING LENDER" means and includes each Lender other than a "Defaulting Lender". "NOTE" means a Term A Note, a Term B Note, a Term C Note or a Registered Note. "NOTE CONSTRUCTION DISBURSEMENT ACCOUNT" is defined in the Holdings Collateral Account Agreement. "NOTEHOLDER COMPLETION GUARANTY" means, on any date, the Noteholder Completion Guaranty, as originally in effect on the Effective Date, by the Comple- A-61 tion Guarantors in favor of the Discount Note Indenture Trustee (for the benefit of the Discount Noteholders) as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "NRS" means Nevada Revised Statutes. "OBLIGATIONS" means (x) all loans, advances, debts, liabilities and obligations, howsoever arising, owed by the Borrower under the Credit Agreement to any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, pursuant to the terms of the Disbursement Agreement, any of the Loan Documents or any of the other Operative Documents, including all interest, fees, charges, expenses, attorneys' fees, consultants' fees and accountants' fees chargeable to the Borrower in connection with such Person's dealings with the Borrower and payable by the Borrower under the Credit Agreement or thereunder; (y) any and all sums advanced by the Lenders in order to preserve the Main Project Security or preserve any Secured Parties' security interest in the Main Project Security, including all protective advances; and (z) in the event of any proceeding for the collection or enforcement of, or any "working out" of, the Obligations after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Main Project Security, or of any exercise by any Secured Party of its rights under the Operative Documents, together with reasonable attorneys' fees and court costs. "OBLIGOR" means, as the context may require, the Borrower, each other Aladdin Party, LCNI, London Clubs Holdings, London Clubs, each Sponsor, each Completion Guarantor and each other Person (other than the Agents, the Issuer or any Lender) to the extent such Person is obligated under the Credit Agreement or any other Operative Document. "ONGOING INVESTMENT" is any Investment listed in ITEM 7.2.5(A) on the Disclosure Schedule. "ON SCHEDULE CERTIFICATE" means a certificate in the form of EXHIBIT AA to the Credit Agreement. A-62 "OPENING CONDITION" means, collectively, the following: (a) Substantial Completion shall have occurred; (b) the Hotel/Casino shall have received a Main Project Certificate of Occupancy from the Building Department (and a copy of such certificate shall have been delivered to the Administrative Agent); (c) each remaining Main Project Punchlist Item with respect to the Hotel/Casino and the completion thereof shall be such that it will not interfere with or disrupt the operation of the Main Project for its intended purposes or detract from the aesthetic appearance of the Main Project other than to a DE MINIMIS extent, as reasonably determined by the Owner Representative and confirmed by the Construction Consultant; (d) the failure to complete each remaining Main Project Punchlist Item would not interfere with or disrupt the operation of the Main Project for its intended purposes or detract from the aesthetic appearance of the Main Project other than to a DE MINIMIS extent, as reasonably determined by the Owner Representative and confirmed by the Construction Consultant; and (e) the Borrower shall have available a fully trained staff to operate the Hotel/Casino in accordance with first-class industry standards for a hotel/casino operation of similar size and location. "OPENING DATE" means the date on which all of the Opening Conditions are satisfied. "OPERATING" means the first time that (t) all Gaming Licenses have been granted and are not then revoked or suspended, (u) all Liens (other than Permitted Liens) related to the development, construction, and equipping of the Main Project have been paid or, if payment is not yet due or if such payment is contested in good faith by Borrower, either (1) sufficient funds remain in the Construction Note Disbursement Account to discharge such Liens or (2) such Liens have been bonded, (v) the Construction Consultant, the Design/Builder and the Architect of Record shall have delivered one or more certificates to the Administrative Agent each certifying that the Main Project is Complete in all material respects in accordance with the Plans and Specifications and all applicable Legal Requirements, (w) the Main Project is in a condition (including installation of FF&E) to receive invitees in the ordinary A-63 course of business, (x) gaming and other operations in accordance with applicable Legal Requirements are open to the general public and are being conducted at the Hotel/Casino, (y) a Main Project Certificate of Occupancy has been issued for the Main Project by the Building Department and (z) a notice of completion of the Main Project has been duly recorded. "OPERATING COSTS" means all actual cash costs incurred by the Borrower and related to the operation of the Main Project or any portion thereof in the ordinary course of business, including costs incurred for labor, consumables, utility services and all other operation-related costs; PROVIDED, HOWEVER, that (x) Operating Costs shall not include non-cash charges (including depreciation and amortization) and (y) Debt Service shall constitute Operating Costs from and after the Conversion Date but not prior to such date. "OPERATIVE DOCUMENT" means any Loan Document or Main Project Document. "ORGANIZATIONAL DOCUMENT" means, relative to any Obligor, as applicable, its certificate or articles of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation, articles of organization, operating agreement, limited liability company or operating agreement and all shareholder agreements, voting trusts and similar arrangements applicable to any of such Obligor's partnership interests, limited liability company interests or authorized shares of capital stock. "OUTSIDE COMPLETION DEADLINE" means the date which is 28 months following the Effective Date, time being of the essence; PROVIDED, HOWEVER, if a Force Majeure Event occurs, then the Borrower shall be permitted to extend the Completion Date for up to one year subject to the satisfaction by the Borrower of the conditions to such extension as set forth in the definition of "Force Majeure Event". "OWNER REPRESENTATIVE" means Tishman Construction Corporation of Nevada. "PARTICIPANT" is defined in SECTION 10.11.2 of the Credit Agreement. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. A-64 "PENSION PLAN" means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (EXCLUDING, HOWEVER, a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "PERCENTAGE" means, relative to any Lender, the applicable percentage relating to Term A Loans, Term B Loans or Term C Loans, as the case may be, as set forth opposite its signature to the Credit Agreement under the applicable column heading or as set forth in a Lender Assignment Agreement under the applicable column heading, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to SECTION 10.11.1 of the Credit Agreement. A Lender shall not have any Commitment to make Term A Loans, Term B Loans or Term C Loans, as the case may be, if its percentage under the applicable column heading is zero percent (0%). "PERMIT" means any material building, construction, land use, environmental or other permit, license, franchise, approval, consent and authorization (including central bank and planning board approvals from applicable Governmental Instrumentalities and approvals required under the Nevada Gaming Law) required for or in connection with the construction, ownership, use, occupation and operation of the Main Project and the transactions provided for in the Credit Agreement and the other Operative Documents. "PERMITTED ENCUMBRANCE" means any encumbrance against all or a portion of the Site as set forth in EXHIBIT BB to the Credit Agreement. "PERMITTED EXCEPTION" means any exception to title to all or a portion of the Site as set forth in EXHIBIT CC to the Credit Agreement. "PERMITTED LIEN" means any of the following types of Liens (EXCLUDING, HOWEVER, any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim and any such Lien expressly prohibited by A-65 any applicable terms of any of the Operative Documents or the Discount Note Indenture): (a) Liens in favor of the Borrower; (b) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business or in the construction of the Main Project; PROVIDED, HOWEVER, that the Borrower has obtained a title insurance endorsement insuring against losses arising therewith or, if such Lien arises after completion of the Main Project, the Borrower has bonded such Lien within a reasonable time after becoming aware of the existence of such Lien; (c) Liens securing the Obligations under the Operative Documents; (d) Liens existing on the Effective Date and set forth in ITEM 7.2.3 of the DISCLOSURE SCHEDULE; (e) (x) Liens for Impositions or (y) statutory Liens of landlords, and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business or in the construction of the Main Project, in the case of each of ITEMS (X) and (Y), with respect to amounts that either (1) are not yet delinquent or (2) are being diligently contested in good faith by appropriate proceedings, PROVIDED, however, that, in each case, any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (f) easements, rights-of-way, avigational servitude, restrictions, minor defects or irregularities in title and other similar charges or encumbrances which do not interfere in any material respect with the ordinary conduct of business of the Borrower; (g) Liens created by the Reciprocal Easement Agreement; (h) Liens created by the Disbursement Agreement; (i) licenses of patents, trademarks and other intellectual property rights granted by the Borrower in the ordinary course of business; A-66 (j) any judgment attachment or judgment Lien not constituting an Event of Default; (k) subject to the terms of the GECC Intercreditor Agreement, Liens to secure all obligations under the FF&E Financing; PROVIDED, HOWEVER, that (x) the principal amount of such Indebtedness does not exceed the cost (including sales and excise taxes, installation and delivery charges and other direct costs of, and other direct expenses paid or charged in connection with, such purchase) of the FF&E purchased or leased with the proceeds thereof and (y) the aggregate principal amount of such Indebtedness including any Permitted Refinancing Indebtedness incurred to refinance or replace any Indebtedness secured by such Lien does not exceed $80,000,000 (including obligations characterized as operating leases or other off-balance sheet financing arrangements) outstanding at any time; (l) Liens securing obligations arising under the Contribution Agreement and between the parties thereto so long as such Liens cannot be enforced by the holder thereof until all Obligations have been paid in cash in full, all Letters of Credit have been terminated or expired and all Commitments have terminated PROVIDED, HOWEVER, that to the extent any distributions on any relevant Capital Stock or Membership Interests, as the case may be, are permitted to be made to the shareholders or members, as the case may be, in respect thereof under the Loan Documents, such holder shall be permitted to enforce such Liens (including by causing the redirection of any such distribution to such holder); (m) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (EXCLUDING, HOWEVER, obligations for the payment of borrowed money), incurred in the ordinary course of business so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Main Project Security on account thereof, (x) for amounts not yet overdue or (y) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by generally A-67 accepted accounting principles shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Main Project Security, such contest proceedings conclusively operate to stay the sale of any portion of the Main Project Security on account of such Lien; (n) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time due and payable or which is being contested in good faith by appropriate governmental proceedings promptly instituted and diligently contested, so long as (x) such reserve or other appropriate provision, if any, as shall be required in conformity with generally accepted accounting principles shall have been made therefor through an allocation in the Trade Detail Report and (y) in case of any charge or claim which has or may become a Lien against any of the Main Project Security, such contest proceedings conclusively operate to stay the sale of any portion of the Main Project Security to satisfy such charge or claim; (o) Liens created by the Common Parking Area Use Agreement; and (p) Liens created pursuant to Permitted Refinancing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien and is permitted under SECTION 7.2.2 of the Credit Agreement and which has been incurred in accordance with such Section; PROVIDED, HOWEVER, that such Liens do not extend to cover any property or assets of the Borrower not already securing the Indebtedness so refinanced. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Borrower issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Borrower; PROVIDED, HOWEVER, that (u) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount plus accrued interest on the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (PLUS the amount of reasonable expenses incurred in connection therewith), (v) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, (w) such Indebtedness is incurred by the Borrower as the Obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, (x) the security, if any, for the Permitted Refinancing Indebtedness shall be the same as that for the Indebtedness A-68 being refinanced (except to the extent that less security is granted to holders of such refinancing Indebtedness), (y) the holders of the Permitted Refinancing Indebtedness are not afforded covenants, defaults, rights or remedies more burdensome to the obligor or obligors than those contained in the Indebtedness being refinanced and (z) the Permitted Refinancing Indebtedness is subordinated to the same degree, if any, as the Indebtedness being refinanced. "PERSON" means any natural person, corporation, limited liability company, partnership, joint venture, joint stock company, firm, association, trust or unincorporated organization, government, governmental agency, Governmental Instrumentality, court or any other legal entity, whether acting in an individual, fiduciary or other capacity. "PLAN" means any Pension Plan or Welfare Plan. "PLANET HOLLYWOOD" means Planet Hollywood International, Inc. "PLANS AND SPECIFICATIONS" means all plans, specifications, design documents, schematic drawings and related items for the design, architecture and construction of the Main Project that are listed on SCHEDULE VII to the Credit Agreement, as the same may be (x) finalized in a manner that reflects a natural evolution of their status on the date of the Credit Agreement and in a manner consistent with the standards set forth in SECTION 7.2.17 of the Credit Agreement and (y) amended in accordance with SECTION 7.2.17 of the Credit Agreement. "PLEDGE AGREEMENT" means, as the context may require, the Holdings Pledge Agreement, the LCNI Pledge Agreement, the Sommer Enterprises Pledge Agreement, the AHL Pledge Agreement, the Enterprises Pledge Agreement, the Borrower Pledge Agreement or the AMH Pledge Agreement. "PLEDGED ENTITY" means, at any time, each Person in respect of which the Lenders have been granted, at such time, a security interest in and to, or a pledge of, any of the issued and outstanding interests or shares of Capital Stock of such Person. "PREFERRED STOCK" means any Equity Interest with preferential right of payment of dividends or distributions, as applicable, or upon liquidation, dissolution or winding up. A-69 "PRE-OPENING EXPENSE" means any expense of the type listed in SCHEDULE VIII to the Credit Agreement. "PRE-OPENING REVENUES" means all operating revenues received by the Borrower with respect to the Main Project prior to the Opening Date. "PROCESS AGENT" is defined in SECTION 10.14 of the Credit Agreement. "PROJECT MANAGEMENT AGREEMENT" means, on any date, the Project Management Agreement, as originally in effect on the Effective Date, between AHL and the Owner Representative and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "PROJECT PARTY" means the Borrower, AHL, Sommer Enterprises, Capital, Holdings, London Clubs, LCNI, the Design/Builder or Fluor. "QUARTERLY PAYMENT DATE" means the last Business Day of each March, June, September and December. "RATE PROTECTION AGREEMENT" means any interest rate swap, cap, collar or similar agreement entered into by the Borrower in respect of the Loans pursuant to the terms of the Credit Agreement under which the counterparty to such agreement is (or, at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender reasonably acceptable to the Administrative Agent. "REAL PROPERTY" means, relative to any Person, such Person's present and future right, title and interest (including any leasehold estate) in (a) any plots, pieces or parcels of land; (b) any improvements, buildings, structures and fixtures now or hereafter located or erected thereon or attached thereto of every nature whatsoever; (c) any other interests in property constituting appurtenances to the Site, or which hereafter shall in any way belong, relate or be appurtenant thereto; and A-70 (d) all other rights and privileges thereunto belonging or appertaining and all extensions, additions, improvements, betterments, renewals, substitutions and replacements to or of any of the rights and interests described in CLAUSE (C). "REALIZED SAVINGS" means: (a) the portion of any decrease to the Guaranteed Maximum Price retained or to be retained by the Borrower in accordance with the provisions of Attachment H to the Design/Build Contract in the "COST OF THE WORK" (as defined in Section 3 of attachment G to the Design/Build Contract) contemplated by a Line Item but only to the extent that the Guaranteed Maximum Price has been reduced as a result of such decrease in the anticipated "COST OF THE WORK" as approved in writing by the Design/Builder and such reduction is confirmed by the Construction Consultant; (b) with respect to the Construction Period Interest Line Item, a decrease in the anticipated cost of construction period interest resulting from (x) a decrease in the interest rates payable by the Borrower prior to the date which is six months after the Conversion Date as determined by the Administrative Agent with the reasonable concurrence of the Borrower taking into account the current and future anticipated interest rates and the anticipated times and amounts of draws under the Bank Credit Facility for the payment of Main Project Costs or (y) the anticipated Conversion Date being earlier than the date set therefor in the Construction Benchmark Schedule as determined by the Owner Representative with the reasonable concurrence of the Construction Consultant; and (c) with respect to any other Line Item, the amount by which the total cost allocated to such Line Item exceeds the total cost incurred by the Borrower to complete all aspects of the Work contemplated by such Line Item which amount shall not be established until the Borrower has actually completed 90% of all such Work; in each case, which is documented by the Borrower in a Realized Savings Certificate substantially in the form of EXHIBIT W to the Credit Agreement, duly executed and completed with all exhibits and attachments thereto. A-71 "RECIPROCAL EASEMENT AGREEMENT" means, on any date, the Construction, Operation and Reciprocal Easement Agreement, as originally in effect on the Effective Date, by and among the Borrower, Aladdin Bazaar and AMH and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "REGISTER" is defined in CLAUSE (B) of SECTION 2.8 of the Credit Agreement. "REGISTERED NOTE" is defined in SECTION 2.8 of the Credit Agreement, in the form of EXHIBIT A-4 to the Credit Agreement (as such promissory note may be amended, endorsed or otherwise modified from time to time). "RELEASE" means a "RELEASE", as such term is defined in CERCLA. "REMAINING COSTS" means, without duplication, the sum of (w) the costs required to achieve Final Completion PLUS (x) the Retainage Amounts to be paid to Persons who have supplied labor or materials in connection with such line item, PLUS (y) the amount required to pay fees and interest at the maximum rate of interest set forth in the Loan Documents (after giving effect to the Rate Protection Agreement) through the date which is six months after the Conversion Date PLUS (z) the Required Minimum Contingency. "REQUIRED LENDERS" means, at any time, (a) Non-Defaulting Lenders holding at least 66 2/3% of the sum of the aggregate outstanding principal amount of the Loans then held by such Lenders PLUS the participation interests of such Lenders in the Letter of Credit Outstandings, or (b) if no Loans or Letter of Credit are then outstanding, Lenders having at least 66 2/3% of the Commitments; PROVIDED, HOWEVER, that (x) amendments affecting only one class of Lenders (with a class for each of the Term A Lenders, the Term B Lenders and the Term C Lenders) will require the approval of the Non-Defaulting Lenders holding 66 2/3% or more of the principal amount of the Loans, Letters of Credit or, if applicable, Commitments for such class and (y) the consent of all of the Non-Defaulting Lenders in the same class and of all Non-Defaulting Lenders in all classes shall be required with respect to the matters set forth in SECTION 10.1 of the Credit Agreement. A-72 "REQUIRED MINIMUM CONTINGENCY" means (w) during the first month after the Effective Date, no less than $24,000,000, (x) during the second month after the Effective Date, no less than $23,000,000, (y) during the third month after the Effective Date, no less than $22,000,000 and (z) thereafter the product of (1) $25,000,000 REDUCED BY (2) the $25,000,000 multiplied by the percentage completed in respect of such Line Item Category on the date that the Advance is made. "REQUIRED SCOPE CHANGE APPROVAL" means, relative to each proposed Scope Change, the consent of the Administrative Agent. "RESTRICTED PAYMENT" is defined in CLAUSE (B) of SECTION 7.2.6 of the Credit Agreement. "RETAINAGE AMOUNT" means, at any given time, amounts which have accrued and are owing under the terms of the Design/Build Contract, a Contract or a Subcontract, as the case may be, for work or services already provided but which at such time (and in accordance with the terms of the Design/Build Contract, the Contract or Subcontract, as the case may be) are being withheld from payment to the Design/Builder, a Contractor or a Subcontractor, as the case may be, until certain subsequent events (E.G., completion benchmarks) have been achieved under the Design/Build Contract or relevant Contract or Subcontract. "REVIEWING ACCOUNTANT" means Arthur Andersen LLP or any nationally recognized firm of independent public accountants subsequently selected by the Borrower with the consent of the Administrative Agent from time to time (which shall not be unreasonably withheld or delayed), as auditors of the Borrower. "S&P" means Standard & Poor's Ratings Group, Inc., a New York corporation, or any successor thereto. "SALLE PRIVEE MANAGEMENT AGREEMENT" means, on any date, the Management Agreement, as originally in effect on the Effective Date, between the Borrower, LCNI and London Clubs and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "SCHEDULED AMORTIZATION" is defined in CLAUSE (B) of SECTION 3.1.1 of the Credit Agreement. A-73 "SCOPE CHANGE" means any change in the "Services" or "Work". "SCOTIABANK" is defined in the PREAMBLE of the Credit Agreement. "SCOTIABANK FEE LETTER" means the confidential letter agreement, dated December 4, 1997, among the Borrower, the Sponsors and Scotiabank. "SEC" means the Securities and Exchange Commission. "SECURED PARTY" means the Lenders, the Issuer, the Agents, each counterparty to a Rate Protection Agreement that is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate thereof reasonably acceptable to the Administrative Agent and, in each case, each of their respective successors, transferees and assigns. "SECURITY AGREEMENT" means, on any date, the Security Agreement executed and delivered by an Authorized Representative of the Borrower pursuant to SECTION 5.1.5 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT F to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "SERVICES" is defined in SECTION 1.7 of the Design/Build Contract. "SERVICING AND COLLATERAL ACCOUNT AGREEMENT" means, on any date, the Servicing and Collateral Account Agreement, as originally in effect on the Closing Date, among the Disbursement Agent, the Borrower and the Servicing Agent and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "SHOULDER SPACE" means the property and space described in EXHIBIT N-6 to the Credit Agreement. "SITE" is defined in the FOURTH RECITAL of the Credit Agreement and is more fully described in EXHIBIT N-1 to the Credit Agreement. "SITE EASEMENT" means any easement appurtenant, easement in gross, license agreement and other right running for the benefit of the Borrower, the Main Project, the Mall Project and the owner of the Mall Project, the Music Project and the owner of the Music Project, the Energy Project and the lessee of the Energy Project or A-74 appurtenant to the Site, including those certain easements and licenses described in the Title Policy. "SITE WORK AGREEMENT" means, on any date, the Site Work Development and Construction Agreement, as originally in effect on the Effective Date, among the Borrower, AHL and Aladdin Bazaar and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified in accordance with the terms of the Credit Agreement. "SOLVENCY CERTIFICATE" means a solvency certificate to be executed and delivered by the chief financial or accounting Authorized Representative of the Borrower substantially in the form of EXHIBIT P to the Credit Agreement. "SOLVENT" means, relative to any Person and its Subsidiaries on a particular date, that on such date (w) the fair value of the property of such Person and its Subsidiaries on a consolidated basis is greater than the total amount of liabilities, including contingent liabilities, of such Person and its Subsidiaries on a consolidated basis, (x) the present fair salable value of the assets of such Person and its Subsidiaries on a consolidated basis is not less than the amount that will be required to pay the probable liability of such Person and its Subsidiaries on a consolidated basis on its debts as they become absolute and matured, (y) such Person does not intend to, and does not believe that it or its Subsidiaries will, incur debts or liabilities beyond the ability of such Person and its Subsidiaries to pay as such debts and liabilities mature and (z) such Person and its Subsidiaries on a consolidated basis are not engaged in a business or transaction, and such Person and its Subsidiaries on a consolidated basis are not about to engage in business or a transaction, for which the property of such Person and its Subsidiaries on a consolidated basis would constitute an unreasonably small capital. "SOMMER ENTERPRISES" means Sommer Enterprises, LLC, a Nevada limited-liability company. "SOMMER ENTERPRISES PLEDGE AGREEMENT" means, on any date, the Pledge Agreement executed and delivered by an Authorized Representative of Sommer Enterprises pursuant to CLAUSE (C) of SECTION 5.1.3 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of EXHIBIT E-7 to the Credit Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. A-75 "SPECIFIED EQUIPMENT" means the portion of the new FF&E together with all improvements and/or additions thereto covered by an FF&E Lease and financed by a portion of the FF&E Financing. "SPONSOR" means AHL or London Clubs. "STATED AMOUNT" of each Letter of Credit means the total amount available to be drawn under such Letter of Credit upon the issuance thereof. "STATED MATURITY DATE" means (a) with respect to all Term A Loans, the date which is the seventh anniversary of the Closing Date; (b) with respect to all Term B Loans, the date which is 8.5 years after the Closing Date; and (c) with respect to all Term C Loans, the tenth anniversary of the Closing Date. "SUBCONTRACT" means a contract between the Design/Builder and a Subcontractor which has been entered into in accordance with the Design/Build Contract. "SUBCONTRACTOR" is defined in the Design/Build Contract. "SUBSIDIARY" means, relative to any Person, any corporation, partnership or other business entity of which more than 50% of the outstanding capital stock (or other ownership interest) having ordinary voting power to elect the board of directors, managers or other voting members of the governing body of such Person (irrespective of whether at the time Capital Stock (or other ownership interest) of any other class or classes of such Person shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Except as otherwise indicated herein, references to Subsidiaries refer to Subsidiaries of the Borrower. "SUBSTANTIAL COMPLETION" means that (x) the conditions set forth in the definition of "Completion" have occurred, (y) "SUBSTANTIAL COMPLETION" (as such is defined in SECTION 31.8 of the General Conditions annexed to the Design/Build A-76 Contract as ATTACHMENT D) has occurred and (z) a Main Project Certificate of Occupancy has been issued and is outstanding for the Hotel/Casino. "SURVEY" means, collectively, the surveys required by SECTION 3.1.24 of the Disbursement Agreement. "SYNDICATION AGENT" is defined in the PREAMBLE of the Credit Agreement. "TAX" means any federal, state, local, foreign or other tax, levy, impost, fee, assessment or other government charge, including income, estimated income, business, occupation, franchise, property, payroll, personal property, sales, transfer, use, employment, commercial rent, occupancy, franchise or withholding taxes, and any premium, including interest, penalties and additions in connection therewith. "TAX AMOUNT" means, relative to any period, without duplication, the increase in the cumulative United States federal, state and local income tax liability of the holders of Equity Interests in the Borrower (or if the holder is a pass-though entity for United States income tax purposes, the direct or indirect holders of its equity interests subject to United States, state and local income tax) in respect of such interests for such period, plus any additional amounts payable to such holders for taxes arising from ownership of such Equity Interests. "TENANT IMPROVEMENT" means (x) the portion of the construction to be performed by or on behalf of the Borrower in the interior of the Main Project pursuant to a lease to adapt the same for the initial use and occupancy by the tenant under such lease or (y) if a tenant under a Lease undertakes to complete the work to the portion of the Main Project covered by such Lease, any allowances or payments advanced to such Person by the Borrower. "TERM A LENDER" means any Lender which has made a Term A Loan Commitment or holds a Term A Loan. "TERM A LOAN" is defined in SECTION 2.1.1 of the Credit Agreement. "TERM A LOAN COMMITMENT" means the aggregate principal amount of Term A Loans which the Term A Lenders are obligated to make pursuant to SECTION 2.1.1 of the Credit Agreement. The Term A Loan Commitment shall not exceed $136,000,000. A-77 "TERM A LOAN COMMITMENT AMOUNT" means, on any date, relative to any Term A Lender, the portion of the Term A Loan Commitment of such Term A Lender reduced by the principal amount of any Term A Loans made by such Term A Lender as of such date. The portion of the Term A Loan Commitment of each Term A Lender is set forth below such Term A Lender's signature to the Credit Agreement or in a Lender Assignment Agreement. "TERM A LOAN COMMITMENT FEE" is defined in SECTION 3.3.1 of the Credit Agreement. "TERM A LOAN COMMITMENT TERMINATION DATE" means the earlier of (a) the Term B and Term C Loan Commitment Termination Date (if the Term B Loans and Term C Loans have not been made on or prior to such date); (b) the Conversion Date; and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in CLAUSE (A) or (B), the Term A Loan Commitments shall terminate automatically and without any further action. "TERM A NOTE" means, on any date, a promissory note of the Borrower payable to any Term A Lender, in the form of EXHIBIT A-1 to the Credit Agreement (as such promissory note may thereafter from time to time be amended, supplemented, amended and restated, endorsed or otherwise modified), evidencing the aggregate Indebtedness of the Borrower to such Term A Lender resulting from outstanding Term A Loans, and also means all other promissory notes accepted from time to time in substitution or replacement therefor or renewal thereof. "TERM B AND TERM C LOAN COMMITMENT FEE" is defined in SECTION 3.3.1 of the Credit Agreement. . "TERM B AND TERM C LOAN COMMITMENT TERMINATION DATE" means the earlier of (a) February 27, 1998; and A-78 (b) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in CLAUSE (A) or (B), the Term B Loan Commitments and the Term C Loan Commitments shall terminate automatically and without any further action. "TERM B LENDER" means any Lender which has made a Term B Loan Commitment or holds a Term B Loan. "TERM B LOAN" is defined in CLAUSE (A) of SECTION 2.1.3 of the Credit Agreement. "TERM B LOAN COMMITMENT" means the aggregate principal amount of Term B Loans which the Term B Lenders are obligated to make pursuant to CLAUSE (B) of SECTION 2.1.3 of the Credit Agreement. The Term B Loan Commitment shall not exceed $114,000,000. "TERM B LOAN COMMITMENT AMOUNT" means, on any date, relative to any Term B Lender, the portion of the Term B Loan Commitment of such Term B Lender reduced by the principal amount of any Term B Loans made by such Term B Lender as of such date. The portion of the Term B Loan Commitment of each Term B Lender is set forth below such Term B Lender's signature to the Credit Agreement or in a Lender Assignment Agreement. "TERM B NOTE" means, on any date, a promissory note of the Borrower payable to any Term B Lender, in the form of EXHIBIT A-2 to the Credit Agreement (as such promissory note may thereafter from time to time be amended, supplemented, amended and restated, endorsed or otherwise modified), evidencing the aggregate Indebtedness of the Borrower to such Term B Lender resulting from outstanding Term B Loans, and also means all other promissory notes accepted from time to time in substitution or replacement therefor or renewal thereof. "TERM C LENDER" means any Lender which has made a Term C Loan Commitment or holds a Term C Loan. "TERM C LOAN" is defined in CLAUSE (B) of SECTION 2.1.3 of the Credit Agreement. A-79 "TERM C LOAN COMMITMENT"means the aggregate principal amount of Term C Loans which the Term C Lenders are obligated to make pursuant to CLAUSE (C) of SECTION 2.1.3 of the Credit Agreement. The Term C Loan Commitment shall not exceed $160,000,000. "TERM C LOAN COMMITMENT AMOUNT" means, on any date, relative to any Term C Lender, the portion of the Term C Loan Commitment of such Term C Lender reduced by the principal amount of any Term C Loans made by such Term C Lender as of such date. The portion of the Term C Loan Commitment of each Term C Lender is set forth below such Term C Lender's signature to the Credit Agreement or in a Lender Assignment Agreement. "TERM C NOTE" means, on any date, a promissory note of the Borrower payable to any Term C Lender, in the form of EXHIBIT A-3 to the Credit Agreement (as such promissory note may thereafter from time to time be amended, supplemented, amended and restated, endorsed or otherwise modified), evidencing the aggregate Indebtedness of the Borrower to such Term C Lender resulting from outstanding Term C Loans, and also means all other promissory notes accepted from time to time in substitution or replacement therefor or renewal thereof. "THEATER" is defined in CLAUSE (D) of the FOURTH RECITAL of the Credit Agreement. "THEATER LEASE" means, on any date, the Lease, to be entered into between the Borrower and Aladdin Music covering the Theater Space as the same may be amended, supplemented, amended and restated, replaced or otherwise modified from time to time in accordance with the terms of the Credit Agreement. "THEATER RENOVATION COMPLETION" means that each of the following has occurred: (a) the renovation of the Theater has been completed substantially in accordance with the Credit Agreement, the Plans and Specifications, the provisions of the Reciprocal Easement Agreement applicable to the Theater and all of the other Operative Documents to the extent that the development, renovation, use or operation of the Theater are affected thereby, except for the Main Project Punchlist Items applicable to the Theater and in substantial compliance with all Legal Requirements pertaining to the renovation of the Theater so as to allow the Theater to be utilized for its intended purpose; A-80 (b) reasonable and safe means of access and facilities necessary for the use and occupancy of the Theater have been installed and are operational including corridors, elevators, stairways, heating, ventilation, air conditioning, sanitary, water and electrical facilities and all security systems and life safety systems required by the Plans and Specifications, the Reciprocal Easement Agreement, the other Operative Documents and all Legal Requirements; and (c) there are no outstanding claims or Liens by any Contractor or Subcontractor or any other Person against any portion of the Hotel/Casino Component except for Permitted Liens and Permitted Encumbrances. "THEATER SPACE" means the property and the space described in EXHIBIT N-7 to the Credit Agreement. "TITLE INSURER" means, collectively, Stewart Title Guaranty Company and Lawyers Title Insurance Corporation. "TITLE POLICY" means each lenders A.L.T.A. policy of title insurance issued by the Title Insurer as of the Effective Date, as provided in SECTION 3.1.25 of the Disbursement Agreement, including all amendments thereto, endorsements thereof and substitutions or replacements therefor. "TOTAL DEBT" means, on any date, the outstanding principal amount of all Indebtedness of the Borrower of the type described in CLAUSES (A), (B) and (C) of such definition and (without duplication) any Contingent Liability in respect of any of the foregoing of any other Person. "TOTAL DEBT TO EBITDA RATIO" means, as of the close of any Fiscal Quarter, commencing with the close of the Fiscal Quarter in which the Conversion Date occurs, the ratio of (a) Total Debt outstanding on the last day of such Fiscal Quarter TO (b) EBITDA computed for the period consisting of such Fiscal Quarter (or such shorter portion of any Fiscal Quarter after the occurrence therein of the Conversion Date) and each of the three immediately preceding A-81 Fiscal Quarters (or such lesser number of Fiscal Quarters to have closed since the Conversion Date) and determined for any period ending on or prior to the first anniversary of the Conversion Date, consistently with the proviso to the definition of the term "EBITDA". "TRADE DETAIL REPORT" means a Trade Detail Report in the form of EXHIBIT DD to the Credit Agreement. "TRADEMARK SECURITY AGREEMENT" means, on any date, the Trademark Security Agreement executed and delivered by an Authorized Representative of the Borrower pursuant to SECTION 5.1.6 of the Credit Agreement, as originally in effect on the Closing Date, in substantially the form of Exhibit B to the Security Agreement and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified. "TRANSACTION" means the transactions contemplated by the Discount Note Indenture and the Operative Documents. "TRUST" means the Trust under Article Sixth u/w/o Sigmund Sommer, or in the event of the dissolution of the Trust, the beneficiaries or the remaindermen thereof. "TRUST ESTATE" is defined in the Deed of Trust. "TYPE" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "UCC" means the Uniform Commercial Code of the jurisdiction the law of which governs the document with respect to the term used. "UNALLOCATED CONTINGENCY BALANCE" means (w) during the first month after the Effective Date, the greater of (1) $24,000,000 or (2) the Unallocated Contingency Calculation, (x) during the second month after the Effective Date, the greater of $23,000,000 or (2) the Unallocated Contingency Calculation, (y) during the third month after the Effective Date, the greater of $22,000,000 or (2) the Unallocated Contingency Calculation, and (z) thereafter, from time to time, the Unallocated Contingency Calculation. A-82 "UNALLOCATED CONTINGENCY CALCULATION" means an amount equal to (x) $25,000,000 MINUS (y) the product of (1) $25,000,000 MULTIPLIED BY (2) the percentage of construction completed on the date that the Advance is to be made, as determined by the Construction Consultant. "UNITED STATES" or "U.S." means the United States of America, its fifty states and the District of Columbia. "UNSUITABLE LENDER" is defined in CLAUSE (C) of SECTION 4.11 of the Credit Agreement. "VOTING STOCK" means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "WARRANT" means the warrants issued by Enterprises on February 18, 1998 which, if exercised, will in the aggregate for all such warrants entitle the holders thereof to acquire an aggregate of not more than 2,215,000 shares of the Capital Stock of Enterprises representing an indirect interest in not more than 10% of the Holdings Common Membership Interests, plus, warrants for up to 1,107,500 shares of the Capital Stock of Enterprises which may be issued in connection with the Mall Project credit enhancement on terms substantially the same as the Warrants issued by Enterprises on February 18, 1998. "WEIGHTED AVERAGE LIFE TO MATURITY" means, relative to any Indebtedness at any date, the number of years (calculated to the nearest one-twelfth) obtained as the quotient of (x) the sum of the product of (1) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, MULTIPLIED BY (2) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment DIVIDED BY (y) the then outstanding principal amount or liquidation preference, as applicable, of such Indebtedness. "WELFARE PLAN" means a "WELFARE PLAN", as such term is defined in Section 3(1) of ERISA. "WHOLLY-OWNED" means, with respect to any direct or indirect Subsidiary, any Subsidiary all of the outstanding common stock (or similar equity interest) of which A-83 (other than any director's qualifying shares or investments by foreign nationals mandated by applicable laws) is owned directly or indirectly by the Borrower. "WORK" is defined in SECTION 1.7 of the Design/Build Contract. A-84 EX-10.8 16 AMENDED & RESTATED LONDON CLUBS PURCHASE AGREEMENT - -------------------------------------------------------------------------------- AMENDED AND RESTATED PURCHASE AGREEMENT dated as of February 26, 1998 between LONDON CLUBS NEVADA INC., LONDON CLUBS INTERNATIONAL, P.L.C., ALADDIN GAMING HOLDINGS, LLC, ALADDIN GAMING, LLC, ALADDIN HOLDINGS, LLC, SOMMER ENTERPRISES, LLC and TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I Definitions SECTION 1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II Purchase and Sale of the Purchaser Shares SECTION 2.1. Purchase and Sale of the Purchaser Shares. . . . . . . . . . . 14 SECTION 2.2. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.3. Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE III Representations and Warranties of Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust SECTION 3.1. Organization and Good Standing. . . . . . . . . . . . . . . . 17 SECTION 3.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 3.3. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 3.4. Consents and Approvals. . . . . . . . . . . . . . . . . . . . 19 SECTION 3.5. Outstanding Shares. . . . . . . . . . . . . . . . . . . . . . 19 SECTION 3.6. Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 3.7. Title Matters . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 3.8. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 20 SECTION 3.9. No Event of Default . . . . . . . . . . . . . . . . . . . . . 20 SECTION 3.10. Hazardous Substances. . . . . . . . . . . . . . . . . . . . . 21 SECTION 3.11. Environmental and Soils Reports . . . . . . . . . . . . . . . 22 SECTION 3.12. Sommer Enterprises Interest . . . . . . . . . . . . . . . . . 22 SECTION 3.13. Holdings' Business. . . . . . . . . . . . . . . . . . . . . . 22 SECTION 3.14. Financial Statements. . . . . . . . . . . . . . . . . . . . . 22 SECTION 3.15. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 3.16. Material Adverse Effect . . . . . . . . . . . . . . . . . . . 23 SECTION 3.17. Absence of Undisclosed Liabilities. . . . . . . . . . . . . . 23 Section 3.18. Assets of the Trust . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE IV Representations and Warranties of Gaming Holdings, Gaming, Sommer Enterprises and Holdings SECTION 4.1. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 4.2. Material Contracts. . . . . . . . . . . . . . . . . . . . . . 24 SECTION 4.3. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 25 i Page ---- SECTION 4.4. Employees Benefit Plans; ERISA. . . . . . . . . . . . . . . . 25 SECTION 4.5. Aladdin Names . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 4.6. Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE V Representations and Warranties of the Purchaser and LCI Parent SECTION 5.1. Organization and Good Standing. . . . . . . . . . . . . . . . 27 SECTION 5.2. Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 5.3. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 5.4. Non-contravention . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 5.5. Consents and Approvals. . . . . . . . . . . . . . . . . . . . 28 SECTION 5.6. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 5.7. Investment. . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 5.8. No Public Market. . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 5.9. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 29 SECTION 5.10. Material Adverse Effect . . . . . . . . . . . . . . . . . . . 29 ARTICLE VI Covenants SECTION 6.1. Redevelopment Documents . . . . . . . . . . . . . . . . . . . 29 SECTION 6.2. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 6.3. Discount Notes and Warrants . . . . . . . . . . . . . . . . . 33 SECTION 6.4. Interests of Employees, Officers and Consultants . . . . . . . . . . . . . . . . . . 33 SECTION 6.5. Information and Consultation. . . . . . . . . . . . . . . . . 34 SECTION 6.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 6.7. Second Hotel. . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 6.8. Gaming Matters. . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 6.9. Conveyance of Land And Existing Improvements . . . . . . . . . . . . . . . . . . . . 39 SECTION 6.10. JMJ Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE VII Conditions To Closing SECTION 7.1. Conditions to the Purchaser's and LCI Parent's Obligations. . . . . . . . . . . . . . . . . 41 SECTION 7.2. Conditions to Gaming Holdings's, Gaming's, Holdings', Sommer Enterprises' and the Trust's Obligations . . . . . . . . . . . . . . . . . . . . . 44 ii Page ---- ARTICLE VIII Guarantee SECTION 8.1. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE IX Termination SECTION 9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 9.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . 47 ARTICLE X SURVIVAL; INDEMNIFICATION SECTION 10.1. Survival; Remedy for Breach. . . . . . . . . . . . . . . . . 47 SECTION 10.2. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 10.3. Aronow Indemnification . . . . . . . . . . . . . . . . . . . 48 ARTICLE XI MISCELLANEOUS SECTION 11.1. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 11.2. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 49 SECTION 11.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 11.4. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 11.5. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 11.6. Further Assurances . . . . . . . . . . . . . . . . . . . . . 50 SECTION 11.7. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 11.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 11.9. Consents and Approvals . . . . . . . . . . . . . . . . . . . 53 SECTION 11.10. Counterparts; Effectiveness. . . . . . . . . . . . . . . . . 53 SECTION 11.11. Construction . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 11.12. Severance. . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 11.13. Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 11.14. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 11.15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 11.16. Entirety of Agreement. . . . . . . . . . . . . . . . . . . . 55 iii AMENDED AND RESTATED PURCHASE AGREEMENT This AMENDED AND RESTATED PURCHASE AGREEMENT, dated as of February 26, 1998 is entered into and made by and between ALADDIN GAMING HOLDINGS, LLC, a Nevada limited-liability company ("Gaming Holdings"), LONDON CLUBS NEVADA INC., a Nevada corporation (the "PURCHASER"), LONDON CLUBS INTERNATIONAL, P.L.C., a public limited company organized under the laws of England and Wales ("LCI PARENT"), ALADDIN GAMING, LLC, a Nevada limited-liability company ("Gaming"), ALADDIN HOLDINGS, LLC, a Delaware limited liability company ("HOLDINGS"), SOMMER ENTERPRISES, LLC, a Nevada limited liability company ("SOMMER ENTERPRISES") and TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER(the "TRUST") as an amendment to and restatement of the Purchase Agreement dated as of September 24, 1997 (and subsequently amended on October 16, 1997, November 18, 1997 and December 1, 1997), among certain of the undersigned. WHEREAS, subject to the terms and conditions set forth herein, the Purchaser desires to purchase from Gaming Holdings, and Gaming Holdings desires to issue and sell to the Purchaser, the Purchaser Shares (as defined hereinafter). NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions set forth in this Agreement and intending to be legally bound, Gaming Holdings, the Purchaser, LCI Parent, Gaming, Holdings, Sommer Enterprises and Trust agree as follows: ARTICLE I Definitions SECTION 1.1. DEFINED TERMS. As used in this Agreement, the following terms have the meaning set forth below: "ALADDIN ENTERPRISES" means Aladdin Gaming Enterprises, Inc., a Nevada corporation, which will be a Member of Gaming Holdings on and after the Closing Date. "AFFILIATE" means, in respect of a specified Person, any Person who or which is (a) directly or indi- rectly controlling, controlled by or under common control with such specified Person, or (b) any member, director, officer, manager, relative or spouse of such specified Person. For the purposes of this definition, "CONTROL" means the right to exercise, directly or indirectly, more than fifty percent of the voting power of the stockholders, members or owners, and, with respect to any individual, partnership, trust or other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity, and "CONTROLLED" and "CONTROLLING" shall have corresponding meanings. "AFFIRMATIVE RESPONSE NOTICE" has the meaning set forth in Section 2.2. "AGREEMENT" means this Amended and Restated Purchase Agreement. "ALADDIN NAMES" has the meaning set forth in Section 4.5. "AMENDED AND RESTATED ARTICLES" means the Amended and Restated Articles of Organization of Gaming Holdings to be entered into on or prior to the Closing. "APPLICATIONS" has the meaning set forth in Section 6.5. "APPROVALS" has the meaning set forth in Section 6.5. "ARBITRATION PROVISION" has the meaning set forth in Section 6.7. "ARTICLES OF ORGANIZATION" means the Articles of Organization of Gaming Holdings filed with the Secretary of State of the State of Nevada on December 1, 1997, as amended from time to time. "BANK DEBT" means the portion of the Gaming Financing under a bank credit facility, in the amount of $410 million. "BANK LENDERS" has the meaning set forth in Section 6.2. "BAZAAR" means Aladdin Bazaar, LLC, a Delaware limited liability company. 2 "BAZAAR FINANCING" means the bank financing, and/or high yield debt, and/or such alternative financing as Bazaar shall enter into, in order for Bazaar to finance the development of the Shopping Center and/or all or some of the Parking. "CERCLA" is defined in clause (a) of the definition of "Environmental Laws". "CERLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "CERTIFICATE OF SHARES" means a certificate of Gaming Holdings representing Shares in Gaming Holdings. "CLOSING" has the meaning set forth in Section 2.2. "CLOSING DATE" has the meaning set forth in Section 2.2. "CLOSING SCHEDULES" means Schedules to this Agreement in respect of the representations and warranties of the parties to this Agreement made as of the Closing Date. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "GAMING HOLDINGS CLOSING CERTIFICATE" has the meaning set forth in Section 7.1. "COMPLETION GUARANTIES" has the meaning set forth in Section 6.2. "CONFIDENTIAL INFORMATION" has the meaning set forth in Section 11.4. "CONSENTS" has the meaning set forth in Section 5.5. "CONTRIBUTION AGREEMENT" has the meaning set forth in Section 6.2. "DISCOUNT NOTES" means 13.5% senior discount notes, accreting to an aggregate principal amount of $221.5 million at maturity, due 2010 to be issued by Gaming Holdings and Aladdin Capital Corp. on or about the Closing Date. 3 "DOLLARS" and "$" means the lawful currency of the United States of America. "EFFECTIVE DATE" means September 24, 1997. "EMPLOYEE PLANS" has the meaning set forth in Section 4.4. "ERISA" has the meaning set forth in Section 4.4. "ENVIRONMENTAL LAWS" means any of: (a) the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.) ("CERCLA"); (b) the Federal Water Pollution Control Act (33 U.S.C. Section 1251, ET SEQ.) ("CLEAN WATER ACT" OR "CWA"); (c) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, ET SEQ.) ("RCRA"); (d) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011, ET SEQ.); (e) the Clean Air Act (42 U.S.C. Section 7401, ET SEQ.); (f) the Emergency Planning and Community Right to Know (42 U.S.C. Section 11001, ET SEQ.); (g) the Federal Insecticide, Fungicide, and Rondenticide Act (7 U.S.C. Section 136, ET SEQ.) ("FIFRA"); (h) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486); (i) the Safe Drinking Water Act (42 U.S.C. Sections 300f, ET SEQ.) ("SDWA"); (j) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C. Sections 1201, ET SEQ.); 4 (k) the Toxic Substances Control Act (15 U.S.C. Section 2601, ET SEQ.); (l) the Hazardous Material Transportation Act (49 U.S.C. Section 1801, ET SEQ.) ("HMTA"); (m) the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. Section 7901, ET SEQ.) ("UMTRCA"); (n) the Occupational Safety and Health Act (29 U.S.C. Section 651, ET SEQ.) ("OSHA"); (o) the Nevada Hazardous Material law (NRS Chapter 459); (p) the Nevada Solid Waste/Disposal of Garbage or Sewage law (NRS 444.440 to 444.650, inclusive); (q) the Nevada Water Controls/Pollution law (NRS Chapter 445A); (r) the Nevada Air Pollution law (NRS Chapter 445B); (s) the Nevada Cleanup of Discharged Petroleum law (NRS 590.700 to 590.920, inclusive); (t) the Nevada Control of Asbestos law (NRS 618.750 to 618.850); (u) the Nevada Appropriation of Public Waters law (NRS 533.324 to 533.4385, inclusive); (v) the Nevada Artificial Water Body Development Permit law (NRS 502.390); (w) the Nevada Protection of Endangered Species, Endangered Wildlife Permit (NRS 503.585) and Endangered Flora Permit law (NRS 527.270); and (x) all others Federal, state and local Legal Requirements which govern Hazardous Substances, and the regulations adopted and publications promulgated pursuant to such foregoing laws; in each case as amended by an amendment thereto or succeeded by a successor law. 5 "ESCROW AGENT" has the meaning set forth in Section 2.2. "ESCROW AGREEMENT" has the meaning set forth in Section 2.2. "EXERCISE" means, in respect of any Warrants, the exercise of such Warrants into shares in Aladdin Enterprises, and "EXERCISED" shall have a corresponding meaning. "FINANCIAL STATEMENTS" has the meaning set forth in Section 3.14. "FIRST AVAILABLE PROCEEDS" shall mean any and all amounts available at any time the payment of which is not restricted under the arrangements in respect of the Bank Financing and the Discount Notes. "FF&E LOAN" means the approximately $80 million loan to Gaming secured by, and/or capital lease to Gaming of, certain of the furniture, fixtures and equipment located in the Redevelopment. "GAI" means GAI, LLC, a Nevada limited liability company. "GAI CONSULTING AGREEMENT" means the Consulting Agreement, as amended as of the date hereof, effective as of June 16, 1997, among Gaming Holdings, Gaming, Holdings and GAI. "GAMING FINANCING" means the Bank Debt, the Discount Notes and the FF&E Loan. "GAMING PROBLEM" means circumstances such that any Member or any Affiliate of any Member may preclude or materially delay, impede or impair the ability of Gaming to obtain or retain any licenses required by the Nevada Gaming Authorities in connection with the transactions contemplated hereby, including for the conduct of business of Gaming, or such as may result in the imposition of significantly burdensome terms and conditions on any such license. "GAMING PROBLEM PARTY" has the meaning set forth in Section 6.8. "GOEGLEIN" means Richard J. Goeglein. 6 "GOEGLEIN EMPLOYMENT AND CONSULTING AGREEMENT" means the Employment and Consulting Agreement, as amended on the date hereof, effective as of June 16, 1997, entered into by and among Gaming Holdings, Gaming, Holdings and Goeglein. "GOVERNMENTAL ENTITY" has the meaning set forth in Section 3.4. "HAZARDOUS SUBSTANCES" means (statutory acronyms and abbreviations having the meaning given them in the definition of "Environmental Laws") substances defined as "hazardous substances," "pollutants" or "contaminants" in Section 101 of the CERCLA; those substances defined as "hazardous waste," "hazardous materials" or "regulated substances" by the RCRA; those substances designated as a "hazardous substance" pursuant to Section 311 of the CWA; those substances defined as "hazardous materials" in Section 103 of the HMTA; those substances regulated as a hazardous chemical substance or mixture or as an imminently hazardous chemical substance or mixture pursuant to Sections 6 or 7 of the TSCA; those substances defined as "contaminants" by Section 1401 of the SDWA, if present in excess of permissible levels; those substances regulated by the Oil Pollution Act; those substances defined as a pesticide pursuant to Section 2(u) of the FIFRA, those substances defined as a source, special nuclear or by-product material by Section 11 of the AEA; those substances defined as "residual radioactive material" by Section 101 of the UMTRCA; those substances defined as "toxic materials" or "harmful physical agents" pursuant to Section 6 of the OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part 261.3; those substances defined as hazardous waste constituents in 40 C.F.R. Part 260.10, specifically including Appendices VII and VIII of Subpart D of 40 C.F.R. Part 261; those substances designated as hazardous substances in 40 C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous substances or hazardous materials in 49 C.F.R. Part 171.8; those substances regulated as hazardous materials, hazardous substances or toxic substances in 40 C.F.R. Part 1910; those substances defined as hazardous materials, hazardous substances or toxic substances in any other Environmental Laws; and those substances defined as hazardous materials, hazardous substances or toxic substances in the regulations adopted and publications promulgated pursuant to said laws, whether or not such regulations or publications are specifically referenced herein. 7 "INDEMNIFIED PARTIES" has the meaning set forth in Section 10.2. "INDEMNIFYING PARTY" has the meaning set forth in Section 10.2. "INTEREST" means the entire ownership interest in Gaming Holdings of a Member holding Voting Shares at any particular time, including the right of such Member to any and all benefits to which a Member may be entitled as provided under the NRS and in the Operating Agreement. "JMJ LEASE" means the Amended and Restated Lease Agreement dated July 27, 1994 between BATCL-1991-1, Inc. and JMJ, Inc. in respect of the Land And Existing Improvements. "KEEP WELL AGREEMENT" has the meaning set forth in Section 6.2. "LAND AND EXISTING IMPROVEMENTS" means the land and existing improvements located on an approximately 35 acre site at 3667 Las Vegas Boulevard South, Las Vegas, Nevada, as indicated on the site plans attached hereto as Exhibit 1, and as more particularly described on Exhibit 1A. "LAW" means any statute, law, judgment, writ, order, injunction, decree, ordinance, rule or regulation of any Governmental Entity. "LIABILITIES" has the meaning set forth in Section 3.17. "LIEN" means any lien, encumbrance, security interest, charge, claim, mortgage, pledge or restriction on transfer of any nature whatsoever. "LOSS" has the meaning set forth in Section 10.2. "MATERIAL ADVERSE EFFECT" means a material adverse effect on assets, liabilities, operations, intended operations, results of operations or financial condition. "MEMBER" means a Person who has been admitted to Gaming Holdings as a member in accordance with the NRS and the Operating Agreement. 8 "MUSIC HOLDINGS" means Aladdin Music Holdings, LLC, a Nevada limited liability company. "NEVADA ACT" means the Nevada State Gaming Control Act (NRS Ch. 463 et seq) and the rules and regulations promulgated thereunder. "NEVADA GAMING AUTHORITIES" means, collectively, the Nevada Gaming Commission, the Nevada State Gaming Control Board and all other state and local regulatory and licensing authorities in the State of Nevada. "NOTE REGISTRATION RIGHTS AGREEMENT" means the Note Registration Rights Agreement dated as of February 26, 1998 among Gaming Holdings, Aladdin Capital Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. "NRS" means the Nevada Revised Statutes, as amended from time to time. "OPENING DATE" means the date of the opening of the Redevelopment, currently expected to be in the first quarter of 2000. "OPERATING AGREEMENT" means the Operating Agreement of Gaming Holdings, to be dated as of the Closing Date (the Operating Agreement shall have attached as an exhibit thereto a form of Shareholders and Registration Rights Agreement to be entered into by the shareholders of a successor corporation to Gaming Holdings or Gaming in certain circumstances). "PARKING" means the multi-level parking structure and other parking areas for approximately 4,000 motor vehicles to be developed by Bazaar and Gaming as part of the Redevelopment. "PERCENTAGE INTEREST" means, with respect to a particular Member, the proportionate share (expressed as a percentage) of such Member's Interest in the Voting Shares in Gaming Holdings, computed by dividing the number of Voting Shares held by such Member by the total number of Voting Shares issued and outstanding. "PERMITTED ENCUMBRANCES" has the meaning ascribed thereto in Section 3.6. 9 "PERSON" means a natural person, any form of business or social organization and any other nongovernmental legal entity, whether domestic or foreign, including a corporation, partnership, association, trust, unincorporated organization, estate or limited liability company. "PROHIBITED TRANSFEREES" means (a) an owner, operator or manager of a hotel or casino competitive with the existing Aladdin Hotel and Casino or the Redeveloped Aladdin, (b) a non-profit or governmental entity, (c) a Person primarily in the business of owning or operating a casino or other gambling facility, (d) Focus 2000, or the then current owner(s) and/or lessee(s) of the property at the north-east corner of Las Vegas Boulevard and Harmon Avenue, and their Affiliates, (e) Bazaar, any member of Bazaar and the Affiliates of Bazaar or any such member, (f) an owner or operator of a distillery, winery, brewery or distributorship of alcoholic beverages, or (g) a Person that has been convicted of a felony crime. "PURCHASE PRICE" has the meaning set forth in Section 2.1. "PURCHASER CLOSING CERTIFICATE" has the meaning set forth in Section 7.2. "PURCHASER SHARES" means the Voting Shares to be sold to the Purchaser under this Agreement representing twenty-five percent of the outstanding Voting Shares of Gaming Holdings at the Closing. "RECEIVING PARTY" has the meaning set forth in Section 11.4. "REDEVELOPMENT" means: (a) the redevelopment of the existing Aladdin hotel and casino to include a total of approximately 2,600 rooms and approximately 116,000 square feet of main casino space (the "Redeveloped Aladdin"); (b) the development of the Shopping Center and the Parking; (c) the development of the Salle Privee Facilities within the Redeveloped Aladdin; and 10 (d) the construction, fitting out, furnishing, maintenance and operation of all or any part of the foregoing. "REDEVELOPMENT AGREEMENTS" means any and all material contracts and agreements relating to the Redevelopment or any part thereof, but does not include any sub-lease in respect of the Shopping Center made by Bazaar as sub-landlord, except any such sub-lease to Gaming as sub-tenant, and does not include the Salle Privee Agreement and the Operating Agreement. "REDEVELOPMENT BUDGETS" means any and all budgets relating to the Redevelopment, or any part thereof. "REDEVELOPMENT DOCUMENTS" means the Redevelopment Agreements, the Redevelopment Financing Agreements, the Redevelopment Budgets and the Redevelopment Plans and Specifications, including the construction contract with Fluor Daniel, Inc. "REDEVELOPMENT FINANCING AGREEMENTS" means any and all material contracts or agreements relating to the Gaming Financing or the Bazaar Financing, including the FF&E Loan and related agreements, inter-creditor agreements, attornment agreements and guarantees of payment, performance, completion or cash flow, other than the Contribution Agreement, the Completion Guaranties and the Keep Well Agreement. "REDEVELOPMENT PLANS AND SPECIFICATIONS" means any and all plans and any and all specifications relating to the Redevelopment or any part thereof. "RELEASE" means a "release", as such term is defined in CERCLA. "RESOLUTION AGREEMENT" has the meaning set forth in Section 2.2. "SALLE PRIVEE AGREEMENT" means an agreement between the Purchaser, LCI Parent and Gaming with respect to the construction, operation, maintenance and marketing of the Salle Privee Facilities. "SALLE PRIVEE FACILITIES" means facilities open to the public at large, consisting of: 11 (a) a gaming facility, containing approximately 20 to 30 high limit tables and approximately 100 high limit slot devices, located on the mezzanine level directly above the main gaming floor of the Redeveloped Aladdin; (b) a super-premium gourmet restaurant facility, located adjacent to and as part of the gaming facility of the Salle Privee Facilities and containing a separate kitchen, a bar, approximately 25 dining tables inside the restaurant, as well as several additional dining tables located in a roof garden accessible through the restaurant; (c) an exclusive hospitality facility comprising approximately 25 double-module luxury suites, 5 triple-module suites, a concierge facility and guest bar and lounge, to be located in the main tower of the Redeveloped Aladdin; (d) an entrance and reception area for guests of the Salle Privee Facilities, offering secure and discrete access for arrivals and departures; and (e) vertical and horizontal circulation infrastructure providing for private elevator access to the hospitality facility and private corridor access from the hospitality facility to the gaming facility of the Salle Privee Facilities. "SECOND HOTEL" means a second, separately themed hotel and casino on the Second Hotel Parcel with approximately 1,000 rooms and approximately 50,000 square feet of casino space. "SECOND HOTEL DOCUMENTS" has the meaning set forth in Section 6.5. "SECOND HOTEL NOTICE" has the meaning set forth in Section 6.7. "SECOND HOTEL PARCEL" means the approximately 4.7 acres of land which is approximately the land indicated to be the Second Hotel Parcel on the site plans attached hereto as Exhibit 1. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder. 12 "SHARE" represents a share of an Interest in Gaming Holdings as shall be provided in the Operating Agreement. "SHOPPING CENTER" means a themed entertainment shopping center containing approximately 450,000 square feet of gross leasable area to be developed by Bazaar as part of the Redevelopment. "SHOPPING CENTER PARCEL" means the approximately 11.4 acres of land which is approximately the land indicated to be the Shopping Center Parcel on the site plans attached hereto as Exhibit 1, together with an elevated area or areas to be determined in accordance with the Redevelopment Plans and Specifications. "TAX INDEMNITY AGREEMENT" has the meaning set forth in Section 6.2. "THIRD PARTY" means a Person who is not an Affiliate of Gaming Holdings, the Purchaser, LCI Parent, Gaming, the Trust or Holdings. "THRESHOLD" has the meaning set forth in Section 10.2. "TIMESHARE PARCEL" means the area which is approximately the area indicated to be the Timeshare Parcel on the site plans attached hereto as Exhibit 1. "TITLE REPORT" has the meaning set forth in Section 3.7. "UTILITY PARCEL" means the approximately 0.64 acres of land which is approximately the land indicated to be the CoGen Parcel on the site plans attached hereto as Exhibit 1. "VOTING SHARES" means Shares which have full voting rights attached thereto. "WARRANTS" means warrants to be issued by Aladdin Enterprises on or about the Closing Date in connection with the issuance of the Discount Notes to purchase Class B non-voting common shares in the capital of Aladdin Enterprises. "WARRANT REGISTRATION RIGHTS AGREEMENT" means the Warrant Registration Rights Agreement dated as of 13 February 26, 1998 among Gaming Holdings, Aladdin Capital Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. ARTICLE II PURCHASE AND SALE OF THE PURCHASER SHARES SECTION 2.1. PURCHASE AND SALE OF THE PURCHASER SHARES. Upon the terms and subject to the conditions of this Agreement Gaming Holdings agrees to issue, sell and convey to the Purchaser, and the Purchaser agrees to purchase from Gaming Holdings, the Purchaser Shares, free and clear of all Liens, for an aggregate purchase price of $50,000,000 (the "PURCHASE PRICE"). SECTION 2.2. CLOSING. (a) When Gaming Holdings shall in good faith believe that the conditions contained in Section 7.1 to the Purchaser's obligations to effect the purchase and sale of the Purchaser Shares under this Agreement are in such position either to be satisfied at the Closing, or, in respect of those conditions (which shall be specifically identified in the notice) that will not be satisfied, will be waived by the Purchaser at the Closing, Gaming Holdings shall so notify the Purchaser. (b) Upon receipt of such notice under Section 2.2(a) the Purchaser shall have fifteen days to notify Gaming Holdings of its opinion as to whether the conditions contained in Section 7.1 will be satisfied or waived by the Purchaser at the Closing. Upon the failure of the Purchaser to deliver such a notice within such fifteen day time period, time being of the essence, Gaming Holdings may terminate this Agreement pursuant to Article IX. Any notice by the Purchaser stating the Purchaser's opinion that the conditions will not be satisfied or waived at the Closing shall identify the condition(s) the Purchaser believes have not been satisfied or will not be waived by Purchaser and, for the purposes of facilitating the good faith negotiations referred to below, shall provide reasons for the Purchaser's opinion, which reasons shall not include in respect of Sections 7.1(e) through (f) any Redevelopment Document approved pursuant to Section 6.1 (except to the extent that the Purchaser makes a subsequent determination to the contrary pursuant to Section 6.1(c) or 14 7.1(g)). Upon receipt of such notice from the Purchaser stating the Purchaser's opinion that the conditions will not be satisfied or waived at the Closing, Gaming Holdings and the Purchaser shall promptly enter into good faith negotiations for an additional fifteen day period in an effort to reach agreement (the "RESOLUTION AGREEMENT") to resolve each other's concerns. Any Resolution Agreement shall be in writing and duly signed. Upon the failure of Gaming Holdings and the Purchaser to reach such agreement within such additional fifteen day period, Gaming Holdings and the Purchaser shall each have the right within fifteen days after the expiration of such additional fifteen day period to terminate this Agreement pursuant to Article IX. (c) If the Purchaser notifies Gaming Holdings within the initial fifteen day period, time being of the essence, of its opinion that the conditions contained in Section 7.1 will be satisfied or waived at the Closing (the "AFFIRMATIVE RESPONSE NOTICE") or if the Resolution Agreement is made, if required by the Gaming Financing, at such time prior to the Closing as is required by the Gaming Financing, the Purchaser shall pay $50,000,000 into escrow with an escrow agent (the "ESCROW AGENT") pursuant to an Escrow Agreement (the "ESCROW AGREEMENT"), which Escrow Agreement is to be negotiated and mutually agreed between Gaming Holdings, the Escrow Agent and the Purchaser. (d) Subject to the terms and conditions of this Agreement, the purchase and sale of the Purchaser Shares (the "CLOSING") shall take place after conclusion of the process set forth in Section 2.2(a) through (c) above at 10:00 a.m. at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, (i) on the thirtieth business day after the Affirmative Response Notice has been given, or (ii) on the tenth business day after the date the Resolution Agreement is made, as the case may be (the "CLOSING DATE"), unless another date or time is mutually agreed to in writing by Gaming Holdings and the Purchaser or is required by the Gaming Financing. SECTION 2.3. CLOSING DELIVERIES. At the Closing: (a)the Purchaser shall deliver or cause to be delivered to Gaming Holdings: 15 (i) $50,000,000 (delivered by the Purchaser or by the Escrow Agent on behalf of the Purchaser pursuant to the terms of the Escrow Agreement, as the case may be), apportioned between (A) and (B), below, as the Purchaser may determine (subject to the requirements of the Gaming Financing): (A) by wire transfer of immediately available funds to an account designated in writing by Gaming Holdings, and (B) by delivery to Gaming Holdings of an irrevocable letter of credit in favor of Gaming Holdings and immediately callable by Gaming Holdings on demand in form and substance and from a nationally recognized U.S. bank satisfactory to Gaming Holdings; (ii) a counterpart of the Operating Agreement, duly executed by the Purchaser; (iii) a counterpart of the Salle Privee Agreement, duly executed by the Purchaser and LCI Parent; (iv) a counterpart of the Contribution Agreement, duly executed by LCI Parent; (v) a counterpart of the Keep Well Agreement, duly executed by LCI Parent; (vi) a counterpart of the Completion Guaranties, duly executed by LCI Parent; (vii) a counterpart of the Tax Indemnity Agreement, duly executed by the Purchaser and LCI Parent; (viii) the Purchaser Closing Certificate; and (ix)such other documents and certificates as shall be required to satisfy the conditions to the obligations of Gaming Holdings set forth in Section 7.2 (b) Gaming Holdings shall deliver or cause to be delivered to the Purchaser: (i) a Certificate of Shares in respect of the Purchaser Shares; 16 (ii) a counterpart of the Operating Agreement, duly executed by the Members of Gaming Holdings other than the Purchaser; (iii) a counterpart of the Salle Privee Agreement, duly executed by Gaming Holdings; (iv) a counterpart of the Contribution Agreement, duly executed by Holdings and the Trust; (v) a counterpart of the Keep Well Agreement, duly executed by Holdings; (vi) a counterpart of the Completion Guaranties, duly executed by the Trust; (vii) a counterpart of the Tax Indemnity Agreement, duly executed by Holdings and the Trust; (viii) Gaming Holdings Closing Certificate; (ix)the Closing Schedules; and (x) such other documents and certificates as shall be required to satisfy the conditions to the obligations of the Purchaser set forth in Section 7.1. ARTICLE III Representations and Warranties of Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust ----------------------------------------------------- Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust jointly and severally represent and warrant to the Purchaser and LCI Parent as of the Effective Date and as of the Closing Date that: SECTION 3.1. ORGANIZATION AND GOOD STANDING. (a) Each of Gaming Holdings, Music Holdings, Gaming and Sommer Enterprises is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Nevada. 17 (b) Holdings is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. (c) The Trust is a trust duly created under the will of Sigmund Sommer, under the laws of the State of New York and is being validly administered under the laws of the State of New York. SECTION 3.2. AUTHORITY. Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust have all requisite power and authority to enter into this Agreement; the execution and delivery by Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust of this Agreement and the consummation by Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust of the transactions contemplated hereby (including, as of the Closing Date, the Operating Agreement, the Salle Privee Agreement, the Contribution Agreement and the Tax Indemnity Agreement) have been duly authorized by all necessary corporate and other action on the part of Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust; and this Agreement has been duly and validly executed and delivered by Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust and constitutes and, as of the Closing Date, the Operating Agreement, the Salle Privee Agreement, the Contribution Agreement and the Tax Indemnity Agreement will constitute, (assuming the due and valid execution and delivery thereof by the Purchaser and LCI Parent) the legal, valid and binding obligation of Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust, enforceable against Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and by general equitable principles. SECTION 3.3. NON-CONTRAVENTION. Neither the execution, delivery and performance by Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust of this Agreement nor the consummation of the transactions contemplated hereby by Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust will (i) result in a breach of any of the terms or provisions of the Articles of Organization or Operating Agreement of Gaming Holdings, Gaming, Holdings or Sommer Enterprises, or the will 18 under which the Trust, was created, (ii) violate any applicable Law, or (iii) result in a violation or breach of any of the terms, conditions or provisions of any agreement to which Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust is a party, except such violations or breaches which are not reasonably likely to have a Material Adverse Effect on Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust or materially and adversely affect any of Gaming Holdings', Gaming's, Holdings', Sommer Enterprises' or the Trust's obligations under this Agreement, or under any agreement to be entered into by any of them pursuant hereto. SECTION 3.4. CONSENTS AND APPROVALS. The execution and delivery by Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust of this Agreement and the consummation of the transactions contemplated hereby do not require any filing by Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust with, or approval or consent of any domestic or foreign governmental or regulatory authority, agency or commission, including courts of competent jurisdiction (each, a "GOVERNMENTAL ENTITY") which has not already been made or obtained, except for (i) the filing of the Amended and Restated Articles with the Secretary of State of the State of Nevada, (ii) such filings and approvals as are required under the Nevada Act, and (iii) such filings, consents or approvals that will have been made or obtained on or prior to the Closing Date or the failure of which to make or obtain is not reasonably likely to have a Material Adverse Effect on Gaming Holdings or Gaming or to materially and adversely affect any of Gaming Holdings' or Gaming's obligations under this Agreement. SECTION 3.5. OUTSTANDING SHARES. (a) Subject to Gaming Holdings and the Purchaser agreeing upon an alternate capital structure, immediately after the Closing the only Members of Gaming Holdings and the outstanding Shares of Gaming Holdings will be as set forth in Schedule 3.5 and all such Shares shall be duly authorized and validly issued. Except as set forth on Schedule 3.5, there are no rights of any kind or legal or equitable claims to memberships, Interests or Shares in Gaming Holdings. (b) At the Closing, the only members of Sommer Enterprises will be Ronald Dictrow (who shall hold a 1.33 percent interest in the issued and outstanding membership interests in Sommer Enterprises) and Holdings (which 19 shall hold a 98.67 percent interest in the issued and outstanding membership interests in Sommer Enterprises) and except as set forth in Schedule 3.15 there are no other rights of any kind or legal or equitable claims to memberships, Interests or Shares in Sommer Enterprises. (c) At the Closing, Holdings shall be a ninety-five percent owned subsidiary of the Trust. SECTION 3.6. WARRANTY. As of the Effective Date Holdings owns, and as of the Closing Date Gaming shall own, indefeasible and insurable fee simple title to the Land And Existing Improvements subject only to those matters set forth on Schedule 3.6 (the "PERMITTED ENCUMBRANCES"). SECTION 3.7. TITLE MATTERS. Except as provided in Section 6.9 or as disclosed in Schedule 3.6, neither Gaming Holdings nor Gaming nor Holdings nor the Trust nor Sommer Enterprises has created or have knowledge of any unrecorded or undisclosed documents or any Liens, leases, rights of possession, covenants, conditions, easements, restrictions on use or claims affecting the Land And Existing Improvements, or other matters which affect title to the Land And Existing Improvements which are not disclosed on Schedule 3.6 (including the Title Report attached thereto (the "TITLE REPORT")). SECTION 3.8. COMPLIANCE WITH LAWS. Gaming Holdings, Gaming, Holdings, Sommer Enterprises, the Trust, and the Land And Existing Improvements are in material compliance with all Laws, including all building and zoning ordinances and codes. SECTION 3.9. NO EVENT OF DEFAULT. None of Gaming Holdings, Gaming, the Trust, Sommer Enterprises or Holdings is in default in any material respect beyond any applicable grace period under or with respect to any mortgage or any other material agreement or instrument to which either Gaming Holdings, Gaming, the Trust, Sommer Enterprises or Holdings is a party or by which any of Gaming Holdings, Gaming, the Trust, Sommer Enterprises or Holdings or any part of the Land And Existing Improvements is bound in any respect, nor has any event occurred, nor does any state of circumstances exist, the existence of which, with or without the passage of time or the giving of notice or both, would constitute an event of default under such mortgage, agreement or instrument. 20 SECTION 3.10. HAZARDOUS SUBSTANCES. Except as otherwise disclosed in the environmental reports described on Schedule 3.11: (a) the Land And Existing Improvements and all existing uses and conditions of the Land And Existing Improvements and the Redevelopment have been, and continue to be, in material compliance with all Environmental Laws, and neither Gaming Holdings, Gaming nor Holdings has received, and there are no pending or threatended (i) claims, complaints, notices or requests for information with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries regarding potential liability under any Environmental Law with respect to the Land And Existing Improvements or any portion thereof or any use or condition thereof; (b) there have been no Releases of Hazardous Substances at, or under the Land And Existing Improvements by Gaming Holdings, Gaming or Holdings that singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect on Gaming Holdings, Gaming or Holdings; (c) Gaming Holdings, Gaming or Holdings have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desireable for their businesses; (d) no part of the Land And Existing Improvements now or previously owned or leased by Gaming Holdings, Gaming or Holdings is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list requiring investigation or clean-up; (e) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under the Land And Existing Improvements now or previously owned or leased by Gaming Holdings, Gaming or Holdings that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect on Gaming Holdings, Gaming or Holdings; (f) neither Gaming Holdings, Gaming nor Holdings has directly transported or directly arranged for 21 the transportation of any Hazardous Substances to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against Gaming Holdings, Gaming or Holdings for any remedial work, damage to natural resources or personal injury, including claims under CERCLA; (g) there are no polychlorinated biphenyls or friable asbestos on or in the Land And Existing Improvements now or previously owned or leased by Gaming Holdings, Gaming or Holdings that, singly or in the aggregate, have or may reasonably be expected to have, a Material Adverse Effect on Gaming Holdings, Gaming or Holdings; and (h) no conditions exist at, on or under the Land And Existing Improvements now or previously owned or leased by Gaming Holdings, Gaming or Holdings which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law. SECTION 3.11. ENVIRONMENTAL AND SOILS REPORTS. Schedule 3.11 sets forth a complete list of all environmental, soils, seismic and geologic reports, studies and certificates relating to the Land And Existing Improvements. SECTION 3.12. SOMMER ENTERPRISES INTEREST. Sommer Enterprises owns, free and clear of all encumbrances, its Interest in Gaming Holdings. SECTION 3.13. HOLDINGS' BUSINESS. (a) Since its formation, the business of Holdings has been to acquire the Land And Existing Improvements and to engage in activities relating to the operation and development thereof, including pursuant to the JMJ Lease, and in respect of the Redevelopment. Except for the Land And Existing Improvements, (i) except as set forth in item (i) on Schedule 3.13, Holdings has no material assets, and (ii) except as set forth in item (ii) on Schedule 3.13, Holdings has no material liabilities. SECTION 3.14. FINANCIAL STATEMENTS. (a) The unaudited consolidated balance sheet of Gaming (with footnotes) and the related statements of income, changes in Members' equity and cash flow previously delivered to 22 Purchaser were prepared in accordance with generally accepted accounting principles applied on a consistent basis and present fairly, in all material respects, the financial condition of Gaming as of the date thereof and the results of their operations for the period indicated. (b) A consolidated balance sheet of Gaming Holdings (with footnotes) and the related statements of income, changes in Members' equity and cash flow shall be prepared as of the last day of the last month ending prior to the Closing and included in the Closing Schedules and shall be audited to the extent that audited financials are required on or around the Closing Date by the Gaming Financing. (c) The financial statements referred to in Sections 3.14(a) and (b), collectively, the "Financial Statements." SECTION 3.15. LITIGATION. Except as disclosed in Schedule 3.15, there is no action, suit, judgement, decree, charge, complaint, injunction, investigation or proceeding pending or, to the best knowledge of Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust, threatened against Gaming Holdings, Gaming, Holdings, Sommer Enterprises, the Trust, Music Holdings or Jack Sommer. SECTION 3.16. MATERIAL ADVERSE EFFECT. Except as disclosed in Schedule 3.16, since the date of this Agreement there has been no event, occurrence, or development, and there is not any state of circumstances or facts which has had or is likely to have, a Material Adverse Effect on Gaming Holdings, Gaming, Holdings, Sommer Enterprises, Music Holdings or the Trust. SECTION 3.17. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Schedule 3.17, neither Gaming Holdings, Music Holdings nor Gaming has any direct or indirect indebtedness, liability, claim, loss, damage, deficiency or obligation, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise (collectively, the "LIABILITIES"), required under generally accepted accounting principles to be reflected on a balance sheet (with footnotes) other than those Liabilities fully and adequately reflected or reserved against on the Financial Statements. Since the date of the latest Financial Statements, except as set forth in 23 Schedule 3.17, neither Gaming Holdings nor Gaming has incurred any Liabilities required under generally accepted accounting principles to be reflected on a balance sheet (with footnotes), other than such Liabilities as are incurred after the Effective Date under, pursuant to or as contemplated in a Redevelopment Document which has been approved by Purchaser pursuant to Section 6.1. Section 3.18. ASSETS OF THE TRUST. The Trust is possessed of assets free of encumbrances to an extent sufficient to meet its obligations under the Completion Guaranties, the Contribution Agreement, the Tax Indemnity Agreement, this Purchase Agreement and any guaranty obligations it may undertake in connection with any financing relating to the Shopping Center or the Second Hotel. ARTICLE IV Representations and Warranties of GAMING HOLDINGS, GAMING, SOMMER ENTERPRISES AND HOLDINGS Gaming Holdings, Gaming, Sommer Enterprises and Holdings jointly and severally represent and warrant to the Purchaser and LCI Parent as of the Effective Date and as of the Closing Date that: SECTION 4.1. SUBSIDIARIES. Except as set forth in Schedule 4.1 (which sets forth the extent of ownership), Gaming Holdings and Gaming have no subsidiaries, and Gaming Holdings and Gaming have no legal or equitable right or obligation to acquire any interest of any kind in any other Person. SECTION 4.2. MATERIAL CONTRACTS. Except as disclosed in Schedule 4.2, neither Gaming Holdings, Music Holdings nor Gaming is a party to or bound by: (i)any lease or sublease of real or personal property providing for annual rentals of $100,000 or more; (ii)any agreement for the purchase of goods, services, equipment or other assets that provides for annual payments by Gaming Holdings or Gaming of $100,000 or more; 24 (iii)any partnership, joint venture or other similar agreement or arrangement; (iv)any agreement relating to indebtedness (whether incurred, assumed, guaranteed or secured by any asset) or indemnification, other than any such agreement with an aggregate outstanding principal amount not exceeding $100,000; (v)any agreement with any Member, manager or officer of Gaming Holdings, Music Holdings or Gaming or with any Affiliate of any such Member, manager or officer; or (vi)any other agreement, commitment, arrangement or plan that is material to Gaming Holdings, Music Holdings or Gaming. SECTION 4.3. EMPLOYEES. Except as set forth in Schedule 4.3, neither Gaming Holdings, Music Holdings nor Gaming is a party to nor have they announced or promulgated any agency, employment or consulting agreements or union contracts. To the best knowledge of Gaming Holdings and Gaming each is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours. SECTION 4.4. EMPLOYEES BENEFIT PLANS; ERISA. Schedule 4.4 contains a list of each bonus, deferred compensation, incentive compensation, severance or termination pay, hospitalization or other medical, stock purchase, stock option, pension, life or other insurance, supplemental unemployment benefit, profit-sharing or retirement plan, agreement or arrangement, maintained for the benefit of any employee or former employee of Gaming Holdings, Music Holdings or Gaming (the "EMPLOYEE PLANS"). Except as set forth in Schedule 4.4: (a) No liability under Section 502 (i) or Title IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a tax under Section 4975 of the Code, has been incurred by Gaming Holdings or Gaming with respect to any Employee Plan established or maintained, or to which contributions are or have been made by Gaming Holdings, Music Holdings or Gaming which is an employee pension benefit plan (within the meaning of Section 3(2) of ERISA). No Employee Plans of Gaming Holdings or Gaming are multiemployer plans (as defined in 25 Section 3(37) of ERISA). No event has occurred, and no condition or set of circumstances currently exists with respect to the Employee Plans which presents a material risk of the occurrence of any event that might result in any liability of Gaming Holdings, Music Holdings or Gaming under Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code or other applicable Law. (b) Each Employee Plan is in compliance with ERISA and all other applicable Federal Laws and each Employee Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and Gaming Holdings and Gaming know of no fact which has adversely affected or which will adversely affect the qualified status of each Employee Plan. SECTION 4.5. ALADDIN NAMES. Schedule 4.5 contains a true and complete list of all trade names, trademarks, service marks, patents and copyrights used in connection with the business of the Aladdin Hotel and Casino (the "ALADDIN NAMES"). On the Closing Date, Gaming Holdings and Gaming shall have the exclusive (subject to the rights of other Persons in respect of the Redevelopment and the Land And Existing Developments as contemplated in this Agreement or as contemplated under the JMJ Lease) right to use each registered trademark and service mark listed on Schedule 4.5, and Gaming Holdings and Gaming's use thereof does not infringe on any trademark, trade names, assumed names, service marks, patents or copyrights or any other rights of any person or entity. SECTION 4.6. BROKERS OR FINDERS. Except as set forth in Schedule 4.2, neither Gaming Holdings, Music Holdings nor Gaming has employed any investment banker, broker or finder or incurred any liability for any investment banking fees, brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement, including the Gaming Financing and the Bazaar Financing. ARTICLE V Representations and Warranties of THE PURCHASER AND LCI PARENT The Purchaser and LCI Parent jointly and severally represent and warrant to Gaming Holdings, Gaming, 26 Holdings, Sommer Enterprises and the Trust as of the Effective Date and as of the Closing Date that: SECTION 5.1. ORGANIZATION AND GOOD STANDING. (a) The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Nevada. (b) LCI Parent is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. SECTION 5.2. PARENT. The Purchaser is an indirect wholly owned subsidiary of LCI Parent. SECTION 5.3. AUTHORITY. The Purchaser and LCI Parent have all requisite power and authority to enter into this Agreement; the execution and delivery by the Purchaser and LCI Parent of this Agreement and the consummation by the Purchaser and LCI Parent of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Purchaser and LCI Parent; and this Agreement has been duly and validly executed and delivered by the Purchaser and LCI Parent and constitutes (assuming the due and valid execution and delivery of this Agreement by Gaming Holdings, Gaming, the Trust, Holdings and Sommer Enterprises) the legal, valid and binding obligation of the Purchaser and of LCI Parent enforceable against the Purchaser and LCI Parent in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and by general equitable principles. SECTION 5.4. NON-CONTRAVENTION. Neither the execution, delivery and performance by the Purchaser and LCI Parent of this Agreement nor the consummation of the transactions contemplated hereby by the Purchaser and LCI Parent will (i) violate the Articles of Organization of the Purchaser or the Memorandum of Association and Articles of Association of LCI Parent,(ii) violate any applicable Law, or (iii) result in a violation or breach of any of the terms, conditions or provisions of any agreement to which the Purchaser or LCI Parent is a party, except such violations or breaches which are not reasonably likely to have material adverse effect on Gaming Holdings, Gaming, LCI Parent or the Purchaser or any of the Purchaser's or LCI Parent's obligations under 27 this Agreement, or under any agreement to be entered into by either of them pursuant hereto. SECTION 5.5. CONSENTS AND APPROVALS. The execution and delivery by the Purchaser and LCI Parent of this Agreement and the consummation of the transactions contemplated hereby do not require any filing by the Purchaser or LCI Parent with, or approval or consent of, any Governmental Entity which has not already been made or obtained, except such filings and approvals as are required under the Nevada Act, and except for such filings, consents or approvals that will have been obtained on or prior to the Closing Date or the failure of which to make or obtain is not reasonably likely to have a Material Adverse Effect on Gaming Holdings or Gaming or to materially and adversely affect any of the Purchaser's or LCI Parent's obligations under this Agreement. SECTION 5.6. LITIGATION. There is no action, suit, judgement, decree, charge, complaint, injunction, investigation or proceeding pending or, to the best knowledge of the Purchaser or LCI Parent, threatened against the Purchaser or LCI Parent. SECTION 5.7. INVESTMENT. The Purchaser is acquiring the Purchaser Shares for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof in violation of the Securities Act. The Purchaser understands that the Purchaser Shares to be purchased have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations with respect thereto as expressed herein. The Purchaser understands and acknowledges that the Purchaser Shares are subject to restrictions on transfer pursuant to the terms of the Operating Agreement. SECTION 5.8. NO PUBLIC MARKET. The Purchaser understands that no public market now exists for any securities issued by Gaming Holdings, including the Purchaser Shares, and that there can be no assurance that a public market for such securities, including the Purchaser Shares, will develop in the future. The Purchaser acknowledges that the Purchaser Shares must be held indefinitely unless subsequently registered under the 28 Securities Act or unless an exemption from such registration is available. The Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resales of securities purchased in a private placement, subject to the satisfaction of certain conditions, and that there can be no assurance that Rule 144 will ever be available for any resale of the Purchaser Shares. SECTION 5.9. BROKERS AND FINDERS. Except for Oppenheimer & Co., Inc., neither the Purchaser nor LCI Parent have employed any investment banker, broker or finder or incurred any liability for any investment banking fees, brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement. SECTION 5.10. MATERIAL ADVERSE EFFECT. Since the date of this Agreement, there has been no event, occurrence, or development, and there is not any state of circumstances or facts which has had or is likely to have, a Material Adverse Effect on the Purchaser or LCI Parent. ARTICLE VI COVENANTS SECTION 6.1. REDEVELOPMENT DOCUMENTS. (a) When Gaming Holdings in good faith believes that one or more of the Redevelopment Documents as to which consultation and counseling has taken place pursuant to Section 6.5 is complete and satisfactory, Gaming Holdings shall send a notice to the Purchaser to that effect (a copy of the relevant Redevelopment Document(s) shall accompany such notice and such notice shall make express reference to each Redevelopment Document accompanying it). The Purchaser, in respect of each Redevelopment Document included in such notice, within fifteen days after receipt by the Purchaser of such notice, time being of the essence, in its sole discretion shall either (i) approve such Redevelopment Document in that form, or (ii) object to such Redevelopment Document and provide Gaming Holdings with written reasons for its objection. (b) If the Purchaser objects to a Redevelopment Document, or fails to approve a Redevelopment Document within fifteen days of the Purchaser's notice under 29 Section 6.1(a), time being of the essence, Gaming Holdings and the Purchaser shall enter into good faith negotiations for an additional fifteen day period and use commercially reasonable efforts to reach agreement to resolve each other's concerns. Upon the failure of Gaming Holdings and the Purchaser to reach such agreement within such additional fifteen day period, either Gaming Holdings or the Purchaser may within fifteen days of the expiration of such additional fifteen day period terminate this Agreement pursuant to Article IX. (c) Any Redevelopment Documents approved by the Purchaser at any time pursuant to this Section 6.1 shall be deemed to have been approved by the Purchaser for the purposes of Sections 2.2 and 7.1, and no new approval shall be required from the Purchaser, except to the extent that the Purchaser determines (i) that any such Redevelopment Document is adversely affected by or adversely affects any subsequent Redevelopment Document(s) presented to the Purchaser for approval hereunder, or (ii) that the effect of any subsequently presented Redevelopment Document or the Redevelopment Documents taken as a whole, materially increase LCI Parent's potential liability under the Completion Guaranties or the Keep Well Agreement above reasonably anticipated levels. (d) Gaming Holdings, subject to prior consultation and counseling with the Purchaser pursuant to Section 6.5, may submit amendments of or variations to any or all of the Redevelopment Documents to the Purchaser at any time, whether or not the Purchaser has previously approved such Redevelopment Documents, and the procedures and provisions of Sections 6.1(a), (b) and (c) above shall apply. (e) As of the date hereof the Purchaser has approved for all purposes herein the documents set forth on Schedule 6.1. SECTION 6.2. FINANCING. (a) Subject to the provisions hereinafter set forth, LCI Parent, Holdings, the Trust and the Purchaser agree that they shall use commercially reasonable efforts to assist Gaming and Gaming Holdings to arrange the Gaming Financing, including (i) with respect to LCI Parent and the Trust, to enter into (A) a joint and several guaranty of performance and completion in connection with the Bank Debt, and (B) a joint and several guaranty of performance and completion in favor of the holders of the Discount Notes 30 and in favor of the Contingent Guarantor (as shall be defined therein) (collectively, the "COMPLETION GUARANTIES"); (ii) with respect to LCI Parent and Holdings, to enter into a Keep Well Agreement (the "KEEP WELL AGREEMENT") with the providers of the Bank Debt (the "BANK LENDERS") under which Holdings and LCI Parent shall jointly and severally covenant to make certain cash equity contributions to Gaming in certain circumstances; (iii) with respect to LCI Parent, Holdings and the Trust, to enter into a contribution agreement (the "CONTRIBUTION AGREEMENT") pursuant to which (A) LCI Parent and the Trust shall agree to be obligated, notwithstanding the joint and several obligations of LCI Parent and the Trust stated in the Completion Guaranties, for such portion of any liability incurred under the Completion Guaranties in the proportion of twenty-five percent for LCI Parent and seventy-five percent for the Trust, and (B) pursuant to which LCI Parent and Holdings shall agree to be obligated, notwithstanding the joint and several obligations of LCI Parent and Holdings stated in the Keep Well Agreement, for such portion of any liability incurred under the Keep Well Agreement in the proportion of twenty-five percent for LCI Parent and seventy-five percent for Holdings; and (iv) with respect to the Purchaser, LCI Parent, the Trust and Holdings, to enter into a tax indemnity agreement (the "Tax Indemnity Agreement") consistent with the terms of the Agreement entered into by the Purchaser, LCI Parent, the Trust and Holdings, dated as of January 29, 1998 pursuant to which the Trust and Holdings jointly and severally shall agree to indemnify on an after tax basis the Purchaser and LCI Parent, and each of them against various taxes, losses, costs or damages; PROVIDED that the terms and conditions of each of the Completion Guaranties, the Keep Well Agreement, the Contribution Agreement and the Tax Indemnity Agreement are satisfactory to LCI Parent, Holdings and the Trust, each in its respective sole discretion. In consideration of the foregoing, LCI Parent shall receive (x) an initial fee of $2.65 million and (y) a fee accruing from the Closing Date of one and one-half percent (1.5%) per annum of Gaming's average annual indebtedness with respect to that portion of the Bank Debt which is supported and enhanced by the Keep Well Agreement for each relevant twelve month period (or part thereof) (which amount shall reflect the extent, if any, by which the obligations under the Keep Well Agreement are reduced or eliminated under certain circumstances over time), which (A) in respect of the fee accruing during the period from the Closing Date to the Opening Date, shall be paid following the Opening Date 31 out of First Available Proceeds and (B) in respect of the fee accruing during the period from and after the Opening Date shall be payable annually in arrears within thirty days after each twelve month anniversary of the Opening Date, failing which Gaming Holdings shall pay such fee by issuing to LCI Series A Preferred Shares in the capital of Gaming Holdings at the rate of one Series A Preferred Share for each $100 which is not paid at the end of such thirty day period. (b) On or prior to the Closing, Gaming Holdings and Gaming shall enter into all Redevelopment Documents comprising the Gaming Financing that have been approved by the Purchaser pursuant to Section 6.1 or Section 2.2. (c) Each of Holdings and the Purchaser agrees to pay, within thirty days after receipt of a request therefor (together with reasonably detailed documentation evidencing such costs), its pro rata share (i.e., seventy-five percent for Holdings and twenty-five percent for the Purchaser) of all fees and expenses paid or incurred in connection with the Gaming Financing to the extent previously mutually approved in writing by the Purchaser and Holdings. Without limiting the foregoing, the parties acknowledge and agree to pay their respective shares of the commitment fee which is due upon execution of a commitment letter in respect of the Bank Debt. All such payments shall become obligations of Gaming (and shall be reimbursed as appropriate) as of the Closing Date. (d) Subject to the consummation of the Closing, Gaming shall pay (i) the fees of Westwood Capital, LLC and HK Group, LLC, respectively, arising under the agreements set forth in Schedule 4.2, and (ii) the fees of Oppenheimer & Co. in connection with the transactions contemplated herein, and (iii) the legal fees relating to the transactions contemplated herein. The parties acknowledge that Gaming shall pay to the Trust (A) in consideration for certain expenses incurred by the Trust prior to the Closing, $3 million at the Closing and (B) after the Closing, amounts to reimburse the Trust for out-of-pocket expenses relating to the Redevelopment, not to exceed $900,000. (e) The parties agree to exercise reasonable diligent efforts to coordinate the Gaming Financing and the Bazaar Financing, including facilitating inter-creditor agreements and the delivery of attornment and 32 nondisturbance agreements; PROVIDED that the terms and conditions thereof are satisfactory to each of the parties in their respective sole discretion. SECTION 6.3. DISCOUNT NOTES AND WARRANTS. At the Closing, Gaming shall issue the Discount Notes and Sommer Enterprises shall cause Aladdin Enterprises to issue the Warrants. SECTION 6.4. INTERESTS OF EMPLOYEES, OFFICERS AND CONSULTANTS. (a) The parties acknowledge that in consideration for the contribution of certain interests in Gaming, Gaming Holdings shall at the Closing (i) issue to Goeglein an unvested Interest in Gaming Holdings equal to a two percent Percentage Interest on the terms and conditions of the Goeglein Employment and Consulting Agreement, (ii) issue to GAI an Interest in Gaming Holdings equal to a three percent Percentage Interest, fully vested, on the terms and conditions of the GAI Consulting Agreement and (iii) issue to various other officers and employees of Gaming certain unvested Interests in Gaming Holdings on the terms and conditions of various amended employment agreements disclosed in Schedule 4.3. The parties further acknowledge that Goeglein, GAI and such other officers and employees of Gaming will, pursuant to the Goeglein Employment and Consulting Agreement and the GAI Consulting Agreement and the above-mentioned other amended employment agreements with officers and employees of Gaming disclosed in Schedule 4.3, respectively, each have the right to purchase additional securities in certain circumstances to avoid dilution of their respective Interests and/or put their Interests to Gaming Holdings in certain circumstances and on certain terms and conditions. (b) The capital structure of Gaming Holdings at the Closing shall reflect that immediately after the Closing GAI shall have a three percent (3%) Percentage Interest, and Sommer Enterprises' Interest shall be diluted to accommodate such three percent interest of GAI and the Purchaser's Interest shall not be diluted thereby. Subject to the consummation of the Closing, on the Opening Date the Purchaser's Percentage Interest shall be decreased by 0.5% and Sommer Enterprises' Percentage Interest shall be correspondingly increased by 0.5%. Notwithstanding the foregoing, Goeglein's two percent (2%) Percentage Interest (whether vested or unvested), GAI's three percent (3%) Percentage Interest and the Interests of the other officers and employees of Gaming 33 referred to in Section 6.4(a) (whether vested or unvested) shall be subject to dilution upon the Exercise of any Warrants. (c) Gaming Holdings shall, on or prior to the Closing, ensure that the Goeglein Employment and Consulting Agreement is amended to provide that a change of control which occurs, pursuant to the provisions of the Operating Agreement, in connection with defaults and/or calls under the Completion Guaranties, the Keep Well Agreement or the Contribution Agreement, shall not be deemed a change of control for purposes of the Goeglein Employment and Consulting Agreement. SECTION 6.5. INFORMATION AND CONSULTATION. (a) Within ten days after the Effective Date, Gaming shall endeavor to deliver to the Purchaser a copy of all items set forth on the Schedules hereto the most recent drafts as at the Effective Date of the Redevelopment Documents, to the extent that such Redevelopment Documents exist, copies of all licenses, applications (other than applications relating to the submissions to the Nevada Gaming Authorities), permits and other approvals and notices from Governmental Entities relating to the Redevelopment, or any part thereof (collectively "APPLICATIONS" and "APPROVALS") and copies of all documents, deeds, proposals, letters of intent and agreements relating to the construction, financing, fitting out and furnishing, maintenance and operation of the Second Hotel, provided, however, that to the extent that the Purchaser shall have elected to proceed pursuant to Section 6.7(a)(iii), such documents and agreements shall be only those which directly or indirectly affect the Redevelopment (the "SECOND HOTEL DOCUMENTS"). (b) From and after the Effective Date and until and including the Closing Gaming shall: (i) promptly and regularly consult and counsel with Purchaser with respect to all material issues arising with respect to the Redevelopment and any part thereof, the Redevelopment Documents, the Applications and Approvals, and the Second Hotel Documents, as such issues arise and to the extent such issues will be the subject of discussions or negotiations with third parties, cooperate with Purchaser in developing Gaming's positions, and afford the Purchaser the opportunity to attend meetings at which such issues will be negotiated; 34 (ii) without limiting the foregoing, promptly consult and counsel with the Purchaser with respect to the development of Redevelopment Plans and Specifications, and the Redevelopment Budgets; (iii) without limiting the foregoing, promptly and regularly consult and counsel with the Purchaser with respect to any proposed material commitment of Gaming Holdings, Music Holdings or Gaming with respect to the Redevelopment or any part thereof; and (iv) without limiting the foregoing, Gaming shall promptly provide to the Purchaser the latest drafts of the Redevelopment Documents, the Second Hotel Documents, and all Applications, Approvals and notices from Governmental Entities, shall notify the Purchaser of, and invite representatives of the Purchaser to attend, all of Gaming's project meetings, and upon reasonable notice shall provide the Purchaser with access to all books, records and key employees of Gaming, Gaming Holdings and Music Holdings. SECTION 6.6. INSURANCE. From and after the Closing Gaming shall maintain insurance in kind and amount reasonably necessary to protect against the risks inherent or associated with the business of Gaming, including the operations and marketing of the Salle Privee Facilities, which insurance, in kind and amount, shall at all times comply with the requirements of the Gaming Financing and shall include LCI Parent and the Purchaser as named insureds. SECTION 6.7. SECOND HOTEL. (a) Subject to (i) the constituent draft Redevelopment Documents in respect of the Second Hotel which have been provided to LCI as of the date hereof being unchanged, (ii) an adequate and satisfactory financing commitment being in place for the Second Hotel, (iii) there being no use, directly or indirectly of the credit support and enhancement which LCI is providing pursuant to Section 6.2 (including the Keep Well Agreement and Completion Guaranties) and (iii) the terms of the Second Hotel venture being satisfactory to Trizec Hahn Centres, Inc., Purchaser has agreed that Gaming will proceed with the development of the Second Hotel through a partially owned subsidiary of Music Holdings, PROVIDED that the material terms of the Second Hotel Documents shall provide for the development of the Second Hotel without utilizing, and shall specifically indemnify LCI Parent against the use 35 of, the credit support and enhancement which LCI Parent is providing pursuant to Section 6.2 (including the Keep Well Agreement and Completion Guaranties). (b) If Purchaser decides not to proceed with the Second Hotel venture on the terms of Section 6.7(a) on the grounds of any of the matters listed in clauses (i)-(iv) Gaming may propose by notice (the "SECOND HOTEL NOTICE") to the Purchaser that Gaming proceed with the development of the Second Hotel at some point during or subsequent to the Redevelopment, which Second Hotel Notice shall contain the material terms of such proposed development (including the financing thereof). The Purchaser shall notify Gaming, within thirty days after delivery of the Second Hotel Notice, time being of the essence, as to which of the following courses of action it shall pursue (the failure to so notify being deemed to be the election of choice (iii) below): (i) Gaming may proceed with the development of the Second Hotel substantially in accordance with the Second Hotel Notice and utilizing the Gaming Financing and the credit support and enhancement which LCI Parent is providing pursuant to Section 6.2. (ii)Gaming may proceed with the development of the Second Hotel substantially in accordance with the Second Hotel Notice, provided that the material terms shall provide for the development of the Second Hotel without utilizing, and shall specifically indemnify LCI Parent against the use of, the credit support and enhancement which LCI Parent is providing pursuant to Section 6.2 (including the Keep Well Agreement and Completion Guaranty). (iii) Holdings shall have the right to cause Gaming to convey to Holdings or an Affiliate thereof, or to a joint venture involving Holdings or an Affiliate thereof, or to a third party, the Second Hotel Parcel, and such entity shall thereafter have the right to develop the Second Hotel. In such event, the Purchaser at Purchaser's election shall have the right to receive either (A) cash equal to twenty-five percent (25%) of the independently assessed market value of the Second Hotel Parcel or (B) twenty-five percent (25%) of the equity interest of Holdings and its Affiliates in the entity which will own and develop the Second Hotel. 36 (c) The Purchaser shall have the right to approve, such approval not to be unreasonably withheld, matters relating to the Second Hotel to the extent such matters directly or indirectly affect the Aladdin Redevelopment or Gaming Holdings, Music Holdings or Gaming, including (if the Second Hotel proceeds as a partially owned subsidiary of Music Holdings pursuant to Section 6.7(a)) any proposed rights or remedies to be afforded to the Trust of any of its Affiliates in connection with any completion guaranty or keep well obligations undertaken by the Trust or any Affiliate of the Trust. Such reasonableness on the part of the Purchaser shall include, without limitation, any potential detrimental effect such Second Hotel (other than its mere existence, as to which the Purchaser shall not have the right to object) may have on the financial risks of the Purchaser or its Affiliates in connection with the Aladdin Redevelopment. (d) Any dispute between the Purchaser and Gaming or Holdings in connection with any determination pursuant to Section 6.7(c) shall be finally settled through binding arbitration by a sole, disinterested arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall be jointly selected by the Purchaser and Holdings but, if the Purchaser and Holdings do not agree on an arbitrator within thirty days after demand for arbitration is made, they shall request that the arbitrator be designated by the American Arbitration Association. The award of the arbitrator shall be final and conclusive upon the Purchaser, Gaming and Holdings. Each party to the arbitration shall pay the compensation, costs, fees and expenses of its own witnesses, experts and counsel. The compensation and any costs and expenses of the arbitrator shall be borne equally by the Purchaser and Gaming. Judgement upon the award rendered may be entered in any court having jurisdiction thereof, which court may order appropriate relief at law or equity. All proceedings relating to any such arbitration, and all testimony, written submissions and award of the arbitrator therein, shall be private and confidential as among the parties thereto, and shall not be disclosed to any other Person, except as required by law and except as reasonably necessary to prosecute or defend any judicial action to enforce, vacate or modify such arbitration award. 37 SECTION 6.8. GAMING MATTERS. (a) The parties agree that from the Effective Date they shall be subject to the provisions of the Nevada Act and to the licensing and regulatory control of the Nevada Gaming Authorities. The parties acknowledge that, in order for Gaming Holdings and Gaming to carry on their business, Sommer Enterprises, Holdings, the Trust, the Purchaser, LCI Parent and their Affiliates and respective employees, officers and directors may be required to submit personal history and financial information to, and be found suitable by, the Nevada Gaming Authorities and gaming authorities of other jurisdictions. If required by the Nevada Gaming Authorities or gaming authorities of other jurisdictions, Sommer Enterprises, Gaming Holdings, Holdings, the Trust, the Purchaser and LCI Parent shall each, and shall cause their respective Affiliates, employees, officers and directors to, (i) promptly submit such personal history and financial history, (ii) cooperate in any investigation and (iii) seek a finding of suitability. Sommer Enterprises, Gaming Holdings, Holdings, the Trust, the Purchaser and LCI Parent each shall be responsible for its own costs and expenses (i.e., the costs and expenses incurred by them, their Affiliates and their respective principals/members and employees, officers and directors) in connection with obtaining, attempting to obtain or retaining a license in accordance with this Section 6.8. (b) The parties acknowledge, understand and agree that, to the extent that the prior approval of the Nevada Gaming Authorities is required pursuant to the Nevada Act for the taking of any action under, or the operation and effectiveness of, any provision of this Agreement, each of them will use commercially reasonable efforts to obtain same. (c) If Gaming Holdings or Purchaser shall determine prior to the Closing Date, in good faith, based upon verifiable information and specific provisions of the applicable gaming statutes and rules promulgated thereunder or upon specific information received from the Nevada Gaming Authorities, that a Gaming Problem exists in respect of either Sommer Enterprises, Gaming Holdings, Gaming, Holdings, the Trust or their respective Affiliates (in the case of a determination by the Purchaser) or the Purchaser, LCI Parent or their respective Affiliates (in the case of a determination by Gaming Holdings), then Gaming Holdings or the Purchaser, as the case may be, shall provide written notice to the other such party (the "GAMING PROBLEM PARTY") requesting that the Gaming Prob- 38 lem Party provide for the elimination of the Gaming Problem, and: (i) (A) if the Gaming Problem is caused by directors, officers, managers or trustees of the Gaming Problem Party, the Gaming Problem Party shall terminate the employment of such Person and (B) if the Gaming Problem is caused by a shareholder, partner, member or beneficiary of the Gaming Problem Party, the Gaming Problem Party shall either purchase such Person's ownership or other interest in the Gaming Problem Party or require such Person to transfer its ownership or other interest in the Gaming Problem Party to a trust or other entity (if any) that would eliminate the Gaming Problem; or (ii) after providing the Gaming Problem Party with such written notice and ninety days to eliminate such Gaming Problem, Gaming Holdings (where the Purchaser or LCI Parent is the Gaming Problem Party) or the Purchaser (where Sommer Enterprises, Gaming Holdings, Gaming, Holdings or the Trust is the Gaming Problem Party) may elect to terminate this Agreement pursuant to Article IX, without further liability hereunder (other than pursuant to Sections 6.2(c) and 11.4), if the Gaming Problem Party does not eliminate such Gaming Problem within such ninety day period, time being of the essence. SECTION 6.9. CONVEYANCE OF LAND AND EXISTING IMPROVEMENTS. (a) On or prior to the Closing, simultaneously upon the fulfillment of the conditions set forth in Section 7.2 hereof and the delivery of all items set forth in Section 2.3(a) hereof, the Trust and Holdings shall cause (i) the Land And Existing Improvements to be conveyed to Gaming with title as warranted in this Agreement, and (ii) to the extent permitted by law, all Applications and Approvals to be assigned to Gaming. (b) The parties agree that Gaming may (i) lease and/or convey the Second Hotel Parcel to another entity pursuant to and subject to the requirements of Section 6.7, (ii) subject to Gaming receiving the economic terms set forth on Exhibit 2, lease and/or convey the Shopping Center Parcel to Bazaar or an Affiliate of Bazaar, (iii) lease and/or convey the Utility Parcel to a third party in consideration for such party's agreement to construct, maintain and operate a cogeneration or central utility plant, and (iv) in the event that Gaming, with the Purchaser's approval, shall decline to develop 39 the Timeshare Parcel, lease and/or convey the Timeshare Parcel to Sommer Enterprises, an Affiliate of Sommer Enterprises or a Third Party in consideration for the appraised market value, independently assessed, of the Timeshare Parcel, and otherwise on terms and conditions reasonably approved by the Purchaser and provided that the Purchaser shall have the right to approve all documents, deeds, proposals, letters of intent and agreements, including financing agreements, relating to the construction, fitting out, maintenance and operation of the Utility Parcel or the Timeshare Parcel developments which, directly or indirectly, affect the Redevelopment. SECTION 6.10. JMJ LEASE. The parties agree that Holdings shall be responsible for all payments made to JMJ, Inc. under the JMJ Lease, as a result of the termination of the JMJ Lease, except that Gaming shall be responsible for all payments required to be made in respect of the federal WARN statute. Gaming shall have the benefit of the proceeds received from the sale of salvageable equipment on the Land And Existing Improvements owned by Gaming Holdings, Gaming, Holdings, Sommer Enterprises, the Trust and their respective Affiliates after the termination of the JMJ Lease. SECTION 6.11. FINANCIAL INFORMATION. (a) If, in connection with the registration of the Discount Notes or Warrants under the Securities Act or the Securities Exchange Act of 1934, as amended, a registration statement is, in the reasonable opinion of counsel to Gaming Holdings, Aladdin Capital Corp. and Aladdin Enterprises ("Issuers' Counsel") or the Securities and Exchange Commission ("SEC"), required to contain financial statements and/or other financial information of or concerning LCI Parent, then LCI Parent agrees to provide to Gaming Holdings, Aladdin Capital Corp. and Aladdin Enterprises such financial statements and/or financial information prepared and presented in the manner required by Issuers' Counsel or the SEC, as applicable (including reconciliation of such statements and information to United States generally accepted accounting principles, if required) within a sufficient time period to allow Gaming Holdings, Aladdin Capital Corp. and Aladdin Enterprises to comply with their obligations under the Notes Registration Rights Agreement and the Warrant Registration Rights Agreement within the time periods required thereunder. (b) In the event that financial statements and/or other financial information of or concerning LCI 40 Parent as of any dates or periods which do not correspond with the dates or periods when or in respect of which LCI Parent regularly prepares such information, both Gaming Holdings and Gaming and LCI Parent shall use their best endeavors to submit to the SEC that such dates or periods are impractical and to persuade the SEC not to require such statements and/or information as of those dates or periods. (c) All costs and expenses in connection with any adaptation whether as to dates, time periods or otherwise, or any reconciliation of LCI Parent financial statements and/or financial information and any effort undertaken on behalf of LCI Parent to persuade the SEC as aforesaid (including, without limitation, the fees and expenses of counsel and of auditors or other advisors or experts), shall be borne by Gaming Holdings or Gaming. ARTICLE VII CONDITIONS TO CLOSING SECTION 7.1. CONDITIONS TO THE PURCHASER'S AND LCI PARENT'S OBLIGATIONS. The obligation of the Purchaser and LCI Parent to consummate the purchase of the Purchaser Shares and the other transactions contemplated hereby is subject to the satisfaction (or waiver by the Purchaser or LCI Parent, in their sole discretion) at or prior to the Closing of the following conditions: (a) The representations and warranties of Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust made in this Agreement shall be true and correct in all material respects as of the Effective Date and as of the Closing Date with the same effect as if made at and as of the Closing Date. Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust shall have performed in all material respects the agreements required to be performed by Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust on or prior to the Closing Date. Gaming Holdings shall have delivered to the Purchaser a certificate of an officer of Gaming Holdings to the foregoing effect (the "GAMING HOLDINGS CLOSING CERTIFICATE"). (b) No injunction or order of any Governmental Entity shall be in effect as of the Closing Date, and no lawsuit, claim, arbitration, proceeding or investigation shall be pending before any Governmental Entity as of the 41 Closing Date, and there shall be no outstanding judgment, order or decree of any Governmental Entity, in each case, which would restrain or prohibit the issuance and sale of the Purchaser Shares on the Closing Date or the consummation of any of the other transactions contemplated by this Agreement or invalidate or suspend any provision of this Agreement. (c) Since the Effective Date, there shall have been no event, occurrence, or development and there shall not be any state of circumstances or facts (whether or not disclosed in the Closing Schedules or the Gaming Holdings Closing Certificate) which has had or is likely to have a Material Adverse Effect on Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust. (d) Gaming shall have delivered to the Purchaser an opinion of counsel to Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust in form and substance satisfactory to the Purchaser. (e) The Purchaser shall be satisfied, in its sole discretion, that all Redevelopment Documents necessary for the timely completion of the construction, furnishing and fitting out of the Redevelopment are in full force and effect and all of such Redevelopment Documents shall have theretofore been presented to, and approved by, the Purchaser in its sole discretion pursuant to Section 6.1 or Section 2.2. (f) Without limiting the foregoing, the Gaming Financing shall, on terms and conditions satisfactory to the Purchaser in its sole discretion, have been consummated and be in full force and effect, and with respect to Bazaar Financing, a financing commitment shall be in full force and effect on terms and conditions satisfactory to the Purchaser in its sole discretion to the extent that such terms and conditions directly or indirectly affect the Redeveloped Aladdin, Gaming Holdings or Gaming. (g) The Purchaser shall be satisfied in its sole discretion that the Redevelopment Documents taken as a whole do not materially increase LCI Parent's liability under the Completion Guaranties or the Keep Well Agreement above reasonably anticipated levels. 42 (h) A counterpart of each of the Operating Agreement, Salle Privee Agreement and Contribution Agreement shall have been duly executed by the other party or parties thereto, shall have been delivered to the Purchaser, and shall be in full force and effect, assuming due and valid execution and delivery by the Purchaser and LCI Parent of each such agreement to which they are a party. (i) A counterpart of the Completion Guaranties and the Keep Well Agreement containing terms and conditions satisfactory to LCI Parent in its sole discretion shall have respectively been duly executed by Holdings and the Trust, and Holdings, delivered to the Bank Lenders, and be in full force and effect, assuming due and valid execution and delivery by LCI Parent. (j) A counterpart of the Tax Indemnity Agreement shall have been duly executed by the Trust and Holdings, shall have been delivered to LCI Parent and the Purchaser and shall be in full force and effect, assuming due and valid execution and delivery by the Purchaser and LLC Parent. (k) If an Escrow Agreement is required by the Gaming Financing, a counterpart of the Escrow Agreement with an Escrow Agent, and on terms and conditions satisfactory to the Purchaser in its sole discretion, shall have been duly executed by the other parties thereto, and a counterpart thereof shall have been delivered to the Purchaser. (l) An amendment to the Goeglein Employment and Consulting Agreement providing that a change of control which occurs, pursuant to the provisions of the Operating Agreement, in connection with defaults and/or calls under the Completion Guaranties, the Keep Well Agreement or the Contribution Agreement, shall not be deemed a change of control for purposes of the Goeglein Employment and Consulting Agreement. (m) An ALTA Policy of Title Insurance in the amount of at least $180 million insuring in favor of Gaming's title to the Land And Existing Improvements as warranted in this Agreement and issued by a title insurer (and if reinsured, reinsured by reinsurers) reasonably satisfactory to the Purchaser, shall have been delivered to Gaming, and shall be in full force and effect. 43 (n) The Amended and Restated Articles shall have been entered into. (o) The closing of the sale of the Discount Notes and Warrants shall have taken place. SECTION 7.2. CONDITIONS TO GAMING HOLDINGS'S, GAMING'S, HOLDINGS', SOMMER ENTERPRISES' AND THE TRUST'S OBLIGATIONS. The obligation of Gaming Holdings, Gaming, Holdings, Sommer Enterprises and the Trust to consummate the issuance and sale of the Purchaser Shares and the other transactions contemplated hereby is subject to the satisfaction (or waiver by Gaming Holdings, Gaming, Holdings, Sommer Enterprises or the Trust, in their sole discretion) at or prior to the Closing of the following conditions: (a) The representations and warranties of the Purchaser and LCI Parent made in this Agreement shall be true and correct in all material respects as of the Effective Date and as of the Closing Date with the same effect as if made at and as of the Closing Date. The Purchaser or LCI Parent shall have performed in all material respects the agreements required to be performed by the Purchaser or LCI Parent on or prior to the Closing Date. The Purchaser shall have delivered to Gaming Holdings a certificate of an officer of the Purchaser to the foregoing effect (the "PURCHASER CLOSING CERTIFICATE"). (b) No injunction or order of any Governmental Entity shall be in effect as of the Closing Date, and no lawsuit, claim, arbitration, proceeding or investigation shall be pending before any Governmental Entity as of the Closing Date, and there shall be no outstanding judgment, order or decree of any Governmental Entity, in each case, which would restrain or prohibit the issuance and sale of the Purchaser Shares on the Closing Date or the consummation of any of the other transactions contemplated by this Agreement or invalidate or suspend any provision of this Agreement. (c) Each of the Redevelopment Documents that, in Gaming Holdings' opinion in its sole discretion, are necessary for the timely completion of the construction, furnishing and fitting out of the Redevelopment shall have been presented to and approved by the Purchaser pursuant to Section 6.1, and the Redevelopment Agreements and the Redevelopment Financing Agreements shall have 44 been duly executed and delivered by the parties thereto and shall be in full force and effect. (d) Without limiting the foregoing, the Gaming Financing shall, on terms and conditions satisfactory to Gaming Holdings in its sole discretion, have been consummated and be in full force and effect, and with respect to the Bazaar Financing, a financing commitment shall be in full force and effect on the terms and conditions satisfactory to Gaming Holdings and Gaming in its sole discretion. (e) A counterpart of each of the Operating Agreement, Salle Privee Agreement and Contribution Agreement shall have been duly executed by the other party or parties thereto, shall have been delivered to Gaming Holdings, and shall be in full force and effect, assuming due and valid execution and delivery by Gaming, Holdings and the Trust of each such agreement to which they are a party. (f) A counterpart of each of the Completion Guaranties and the Keep Well Agreement containing terms and conditions satisfactory to the Trust and Holdings, respectively, in their sole discretion shall have been duly executed by LCI Parent, delivered to the Bank Lenders, and be in full force and effect, assuming due and valid execution and delivery by the Trust and Holdings, respectively. (g) If an Escrow Agreement is required by the Gaming Financing, a counterpart of the Escrow Agreement with an Escrow Agent, and on terms and conditions satisfactory to Gaming Holdings in its sole discretion, shall have been duly executed by the other parties thereto, and a counterpart thereof shall have been delivered to Gaming Holdings. (h) The Purchaser shall have paid the Purchase Price to Gaming Holdings, as provided in Section 2.3(a)(i). (i) Since the Effective Date, there shall have been no event, occurrence, development, state of circumstances or facts (whether or not disclosed in the Purchaser Closing Certificate) which has had or is likely to have a Material Adverse Effect on the Purchaser or LCI Parent. 45 (j) The Discount Notes and Warrants shall be issued and outstanding. (k) The Purchaser shall have delivered to Gaming an opinion of counsel to the Purchaser and LCI Parent in form and substance satisfactory to Gaming. ARTICLE VIII GUARANTEE SECTION 8.1. GUARANTEE. LCI Parent hereby unconditionally and irrevocably guarantees to Gaming Holdings the prompt and complete performance by the Purchaser, when due, of the Purchaser's obligations under this Agreement. ARTICLE IX TERMINATION SECTION 9.1. TERMINATION. This Agreement may be terminated at any time prior to the Closing Date: (a) by mutual agreement in writing of the Purchaser and Gaming Holdings; (b) by written notice given by Gaming Holdings or by Purchaser as provided in Sections 2.2(b) and 6.1(b); (c) by written notice by Gaming Holdings or Gaming if (i) LCI Parent or the Purchaser fails to cure a Gaming Problem within the ninety day period provided in Section 6.8(c)(ii), time being of the essence, or (ii) LCI Parent or the Purchaser or any of their respective Affiliates or any of their respective employees, officers or directors fails to make any filing or disclosure required or requested by, or withdraws any filing or disclosure made to, the Nevada Gaming Authorities; (d) by written notice by the Purchaser if (i) Sommer Enterprises, Gaming Holdings, Gaming, Holdings or the Trust fails to cure a Gaming Problem within the ninety day period provided in Section 6.8(c)(ii), time being of the essence, or (ii) Sommer Enterprises, Gaming Holdings, Gaming, Holdings or the Trust or any of their 46 respective Affiliates or any of their respective employees, officers or directors fails to make any filing or disclosure required or requested by, or withdraws any filing or disclosure made to, the Nevada Gaming Authorities; (e) by written notice given on or before March 6, 1998 by Gaming Holdings or by the Purchaser if the Closing is not consummated on or before March 3, 1998; or (f) by written notice on or before March 6, 1998 by Gaming Holdings or the Purchaser if the consents have not been received on or before March 3, 1998; (g) by Gaming Holdings or the Purchaser by written notice if any Governmental Entity will have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated hereby and such order, decree, ruling or other action will have become final and nonappealable; PROVIDED that the right to terminate this Agreement pursuant to this Section 9.1(j) shall not be available to any party whose failure to fulfill any of its obligations under this Agreement has been the cause of such action by the Governmental Entity. SECTION 9.2. EFFECT OF TERMINATION. Except for Sections 6.2(c) and 11.4 which shall remain in effect, upon termination pursuant to this Article IX, this Agreement shall terminate and be void and have no effect, the transactions contemplated hereby shall be abandoned, no party hereto shall have any liability to any other party hereto, and the parties shall bear their own expenses, including counsel fees. ARTICLE X SURVIVAL; INDEMNIFICATION SECTION 10.1. SURVIVAL; REMEDY FOR BREACH. The representations and warranties of the parties contained in this Agreement shall (except with respect to the representations and warranties contained in Sections 3.5, 3.7, 3.10, 3.11, 3.12, 3.13, 3.16, 3.17, 3.18 and 5.10, which shall survive for a period of three years after the Closing Date) survive the Closing for a period of one year after the Closing Date, after which all representations and warranties made by the parties herein 47 or pursuant hereto shall expire. Notwithstanding the foregoing, any representation or warranty in respect of which indemnity may be sought under any Section of this Agreement shall survive the time at which it would otherwise terminate pursuant to this Agreement if notice of the breach of the representation or warranty giving rise to such indemnity shall have been give to the party against whom such indemnity may be sought, prior to such time. After the Closing, the sole and exclusive remedy of any party for any incorrect representation or warranty contained herein shall be the indemnities contained in Section 10.2, provided that the foregoing shall not limit the right of the parties to such equitable remedies as may be available. SECTION 10.2. INDEMNIFICATION. Each party hereto (the "INDEMNIFYING PARTY") hereby indemnifies each other party hereto (the "INDEMNIFIED PARTIES") against and agrees to hold them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and attorneys' fees and expenses) ("LOSS"), incurred or suffered by the Indemnified Parties arising out of or relating, directly or indirectly, to any breach of any representation or warranty of the Indemnifying Party made to such Indemnified Party which is contained in this Agreement. Notwithstanding the foregoing, the Indemnifying Party shall not be liable under this Section 10.2 unless the aggregate amount of liability under this Section 10.2 to any party or its Affiliates exceeds $1 million (the "THRESHOLD") whereupon such Indemnified Party shall be entitled to indemnification hereunder for the aggregate amount of such liability. SECTION 10.3. ARONOW INDEMNIFICATION. Holdings and the Trust hereby jointly and severally indemnify Gaming Holdings, Gaming, the Purchaser and LCI Parent against and agree to hold them harmless from, all Loss incurred or suffered by Gaming Holdings, Gaming, the Purchaser or LCI Parent arising out of or relating, directly or indirectly, to (i) that certain litigation filed in the Supreme Court of the State of New York, County of New York, Index No. 112618/95 entitled "Joseph Aronow, et al., vs. Jack Sommer, et al.," or any subsequent claims made by the parties thereto; (ii) that certain litigation filed in the Supreme Court of the State of New York, County of New York, Index No. 600301/97 entitled "Kanbar, et al. v. Aronow, et al.", or any subsequent claims made by the parties thereto, or 48 (iii) that certain litigation filed in the Southern District of New York, Case No. 88 CIV. 2537 (DAB), entitled "Sommer, et al. v. PMEC", or any subsequent claims made by the parties thereto. SECTION 10.4. ENVIRONMENTAL INDEMNITY. Notwithstanding any other provision of this Agreement, the Trust hereby indemnifies and holds LCI Parent, and any Affiliates of LCI Parent that are signatories to the Subsidiary Guarantee to be delivered to the Bank Lenders in respect of the Bank Debt, harmless from and against all Loss incurred or suffered by them or any of them arising out of or relating directly or indirectly to the Environmental Indemnity Agreement, Exhibit J-1 to the Credit Agreement entered into in respect of the Bank Debt. Holdings and Sommer Enterprises hereby join in said indemnification. This indemnification shall not be in duplication of any other indemnity hereunder. ARTICLE XI MISCELLANEOUS SECTION 11.1. ASSIGNMENT. This Agreement and the rights hereunder shall not be assignable or transferable by any party hereto (by operation of law or otherwise) without the prior written consent of the other parties hereto. SECTION 11.2. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder. SECTION 11.3. EXPENSES. Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses. SECTION 11.4. CONFIDENTIALITY. Each party shall treat as confidential and not use or disseminate, other than as contemplated under or in connection with this Agreement (including such use by or dissemination to their advisors or counsel as may be reasonably necessary in the context of the transactions contemplated under and in connection with this Agreement) all documents and 49 information concerning this Agreement, the Redevelopment, the Salle Privee Facilities, the transactions contemplated by this Agreement and Gaming Holdings or Gaming which has been furnished to such party (the "RECEIVING PARTY") by any of the other parties or their Affiliates (collectively, the "CONFIDENTIAL INFORMATION"), except to the extent that such information can be shown to have been (i) previously known on a non-confidential basis by the Receiving Party, (ii) in the public domain through no fault of the Receiving Party or (iii) previously or later acquired through sources other than such other party and its Affiliates. The parties agree that upon the expiration or termination of this Agreement (i) each party shall promptly return all written material containing or reflecting Confidential Information, (ii) no party will retain any copies or other reproductions in whole or part containing or reflecting any Confidential Information and (iii) all documents, memos, notes and other writings prepared by each party or its respective advisors containing or reflecting Confidential Information shall be destroyed, and such destruction shall be certified in writing to the other parties by an authorized officer of the destroying party supervising such destruction. SECTION 11.5. PUBLICITY. The parties agree that no public release, announcement or other form of publicity concerning the purchase of the Purchaser Shares by the Purchaser and the other transactions contemplated hereby shall be issued by any party hereto without the prior written consent of the other parties, except as such release or announcement may be required by a Governmental Entity or by Law or the rules or regulations of any securities exchange; PROVIDED, HOWEVER, in the event of a release or announcement by the Purchaser pursuant to the immediately preceding clause, the Purchaser shall provide Gaming Holdings with prompt prior notice of such request and cooperate with Gaming Holdings with respect thereto. SECTION 11.6. FURTHER ASSURANCES. Gaming Holdings, Gaming, Holdings and the Trust shall use their reasonable efforts to obtain and to assist the Purchaser and LCI Parent, and the Purchaser and LCI Parent shall use their reasonable efforts to obtain and to assist Gaming Holdings, Gaming, Holdings and the Trust, as the case may be, in obtaining promptly all necessary consents or approvals from any Governmental Entity or any other Person for any exercise by the Purchaser, Gaming Holdings, Gaming, Holdings, the Trust or the LCI Parent, as 50 the case may be, of its rights under this Agreement and to take such other actions as may reasonably be requested by the Purchaser, LCI Parent or Gaming Holdings or Gaming, as the case may be, to effect the purpose of this Agreement. SECTION 11.7. AMENDMENTS. The terms and provisions of this Agreement may not be amended except by a written instrument signed by the parties hereto making express reference to this Agreement and expressly stating that such written instrument is an amendment of this Agreement. SECTION 11.8. NOTICES. (a) All notices, consents and other communications given under this Agreement shall be in writing and shall be deemed to have been duly given and delivered (i) when delivered by hand or by DHL or Federal Express or a courier of similar international standing to the party for whom intended, (ii) five days after being deposited in any official government post office in the United States of America or England, as the case may be, enclosed in an airmail postage prepaid registered or certified envelope addressed to, or (iii) when successfully transmitted by facsimile to, the party for whom intended at the address or facsimile number for such party set forth below, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein; PROVIDED, HOWEVER, that any notice of change of address or facsimile number shall be effective only upon receipt. All notices shall specifically state: (A) the provision (or provisions) of this Agreement with respect to which such notice is given, and (B) the relevant time period, if any, in which the party given such notice must respond. (b) Subject to Section 11.8(a), the addresses and facsimile members of the parties for notices, consents and other communications given under this Agreement shall be as follows: (i) if to Gaming Holdings, Gaming, Sommer Enterprises, Holdings or the Trust: Aladdin Gaming, LLC 2810 West Charleston Boulevard Suite 58 Las Vegas, Nevada 89102-1934 Telephone: 702-870-1234 Telecopier: 702-870-8733 51 Attention of Jack Sommer with a copy to: Sigmund Sommer Properties 280 Park Avenue New York, New York 10017 Telephone: 212-661-0700 Telecopier: 212-661-0844 Attention of Ronald Dictrow and Schreck Morris 300 South Fourth Street Suite 1200 Las Vegas, Nevada 89101 Telephone: 702-474-9400 Telecopier: 702-474-9422 Attention of Frank A. Schreck, Esq. and Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Telephone: 212-735-3000 Telecopier: 212-735-2000 Attention of Wallace L. Schwartz, Esq. (ii) if to the Purchaser or LCI Parent: London Clubs International, plc 10 Brick Street London W1Y 8HQ, England Telephone: 011-44-171-518-0000 Telecopier: 011-44-171-493-6981 Attention of Linda M. Lillis with a copy to: Ohrenstein & Brown, LLP 230 Park Avenue New York, New York 10169 Telephone: 212-682-4500 Telecopier: 212-557-0910 Attention of Peter J. Kiernan, Esq. 52 and Lionel, Sawyer & Collins 300 South 4th Street Suite 1700 Las Vegas, Nevada 89101 Telephone: 702-383-8888 Telecopier: 702-383-8845 Attention of P. Gregory Giordano, Esq. SECTION 11.9. CONSENTS AND APPROVALS. Whenever in this Agreement reference is made to the Purchaser being satisfied, to the Purchaser's satisfaction, to the Purchaser's approval, or to Purchaser's consent (or any similar reference), such satisfaction, approval or consent, as the case may be, may for purposes of this Agreement be effective only if in writing, signed by the Purchaser, making express reference to this Agreement and to the document, state of facts or other matter involved, and expressly stating that it is an approval, consent, or state of satisfaction or of being satisfied, as the case may be. Any representation or warranty herein referring to Music Holdings shall, to the extent that it relates to Music Holdings, be made only as of the Closing Date and not as of the Effective Date. SECTION 11.10. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all such counterparts shall together constitute but one and the same contract. SECTION 11.11. CONSTRUCTION. Definitions shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". Any references to any agreement, instrument, statute or regulation is to it as amended and supplemented from time to time (and in the case of statute or regulation, to any successor provision). The table of contents, headings of Articles, Sections, Schedules or other subdivisions have been inserted for convenience of reference only and are not intended to be a part of or to affect the meaning of or interpretation of this Agreement. Any reference to any Schedule in this Agreement shall mean, as the case may 53 be, (a) in connection with a representation and warranty of any party as of the Effective Date, the Schedules attached to this Agreement as of the Effective Date, and (b) in connection with a representation and warranty of any party as of the Closing Date, the Closing Schedules. If any parties' representations and warranties under this Agreement are incorrect or untrue as of the Closing Date by reason of any event, occurrence or development after the Effective Date, or state of circumstances or facts arising after the Effective Date, same shall not be an actionable breach of contract under this Agreement; PROVIDED that such event, occurrence, development, state of circumstances or facts is disclosed in the Purchaser Closing Certificate or the Gaming Holdings Closing Certificate, as the case may be. Any representation or warranty herein referring to Music Holdings shall, to the extent that it relates to Music Holdings, be made only as of the Closing Date and not as of the Effective Date. SECTION 11.12. SEVERANCE. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such term or provision shall be enforced to the maximum extent permitted by law and, in any event, such illegality or invalidity shall not affect the validity of the remainder of this Agreement. SECTION 11.13. NON-WAIVER. No provision of this Agreement shall be deemed to have been waived except if the giving of such waiver is contained in a written notice given to the party claiming such waiver and signed by the party giving such waiver and expressly making reference to this Agreement and the matter being waived and expressly stating that it is a waiver. No such waiver shall be deemed to be a waiver of any other or further obligation or liability of the party or parties in whose favor the waiver was given. SECTION 11.14. APPLICABLE LAW AND JURISDICTION. This Agreement and the rights and obligations of the parties hereto shall be interpreted and enforced in accordance with and governed by the laws of the State of New York without regard to the conflict laws of that State. Except as otherwise expressly provided with respect to arbitration pursuant to Section 6.7 of this Agreement and the Arbitration Provision, any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby 54 shall only be brought in the United States District Court for the Southern District of New York and each party hereto consents to the jurisdiction of the United States District Court for the Southern District of New York, and each party further agrees that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth in this Agreement shall be effective service of process for any action brought against it in connection with this Agreement in said court. SECTION 11.15. REMEDIES. Except as otherwise expressly provided in this Agreement, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law or equity. SECTION 11.16. ENTIRETY OF AGREEMENT. This Agreement sets forth the entire understanding of the parties with respect to the transactions contemplated hereby, and merges and supersedes all prior and contemporaneous understandings, representations and warranties with respect to such transactions. Except as expressly set forth in this Agreement, none of the parties hereto or thereto makes any representation or warranty to any other party. 55 IN WITNESS WHEREOF, the parties hereto have duly executed this Purchase Agreement as of the day and year first above written. ALADDIN GAMING HOLDINGS, LLC By: /s/ Jack Sommer ------------------------------ Name: Jack Sommer Title: Chairman ALADDIN GAMING, LLC By: Aladdin Gaming Corp., its Manager By: /s/ Jack Sommer ----------------------------------- Name: Jack Sommer Title: Secretary LONDON CLUBS NEVADA INC. By: /s/ Linda Lillis ----------------------------------- Name: Linda Lillis Title: Assistant Secretary LONDON CLUBS INTERNATIONAL, P.L.C. By: /s/ Barry Hardy ----------------------------------- Name: Barry Hardy Title: Finance Director 56 ALADDIN HOLDINGS, LLC By: Aladdin Management Corporation, its Manager By: /s/ Viola Sommer ------------------------------ Viola Sommer President By: /s/ Jack Sommer ------------------------------ Jack Sommer Vice President SOMMER ENTERPRISES, LLC By: /s/ Jack Sommer ----------------------------------- Name: Jack Sommer Title: Chairman TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER By: /s/ Viola Sommer ----------------------------------- Viola Sommer, as trustee and not individually By: /s/ Jack Sommer ----------------------------------- Jack Sommer, as trustee and not individually By: /s/ Eugene Landsberg ----------------------------------- Eugene Landsberg, as trustee and not individually 57 SCHEDULE 3.5 PROPOSED CAPITAL STRUCTURE IMMEDIATELY AFTER THE CLOSING A. VOTING INTERESTS PERSON PERCENTAGE INTEREST Sommer Enterprises 47% Aladdin Enterprises 25% Purchaser 25% GAI 3% B. RIGHTS OR CLAIMS TO MEMBERSHIPS, INTERESTS OR SHARES See Schedules 3.15 and 4.3. SCHEDULE 3.6 PERMITTED ENCUMBRANCES PERMITTED ENCUMBRANCES: Shall mean: (i) Liens for impositions not yet due and payable or Liens which are being diligently contested in good faith by appropriate proceedings promptly instituted; (ii) Statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business for sums which are being contested in good faith; (iii) All immaterial easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property and other agreements which do not materially and adversely affect (A) the ability of Holdings, Gaming Holdings or Gaming to pay any of their obligations to any Person as and when due, (B)the marketability of title to the Land And Existing Improvements (C) the fair market value of the Land And Existing Improvements or (D) the use or operation of the Land And Existing Improvements; (iv) The leases, under lettings, concession agreements and licenses of the Land And Existing Improvements or any part thereof, entered into by Holdings, Gaming Holdings or Gaming set forth below (collectively, the "LEASES"): The JMJ Lease (v) Those items set forth in the attached Title Report. SCHEDULE 3.11 ENVIRONMENTAL AND SOILS REPORTS 1. Phase 1 Environmental Site Assessment dated July 25, 1994, prepared by Western Technologies, Inc. 2. Asbestos Air Sampling Survey dated September 2, 1994, prepared by Converse Environmental Consultants Southwest, Inc. 3. Phase 1 Environmental Site Assessment dated October 23, 1996, prepared by Ninyo & Moore Geotechnical and Environmental Sciences Consultants. 4. Limited Soil and Groundwater Investigation dated March 25, 1997, prepared by Converse Environmental Consultants Southwest, Inc. SCHEDULE 3.13 HOLDINGS MATERIAL ASSETS AND LIABILITIES ITEM (I): ASSETS 1. 98.67% interest in the issued and outstanding interests in Sommer Enterprises. 2. Title to the Land And Existing Developments. 3. Rights under the JMJ Lease. 4. Rights under the this Agreement. 5. Rights under Aladdin Hotel & Casino Agreement, by and between County of Clark, Holdings and Aladdin Management Corporation dated March 18, 1997. ITEM (II): LIABILITIES 1. Obligations under JMJ Lease. 2. Obligations under this Agreement. 3. Obligations under Aladdin Hotel & Casino Agreement, by and between County of Clark, Holdings and Aladdin Management Corporation dated March 18, 1997. SCHEDULE 3.14 FINANCIAL STATEMENTS Delivered in October, 1997. SCHEDULE 3.15 LITIGATION 1. ARONOW, ET AL. V. SOMMER, ET AL., Index No. 112618/95 (New York Sup. Ct.) In May 1995 the above-referenced action was commenced in the Supreme Court of the State of New York, County of New York (the "Court"), against defendants Jack Sommer, individually and as Trustee Under Article Sixth u/w/o Sigmund Sommer (the "Trust"); Viola Sommer, individually and as Trustee of the Trust; Eugene Landsberg, as Trustee of the Trust; and GW Vegas, L.L.C. Plaintiffs allege, among other things, that a joint venture was formed between plaintiffs and Jack Sommer to acquire and develop the Aladdin Hotel and Casino in Las Vegas, Nevada. Plaintiffs' alleged causes of action include impressing a constructive trust, breach of a joint venture agreement, breach of fiduciary duty, misappropriation of an opportunity, unjust enrichment and an accounting. Plaintiffs seek, among other things, to impress a constructive trust, an accounting, compensatory damages of not less than $200 million and punitive damages not less than $500 million. Defendants moved to dismiss the complaint and, on May 20, 1996, the Court granted in part and denied in part said motion. Plaintiffs have since filed an Amended Complaint. Defendants have answered the Amended Complaint and Jack Sommer, individually, has asserted a counterclaim for fraudulent inducement. Subsequently, plaintiffs moved for partial summary judgment, to dismiss the affirmative defenses and the individual counterclaim of Jack Sommer, and for a preliminary injunction entitling them to advance notice of any transfer or encumbrance of defendants' interest in the Aladdin. On February 18, 1997, the Court denied all of plaintiffs' motions, except the Court dismissed two of defendants' affirmative defenses. 2. KANBAR, ET AL. V. ARONOW, ET AL., Index No. 600301/97 (New York Sup. Ct.) In January 1997 the above-referenced action was filed in the Supreme Court of the State of New York, County of New York, against, among others, Jack Sommer, Viola Sommer and Eugene Landsberg, each individually and as Trustees of the Trust (the "Trustees"). Plaintiffs allege that they were in a partnership with Joseph Aronow which was formed to seek and develop business opportunities with Jack Sommer. Plaintiffs, among other things, allege that they were fraudulently induced into entering a settlement agreement with Jack Sommer related to these very same issues involved in the lawsuit. Plaintiffs seek against the Trustees, a constructive trust in the Aladdin Hotel and Casino, declaratory judgment, damages not less than $20 million and punitive damages not less than $50 million. The Trustees have moved to dismiss this action. SCHEDULE 3.16 MATERIAL ADVERSE EFFECT None. SCHEDULE 3.17 LIABILITIES NOT REFLECTED ON FINANCIAL STATEMENTS None. SCHEDULE 4.1 SUBSIDIARIES SCHEDULE 4.2 MATERIAL CONTRACTS 1. Letter Agreement dated December 23, 1996 between Westwood Capital, LLC ("WESTWOOD"), Trust Under Article Sixth u/w/o Sigmund Sommer ("TRUST"), Holdings and Gaming under which the obligations, agreements, liabilities and other commitments of the Trust pursuant to a Letter Agreement between Westwood and Trust dated May 31, 1996 were assigned, conveyed and otherwise transferred to Holdings, Gaming and other entities to be formed by the Trust and Holdings in connection with the Redevelopment, jointly and severally. 2. Letter Agreement dated September 11, 1996 between the Trust and HK Group, LLC ("HK GROUP") under which the Trust agreed that a $2 million success fee for the introduction of Gaming to the Purchaser would, subject to the terms and conditions of such Letter Agreement, be paid by Gaming to HK Group. 3. See also Schedule 4.3. SCHEDULE 4.3 EMPLOYEES 1. Goeglein Employment and Consulting Agreement. 2. GAI Consulting Agreement. 3. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and James H. McKennon. 4. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and Cornelius T. Klerk. 5. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and Lee Galati. 6. Employment Agreement dated as of July 1, 1997 between Gaming, Holdings and Jose A. Rueda. SCHEDULE 4.4 EMPLOYEE BENEFIT PLANS; ERISA None. SCHEDULE 4.5 ALADDIN NAMES 1. Service Mark (Reg. No. 1,789,789), "Aladdin Hotel & Casino". Registered August 24, 1993 for Hotel and Restaurant Services. 2. Service Mark (Reg. No. 1,781,854), "Aladdin". Registered June 13, 1993 for Casino and Casino Entertainment Services. 3. Service Mark (Reg. No. 1,779,369) "Aladdin". Registered June 29, 1993 for Hotel and Restaurant Services. 4. Service Mark (Reg. No. 1,781,855), "Aladdin". Registered July 13, 1993 for Casino and Casino Entertainment Services. SCHEDULE 6.1 REDEVELOPMENT AGREEMENTS APPROVED BY LCI To be included in the Closing Schedules only. EXHIBIT 2 ECONOMIC TERMS OF TRANSFER OF SHOPPING CENTER PARCEL A subordinated and unsecured self-amortizing promissory note (or equivalent lease terms) in the principal amount of $16,666,667, with an interest rate of 12% per annum and a maturity date 69 years from the Closing Date, and on other terms and conditions customary for a subordinated and unsecured self-amortizing promissory note. EX-10.9 17 CLOSING SCHEDULES AND AMEND & RESTATED LONDON CLUB CLOSING SCHEDULES TO THE AMENDED AND RESTATED LCI PURCHASE AGREEMENT DATED AS OF SEPTEMBER 24, 1997, AS AMENDED SCHEDULE 3.5 PROPOSED CAPITAL STRUCTURE IMMEDIATELY AFTER THE CLOSING A. VOTING INTERESTS PERSON PERCENTAGE INTEREST Sommer Enterprises 47% Aladdin Enterprises 25% Purchaser 25% GAI 3% RESTRICTED MEMBERSHIP INTERESTS (UNVESTED) Goeglein 2% McKennon 1% Klerk .75% Rueda .75% Galati .25% B. RIGHTS OR CLAIMS TO MEMBERSHIPS, INTERESTS OR SHARES Various rights or legal or equitable claims to Memberships, Interests or Shares in Gaming Holdings arise under the following agreements and arrangements: (a) Under the Pledge Agreements dated as of the date of the Indenture, to be executed by Gaming Holdings in favor of the holders of the Notes. (b) Pledge and security agreements to be entered into pursuant to the Credit Agreement whereby all of Gaming Holdings' interests in Gaming is to be pledged to the Bank Lenders other than the Series A Preferred Interests. See also Schedules 3.15 and 4.3. SCHEDULE 3.6 PERMITTED ENCUMBRANCES PERMITTED ENCUMBRANCES: Shall mean: (i) Liens for impositions not yet due and payable or Liens which are being diligently contested in good faith by appropriate proceedings promptly instituted; (ii) Statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business for sums which are being contested in good faith; (iii) All immaterial easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property and other agreements which do not materially and adversely affect (A) the ability of Holdings or Gaming to pay any of its obligations to any Person as and when due, (B)the marketability of title to the Land And Existing Improvements (C) the fair market value of the Land And Existing Improvements or (D) the use or operation of the Land And Existing Improvements; (iv) The leases, under lettings, concession agreements and licenses of the Land And Existing Improvements or any part thereof, entered into by Holdings or Gaming set forth below (collectively, the "LEASES"): The JMJ Lease (v) Those items set forth in the attached Title Report. SCHEDULE 3.11 ENVIRONMENTAL AND SOILS REPORTS 1. Phase 1 Environmental Site Assessment dated July 25, 1994, prepared by Western Technologies, Inc. 2. Asbestos Air Sampling Survey dated September 2, 1994, prepared by Converse Environmental Consultants Southwest, Inc. 3. Phase 1 Environmental Site Assessment dated October 23, 1996, prepared by Ninyo & Moore Geotechnical and Environmental Sciences Consultants. 4. Limited Soil and Groundwater Investigation dated March 25, 1997, prepared by Converse Environmental Consultants Southwest, Inc. 5. Phase 1 Environmental Site Assessment Update dated February 13, 1998, prepared by Ninyo & Moore Geotechnical and Environmental Sciences Consultants. SCHEDULE 3.13 HOLDINGS MATERIAL ASSETS AND LIABILITIES ITEM (I): ASSETS 1. 98.67% interest in the issued and outstanding interests in Sommer Enterprises. 2. Title to the Land And Existing Developments. 3. Rights under this Agreement. 4. Rights under Aladdin Hotel & Casino Agreement, by and between County of Clark, Holdings and Aladdin Management Corporation dated March 18, 1997. 5. Rights under an oral agreement with LVI in relation to the remediation of asbestos and environmentally hazardous substances. 6. Rights under a Letter Agreement by and between Holdings and Fluor Daniel, Inc. dated as of August 15, 1997 (and since modified by amendment on September 18, 1997, November 24, 1997, December 31, 1997 and January 21, 1998). ITEM (II): LIABILITIES 1. Obligations relating to the termination of the JMJ Lease (which survive). 2. Obligations under this Agreement. 3. Obligations under Aladdin Hotel & Casino Agreement, by and between County of Clark, Holdings and Aladdin Management Corporation dated March 18, 1997. 4. Obligations under an oral agreement with LVI in relation to the remediation of asbestos and environmentally hazardous substances. 5. Obligations under a Letter Agreement by and between Holdings and Fluor Daniel, Inc. dated as of August 15, 1997 (and since modified by amendment on September 18, 1997, November 24, 1997, December 31, 1997 and January 21, 1998). SCHEDULE 3.14 FINANCIAL STATEMENTS See attached SCHEDULE 3.15 LITIGATION 1. ARONOW, ET AL. V. SOMMER, ET AL., Index No. 112618/95 (New York Sup. Ct.) In May 1995 the above-referenced action was commenced in the Supreme Court of the State of New York, County of New York (the "Court"), against defendants Jack Sommer, individually and as Trustee Under Article Sixth u/w/o Sigmund Sommer (the "Trust"); Viola Sommer, individually and as Trustee of the Trust; Eugene Landsberg, as Trustee of the Trust; and GW Vegas, L.L.C. Plaintiffs allege, among other things, that a joint venture was formed between plaintiffs and Jack Sommer to acquire and develop the Aladdin Hotel and Casino in Las Vegas, Nevada. Plaintiffs' alleged causes of action include impressing a constructive trust, breach of a joint venture agreement, breach of fiduciary duty, misappropriation of an opportunity, unjust enrichment and an accounting. Plaintiffs seek, among other things, to impress a constructive trust, an accounting, compensatory damages of not less than $200 million and punitive damages not less than $500 million. Defendants moved to dismiss the complaint and, on May 20, 1996, the Court granted in part and denied in part said motion. Plaintiffs have since filed an Amended Complaint. Defendants have answered the Amended Complaint and Jack Sommer, individually, has asserted a counterclaim for fraudulent inducement. Subsequently, plaintiffs moved for partial summary judgment, to dismiss the affirmative defenses and the individual counterclaim of Jack Sommer, and for a preliminary injunction entitling them to advance notice of any transfer or encumbrance of defendants' interest in the Aladdin. On February 18, 1997, the Court denied all of plaintiffs' motions, except the Court dismissed two of defendants' affirmative defenses. 2. SOMMER, ET AL. V. PMEC, Case No. 88 CIV. 2537 (DAB) (United States District Court; Southern District of New York) In 1988, the Trust and two related entities commenced an action in the Southern District of New York against certain entities owned and controlled by Bronfman family interests (the "Bronfman Defendants") alleging, among other things, that the Bronfman Defendants committed violations of Rule 10b-5 under the Securities Exchange Act of 1934, as amended, as well as multiple breaches of fiduciary duties as general partner of a partnership in which the Trust owns limited partnership interests. Relief requested includes an accounting, imposition of a constructive trust and damages in excess of $100 million. The Bronfman Defendants have asserted counterclaims against plaintiffs and certain Sommer family members individually alleging causes of action for breach of contract, fraud and various related torts. The Bronfman Defendants claim damages of $75 million. SCHEDULE 3.16 MATERIAL ADVERSE EFFECT None. SCHEDULE 3.17 LIABILITIES NOT REFLECTED ON FINANCIAL STATEMENTS None. SCHEDULE 4.1 SUBSIDIARIES Aladdin Capital Corp. Gaming Aladdin Music Holdings, LLC SCHEDULE 4.2 MATERIAL CONTRACTS 1. Letter Agreement dated December 23, 1996 between Westwood Capital, LLC ("WESTWOOD"), Trust Under Article Sixth u/w/o Sigmund Sommer ("TRUST"), Holdings and Gaming under which the obligations, agreements, liabilities and other commitments of the Trust pursuant to a Letter Agreement between Westwood and Trust dated May 31, 1996 were assigned, conveyed and otherwise transferred to Holdings, Gaming and other entities to be formed by the Trust and Holdings in connection with the Redevelopment, jointly and severally. 2. Letter Agreement dated September 11, 1996 between the Trust and HK Group, LLC ("HK GROUP") under which the Trust agreed that a $2 million success fee for the introduction of the Company to the Purchaser would, subject to the terms and conditions of such Letter Agreement, be paid by Gaming to HK Group. 3. Memorandum of Understanding and Letter of Intent dated September 2, 1997 between Holdings, Gaming and Planet Hollywood International, Inc. (as amended). 4. Energy Service Agreement dated January __, 1998 between Gaming and Northwind Aladdin, LLC, and other agreements set out in Section 2.1(f) of the Construction, Operation and Reciprocal Easement Agreement between Gaming, Bazaar and Aladdin Music, LLC, including the Development Agreement and the Unicom Guaranty. 5. $80 million Financing Facility Commitment Letter from General Electric Capital Corporation to Gaming dated January 23, 1998 6. Letter of Agreement dated on or about September 22, 1997 between MMG Worldwide and Aladdin Management Corp. 7. Credit Agreement among Gaming, Various Financial Institutions, The Bank of Nova Scotia, Merrill Lynch Capital Corporation and Canadian Imperial Bank of Commerce for $410 million dated February 26, 1998. 8. "Material Main Project Documents" and "Main Project Documents" as defined in section 1.1 of the Credit Agreement including: the Mall Project Ground Lease, the Music Project Ground Lease, the Construction, Operation and Reciprocal Easement Agreement, the Site Work Agreement, the Theater Lease, the Design/Build Contract, the Interior Design Contract, the Fluor Guaranty and the Project Coordination Agreement. 9. "Loan Documents" as defined in section 1.1 of the Credit Agreement including: the Notes the Letters of Credit, each Pledge Agreement, each Rate Protector Agreement, each Borrowing Request, the Security Agreement, the Keep-Well Agreement, the Completion Guaranty, the GECC Inter-creditor Agreement, the Trademark Security Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Deed of Trust, the Disbursement Agreement, the Mall Project Completion Assignment, the Fee Letters, the Environmental Indemnity, the Assignment of Contracts, the Borrower Collateral Account Agreement, the Holiday Collateral Account Agreement and the Servicing and Collateral Account Agreement. 10. General Liability and other Insurance, including LCI Nevada, LCI and Bank Lenders as named insureds. 11. Salle Prive Agreement by and among Gaming, the Purchaser and LCI Parent dated February 26, 1998. 12. Contribution Agreement among the Trust, Holdings, Sommer Enterprises, LCI Parent and the Purchaser dated February 26, 1998. 13. Construction Consultant Engagement Letter Agreement by and among Rider Hunt (NV),LLC, Gaming, The Bank of Nova Scotia and the State Street Bank and Trust Company dated January 28, 1998. 14. Operating Agreement of Gaming by and between Gaming and Gaming Holdings dated February 26, 1998. 15. The Bazaar Lease, the Second Hotel Lease, the Utility Parcel Lease and the Gaming Lease. 16. Promissory Note between JMJ, Inc. aba Aladdin Hotel & Casino and Community Bank of Nevada dated as of June 12, 1995. 17. Commercial Guaranty between JMJ, Inc. aba Aladdin Hotel & Casino, Community Bank of Nevada and the Trust dated as of June 12, 1995. 18. Bankers Master Lease Agreement between Bankers Leasing Association, Inc. and JMJ, Inc. dates June 16, 1996. (including Equipment Schedule) 19. Bankers Guaranty between Bankers Leasing Association, Inc., JMJ, Inc., the Trust and GW Vegas, LLC dated July 9, 1996. SCHEDULE 4.3 EMPLOYEES 1. Goeglein Employment and Consulting Agreement. 2. GAI Consulting Agreement. 3. Employment Agreement effective as of July 1, 1997 between the Company, Holdings and James H. McKennon (as amended on February 26, 1998). 4. Employment Agreement effective as of July 1, 1997 between the Company, Holdings and Cornelius T. Klerk (as amended on February 26, 1998). 5. Employment Agreement effective as of July 1, 1997 between the Company, Holdings and Lee Galati (as amended on February 26, 1998). 6. Employment Agreement effective as of July 1, 1997 between the Company, Holdings and Jose A. Rueda (as amended on February 26, 1998). 7. GAI Contribution and Amendment Agreement dated as of February 26, 1998 between the Company, Gaming Holdings and GAI. 8. Goeglein Contribution and Amendment Agreement dated as of February 26, 1998 between the Company, Gaming Holdings and Goeglein. 9. McKennon Contribution and Amendment Agreement dated as of February 26, 1998 between the Company, Gaming Holdings and McKennon. 10. Klerk Contribution and Amendment Agreement dated as of February 26, 1998 between the Company, Gaming Holdings and Klerk. 11. Galati Contribution and Amendment Agreement dated as of February 26, 1998 between the Company, Gaming Holdings and Galati. 12. Rueda Contribution and Amendment Agreement dated as of February 26, 1998 between the Company, Gaming Holdings and Rueda. SCHEDULE 4.4 EMPLOYEE BENEFIT PLANS; ERISA None. SCHEDULE 4.5 ALADDIN NAMES 1. Service Mark (Reg. No. 1,789,789), "Aladdin Hotel & Casino".Registered August 24, 1993 for Hotel and Restaurant Services. 2. Service Mark (Reg. No. 1,781,854), "Aladdin". Registered June 13, 1993 for Casino and Casino Entertainment Services. 3. Service Mark (Reg. No. 1,779,369) "Aladdin". Registered June 29, 1993 for Hotel and Restaurant Services. 4. Service Mark (Reg. No. 1,781,855), "Aladdin". Registered July 13, 1993 for Casino and Casino Entertainment Services. 5. Other Aladdin Names which are not material and not presently subject to a registration or application. SCHEDULE 6.1 REDEVELOPMENT AGREEMENTS APPROVED BY LCI In addition to, and including, those Material Contracts set out on schedule 4.2, the following agreements: 1. Construction Contract with Fluor. 2. Commitment letter from Fleet National Bank to Aladdin Bazar, LLC for a loan of $194 million dated as of December 30, 1997. 3. Equity Participation Agreement among Sommer Enterprises, Aladdin Gaming Enterprises, Inc., the Purchaser and State Street Bank and Trust Company dated as of February 26, 1998. 4. Warrant Agreement between Aladdin Gaming Enterprises and State Street Bank Trust Company dated February 26, 1998. 5. Operating Agreement of Gaming Holdings by and between Sommer Enterprises, the Purchaser, Aladdin Enterprises, GAI, Geoglein, McKennon, Klerk, Rueda and Galati dated February 26, 1998. 6. Tax Indemnity Agreement by and between the Purchaser, LCI Parent, the Trust and Holdings dated February 26, 1998. 7. Memorandum of Understanding between Aladdin Music, LLC and Planet Hollywood. 8. The Indenture by and among Gaming Holdings, Aladdin Capital Corp. and the State Street Bank and Trust Company dated February 26, 1998. 9. Warrant Registration Rights Agreement among Enterprises and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. dated February 26, 1998. 10. Notes Registration Rights Agreement among Enterprises and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation, CIBC Oppenheimer Corp. and Scotia Capital Markets (USA) Inc. dated February 26, 1998. 11. Satisfaction Notice. 12. Common Parking Use Agreement. 13. Reciprocal Easement Agreement. 14. Site Work Agreement. 15. Redevelopment Budgets exhibited to the Credit Agreement. 16. Redevelopment Plans and Specifications attached as exhibits to the Reciprocal Easement Agreement. 17. See also Schedules 4.2 and 4.3. EX-10.10 18 CONTRIBUTION AGREEMENT ================================================================================ CONTRIBUTION AGREEMENT among TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER, ALADDIN HOLDINGS, LLC, SOMMER ENTERPRISES, LLC, LONDON CLUBS INTERNATIONAL, P.L.C. and LONDON CLUBS NEVADA INC. ================================================================================ CONTRIBUTION AGREEMENT CONTRIBUTION AGREEMENT, dated as of this 26th day of February, 1998, between Trust Under Article Sixth u/w/o Sigmund Sommer, a New York Trust (the "Trust"), Aladdin Holdings, LLC, a Delaware limited liability company ("Aladdin Holdings"), Sommer Enterprises, LLC, a Nevada limited liability company ("Sommer Enterprises"), London Clubs International, p.l.c., a company registered in England and Wales ("LCI"), and London Clubs Nevada Inc., a Nevada corporation ("LCI Nevada"). WHEREAS, Aladdin Gaming, LLC, a Nevada limited liability company ("Aladdin Gaming"), is entering into a Credit Agreement (the "Credit Agreement") dated as of the date hereof with a syndicate of lenders, including The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation (the "Lenders"); WHEREAS, Aladdin Gaming Holdings, LLC, a Nevada limited liability company ("Gaming Holdings"), the owner of all the issued and outstanding shares of Aladdin Gaming, is issuing discount notes (the "Discount Notes") as of the date hereof to certain persons (the "Discount Noteholders"); WHEREAS, in connection with entering into the Credit Agreement and issuing the Discount Notes and otherwise, (a) the Trust and LCI (the "Comple- 1 tion Guaranty Obligors") and Aladdin Bazaar Holdings, LLC, a Nevada limited liability company ("Bazaar"), are entering into (i) a Guaranty of Performance and Completion in favor of the Lenders dated as of the date hereof (the "Bank Completion Guaranty"), (ii) a Guaranty of Performance and Completion in favor of the Discount Noteholders dated as of the date hereof (the "Discount Note Completion Guaranty") and (iii) a Guarantee of Performance and Completion to be entered into in favor of a Contingent Guarantor after the date hereof (the "Junior Completion Guaranty" and, together with the Bank Completion Guaranty and the Discount Note Completion Guaranty, the "Completion Guaranties") pursuant to each of which the Completion Guaranty Obligors and Bazaar have joint and several obligations for certain payments in connection with the completion of the redevelopment of the Aladdin hotel and casino by Aladdin Gaming (together with the obligations of LCI and the Trust pursuant to Section 1(c), the "Completion Guaranty Obligations") and (b) Aladdin Holdings, LCI (the "Keep Well Obligors", and, together with the Completion Guaranty Obligors, the "Obligors") and Bazaar are entering into a Keep-Well Agreement in favor of the Lenders dated as of the date hereof (the "Keep Well Agreement") pursuant to which the Keep Well Obligors and Bazaar are jointly and severally liable for making certain payments in certain circumstances (the "Keep Well Obligations"); 2 WHEREAS, LCI owns, indirectly (through its wholly owned subsidiary, London Clubs Holdings Ltd.), 100% of LCI Nevada which as of the date hereof owns 25% of the issued and outstanding Common Shares of Gaming Holdings; WHEREAS, the Trust owns 95% of Aladdin Holdings, Aladdin Holdings owns 98.67% of Sommer Enterprises, and Sommer Enterprises directly and indirectly (through its interest in Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Aladdin Enterprises")) owns 72% of the issued and outstanding Common Shares of Gaming Holdings; and WHEREAS, the Trust, Aladdin Holdings, Sommer Enterprises, LCI and LCI Nevada wish to enter into this Agreement to effect a sharing of (a) the Completion Guaranty Obligations in the proportion of 75% to the Trust and 25% to LCI and (b) the Keep Well Obligations in the proportion of 75% to Aladdin Holdings and 25% to LCI. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. COMPLETION GUARANTY CONTRIBUTIONS. (a) At any time a payment is required by a Completion Guaranty Obligor pursuant to a Completion Guaranty (a "Completion Guaranty Payment"), the Completion Guaranty Obligor receiving the demand for such payment under a Completion Guaranty (a "Completion Guaranty 3 Demand") shall within two business days of the receipt of such Completion Guaranty Demand give written notice to the other Completion Guaranty Obligor of the Completion Guaranty Demand and shall include in such written notice a copy of the Completion Guaranty Demand. Each Completion Guaranty Payment shall be made by LCI on the one hand, and the Trust on the other hand, in proportion to their respective Completion Guaranty Contribution Percentages (as provided in Section 3); PROVIDED that if the Completion Guaranty Payment is required as a result of an Event of Default (as hereinafter defined) Caused (as hereinafter defined) by one of the Completion Guaranty Obligors or its Affiliates, the Completion Guaranty Obligor which Caused (or whose Affiliates Caused) such Event of Default shall make all of such Completion Guaranty Payment. (b) In the event that any party hereto shall receive notification from the Lenders to the effect that EBITDA (as defined in the Credit Agreement) shall be less than the Minimum EBITDA (as defined in the Credit Agreement) (such difference being referred to herein as the "EBITDA Shortfall"), LCI on the one hand, and the Trust on the other hand, shall, unless they otherwise agree, make payment in an aggregate amount equal to the EBITDA shortfall (the "EBITDA Shortfall Payment"), in proportion to their respective Completion Guaranty Contribution Percentages (as provided in Section 3). 4 (c) Without limiting Sections 1(a) and 1(b), if a Completion Guaranty Payment or an EBITDA Shortfall Payment is required and, by reason of a failure or refusal of a Completion Guaranty Obligor to make its Completion Guaranty Payment or EBITDA Shortfall Payment as required by Section 1(a) or 1(b), is made by the other Completion Guaranty Obligor (the "Contributing Completion Guaranty Obligor") in excess of the amount such Completion Guaranty Obligor is required to pay pursuant to Section 1(a) or 1(b) (such excess, the "Completion Guaranty Excess Amount"), from the date such Excess Amount becomes past due, such Completion Guaranty Excess Amount shall be treated as a loan from the Contributing Completion Guaranty Obligor to the other Completion Guaranty Obligor (the "Non-Contributing Completion Guaranty Obligor") and shall accrue interest as provided in Section 4. 2. KEEP WELL CONTRIBUTIONS. (a) At any time a payment is required by a Keep Well Obligor pursuant to the Keep Well Agreement (a "Keep Well Payment"), the Keep Well Obligor receiving the demand for such payment under the Keep Well Agreement (a "Keep Well Demand") shall within two business days of the receipt of such Keep Well Demand give written notice to the other Keep Well Obligor of the Keep Well Demand and shall include in such written notice a copy of the Keep Well Demand. A Keep Well Payment shall be made by LCI, on the one hand, and Aladdin Holdings, on the other hand, in proportion to their respec- 5 tive Keep Well Contribution Percentages (as provided in Section 3); PROVIDED that if the Keep Well Payment is required as a result of an Event of Default Caused by one of the Keep Well Obligors or its Affiliates, the Keep Well Obligor which Caused (or whose Affiliates Caused) such Event of Default shall make all of such Keep Well Payment. (b) If the aggregate distributions at any time on the Series B Preferred Shares in Gaming Holdings ("Series B Shares") are less than the aggregate payments which would have been required to be made by Aladdin Gaming under the Credit Agreement in respect of such amount had such debt under the Credit Agreement not been repaid or partially repaid pursuant to the Keep Well Agreement with the amounts in respect of which the Series B Shares were issued (such shortfall, a "Series B Distribution Shortfall"), the parties acknowledge that they should bear the economic burden of such Series B Distribution Shortfall in the proportion of 25 percent for LCI and 75 percent for Aladdin Holdings. Accordingly, in the event of a Series B Distribution Shortfall, within thirty days of receipt of written notice from LCI requesting a payment in respect thereof, Aladdin Holdings shall pay to LCI Nevada 75 percent of (i) the Series B Distribution Shortfall multiplied by (ii) the number of Series B Shares held by LCI Nevada, divided by (iii) the total issued and outstanding Series B Shares, and upon and in consideration for such payment LCI Nevada shall transfer to Sommer Enterprises one Series B Preferred Share for each 6 $100 paid by Aladdin Holdings; PROVIDED that no such payment shall be required to the extent that the Series B Distribution Shortfall is not paid by Gaming Holdings due to restrictions on distributions to Gaming Holdings by Aladdin Gaming in the Credit Agreement or related arrangements with the Lenders or restrictions on distributions by Gaming Holdings to the members of Gaming Holdings in the arrangements in respect of the Discount Notes. (c) Without limiting Sections 2(a) and (b), if a Keep Well Payment is required and, by reason of a failure or refusal of a Keep Well Obligor to make its Keep Well Payment as required by Section 2(a), is made by the other Keep Well Obligor (the "Contributing Keep Well Obligor") in excess of the amount such Keep Well Obligor is required to pay pursuant to Section 2(a) (such excess, the "Keep Well Excess Amount"), from the date such Excess Amount becomes past due, such Keep Well Excess Amount shall be treated as a loan from the Contributing Keep Well Obligor to the other Keep Well Obligor (the "Non-Contributing Keep Well Obligor") and interest shall accrue as provided in Section 4. (d) Notwithstanding any other provision of this Agreement, in no event shall this Agreement create any liability or obligation whatsoever on the part of the Trust in respect of the Keep Well Obligations. 3. CONTRIBUTION PERCENTAGE As used in this Agreement, the "Contribution Percentage" shall mean for all purposes hereof, and whether or not 7 there are changes in the Percentage Interests (as defined in the Operating Agreement of Gaming Holdings) of LCI Nevada or Sommer Enterprises (a) 75% in the case of the Trust or Aladdin Holdings (as the case may be) and (b) 25% in the case of LCI. 4. INTEREST. (a) Any Completion Guaranty Excess Amount or Keep Well Excess Amount (an "Excess Amount") not paid by the Non-Contributing Completion Guaranty Obligor or Non-Contributing Keep Well Obligor (a "Non-Contributing Obligor") on or before the time that the relevant Completion Guaranty Payment or Keep Well Payment is due (the "Due Date") shall, without limiting any rights of the Contributing Completion Guaranty Obligor or Contributing Keep Well Obligor (a "Contributing Obligor") or its Affiliates to recover such Excess Amount, be treated as a loan from the Contributing Obligor to the Non-Contributing Obligor and shall be subject to interest from the Due Date at the rate of twenty percent per annum; PROVIDED that no such interest shall accrue during any period that there is an Event of Default in existence which was Caused by the Contributing Obligor or its Affiliates. (b) Any payment from the Non-Contributing Obligor or its Affiliates to the Contributing Obligor or its Affiliates under this Agreement shall be first be applied to payment of any interest accrued under this Section 4 on the relevant loan and then to payment of the principal of such loan. 8 5. SECURITY INTEREST. (a) As security for the prompt and complete payment and performance in full of the obligations of a Non-Contributing Obligor under this Agreement, in addition to any security interest granted under the Operating Agreement of Gaming Holdings, to the extent permitted by the arrangements with the Lenders in respect of the Credit Agreement, the arrangements with the Discount Noteholders in respect of the Discount Notes, and related arrangements in respect of each of the foregoing and otherwise at law (including, without limitation, the Nevada gaming laws): (i) in respect of when LCI is the Non-Contributing Obligor, LCI Nevada hereby grants to the Contributing Obligor a security interest in and continuing lien on all of LCI Nevada's rights to distributions on any common shares in Gaming Holdings; and (ii) in respect of when the Trust or Aladdin Holdings is the Non-Contributing Obligor, Sommer Enterprises hereby grants to the Contributing Obligor a security interest in and continuing lien on all of Sommer Enterprises' rights to distributions on any common shares in Gaming Holdings and all of Sommer Enterprises' rights to distributions on any class A voting common stock or class B non-voting common stock in Aladdin Enterprises; PROVIDED that such security interest and continuing lien shall be (A) subordinated to the security interests and liens granted in favor of the Lenders 9 pursuant to the Loan Documents (as defined in the Credit Agreement) and by its signature below, the Contributing Obligor hereby agrees that it will not enforce any such security interest or continuing lien until all Loans (as defined in the Credit Agreement) and other Obligations (as defined in the Credit Agreement) have been paid in full in cash, all Letters of Credit (as defined in the Credit Agreement) have been terminated or expired and all Commitments (as defined in the Credit Agreement) have been terminated under the Credit Agreement (PROVIDED that to the extent any distributions on any relevant shares or membership interests are permitted to be made to the holder(s) thereof under the Loan Documents, the Contributing Obligor shall be permitted to enforce its security interest and continuing lien thereon, including, without limitation, diverting distributions thereon to the Contributing Obligor), and (B) suspended for any period in which an Event of Default exists which was Caused by the Contributing Obligor or its Affiliates. (b) In connection with the security interests referred to in Section 5(a), the Non-Contributing Obligor hereby irrevocably appoints the Contributing Obligor, and any of the Contributing Obligor's respective agents, officers, or employees, as the Non-Contributing Obligors' attorney(s)-in-fact, with full power to prepare, execute, acknowledge, and deliver, as applicable, all documents, instruments, and/or agreements memorializing and/or securing such loan(s) including, without limitation, such Uniform Commercial Code financing and continuation 10 statements, pledge and/or security agreements, mortgages and other security instruments as may be reasonably appropriate to perfect and continue the security interest in favor of the Contributing Obligor to the extent permitted in subclause (A) of the proviso to Section 5(a) and by the Nevada gaming laws. 6. RIGHT OF SET OFF. The parties agree that the Completion Guaranty Obligors and the Keep Well Obligors shall be entitled to set off any obligation under this Agreement (the "Payment Obligations") (including loans hereunder) from any other Completion Guaranty Obligor or Keep Well Obligor in whole or partial satisfaction of a Payment Obligation they have such other Completion Guaranty Obligor or Keep Well Obligor under this Agreement. Any such set off shall discharge the relevant obligations of such parties to the extent of such set off. 7. AMENDMENT AND WAIVER. Any provision of this Agreement may be amended or waived only by an amendment or waiver in writing signed by the parties hereto making express reference to this Agreement and expressly stating that it is an amendment or waiver, as the case may be, of this Agreement. 8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and, in the event of the dissolution of the Trust, the remaindermen thereof. 11 9. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein express or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder. 10. DEFINITIONS. In this Agreement (a) "Affiliate" means, with respect to a specified person, any other person who or which is directly or indirectly controlling, controlled by, or under common control with the specified person or any member, stockholder, director, officer, manager, relative or spouse of the specified person; PROVIDED that neither Gaming Holdings nor Aladdin Gaming shall be an Affiliate of Aladdin Gaming Enterprises, Inc., Sommer Enterprises, Aladdin Holdings, the Trust, LCI or LCI Nevada (b) "Caused" means, with respect to a person, that such person has caused an Event of Default by breach or non-performance of a term, provision or covenant of any of the Keep Well Agreement, the Completion Guaranties or the Credit Agreement; PROVIDED that a person shall not be found to have caused an Event of Default as result of such Person's or its Affiliates' control of Gaming Holdings or Aladdin Gaming; (c) "control" means the possession, directly or indirectly, of the power to cause the direction of the management or policies of a person, whether through ownership of voting securities, by contract or otherwise, and "controlling" and "controlled" shall have corresponding meanings; and (d) "Event of Default" means (i) an Event of Default under the Credit Agreement; (ii) a 12 Specified Event under the Keep Well Agreement or any Completion Guaranty; or (iii) any breach or default under the Keep Well Agreement or any Completion Guaranty, in each case pursuant to which the Lenders, the Discount Noteholders or the Contingent Guarantor (as the case may be) have exercised rights or remedies under any of the Credit Agreement, the Completions Guaranties or the Keep Well Agreement, but shall exclude any of the forgoing events which only gives rise to a payment by LCI pursuant to Section 13 of the Keep Well Agreement. 11. NOTICES. All notices provided for in this Agreement shall be deemed to have been given when received and shall be in writing, duly signed by the party giving such notice, and shall be hand delivered, faxed or mailed by registered or certified mail or overnight courier service, as follows: (a) if to Aladdin Holdings, the Trust or Sommer Enterprises: Aladdin Holdings, LLC 2810 West Charleston Boulevard Suite 58 Las Vegas, Nevada 89102-1934 Telephone: 702-870-1234 Telecopier: 702-870-8733 Attention of Jack Sommer 13 with a copy to: Sigmund Sommer Properties 280 Park Avenue New York, New York 10017 Telephone: 212-661-0700 Telecopier: 212-661-0844 Attention of Ronald Dictrow and Schreck Morris 300 South Fourth Street Suite 1200 Las Vegas, Nevada 89101 Telephone: 702-474-9400 Telecopier: 702-474-9422 Attention of Frank A. Schreck, Esq. and Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Telephone: 212-735-3000 Telecopier: 212-735-2000 Attention of Wallace L. Schwartz, Esq. (b) if to LCI or LCI Nevada: London Clubs International, plc 10 Brick Street London W1Y 8HQ, England Telephone: 011-44-171-518-0000 Telecopier: 011-44-171-493-6981 Attention of Linda M. Lillis 14 with a copy to: Ohrenstein & Brown, LLP 230 Park Avenue New York, New York 10169 Telephone: 212-682-4500 Telecopier: 212-557-0910 Attention of Peter J. Kiernan, Esq. and Lionel, Sawyer & Collins 300 South 4th Street Suite 1700 Las Vegas, Nevada 89101 Telephone: 702-383-8888 Telecopier: 702-383-8845 Attention of P. Gregory Giordano, Esq. 12. TERM. This Agreement, as it may be amended, supplemented or otherwise modified from time to time, shall remain in effect until (i) the termination or expiration of each of the Completion Guaranties and the Keep Well Agreement, (ii) termination or expiration of the Completion Guaranty Obligations and the Keep Well Obligations and (iii) the payment in full of all amounts due under the Completion Guaranties and the Keep Well Agreement and hereunder, including, without limitation, any loans hereunder. 13. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. 15 14. APPLICABLE LAW AND JURISDICTION. This Agreement and the rights and obligations of the parties hereto shall be interpreted and enforced in accordance with and governed by the laws of the State of Nevada without regard to the conflict laws of that State. 15. TIMELY NOTICE. The failure of a party to give timely notice hereunder shall not relieve the other party of its obligations hereunder. 16. COMPLIANCE WITH GAMING LAWS. Notwithstanding any other provision of this Agreement, no shares or other ownership interests in any entity shall be issued or transferred, encumbered or disposed of, and no rights to distributions on any shares or other ownership interests in any entity shall be transferred, encumbered or otherwise disposed of in any manner pursuant to this Agreement except in compliance with the provisions of the Nevada Gaming Control Act (or any successor statute) and the rules or regulations promulgated thereunder. 16 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the date first above written. TRUST UNDER ARTICLE SIXTH u/w/o SIGMUND SOMMER By: /s/ Viola Sommer ----------------------------------------------- Viola Sommer, as trustee and not individually By: /s/ Jack Sommer ----------------------------------------------- Jack Sommer, as trustee and not individually By: /s/ Eugene Landsberg ----------------------------------------------- Eugene Landsberg, as trustee and not individually ALADDIN HOLDINGS, LLC By: Aladdin Management Corporation, its manager By: /s/ Viola Sommer ----------------------------------------------- Name: Viola Sommer Title: President By: /s/ Jack Sommer ----------------------------------------------- Name: Jack Sommer Title: Vice President 17 SOMMER ENTERPRISES, LLC By: /s/ Jack Sommer ----------------------------------------------- Name: Jack Sommer Title: Manager LONDON CLUBS INTERNATIONAL, P.L.C. By: /s/ Barry Hardy ----------------------------------------------- Name: Barry Hardy Title: Finance Director LONDON CLUBS NEVADA INC. By: /s/ Linda Lillis ----------------------------------------------- Name: Linda Lillis Title: Assistant Secretary 18 EX-10.11 19 SALLE PRIVEE AGREEMENT SALLE PRIVEE AGREEMENT BY AND AMONG ALADDIN GAMING, LLC, LONDON CLUBS NEVADA INC. AND LONDON CLUBS INTERNATIONAL, PLC SALLE PRIVEE AGREEMENT, dated as of February 26, 1998, by and among ALADDIN GAMING, LLC, a Nevada limited liability company with its principal office located at 2810 West Charleston Boulevard, Suite 58, Las Vegas, NE 89102-1934 ("Aladdin"), LONDON CLUBS NEVADA INC., a Nevada corporation with its principal office located at 300 South Forth Street, Suite 1700, Las Vegas, NE 89101 ("London Clubs") and LONDON CLUBS INTERNATIONAL, PLC, a United Kingdom public limited company with its principal office located at 10 Brick Street, London, W1Y 8HQ, England ("Guarantor"). W I T N E S S E T H : WHEREAS, Aladdin owns that certain parcel of land and the existing improvements thereon (including, without limitation, the Aladdin Hotel and Casino) located at 3667 Las Vegas Boulevard South, Las Vegas, Nevada (the "Premises"), as the same is more particularly described in the Purchase Agreement dated as of September 24, 1997, as amended, entered into among, INTER ALIA, Aladdin, London Clubs and Guarantor (the "Purchase Agreement"); WHEREAS, Aladdin is undertaking, among other things, to redevelop the Aladdin Hotel and Casino (as so redeveloped, the "Redeveloped Aladdin"); WHEREAS, Aladdin and Aladdin Hotel will acquire and maintain all necessary licenses and permits in their respective names as shall be necessary to authorize them to legally operate and maintain gaming operations and a casino at the Redeveloped Aladdin; WHEREAS, London Clubs and Guarantor will acquire and maintain all necessary licenses, approvals or permits in their respective names as shall be necessary to permit each of London Clubs and Guarantor to perform their respective obligations hereunder; WHEREAS, the group of companies of which London Clubs is an Affiliate (as hereinafter defined) has considerable experience and acknowledged expertise and know-how in operating premium casino businesses, and Aladdin wishes to have access to the expertise, advice and know-how of London Clubs; WHEREAS, the "Salle Privee Facilities" (as hereinafter defined) are to be included in the Redeveloped Aladdin and it has been agreed that London Clubs shall (i) provide advice and consulting services regarding the development and fitting out of the Salle Privee Facilities, and (ii) provide certain worldwide marketing and promotional services in relation thereto, and shall direct the operations thereof, pursuant to the principles, policies, procedures and standards as set forth in Article 6 hereof and such additional principles, policies, procedures and standards as shall be determined from time to time by London Clubs in consultation with Aladdin (the "Policies and Procedures"); WHEREAS, Guarantor has agreed to guarantee the obligations and liabilities of London Clubs under this Agreement on the terms set forth herein; and WHEREAS, this Agreement is being entered into pursuant to the Purchase Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein set forth, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement. In addition, the following terms shall have the following meanings: "ABOVE LIMITS GAMING" means all wagers made in the Salle Privee Facilities during the "Above Limits Gaming Period" by any person who has been granted the right by London Clubs to exceed the Normal Gaming Limits. "ABOVE LIMITS GAMING LOSSES" means the aggregate of the amounts won by customers in respect of Above Limits Gaming in any Financial Year. "ABOVE LIMITS GAMING PERIOD" means, with respect to a particular person, the period during which London Clubs has granted such person the right to exceed the Normal Gaming Limits. "ABOVE LIMITS GAMING WINS" means the aggregate of the amounts lost by customers in respect of Above Limits Gaming in any Financial Year. "ABOVE LIMITS GUARANTY" means the guaranty of certain Net Above Limits Gaming Losses as set forth in Section 6.3 (b) hereof. "AFFILIATE" means, in respect of a specified Person, any Person who or which is (a) directly or indirectly controlling, controlled by or under common control with such specified person, or (b) any member, director, officer, manager, relative or spouse of such specified person. For the purpose of this definition, "CONTROL" means the right to exercise, directly or indirectly, more than fifty percent of the voting power of the stockholders, members or owners, and, with respect to any individual, partnership, trust or other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the 2 management or policies of the controlled entity, and "CONTROLLED" and "CONTROLLING" shall have corresponding meanings. "BOARD" means the Board of Managers of Aladdin. "EXECUTIVE MANAGEMENT COMMITTEE" means the committee of the management of Aladdin which shall include, without limitation, the following persons: the president and chief executive officer of Aladdin, the chief financial officer of Aladdin, the senior vice president of Aladdin who is the president and chief operating officer of the Aladdin hotel and casino, the senior vice president of Aladdin who is the president and chief operating officer of the second hotel and casino to be located on the Premises, the senior vice president human resources of Aladdin, the senior vice president electronic gaming of Aladdin and the managing director of the Salle Privee. "FINANCIAL YEAR" means the Initial Financial Year and each period from January 1 to December 31 in each year after the Initial Financial Year. "GAMING LICENSE" means all casino and gaming licenses or other necessary authorizations which are required by the laws of the State of Nevada or Clark county at any time and which authorizes Aladdin to operate a casino at the Redeveloped Aladdin, including the Salle Privee Facilities. "GAMING PROBLEM" means circumstances such that any member of Aladdin, any Affiliate of any member of Aladdin or any Related Party of any member of Aladdin may preclude or materially delay, impede or impair the ability of Aladdin to obtain or retain any licenses required by the Nevada Gaming Authorities for the conduct of business of the Aladdin and its subsidiaries, or such as may result in the imposition of materially burdensome terms and conditions on any such license. "INITIAL FINANCIAL YEAR" means the period from the Opening Date to December 31 of such calendar year. "NET ABOVE LIMITS GAMING LOSSES" means for any Financial Year, the amount, if any, by which Above Limits Gaming Losses exceeds Above Limits Gaming Wins for such Financial Year. "NET ABOVE LIMITS GAMING WINS" means for any Financial Year, the amount, if any, by which Above Limits Gamins Wins exceeds Above Limits Gaming Losses for such Financial Year. "NEVADA GAMING AUTHORITIES" means the Nevada Gaming Commission, the Nevada State Gaming Control Board and any other applicable governmental or administrative state or local agency involved in the regulation of gaming or gaming activities in the State of Nevada. 3 "NORMAL GAMING LIMITS" means the gaming limits as jointly established from time to time by Aladdin and LCI in respect of the Salle Privee. "OPENING DATE" means the day on which the Salle Privee first opens its doors for the commencement of gaming operations. "OPERATING AGREEMENT" means the Operating Agreement of Aladdin of even date herewith among Aladdin and Aladdin Gaming Holdings LLC. "PERSON" means a natural person, any form of business or social organization and any other nongovernmental legal entity, whether domestic or foreign, including a corporation, partnership, association, trust, unincorporated organization, estate or limited liability company. "REDEVELOPMENT" means the redevelopment and expansion of the Aladdin Hotel and Casino and related improvements including the Salle Privee Facilities. "RELATED PARTY" means, in respect of any member of Aladdin, its Affiliates, and the member's and the Affiliates respective shareholders, partners, members, directors and officers. "SALLE PRIVEE FACILITIES" means the following components to be constructed as part of the Redevelopment: (a) a gaming facility containing approximately 20 to 30 high limit tables and approximately 100 high limit slot devices, located on the mezzanine level directly above the main gaming floor of the Aladdin casino (the "Salle Privee"); (b) a super-premium gourmet restaurant facility located adjacent to and as part of the Salle Privee and containing a separate kitchen, a bar, approximately 25 dining tables inside the restaurant as well as several additional dining tables located in a roof garden accessible through the restaurant (the "Restaurant"); (c) an exclusive hospitality facility comprising approximately 25 double-module luxury suites, 5 triple-module suites, a concierge facility and a guest bar and lounge, to be located in the main tower of the Redeveloped Aladdin (the "Hospitality Facility"); (d) a separate entrance and reception area for guests of the Salle Privee offering secure and discreet access for arrivals and departures; and (e) vertical and horizontal circulation infrastructure providing for private elevator access to the Hospitality Facility and private corridor access from the Hospitality Facility to the Salle Privee. "SALLE PRIVEE EBITDA" means, for the period for which the determination is being made (the "Determination Period") the sum of (x) the "Salle Privee Gross Gaming Revenue" (as hereinafter defined) and (y) all other gross receipts from all sources attributable to the Salle Privee Facilities, including, without limitation, sales of food, beverages, and hotel accommodation which 4 sales in accordance with common industry practice shall include, at the agreed value thereof, food, beverages and hotel accommodation provided on a complimentary basis in the Salle Privee Facilities to persons designated for complimentary treatment in accordance with the Policies and Procedures, less (z) all costs and expenses directly attributable to the Salle Privee without any allocation being made for items of Aladdin's general overhead not specifically attributable to the Salle Privee. For purposes of determining Salle Privee EBITDA, the following items SHALL NOT be deducted: (i) interest of any kind payable or receivable by Aladdin; (ii) any federal, state, local or county taxes of any kind and however measured, except for the gaming taxes of the State of Nevada and Clark County and any applicable sales or use taxes payable by Aladdin in respect of the Determination Period but only in respect of the Salle Privee Facilities; (iii) depreciation charges of any kind; (iv) amortization charges of any kind; or (v) any item of cost or expense not directly attributable to the Salle Privee. "SALLE PRIVEE GROSS GAMING REVENUE" means with respect to any Determination Period, the Gross Revenue (as such term is defined in Section 463.0161 of the Nevada Revised Statutes, as amended) from gaming operations at the Salle Privee during such Determination Period. "SALLE PRIVEE MARKETING PLAN" means the marketing plan in respect of the Salle Privee Facilities. 2. TERM OF THE AGREEMENT. The term of this Agreement shall commence on the date hereof and shall continue until the earlier of (i) the sixty ninth (69) anniversary of the date of commencement of gaming operations at the Aladdin, (ii) the date of termination of this Agreement under Section 11 hereof, or (iii) the date of termination hereof by written agreement of the parties hereto. 3. THE REDEVELOPMENT AND FITTING OUT OF THE SALLE PRIVEE FACILITIES. Aladdin, at its sole cost and expense, and in accordance with the plans, specifications, and budgets in such form as shall have been approved pursuant to the Purchase Agreement and the Operating 5 Agreement, shall construct, furnish and fit out the Salle Privee Facilities, which shall include, without limitation, such furniture, fixtures, gaming equipment and security equipment for the Salle Privee Facilities as London Clubs may advise, with such advice and direction from London Clubs with respect to design, lay-out, decor and style and with respect to such other matters as will assure that the Salle Privee Facilities are in full and effective operation from and after the Opening Date. 4. THE MARKETING AND PROMOTION OF THE SALLE PRIVEE FACILITIES. Throughout the term of this Agreement, London Clubs shall direct worldwide marketing and promotional services targeted at its international clientele, based on a Marketing Plan (the "Salle Privee Marketing Plan") to be prepared by London Clubs and submitted to the Executive Management Committee for its advice and comment approximately six (6) months prior to the planned Opening Date. The Salle Privee Marketing Plan shall provide for the marketing and promoting to such clientele of the Redeveloped Aladdin generally and the Salle Privee Facilities particularly. The Salle Privee Marketing Plan shall include a plan for cross-marketing the Salle Privee Facilities with London Clubs and its affiliates' other gaming facilities. London Clubs shall utilize commercially reasonable efforts to deploy their respective group sales and marketing functions and staff in the provision of such services, PROVIDED, HOWEVER, that London Clubs, at all times, shall determine the method by which such marketing and promotional activities are to be conducted. The Salle Privee shall be open to the public at all times that it is open for business. 5. THE OPERATION OF THE SALLE PRIVEE FACILITIES. Throughout the term of this Agreement, London Clubs shall direct the operations of the Salle Privee Facilities in accordance with the Policies and Procedures and with the regulations relating to gaming and any other applicable laws of the State of Nevada and consistent with an international premium standard and in accordance with Aladdin's operating budget and marketing plan. London Clubs shall inform and consult with the Board in connection with all material issues that may arise affecting the operation of the Salle Privee Facilities. 6. OPERATING PRINCIPLES, POLICIES, PROCEDURES AND STANDARDS OF THE SALLE PRIVEE FACILITIES. The following Policies and Procedures shall apply to the operation of the Salle Privee Facilities in consultation with the Executive Management Committee. 6 6.1 OPERATING PRINCIPLES, ETC. Except as otherwise expressly provided herein, London Clubs shall determine Policies and Procedures of the Salle Privee Facilities in consultation with the Executive Management Committee. 6.2 GAMING FACILITIES. London Clubs shall direct the gaming and promotional operations of the Salle Privee Facilities and shall determine the type, number and location of gaming facilities, tables and devices to be installed in the Salle Privee, it being understood that the Salle Privee is expected initially to contain approximately 20 to 30 high limit table games and approximately 100 high limit slot devices. 6.3 CREDIT MANAGEMENT AND GAMING LIMITS.(a) The Salle Privee will be part of the Redeveloped Aladdin's financial control facilities and credit management will be administered by Aladdin's central credit oversight department, PROVIDED that Aladdin will consult regularly with London Clubs with regard to London Clubs' recommendations regarding credit management issues. Basic risk management policies regarding gaming limits and credit facilities for the Salle Privee shall be established by the Board based upon the input and recommendation of London Clubs. In addition, in an effort to provide the same wagering flexibility that London Clubs provides its clientele in its overseas operations, Aladdin shall permit London Clubs greater latitude with respect to the wagering limits imposed upon London Clubs' clientele in connection with wagering in the Salle Privee. In consideration for Aladdin granting London Clubs' clientele such latitude, London Clubs agrees that Net Above Limits Gaming Losses suffered by Aladdin shall be reimbursed by London Clubs to the extent and as set forth in subsection (b) of this Section 6.3. (b)(i) Within sixty (60) days after the close of each Financial Year, Aladdin shall determine the amount of Net Above Limits Gaming Losses or Net Above Limits Gaming Wins for that year, and notify London Clubs of the determination. London Clubs may, within thirty (30) days thereafter, notify Aladdin that it either accepts the determination, or wishes the auditors regularly employed by Aladdin to audit Aladdin's financial statements for purposes of confirming the amount of Net Above Limits Gaming Losses or Net Above Limits Gaming Wins, as the case may be, for that Financial Year. The auditors, if requested as above provided, shall so audit and confirm, and send notice of their determination to Aladdin and London Clubs, within thirty (30) days thereafter. (ii) Within thirty (30) days after (x) London Clubs shall have accepted Aladdin's determination, or (y) the auditors shall have notified London Clubs and Aladdin of their determination, London Clubs shall pay to Aladdin 7 the amount, if any, of any Net Above Limits Gaming Losses, or, at the option of London Clubs, apply any amounts due London Clubs under this Agreement (whether in respect of Incentive Marketing and Consulting Fees or expense reimbursements as provided in Section 8.9) and pay the balance, if any, remaining after such application. Any amounts not paid or applied as set forth above shall be offset against the next amount of any fees otherwise due to London Clubs hereunder. (iii) If during the period of the next two Financial Years immediately following a Financial Year in respect of which London Clubs shall have made a payment to Aladdin of Net Above Limits Gaming Losses as provided in subsection (b) (ii), there shall be Net Above Limits Gaming Wins, Aladdin shall, within thirty (30) days after its, or its auditors' (as the case may be), determination of the amount of Net Above Limits Gaming Wins for such year, reimburse to London Clubs the amount thereof, but not in excess of the aggregate of all amounts theretofore paid by London Clubs to Aladdin pursuant to subsection (b) (ii) in respect of Net Above Limits Gaming Losses not theretofore reimbursed by Aladdin. 6.4 RESTAURANT AND HOSPITALITY EMPLOYEES. London Clubs will direct the Restaurant and the Hospitality Facility. Employees in the Restaurant and the Hospitality Facility will be staffed by the managing director of the Salle Privee Facilities. London Clubs shall provide such training for the employees engaged in the Salle Privee Facilities as it deems necessary in consultation with the Executive Management Committee and consistent with an international premium standard. 6.5 LEGAL PROCEEDINGS IN RESPECT OF SALLE PRIVEE CUSTOMERS. Aladdin will consult with London Clubs before initiating legal proceedings against any customer of the Salle Privee, and will keep London Clubs fully informed of all actions proposed to be taken in connection with credit collection or the status of any legal proceedings. 6.6 REFURBISHMENT, REPAIR AND REDECORATION. Aladdin will be responsible for undertaking such works of refurbishment, repair and redecoration in respect of the Salle Privee Facilities as London Clubs shall advise from time to time as being reasonably necessary to maintain the Salle Privee Facilities at their international premium standard consistent with the Aladdin's budget approved by the Board. London Clubs shall advise Aladdin from time to time in respect of any refurbishment, repair and redecoration of the Salle Privee Facilities that may be required. 6.7 SECURITY. Aladdin shall provide security facilities, equipment and services for the Salle Privee Facilities as directed 8 by London Clubs, provided that such security requests shall be consistent with and not disruptive of the security arrangements for the Redeveloped Aladdin. 6.8 PRICES FOR FOOD, BEVERAGE AND HOSPITALITY FACILITY ACCOMMODATIONS. All pricing in respect of food and beverage charges and Hospitality Facility accommodations shall be determined by London Clubs from time to time in consultation with the Executive Management Committee. 6.9 SALLE PRIVEE COMMITTEE. When, during the term of this Agreement, matters shall arise requiring consultation between London Clubs and Aladdin with respect to the Salle Privee Facilities, such matters shall be referred to a special committee of the Board (the "SALLE PRIVEE COMMITTEE"). The Salle Privee Committee shall consist of the Chief Executive Officer of Aladdin and a member of the Board designated by London Clubs. 7. ACCOUNTING AND REPORTING. Aladdin shall: (i) maintain, in accordance with generally accepted accounting principles, complete and accurate books of account and records relating to the Salle Privee Facilities which shall be made available at any time on reasonable notice to Aladdin for inspection by London Clubs or its agents; (ii) cause to be rendered to London Clubs, in an agreed format, daily reports and weekly summary reports as to drop, win, major players, credit facilities granted and other operating and financial statistics in relation to the Salle Privee Facilities; (iii) cause to be rendered to London Clubs, in an agreed format, monthly reports and accounts relating to the Salle Privee Facilities detailing for each month (A) the Salle Privee EBITDA, and (B) the results of Above Limits Gaming, each of such reports and accounts to be rendered in every case within fifteen (15) days from the conclusion of the month to which they relate; (iv) cause to be rendered to London Clubs, quarterly reports and accounts relating to the Salle Privee Facilities detailing the calculation of the Salle Privee EBITDA for that quarter, each of such reports and accounts to be rendered in every case within thirty (30) days from the conclusion of the quarter to which they relate; and 9 (v) cause to be submitted to London Clubs on or prior to sixty (60) days following the end of the Initial Financial Year and each Financial Year thereafter, a draft Statement of Accounts in respect of the Salle Privee Facilities for such Financial Year, such Statement detailing the Salle Privee Gaming Win and the Salle Privee EBITDA for such Financial Year. (vi) Any disputes regarding the definition of Salle Privee EBITDA, the components thereof, the allocation or non- allocation of any items of Aladdin's general overhead and the nature and amount of any line items incorporated in Salle Privee EBITDA shall be determined by Aladdin's regular auditors. 8. INCENTIVE MARKETING AND CONSULTING FEE. 8.1 In consideration of the services to be furnished by London Clubs hereunder, Aladdin shall pay to London Clubs, in relation to the Initial Financial Year and each Financial Year thereafter, an incentive marketing and consulting fee (the "Incentive Marketing and Consulting Fee") calculated as follows: (i) 10% of the Salle Privee EBITDA, in excess of $0, up to and including $15,000,000; plus (ii) 12.5% of the Salle Privee EBITDA, in excess of $15,000,000, up to and including $17,000,000; plus (iii) 25% of the Salle Privee EBITDA, in excess of $17,000,000, up to and including $20,000,000; plus (iv) 50% of the Salle Privee EBITDA over the amount of $20,000,000. 8.2 In respect of the Initial Financial Year or the Financial Year in which this Agreement terminates, if not a full twelve month period, the dollar thresholds of the Incentive Marketing and Consulting Fee set forth in clauses (i) through (iv) of Section 8.1 (each such threshold a "Dollar Threshold" and, collectively, the "Dollar Thresholds") shall be pro-rated by multiplying each Dollar Threshold amount by a fraction, the numerator of which shall be the number of days in the Initial Financial Year or such final Financial Year (as the case may be) and the denominator of which shall be three hundred sixty-five (365). 8.3 The Dollar Thresholds shall be adjusted on every fifth anniversary of the Opening Date by such percentage as shall be equal to the percentage change, if any, in the Consumer Price Index 10 for All Urban Consumers, U.S. City Average All Items - (CPI-U; 1982 - 1984 = 100), published by the Bureau of Labor Statistics of the United States Department of Labor ("CPI"), by comparing the CPI for the month immediately preceding the month in which such fifth anniversary occurs and the CPI for the month in which the Opening Date occurs. If publication of the Consumer Price Index is discontinued, the parties shall accept comparable statistics on the cost of living as computed and published by an agency of the United States or by a responsible financial periodical of recognized authority to be selected by the parties. 8.4 For the purpose of determining the quarterly payments provided in Section 8.5 below, the Dollar Thresholds set forth in Section 9.1 shall be pro-rated by quarter. 8.5 Payments on account of the Incentive Marketing and Consulting Fee shall be made by Aladdin to London Clubs within thirty (30) days after the end of each calendar quarter and the amounts of such payments shall be based on the reports to be provided by Aladdin pursuant to Section 7 (iv) above. 8.6 Any adjustment that may be required to the Incentive Marketing and Consulting Fee shall be made after the Salle Privee EBITDA for the relevant Financial Year has been mutually agreed upon by Aladdin and London Clubs. In the absence of such agreement, and upon the request of either party, Aladdin's regularly retained auditors shall conduct an audit of the Salle Privee EBITDA in accordance with Generally Accepted Auditing Standards and shall certify the Salle Privee EBITDA for the relevant Financial Year in accordance with the definition thereof set forth in Section 1 of this Agreement. Such certification shall be completed within fifteen (15) days of completion of the audit of Aladdin's accounts for the Financial Year in question or within thirty (30) days after a request, whichever shall last expire. For purposes of performing any audit hereunder, Aladdin and London Clubs shall provide said auditors with reasonable access to all accounts, books, records, working papers and other information. 8.7 Aladdin shall make further payment to London Clubs or London Clubs shall reimburse to Aladdin the amount of such adjustment required, if any, within fifteen (15) days of such agreement or certification as is referred to in Section 8.6 above. 8.8 The Incentive Marketing and Consulting Fee shall be determined and be made payable in US dollars. 8.9 In addition to the Incentive Marketing and Consulting Fee, London Clubs shall be entitled to prompt reimbursement from Aladdin subject to Aladdin's budget and upon submission by London Clubs of any report setting forth all expenses incurred by London Clubs in the provision of marketing, promotional and advertising service and in the provision of any staff of London Clubs for 11 employment by Aladdin in the Salle Privee Facilities and of all travel accommodations and related expenses properly incurred in connection with services rendered by such staff and also in connection with marketing, promotional and advertising services rendered by executives of any Affiliate of London Clubs, all of which, to the extent actually reimbursed by Aladdin, shall be deducted in calculating the Salle Privee EBITDA. 9. MANAGEMENT AND PERSONNEL. 9.1 The Salle Privee Facilities shall be operated as a department within the Redeveloped Aladdin. All personnel to be engaged from time to time in relation to any of the Salle Privee Facilities shall be approved by London Clubs and shall be employees of Aladdin. London Clubs shall provide such additional training for employees engaged in the Salle Privee Facilities as it shall deem appropriate in order for the Salle Privee Facilities to be operated at their international premium standard. Aladdin and London Clubs agree that they shall endeavor to promote employees of the Redeveloped Aladdin who have exhibited exemplary work performance into employment positions in the Salle Privee Facilities when such positions become available. 9.2 London Clubs shall source and nominate, and may from time to time second or assign, the managing director for the Salle Privee Facilities and experienced employees to staff the principal management posts in the Salle Privee Facilities, including, but not limited to, the heads of the Salle Privee, the Restaurant, the Hospitality Facility, the registration desk and the marketing departments of the Salle Privee Facilities. The employment of such nominees will be subject to the approval of Aladdin, which approval shall not be unreasonably withheld or delayed. In this connection, London Clubs shall arrange prior to the Opening Date for training of employees designated by London Clubs for key positions in the Salle Privee Facilities who will take up their posts on or (as necessary) before the Opening Date. 9.3 Aladdin shall use all reasonable efforts to resolve any immigration requirements for any of the foregoing persons and shall use all reasonable efforts to obtain such work permits and visas as may be required. 9.4 The employees of the Salle Privee Facilities will participate equitably with all other employees of the Redeveloped Aladdin with respect to all employment policies and benefits including, but not limited to, the pooling of gratuities, incentive compensation and stock option and ownership plans based upon the relative seniority, performance and position of individual employees. 12 9.5 Without limitation to the definition of Salle Privee EBITDA, Aladdin shall procure and maintain in force at all times during this Agreement (which may be within its insurance coverage for the Aladdin Hotel and Casino generally), workers compensation, employer's liability and public and commercial general liability insurance coverages against any claims for personal injury, death, loss or damage to property or any other claim made by or against employees of Aladdin serving in the Salle Privee Facilities, including any employees seconded or assigned by London Clubs. Such policies shall include London Clubs and Guarantor as additional named insureds. Aladdin hereby further agrees to produce evidence of all such coverages to London Clubs upon demand. 10. NAME. 10.1 Throughout the term of this Agreement, the Salle Privee shall be known as the "Salle Privee at the Aladdin" or such other name as shall be selected by London Clubs subject to approval by Aladdin not to be unreasonably withheld or delayed. 10.2 The name "London Clubs" is and shall remain the exclusive property of London Clubs and its use, and the use of any logos in connection therewith, shall be strictly controlled by London Clubs in its sole discretion. No right to use such name, whether on its own or in conjunction with any other word or words, shall be conferred on Aladdin by this Agreement or following the termination hereof. London Clubs agrees to allow Aladdin to use the name "London Clubs" and related logos in connection with the Redeveloped Aladdin, provided that such use shall require the express prior written approval of London Clubs in each instance (except for on-going usage in the normal course of business previously approved pursuant to this Section 10.2). 11. TERMINATION. 11.1 This Agreement may be terminated by London Clubs or Aladdin: (i) in the event of any default in the performance of any obligation by the other party, thirty (30) days after the date of the delivery of written notice specifying the nature of the asserted default, unless the defaulting party shall have cured same within said thirty (30) days hereunder or, if the default is of such a nature that it cannot be cured within thirty (30) days, unless during such thirty (30) days the defaulting party shall have commenced curing such default and have proceeded with diligence to effect the cure within a reasonable period thereafter; or 13 (ii) in the event of the failure of the other party to make any payment due hereunder within ten (10) days after the date of provision of written notice from the non-defaulting party specifying the amount due. 11.2 This Agreement may be terminated by London Clubs immediately upon provision of notice in writing to Aladdin, without prejudice to any claim which London Clubs may have against Aladdin, if, at any time during the term of this Agreement, Aladdin shall have a Gaming Problem not directly attributable to London Clubs or any Related Party of London Clubs. 11.3 This Agreement shall be terminated effective as of the date that London Clubs shall no longer own any common membership interest or common stock, as the case may be, of Aladdin or any successor entity. 11.4 This Agreement shall be terminated if London Clubs has a Gaming Problem which would prevent it from operating the Salle Privee Facilities as contemplated by the terms of this Agreement; provided, however, that this Agreement shall be reinstated effective immediately upon the resolution of the Gaming Problem in a manner that would permit London Clubs to operate the Salle Privee Facilities as contemplated by the terms of this Agreement. 11.5 This Agreement may be terminated immediately by Aladdin upon the filing by London Clubs or Guarantor of a voluntary petition in bankruptcy or insolvency under any applicable law; the filing by London Clubs or Guarantor of any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief; the making by London Clubs or Guarantor of any general assignment for the benefit of creditors; London Clubs' or Guarantor's failure generally to pay its debts as such debts become due; London Clubs' or Guarantor's notice to any governmental body of insolvency, pending insolvency or suspension of operations; or the entry by a court of competent jurisdiction of an order, judgment or decree approving a petition filed against London Clubs or Guarantor seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any applicable law or regulation relating to bankruptcy, insolvency or other relief, which order, judgment or decree remains unvacated and unstayed for an aggregate of sixty (60) days from the date of entry thereof. 11.6 This Agreement may be terminated immediately by London Clubs upon the filing by Aladdin or Aladdin Hotel of a voluntary petition in bankruptcy or insolvency under any applicable law; the filing by Aladdin or Aladdin Hotel of any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief; the making by Aladdin or Aladdin Hotel of any general assignment for the benefit of creditors; Aladdin's or Aladdin 14 Hotel's failure generally to pay its debts as such debts become due; Aladdin's or Aladdin Hotel's notice to any governmental body of insolvency, pending insolvency or suspension of operations; or the entry by a court of competent jurisdiction of an order, judgment or decree approving a petition filed against Aladdin or Aladdin Hotel seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any applicable law or regulation relating to bankruptcy, insolvency or other relief, which order, judgment or decree remains unvacated and unstayed for an aggregate of sixty (60) days from the date of entry thereof. 11.7 In the event of a termination of this Agreement for the reasons set forth in Section 11.2, London Clubs shall have the right, exercisable upon written notice to Sommer Enterprises, LLC ("Sommer") within one hundred and eighty (180) days after the date of termination of this Agreement, to cause Sommer to purchase London Clubs' entire interest in Aladdin including, without limitation, any voting shares or preferred shares, (collectively referred to herein as the "Interest") then owned by London Clubs, for a mutually agreed upon price, or if no price can be mutually agreed, at a price equal to the fair market value of the Interest on the date of the notice, as determined by an independent qualified appraiser appointed by Sommer and London Clubs. If Sommer and London Clubs cannot agree on an appraiser within ten (10) days after the date of the notice, they shall each select an appraiser, which appraisers together shall select a third appraiser, which third appraiser shall determine the fair market value of the Interest. The determination of said third appraiser shall be binding upon the parties. The agreed price or the fair market value of London Clubs' Interest shall be payable in cash, within one hundred and twenty (120) days from the date of agreement or from the date of determination thereof, as the case may be. 11.8 Guarantor hereby absolutely and unconditionally guarantees to Aladdin and its successors and/or permitted assigns the performance by London Clubs of all of the obligations and liabilities of London Clubs under this Agreement, including, without limitation, London Clubs' obligation to reimburse Aladdin for Net Above Limits Gaming Losses pursuant to Section 6.3 hereof. It is expressly understood and agreed that this is a continuing guarantee. 12. FORCE MAJEURE. If a party is unable to perform its obligations under this Agreement, in whole or in part, by reason of war, riots, civil commotion, labor disputes, strikes, lockouts, inability to obtain labor or materials, fire or other acts of elements, acts of God, catastrophic events, accidents, government restrictions or appropriation or other causes, whether like or unlike the forego- 15 ing, beyond its reasonable control, the party shall be relieved of those obligations to the extent that it is so unable to perform for as long as it is so unable to perform, and no liability shall arise from the said non-performance; PROVIDED that in the event any of such events occurs, the Dollar Thresholds shall be pro-rated to reflect the period of time during which the event of force majeure subsists. 13. MISCELLANEOUS PROVISIONS. 13.1 Nothing in this Agreement shall be deemed to constitute a partnership or joint venture between Aladdin and London Clubs, nor shall London Clubs be deemed to be an agent of Aladdin. 13.2 This Agreement and the respective rights and obligations of the parties hereunder shall not be assignable (whether by operation of law or otherwise, including, without limitation, by way of merger, combination or similar transaction) without the prior written consent of the other party. Notwithstanding the foregoing, PROVIDED that Guarantor shall continue to guarantee the obligations of London Clubs or its permitted assigns hereunder, London Clubs (i) shall be entitled to assign its rights and obligations hereunder to an Affiliate, and (ii) London Clubs shall be entitled to assign its right to receive any payment hereunder, PROVIDED, HOWEVER, that no assignment by London Clubs hereunder shall relieve London Clubs of any of its obligations under this Agreement unless Aladdin expressly agrees to such release in writing. Notwithstanding the foregoing, Aladdin shall have the right to assign this Agreement without the consent of London Clubs (i) to any Person which is a successor to Aladdin either by merger, consolidation or other similar transaction, or (ii) to a purchaser of all or substantially all of Aladdin's assets, provided that such merger, consolidation or other similar transaction or purchase was made in compliance with, or not in contravention of, the Operating Agreement or the Shareholders Agreement annexed thereto as Exhibit A (whichever shall then be in effect). In addition, nothing contained herein shall prevent Aladdin from making a collateral assignment of this Agreement to a lender or mortgagee of the Premises. 13.3 The validity, construction, performance and effect of this Agreement shall be governed exclusively by the laws of the State of Nevada applicable to contracts made in that state, without giving effect to its conflicts of laws rules. All disputes, claims and proceedings between the parties relating to the validity, construction, breach or performance of this Agreement shall be subject to the exclusive jurisdiction of the Federal Courts of the State of Nevada to which the parties hereto irrevocably submit. 13.4 All notices, consents and other communications given under this Agreement shall be in writing and shall be deemed to 16 have been duly given and delivered (a) when delivered by hand or by DHL or Federal Express or a courier of similar international standing to the party for whom intended, (b) five days after being deposited in any official government post office in the United States of America or Great Britain, as the case may be, enclosed in an airmail postage prepaid, registered or certified envelope addressed to the party for whom intended, or (c) when successfully transmitted by facsimile to the party for whom intended at the address or facsimile number for such party set forth below, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein; PROVIDED, HOWEVER, that any notice of change of address or facsimile number shall be effective only upon receipt. If to Aladdin, Aladdin Holdings or to Sommer Enterprises: ALADDIN GAMING, LLC 2810 W. Charleston Blvd. Suite F-58 Las Vegas, Nevada 89102-1934 Attention: Richard Goeglein and Jack Sommer Fax (702) 870-8733 with a copy to: ALADDIN GAMING, LLC 280 Park Avenue New York, New York 10017 Attention: Ronald Dictrow Fax: (212) 661-0844 and a copy to: SKADDEN ARPS SLATE MEAGHER & FLOM, LLP 919 Third Avenue New York, New York 10022 Attention: Wallace L. Schwartz, Esq. Fax: (212) 735-2000 If to London Clubs or Guarantor: Chief Executive Officer LONDON CLUBS NEVADA INC. c/o London Clubs International, plc 10 Brick Street London, England, W1Y 8HQ Fax: 011-44-171-493-6981 with a copy to: 17 OHRENSTEIN & BROWN, LLP 230 Park Avenue, 32nd Floor New York, New York 10169 Attention: Peter J. Kiernan, Esq. Fax: (212) 557-0910 and a copy to: LIONEL SAWYER & COLLINS 300 South Fourth Street Suite 1700 Las Vegas, Nevada 89101 Attention: Greg Giordano, Esq. Fax: (702) 383-8845 Either party may at any time change the address for notices to such party by giving notice as provided above. 13.5 No claimed waiver of any provision of this Agreement shall be effective unless such waiver is contained in a writing signed by the party giving such waiver and expressly making reference to this Agreement and the matter being waived and expressly stating that it is a waiver. No such waiver shall be deemed to be a waiver of any other or further obligation or liability of the party or parties in whose favor the waiver was given. 13.6 Notwithstanding termination of this Agreement for any reason, all obligations of any party provided for herein that need to survive such termination in order to give effect to the intention of the parties (including, without limitation, the payment of monies) shall survive and continue until they have been fully satisfied and performed. 13.7 The Exhibits hereto form part of this Agreement and shall be construed and shall have the same full force and effect as if expressly set out in this Agreement. 13.8 Neither Aladdin nor London Clubs shall at any time use or disclose the terms of this Agreement or any confidential information concerning each other, their respective customers or suppliers other than for the purposes of this Agreement, and as to disclosure, solely to the extent that such disclosure is required by law, by the rules of any competent stock exchange or by any regulatory body, or is specifically authorized in writing by the other party, or comes into the public domain through no act or omission of the disclosing party. 13.9 This Agreement, together with the Operating Agreement to the extent referenced herein, contains the entire Agreement between the parties with respect to the subject matter hereof, and supersedes all prior or contemporaneous agreements, negotiations or 18 understandings. This Agreement may not be amended, modified, superseded, or canceled, and the terms and conditions hereof may be waived only by an instrument making express reference to this Agreement, stating that it is an amendment, modification, supersession or cancellation thereof as the case may be, executed by the party to be charged. 13.10 This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, including specifically and without limitation any corporation that shall become a successor to Aladdin as provided in the Operating Agreement. 13.11 The parties agree that six (6) months after the Opening Date, they shall consult with respect to the operations of the Redeveloped Aladdin, including the Salle Privee Facilities. The parties agree to consider in good faith each others advice and views with respect thereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on and as of the day and year first above written. ALADDIN GAMING, LLC. By: /s/ Richard Goeglein ---------------------------- Name: Richard Goeglein Title: Chief Executive Officer/President LONDON CLUBS NEVADA INC. By: /s/ Linda Lillis ---------------------------- Name: Linda Lillis Title: Assistant Secretary LONDON CLUBS INTERNATIONAL, PLC By: /s/ Barry Hardy ---------------------------- Name: Barry Hardy Title: Finance Director 19 SOMMER ENTERPRISES, LLC, solely as to Section 11.7 hereof By: /s/ Jack Sommer ---------------------------- Name: Jack Sommer Title: Chairman 20 EX-10.16 20 DESIGN/BUILD CONTRACT CONTRACT BETWEEN ALADDIN GAMING, LLC ("OWNER") AND FLUOR DANIEL, INC. ("DESIGN/BUILDER") FOR DESIGN/BUILD SERVICES This Contract made this 4th day of December, 1997 (Effective Date), by and between Aladdin Gaming, LLC ("Owner"), a Nevada limited liability company with offices at 2810 West Charleston Boulevard, Suite F-58, Las Vegas, Nevada 89102 and Fluor Daniel, Inc. ("Design/Builder"), a California corporation with offices at 3335 Michelson Drive, Irvine, California 92698, may hereinafter be referred to as "Contract" or "Agreement". BACKGROUND Owner desires to retain the services of Design/Builder to perform pre-construction and design/build services pertaining to the demolition and renovation of existing structures and construction of new structures and associated infrastructure. Design/Builder desires to provide such services in accordance with the terms and conditions set forth in this Contract. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the parties agree as follows: ARTICLE 1 DEFINITIONS Design/Build Contract ______ December 9, 1997 Page 1 ______ For the purpose of this Contract, the following terms shall have meanings ascribed to them below: 1.1 "Design/Builder" - Design/Builder means Fluor Daniel, Inc. 1.2 "Drawings", "Specifications" and/or "Plans" shall mean all those documents prepared by Design/Builder, approved by Owner and set forth in Attachment E - including the final set of plans and specifications used for the construction of the Project. 1.3 "Owner"- Owner means the Aladdin Gaming LLC or its successor or permitted assign or Owner Representative as defined in paragraph 1.4 below. 1.4 "Owner Representative" - Owner Representative means Tishman Realty and Construction Co. ("Tishman") or any other entity acting as on-site representative of Owner designated by Owner in writing as the Owner Representative for this Contract. In no event shall there be more than one entity at a time designated as the Owner Representative. 1.5 "Project" - Project means the new Aladdin Hotel & Casino, the London Clubs International facilities, parts of the retail shell and associated parking facilities located in Clark County, Nevada and as further described and illustrated in Attachments A and E. 1.6 "Architect of Record" or "Engineer" shall mean ADP/FD of Nevada, Inc., a Nevada corporation and/or its successor in interest. 1.7 "Services" or "Work" shall mean all design, engineering, pre-construction services, materials, equipment, components, and other items of any nature covered by this Contract and to be provided or performed by Design/Builder, its consultants and lower tier subcontractors, including responsibilities and obligations relative to punch list items and warranty after acceptance. "Services" will also include Article 3.1 herein. 1.8 "Contract Documents" consist of the Contract and all the Attachments thereto, including all modifications made thereto. 1.9 "Consultants" shall mean all engineering and specialty consulting firms retained by Design/Builder, the coordination and management of whom shall be the responsibility of Design/Builder. Design/Build Contract ______ December 9, 1997 Page 2 ______ 1.10 "Lender" is the bank or other financial institution or entity providing Owner with funds to pay for the Work. Other defined terms shall be deemed to have the meaning ascribed to them in General Conditions, Attachment D. ARTICLE 2 CONTRACT ATTACHMENTS This Contract shall include the following attachments: Attachment A: Scope of Services Attachment B: Invoicing Format Attachment C : Lien Waiver (Partial and Final) Attachment D: General Conditions Attachment E: GMP/Baseline Design Development Documents Attachment F: Progress Schedule Attachment G: Payment Attachment H: Incentive Bonus Attachment I: Insurance Attachment J: Tests Furnished By Design/Builder Attachment K: Permit Responsibility Matrix Attachment L: Design/Builder's Key Personnel Attachment M: Consultants To Be Retained By Design/Builder Attachment N: Bonds and Guarantee Attachment O: Subcontractor Bid Package Design/Build Contract ______ December 9, 1997 Page 3 ______ Attachment P: Letter of Credit Attachment Q: Construction Site Logistics and Staging Plan In the event this Contract and/or its Attachments contain any inconsistency, such inconsistencies shall be resolved by giving precedence in the following order: - the Contract (Articles 1-27) - Attachment D: General Conditions - Attachment E: GMP/Baseline Design Development Documents - Attachment A: Scope of Services - Other Attachments and Documents provided, however, that to the extent any of the Attachments expand upon the rights and obligations of the parties set forth herein, such provisions shall be deemed to be consistent with this Contract, yielding the broadest interpretation of the Contract. ARTICLE 3 SCOPE OF SERVICES 3.1 DESIGN/BUILD SERVICES. The scope of the Design/Build Services (hereinafter referred to as "Services" or "Work") will be as set forth in the Attachments including, without limitation, Attachment A, D and E. The Services, whether performed by Design/Builder or its subcontractors, shall be performed by qualified design professionals, construction contractors and suppliers, licensed as required by law, selected and paid by Design/Builder. Nothing in this Article 3 shall create any professional obligation or contractual relationship between such persons and Owner. 3.2 Owner shall pay for the Phased Design And Construction Plan Review Fee (as defined in the Clark County Building Code - 1997), off-site impact fees, water/sewer tap fees, zoning variances and other government approval fees necessary for the Project; however, Design/Builder shall be responsible for preparing all the necessary paperwork, supporting data and revisions required for government permitting and approval. Design/Builder shall be responsible for ensuring that all the design and Design/Build Contract ______ December 9, 1997 Page 4 ______ construction related paperwork, supporting data and revisions required for government permitting and approval is timely furnished to Owner to allow commencement of construction of the Project and completion of the Project in accordance with this Contract. Notwithstanding the above, Design/Builder is not accountable for paperwork that can only be furnished by Owner. 3.3 Subject to Subsection 2.9.10 of the General Conditions, Attachment D, the Owner Representative shall participate with Design/Builder in the negotiation of all subcontracts and purchase orders for the Work and Services to be performed and all said subcontracts and purchase orders shall be let subject to the written approval (said approval shall be made within five (5) days from receipt of Design/Builder's written recommendation) of Owner or the Owner Representative. ARTICLE 4 COST OF THE SERVICES 4.1 GUARANTEED MAXIMUM PRICE. Design/Builder shall be paid on a Guaranteed Maximum Price ("GMP") basis as described in Attachment G. Subject to additions and deductions which may be made in accordance with the Contract Documents, Design/Builder agrees that the total costs payable by Owner for the Work described in Attachments A and E shall not exceed a Guaranteed Maximum Price of Two Hundred Sixty-Seven Million Dollars ($267,000,000.00), as set forth in Attachment G. Design/Builder agrees to honor the GMP provided that the Notice to Proceed is received on or before February 1, 1998. In the event that the Notice to Proceed is not received on or before February 1, 1998, Design/Builder reserves the right to revise the GMP. In the event that the Notice to Proceed is not received on or before March 1, 1998, Design/Builder may terminate this Contract without any further obligation. 4.2 The Design/Builder's General Conditions Costs shall not exceed the lump sum amount of Sixteen Million Five Hundred Eighty-Eight Thousand Two Hundred Fifteen Dollars ($16,588,215.00) and shall consist of those costs described in Section 3 of Attachment G and more specifically set forth in Appendix 1 attached thereto. Design/Builder acknowledges and agrees to notify the Owner Representative if any General Conditions Costs are reallocated to a trade subcontract. 4.3 DESIGN/BUILDER'S RESPONSIBILITY FOR TAXES AND FEES. Only those taxes and fees directly attributable to the Work are allowable costs pursuant to the provisions of Attachment G. It is expressly understood that the Guaranteed Maximum Price includes all federal, state and local taxes, duties, excise taxes, personal taxes on equipment and property owned by Design/Builder, and income taxes including, without Design/Build Contract ______ December 9, 1997 Page 5 ______ limitation, the following state and local taxes: Sales and Use Taxes, Initial and Annual Corporate Filing Fees, Business Privilege Tax, Realty and Tangible Personal Property Taxes (on property owned by Design/Builder), Contractors' Licenses and Occupational Taxes, Local License Taxes, Unemployment Insurance Taxes, and Motor Carrier and Fuel Taxes. The payment of all other taxes are Owner's responsibility. ARTICLE 5 PERFORMANCE/PAYMENT BONDS/CORPORATE GUARANTEE 5.1 Design/Builder, in lieu of furnishing full performance and payment bonds, shall provide a creditworthy corporate guarantee from its parent the Fluor Corporation. The guarantee must be acceptable to Lender and it shall cover all of Design/Builder's obligations under this Contract. The guarantee shall be in the form as set forth in Attachment N(3). 5.2 Performance and payment bonds (issued by a surety listed in the Treasury Department listing published in the Federal Register, licensed in the State of Nevada and rated by the A.M. Best Company as "A" or better) are required from each of Design/Builder's Subcontractors; however, upon the parties's mutual consent, a Subcontractor may provide a creditworthy corporate guarantee in lieu of furnishing said bonds. Performance and payment Bonds shall be in the form as set forth in Attachment N(1) and N(2). ARTICLE 6 CHANGES IN SERVICES 6.1 RIGHT TO MAKE CHANGES. Owner may make changes in the Services in accordance with Section 18.0 of the General Conditions, Attachment D. ARTICLE 7 INSURANCE 7.1 The parties have elected to implement a Controlled Insurance Program ("CIP") whereby Owner shall reimburse Design/Builder for all associated premiums and costs which will provide General Liability (including Contractual Liability), Workers' Design/Build Contract ______ December 9, 1997 Page 6 ______ Compensation, Excess Liability, Builders Risk and Transit coverages for Design/Builder and all Subcontractors of any tier. The terms and conditions of the CIP are set forth in Attachment I annexed hereto. Design/Builder acknowledges that, unless otherwise specified, each policy it procures must: 1) identify Owner as a Named Insured, 2) identify Tishman Realty & Construction Co., Inc. and the Owner's lender(s) as Additional Insured(s), 3) identify Aladdin Bazaar, LLC as Additional Insured and 4) must contain full waivers of subrogation. ARTICLE 8 INDEMNIFICATION 8.1 Design/Builder shall indemnify Owner in accordance with the terms and provisions set forth in Section 12.0 of the General Conditions, Attachment D. ARTICLE 9 OBLIGATIONS 9.1 EXECUTION OF CONTRACT OBLIGATIONS. Design/Builder's execution of its obligations as set forth under this Contract shall be subject to the approval of Owner Representative; provided, however, such approval by Owner Representative shall not relieve or discharge Design/Builder, either expressly or by implication, from any responsibility under this Contract. Approval by the Owner Representative shall not be unreasonably withheld. Design/Builder acknowledges that approval by the Owner Representative shall not constitute a waiver of Design/Builder's obligations to perform the Work and Services in accordance with the requirements of the Contract. 9.2 Design/Builder acknowledges that a specified portion of the Work is to be performed for the benefit of Aladdin/Bazaar, LLC, a Nevada limited liability company. Said portion of the Work to be performed for the benefit of Aladdin/Bazaar, LLC shall be known as the "Retail Shell" and is more specifically defined in Attachment E, GMP/Baseline Development Documents. Notwithstanding the above, Aladdin/Bazaar, LLC is not a third-party beneficiary of this Agreement and its involvement in any meetings, negotiations or decisions related to the Retail Shell or the overall Project shall not convey or be construed to impart third-party beneficiary status. Design/Builder shall not be obligated to take direction from Aladdin Bazaar, LLC; therefor all instructions given in connection with the Retail Shell must issue from the Owner's Representative. Design/Build Contract ______ December 9, 1997 Page 7 ______ 9.3 INQUIRIES. All inquiries Design/Builder may have concerning this Contract shall be made to Owner or Owner Representative as provided herein or in the General Conditions, Attachment D. If Design/Builder is in doubt as to whom inquiry should be made, the inquiry shall be made to both Owner and Owner Representative. ARTICLE 10 TERMINATION 10.1 Owner may terminate this Contract in accordance with the General Conditions, Attachment D. If Owner terminates this Contract after Services have been undertaken by Design/Builder, compensation for work performed shall be as per Sections 28.0 and 30.0 of the General Conditions, Attachment D. ARTICLE 11 INVOICES 11.1 Design/Builder's monthly invoices shall be submitted to Owner for approval in accordance with the provisions set forth in Section 31.0 of the General Conditions, Attachment D. 11.2 Design/Builder's invoice shall: 11.2.1 Reflect the Schedule of Values for Work and Services performed as submitted by Design/Builder and approved by Owner Representative and any lender(s) representative(s), and shall: 11.2.2 Be sequentially numbered. 11.2.3 Be submitted to the attention of Owner Representative. 11.2.4 Be submitted in accordance with the format of Attachment B. 11.5.5 Reflect retainage in the amount as provided for elsewhere in the Contract Documents. 11.2.6 Be submitted on the 25th day of each month. 11.2.7 Be accompanied by other supporting documentation as may be reasonably requested by Owner Representative. Design/Build Contract ______ December 9, 1997 Page 8 ______ 11.2.8 Each invoice submitted by Design/Builder shall be accompanied by a copy of Attachment C - Lien Waiver executed in accordance with the laws of the State of Nevada. ARTICLE 12 PAYMENT 12.1 Payment shall be governed by the terms of the Attachments, including, without limitations, Section 31.0 of the General Conditions, Attachment D. ARTICLE 13 LIEN WAIVER 13.1 Acceptance by Design/Builder of any payment from Owner for any invoice submitted shall constitute a lien waiver by Design/Builder for any and all work performed and materials supplied to the extent that such costs were included in that submitted invoice and Design/Builder shall provide written release waivers (Attachment C) with respect to such costs and materials. ARTICLE 14 COMPLETION DATE 14.1 SUBSTANTIAL COMPLETION. Design/Builder agrees to cause the Substantial Completion of the Work (as defined in subsection 31.8 of the General Conditions, Attachment D) on or before 790 calendar days from either January 12, 1998 or the date Notice to Proceed is received from Owner - whichever is later. Said period shall be known as the Contract Time and may only be adjusted in accordance with this Agreement. 14.2 TIME. Time limits stated in this Contract are of the essence. Design/Builder's failure to achieve Substantial Completion within the Contract Time specified in Article 14.1 shall be governed by the provisions of Article 14.3 below. 14.3 COMPENSATION FOR EARLY/LATE COMPLETION. In lieu of Owner procuring, at Design/Builder's cost, a liquidated damages insurance policy or a business interruption Design/Build Contract ______ December 9, 1997 Page 9 ______ insurance policy to compensate Owner for late completion of the Work, the parties agree as follows: Owner shall pay Design/Builder Two Million Dollars ($2,000,000.00) as a Bonus Advance upon the issuance of the Notice to Proceed. Design/Builder may, at its option, use the Bonus Advance to purchase liquidated damages insurance or it may elect to self-insure. In either event, Design/Builder shall be entitled to keep the Bonus Advance as a bonus if the Project is Substantially Complete within the Contract Time. As a further bonus, Design/Builder shall be entitled to receive one hundred thousand dollars ($100,000.00) for each day, up to but not to exceed ninety (90) days, that the Project is Substantially Completed in advance of the Contract Time. If Design/Builder fails to achieve Substantial Completion of the Project within the Contract Time, Design/Builder must pay back the Two Million Dollars ($2,000,000.00) Bonus Advance to Owner because Design/Builder will have failed to earn these bonus monies and further Design/Builder shall pay Owner, as liquidated damages and not as a penalty, one hundred thousand dollars ($100,000.00) per day commencing upon the first day following expiration of the Contract Time and continuing up to ninety (90) days thereafter. The parties agree that such liquidated damages are a reasonable estimate of damages Owner will incur as a result of delayed completion of the Work inasmuch as it is not possible to ascertain in advance the actual damages which Owner may incur as a result of the delayed Substantial Completion of the Work. Owner may deduct liquidated damages as described above from any unpaid amounts then or thereafter due to Design/Builder under this Agreement. Any liquidated damages not so deducted from any unpaid amounts due Design/Builder shall be payable immediately to Owner upon Owner's demand. The parties agree that Design/Builder's payment of these liquidated damages and the return of the Bonus Advance shall be Owner's sole and exclusive remedy for Design/Builder's failure to achieve Substantial Completion within the Contract Time. The terms Substantial Completion and Substantially Complete as used herein shall have the same meaning. The bonuses referred to in this Article are not included in the GMP. ARTICLE 15 SUBCONTRACTORS AND SUB-SUBCONTRACTORS Design/Build Contract ______ December 9, 1997 Page 10 ______ 15.1 Design/Builder hereby warrants that it is licensed and qualified to act in the capacity of a contractor and an architect/engineer as of the date hereof and that it will contract with all Subcontractors (as hereinafter defined) as are necessary to complete the Work and Services hereunder, and further agrees to timely pay all such Subcontractors in accordance with payments received for same from Owner. 15.2 All Subcontractors of any tier of Design/Builder (hereinafter referred to collectively as Subcontractors) shall be the exclusive responsibility of Design/Builder. However, before a Subcontractor begins work under the terms of this Contract, Design/Builder shall warrant and produce all relevant documentation to demonstrate that the Subcontractor has furnished all insurance documents required under the provisions of Attachment D and Attachment I necessary to comply with the CIP. ARTICLE 16 PRIVITY OF CONTRACT 16.1 Owner shall have no contractual obligation to Subcontractors and shall communicate with such Subcontractors only through Design/Builder. Design/Builder shall include in all its subcontracts a provision which acknowledges that there is no privity of contract with Owner by reason of the subcontract. However, Owner, or any Lender providing Owner financing on any portion of the Project may contact any Subcontractor directly if Design/Builder is in default hereunder or under any other agreement between Owner and Design/Builder. Design/Builder shall provide in all its subcontracts that if Design/Builder is in default under the Contract, that the subcontract (plus any related performance and/or payment bonds), at Owner's option, shall be deemed assigned to Owner or Owner's designee, and the Subcontractor shall continue to perform its work for Owner pursuant to the terms of the subcontract. The term "subcontract" used in this Article shall also refer to all purchase orders, vendor agreements and professional service agreements with Design/Builder or Design/Builder's Subcontractors. Furthermore, Design/Builder hereby agrees to perform its Work at the Project for Lender if Owner has been declared in default under any loan agreement with such Lender, as long as Design/Builder is paid in accordance with the Contract and Lender agrees to be bound by the terms and conditions of this Agreement. ARTICLE 17 Design/Build Contract ______ December 9, 1997 Page 11 ______ HAZARDOUS MATERIALS 17.1 Pre-Existing Contamination. Anything herein to the contrary notwithstanding, title to, ownership of and legal responsibility for all pre-existing contamination shall remain with Owner. "Pre-existing contamination" is defined as and limited to all hazardous or toxic substances that were not introduced to the Jobsite or negligently disturbed by Design/Builder. 17.2 If Owner has such knowledge, Owner shall advise Design/Builder of the existence of hazardous or toxic substances on the Project site and Owner shall undertake the abatement and disposal of such material which shall include, but not be limited to, asbestos. In the event Design/Builder encounters pre-existing on-site materials or construction reasonably believed to be hazardous or health threatening, then Design/Builder shall notify Owner and stop work until an environmental laboratory properly certified by the applicable State Health or equivalent agency and an environmental engineering consulting firm, both retained directly by Owner, verifies that the materials or construction complained of has been removed or rendered harmless. Until such time Design/Builder shall not be obligated to commence or continue to work in that area of the Project suspected to contain hazardous or health threatening materials under Change Orders or directives issued by Owner and Design/Builder shall be entitled to an equitable adjustment in the Contract Time and reasonable delay related costs. 17.3 Design/Builder shall comply with all applicable environmental laws in the performance of the Work. 17.3.1 All solid and liquid wastes, hazardous substances, and hazardous materials used by Design/Builder (including but not limited to all solvents, cleaners, waste oils, and trash) shall be handled and/or disposed of in full compliance with all applicable federal, state and local statutes, regulations, ordinances and rules. 17.3.2 As soon as the Work is completed, Design/Builder shall clear the premises of all debris, waste, and equipment of every kind and nature remaining from the Work and shall haul all materials belonging to Owner to local storage or the nearest on site shipping point as directed by Owner. ARTICLE 18 TAX EXEMPTION Design/Build Contract ______ December 9, 1997 Page 12 ______ Owner shall, if applicable, execute, provide and deliver to Design/Builder, any and all documents required of Design/Builder by the taxing authorities with jurisdiction over this Project to demonstrate any claimed, full or partial, tax exemption (i.e., IDA Resolution, Tax Exemption Certificate, Certificate of Capital Improvement or the like). ARTICLE 19 LAWS 19.1 The Project is located and this Contract is entered into in Clark County, Nevada. Design/Builder shall comply with all laws, statutes, ordinances, rules and regulations of all applicable governmental entities and, to the fullest extent permitted by law, Design/Builder shall indemnify and hold Owner harmless from any fines, penalties, costs, or liability arising from the failure of Design/Builder or Design/Builder's Subcontractors to comply therewith. Design/Builder warrants that it is duly authorized to do business in the State of Nevada, that it has the knowledge and capability and is fully licensed to act as Design/Builder under the terms of this Contract and that it will evidence said authorization and capability to Owner upon request. 19.2 This Agreement shall be governed and interpreted in accordance with the laws of the State of Nevada without any reference to conflict of laws principles. ARTICLE 20 PARTIAL VALIDITY 20.1 In the event that any portion of this Contract is held to be unlawful or unenforceable as a matter of law, the balance of the Contract shall remain in full force and effect and will be binding upon the parties. In the event of a continuing breach or default on the part of either party, the failure of the other party to insist upon the strict performance of the terms and conditions hereof shall not be construed as a waiver. ARTICLE 21 EFFECTIVE DATE 21.1 This Contract shall take full force and effect on the date shown on page 1 ("Effective Date") and all Attachments and documents shall be referenced as of that date for purposes of determining their meaning and effect. The GMP is established on the basis of Plans, Drawings, Specifications, General Conditions and all other Contract Design/Build Contract ______ December 9, 1997 Page 13 ______ Documents identified or referred to herein. Changes after the Effective Date of this Contract shall be made only as provided by this Contract. Any Work commenced and any payments made pursuant to an award, letter of intent, or any preliminary agreement shall be deemed to have been completed and paid after the Effective Date and under the terms of this Contract. 21.2 Design/Builder acknowledges receipt from Owner of payments in the total sum of Three Million Forty-Four Thousand Eight Hundred Thirty Nine Dollars ($3,044,839.00) ("Advance Payments") which were made prior to the Effective Date and the parties agree that the Advance Payments are to be credited in their full amount as payments made to Design/Builder for its Fee as described in Attachment G. ARTICLE 22 CONSEQUENTIAL DAMAGES 22.1 Neither party hereto shall be liable to the other for any indirect, incidental or consequential damages of any nature whatsoever, except as otherwise provided in Section 12.0 of the General Conditions, Attachment D. ARTICLE 23 REPRESENTATIONS AND REMEDIES 23.1 Owner and Design/Builder make no representations, covenants, warranties or guaranties, express or implied, other than those of good faith and fair dealing or expressly set forth in the Contract Documents. The parties' rights, liabilities, and limitations on liabilities, responsibilities and remedies hereunder shall be exclusively those expressly set forth in the Contract Documents and shall apply even in the event of default or termination, the negligence, or strict liability of the party indemnified or released or whose liability is limited or assumed or against whom rights of subrogation are waived, shall survive the default and/or termination of Design/Builder and shall be enforceable and extend to the parties, their respective officers, directors, employees, agents and related entities. ARTICLE 24 WARRANTY/GUARANTEE OBLIGATIONS 24.1 All warranties/guarantees referred to in this Article shall apply solely to Design/Build Contract ______ December 9, 1997 Page 14 ______ construction related services rendered by Design/Builder, its Subcontractors and Vendors. The provisions of this Article shall not be interpreted or construed to limit responsibility for any design related service rendered by Design/Builder. All design Services performed by Design/Builder shall be free of negligent errors and omissions and must comply with the highest customary and applicable standards of professional care and the failure to meet these standards shall be governed in accordance with prevailing law. 24.2 All warranties/guarantees and undertakings by Design/Builder in favor of Owner shall apply to all materials, equipment or Services as applicable, provided by either Design/Builder, its Subcontractors of any tier, Vendors, or anyone directly or indirectly employed by any of them, to the same extent as if provided by Design/Builder on a direct basis. Design/Builder's guarantee and/or warranty obligations shall be as follows: a. Design/Builder guarantees that its construction workmanship shall be in conformance with good construction practices applicable to projects of this type, that all work shall be done by skilled persons and performed in the best workmanlike manner and that such Work shall be in full compliance with the requirements of the Contract Documents and in compliance with all applicable laws, codes and regulations. b. Design/Builder further guarantees that all materials, equipment and supplies incorporated into the Work shall be new, of the best quality of the kind specified in accordance with industry standards, and shall be fit for its intended purpose. At the time specified in "d" below, Design/Builder agrees to pass on and assign to Owner, all Subcontractor, Vendor and manufacturer's guarantees and warranties and to prosecute the enforcement thereof in cooperation with Owner at Design/Builder's cost and expense during the one (1) year period after Substantial Completion as defined in Subsection 31.8.1 of the General Conditions, Attachment D. c. Design/Builder warrants that (i) Design/Builder and its Subcontractors are experienced, qualified and, where required by law, licensed to perform their respective portions of the Work; (ii) the design of the Work will be in accordance with all agreed upon Project requirements, and all applicable federal, state, local codes, rules ordinances and regulations. Owner's review and approval of drawings or other submittals shall not relieve or discharge Design/Builder either expressly or by implication from any responsibility under this provision. d. Design/Builder's construction warranties and/or guarantees as set forth in this Article shall extend for one (1) year after the date of Substantial Completion. Design/Builder shall assign all Subcontract, Vendor and manufacturers warranties Design/Build Contract ______ December 9, 1997 Page 15 ______ and/or guarantees still surviving and in effect one (1) year after Substantial Completion. e. Upon receipt of written notice of defect(s) by Owner at any time during the Warranty/Guarantee Period, Design/Builder shall, at no cost to Owner, promptly furnish and provide all labor, equipment, materials and other services at the Jobsite and elsewhere as may be necessary to correct such defect(s) whether they be latent or patent and cause the Work to fully conform with the foregoing warranties and/or guarantees. In performing such corrective work, Design/Builder shall perform its Work so as to cause the least inconvenience to Owner's business which may require performance of Work at hours when Owner's business is least active. Design/Builder shall not be entitled to the extra costs, if any, incurred in connection with performing corrective Work at non-business hours. f. In the event Design/Builder fails to correct any warranty and/or guarantee defect, or fails to promptly commence correction to Owner's reasonable satisfaction, within thirty (30) calendar days of receipt of Owner's written notice, Owner shall have the right without any further notice to correct or arrange for the correction of such defects at Design/Builder's sole risk and expense. g. Owner may, in its sole discretion, elect to accept a part of the Work which is not in accordance with the requirements of the Contract Documents. In such case, the GMP shall be reduced as appropriate and equitable. Owner's acceptance of any nonconforming Work shall not waive or otherwise effect Owner's right to demand that Design/Builder correct any other defects or areas of nonconforming Work. h. Warranty and/or Guarantee Exclusions and other Remedies: (i) Design/Builder's warranty and/or guarantee obligations shall exclude damages or defects caused by modifications to the Work directed by Owner and not performed by Design/Builder or its Subcontractors. (ii) Design/Builder's warranty obligation shall not apply to damages or defects caused by ordinary wear and tear, insufficient maintenance, improper operation or improper use by Owner. ARTICLE 25 ENTIRE CONTRACT 25.1 This Contract and the above listed Attachments constitute the entire and Design/Build Contract ______ December 9, 1997 Page 16 ______ integrated agreement between Owner and Design/Builder and supersede all prior negotiations, statements, representations, agreements, letters of intent, awards, or proposals, either written or oral unless incorporated herein by specific reference. This Contract may be modified only by a written instrument signed by both Owner and Design/Builder. 25.1.1 In the event a dispute arises out of or in connection with the meaning of the language set forth in this Agreement or any of the Attachments hereto, the parties covenant and agree that neither party shall, in an effort to establish the intent of the parties or to interpret the aforesaid Contract Documents, be permitted to introduce any prior drafts, notes or memoranda generated in connection with the contract negotiations leading up the execution of this Agreement. 25.2 The parties agree to look solely to each other with respect to performance of this Contract and the Services hereunder. This Contract and each and every provision hereof is for the exclusive benefit of Owner and Design/Builder and not for the benefit of any third party, except to the extent such benefits have been expressly extended pursuant to this Contract. 25.3 The provisions of this Contract which, by their nature, are intended to survive the termination, cancellation, completion or expiration of the Contract, including, but not limited to, any indemnifications, express limitations of or releases from liability, warranties and guarantees all of which shall continue as valid and enforceable obligations of parties, notwithstanding any such termination, cancellation, completion or expiration. 25.4 Headings and titles of Articles, Sections, Paragraphs and other sub-parts of this Contract are for convenience of reference only and shall not be considered in interpreting the text of this Contract. ARTICLE 26 ASSIGNMENT 26.1 By reason of the special experience and unique nature of the services to be rendered by Design/Builder under the Contract, Design/Builder shall not assign its interest, or any part thereof, in this Contract unless such assignment is consented to by Owner in writing, which consent may be refused for any reason or no reason whatsoever, even if it be considered unreasonable. Any purported assignment by Design/Builder without such consent shall be null and void. Owner may, upon notice Design/Build Contract ______ December 9, 1997 Page 17 ______ and without consent of Design/Builder, assign this Contract to one or more lenders providing financing for the Project, including, without limitation, the lender(s) providing financing to Owner and, to the extent this Agreement pertains to the Retail Shell, to the lender(s) providing financing to Aladdin Bazaar, LLC for the design/construction of the Retail Shell, or to any entity which acquires all or substantially all of Owner's interest in the Project. Upon any assignment by Owner, Owner shall be released from all prospective liability under the Agreement and the Attachments thereto. In the event of such assignment by Owner, Design/Builder may request that Owner provide reasonable evidence in writing that the assignee has adequate financing in place for the purposes of completing the Project and that assignee has specifically agreed to make payments due under this Contract. Design/Build Contract ______ December 9, 1997 Page 18 ______ ARTICLE 27 NOTICES 27.1 All notices pertaining to this Contract shall be in writing and, if to Owner, shall be sufficient when sent registered or certified mail or nationally recognized overnight delivery service and telecopied (with oral confirmation) to Owner at the following addresses: Mr. Jack Sommer Aladdin Gaming, LLC Aladdin Management Corp. 2810 W. Charleston Blvd., Ste. F-58 Las Vegas, Nevada 89102 Telecopy Number: (702) 870-8733 Mr. Ronald Dictrow Aladdin Gaming, LLC 280 Park Avenue, 38th Fl. New York, New York 10017 Telecopy Number: (212) 661-0844 Mr. Robert Accardi Tishman Construction Corp. 666 Fifth Avenue New York, New York 10103 Telecopy Number: (212) 708-6750 With a copy to: Peter Goetz, Esq. Goetz, Fitzpatrick, Carbone, Eiseman, Finegan & Rubin, LLP One Pennsylvania Plaza New York, New York 10119 Telecopy Number: (212) 629-4013 Design/Build Contract ______ December 9, 1997 Page 19 ______ 27.2 All notices pertaining to this Contract shall be in writing and, if to Design/Builder, shall be sufficient when sent registered or certified mail or nationally recognized overnight delivery service and telecopied (with oral confirmation) to Design/Builder at the following addresses: Robert A. McNamara Fluor Daniel, Inc. 75 Newman Avenue Rumford, Rhode Island 02916 Telecopy Number: (401) 438-7281 Larry Kessinger Senior Project Director Phoenix Plaza, 19th Floor 2929 N. Central Avenue Phoenix, Arizona 85012 Telecopy Number: (602) 230-9760 With a copy to: Curtis Culver, Esq. Assistant General Counsel Fluor Daniel, Inc. One Fluor Daniel Drive Sugarland, Texas 77478-3899 Telecopy Number: (281) 263-4093 Design/Build Contract ______ December 9, 1997 Page 20 ______ IN WITNESS WHEREOF, the parties hereto have executed this Contract, on the day and year first written above. OWNER: ALADDIN GAMING, LLC, a Nevada Limited Liability Company By: ALADDIN GAMING CORP. a Nevada Corporation, its Manager By: /s/ Ronald Dictrow -------------------------------- Name: Ronald Dictrow -------------------------- Title: Executive Vice President/ Secretary ------------------------- Date: -------------------------- DESIGN/BUILDER: FLUOR DANIEL, INC. By: /s/ Robert McNamara -------------------------------- Name: Robert McNamara -------------------------- Title: ------------------------- Date: -------------------------- Design/Build Contract ______ December 9, 1997 Page 21 ______ EX-10.26 21 DEVELOPMENT AGREEMENT DEVELOPMENT AGREEMENT THIS DEVELOPMENT AGREEMENT is made as of the third day of December, 1997, between ALADDIN GAMING, LLC, a Nevada limited-liability company ("Aladdin"), and NORTHWIND ALADDIN, LLC, a Nevada limited-liability company ("Northwind") (together, the "Parties"). W I T N E S S E T H: WHEREAS, Aladdin is constructing a casino, hotel, theater, and retail shopping complex in Las Vegas, Nevada (the "Aladdin Project") and requested bids to construct, own and operate an energy facility in Las Vegas, Nevada, to supply hot water, chilled water and electricity to the Aladdin Project; and WHEREAS, Northwind has been selected by Aladdin to develop and construct such energy production facility (the "Plant") to serve the energy requirements of the Aladdin Project and the Parties concurrently are entering into an Energy Service Agreement pursuant to which Northwind will provide hot water, chilled water and electricity to the Aladdin Project; WHEREAS, Aladdin shall be leasing space to Northwind within the Aladdin Lands (as defined below) in which the Plant shall be installed and operated; and WHEREAS, Aladdin and Northwind desire to set forth in this Agreement the terms and conditions of their agreement regarding the construction of the Plant. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. As used herein, the following terms shall have the meanings specified herein and shall apply equally to single and plural forms: "Agreement" shall mean this agreement and all Exhibits attached hereto, as the same may from time to time be amended, restated, modified, or supplemented and in effect. "Aladdin Lands" shall mean the lands owned by Aladdin in Clark County, Nevada upon which the Aladdin Project shall be constructed and which lands shall be more particularly described on Exhibit A, which exhibit shall be attached hereto by Aladdin no later than ten (10) days after a Notice to Proceed is received by Northwind. "Buildings" shall mean the entire casino, hotel, theater, and shopping buildings to be developed by Aladdin, the Mall Owner and the Sound Asylum Owner on the Aladdin Lands, including, without limitation, all retail and commercial sections, parking facilities and common areas and facilities whether located at, above or below grade. "Business Day" shall mean a weekday which is not a statutory legal holiday in Clark County, Nevada. "Codes and Standards" shall mean those codes and standards relating to design, engineering, construction, workmanship, equipment, and components set forth in or called for by the Plant Scope or, if ambiguous or not so specified therein, those codes and standards considered, in accordance with generally accepted construction management practices, to be applicable to the Work and such design, construction, workmanship, equipment, and components. "Commencement Date" shall have the meaning ascribed thereto in the Energy Service Agreement. "Construction Financing Cost" shall mean all reasonable costs and expenses to Northwind, including, without limitation, interest, any arrangement fees and closing fees and all reasonable costs and expenses of counsel for Northwind and of counsel for the lenders providing such financing, of negotiating, documenting and closing of financing the construction of the Plant; provided, however, that to the extent that funds for the construction of the Plant are provided by Northwind and not borrowed from third parties, for purposes of determining Construction Financing Cost hereunder it shall be assumed that (a) the portion of such funds which are provided by Northwind not in excess of forty (40) percent of the aggregate of all funds borrowed or provided by Northwind to fund construction of the Plant bear interest at twenty (20) percent per annum, (b) the portion of such funds which are provided by Northwind in excess of forty (40) percent of the aggregate of all funds borrowed or provided by Northwind to fund construction of the Plant bear interest at a rate equal to prime rate as published in the "Money Rates" section of the WALL STREET JOURNAL from time to time and (c) a closing fee in respect of the portion of such funds provided by Northwind referred to in clause (b) preceding equal to one and one-quarter (1.25) percent was payable. "Critical Path Activity" shall mean an activity characterized as a "critical path activity" in the Plant Schedule. "Defects or Deficiencies" shall mean any designs, engineering, materials, equipment, supplies, or installations which (i) do not conform to the Plant Scope, Good Engineering Practices, or Plant Plans and Specifications, or are of inferior workmanship as determined by 2 applicable Codes and Standards or (ii) would materially and adversely affect the ability of Northwind to achieve the Final Completion Deadline. "Development Costs" shall have the meaning ascribed thereto in the Energy Service Agreement. "Energy Service Agreement" shall have the meaning ascribed thereto in Section 3(a) below. "EPC Contract" shall mean the contract described in Section 5(c) hereof, as the same may be amended, restated, modified, or supplemented, and in effect from time to time. "EPC Contractor" shall have the meaning ascribed thereto in Section 5(c) hereof. "Final Completion" shall mean completion of the Plant in accordance with and to the extent set forth in the Plant Scope. "Final Completion Certificate" shall have the meaning ascribed thereto in Section 8(b) below. "Final Completion Deadline" shall mean the date which is one month after the date of Substantial Completion, as such date may be extended from time to time pursuant to the express provisions hereof. "Financial Closing" shall mean the closing of each of (a) the issuance and sale of ____ Units consisting of (i) ___% Senior Discount Notes due 2009 of Aladdin Gaming Holdings, LLC, and Aladdin Capital Corp. and (ii) ____ Initial Warrants and ____ Contingent Warrants to purchase shares of common stock of Aladdin Enterprise, Inc., yielding gross proceeds of approximately $110,000,000 and (b) closing of the senior secured construction/term loan facilities consisting of three construction/term loans (i) a $165,000,000 term A loan that will have a stated maturity of seven (7) years, (ii) a $100,000,000 term B loan that will have a stated maturity of eight and one half (8.5) years, and (iii) a $145,000,000 term C loan that will have a stated maturity of ten (10) years. "Financing Costs" shall mean all reasonable costs of arranging for, negotiating, documenting and closing of permanent financing for the Northwind Facilities, including any arrangement fees and closing fees and all reasonable costs and expenses of counsel for Northwind and of counsel for the lenders providing such financing, and shall not include Construction Financing Costs. 3 "Force Majeure Event" shall have the meaning ascribed thereto in the Energy Service Agreement. "GMP" shall mean the guaranteed maximum price of the Plant determined by Northwind based on the price set forth in the EPC Contract(s) [AND ALL OTHER CONTRACTS], plus a contingency reflective of potential unknowns at the time that the EPC bids are received, such contingency to be determined in accordance with Section 9(b)(i) hereof. "GMPP" shall mean the guaranteed maximum plant price, which shall consist of the GMP, Development Costs, Construction Financing Costs, Other Costs, and Financing Costs, and shall be determined in accordance with Exhibit B, including the caps for specific elements of the GMPP set forth therein. "Good Engineering Practices" shall mean those practices, methods, equipment, specifications, and standards of safety and performance utilizing good, safe and prudent engineering practices in connection with the design, construction, operation, maintenance, repair, and use in similar plants. "Government Approval" shall mean any authorization, consent, approval, license, ruling, permit, tariff, rate, certification, exemption, filing variance, order, judgment, decree, publication, notices to, declarations of or with or registration by or with any Government Authority relating to the ownership, construction, operation, or maintenance of the Plant or to the execution, delivery or performance of this Agreement. "Government Authority" shall mean any Federal, national, state, municipal, local, territorial, or other governmental department, commission, board, bureau, agency, regulatory authority, instrumentality, judicial or administrative body, domestic or foreign. "Independent Engineer" shall mean an engineering firm mutually agreed to by the Parties within ninety (90) days after Northwind receives a Notice to Proceed. "Law" shall mean, as of any relevant date, (a) any statute, law, rule, regulation, code, ordinance, judgment, decree, writ, order, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement or other governmental restriction or any similar form of decision of or determination by, or any interpretation or administration of any of the foregoing by, any Government Authority, whether now or hereafter in effect or (b) any requirements or conditions on or with respect to the issuance, maintenance, or renewal of any Government Approval or applications therefore then in effect. "Mall" shall mean the parking and retail shopping mall to be built on a portion of the Aladdin Lands and owned and operated by the Mall Owner. 4 "Mall Owner" shall mean Aladdin Bazaar, LLC, a Delaware limited-liability company. "Minor Modification" shall mean a minor modification or adjustment to the Work that (i) does not involve any increase to the Plant Price, (ii) is not reasonably likely to affect the ability of Northwind to achieve the Substantial Completion Deadline and/or the Final Completion Deadline, and (iii) results in the quality of the Work being provided under this Agreement being of the same or better quality than as described in the Plant Scope and does not constitute a material change. "Northwind Lease" shall have the meaning ascribed thereto in Section 3(c) below. "Notice to Proceed" shall mean a written notice from Aladdin to Northwind stating that Northwind shall commence the physical construction of the Plant, and shall not be issued by Aladdin until Aladdin has achieved Financial Closing, and in any event not earlier than January 1, 1998. "Other Costs" shall mean all costs and expenses, incurred after the date of execution of this Agreement, other than Construction Financing Costs, Development Costs, Financing Costs, and amounts payable to the EPC Contractor, incurred by Northwind in construction and completion of the Plant, including, without limitation, costs of insurance, construction administration costs and any applicable Tax. "Performance Tests" shall mean the tests to demonstrate that the Plant can produce Services in accordance with the Plant Plans and Specifications, as such tests are agreed upon by Aladdin and Northwind in connection with the establishment of the Plant Plans and Specifications. "Plant" shall mean the energy production facility to be constructed, owned and operated by Northwind primarily located within that portion of the Aladdin Lands to be leased from Aladdin. "Plant Plans and Specifications" shall have the meaning ascribed thereto in Section 5(c) below. "Plant Price" shall mean an amount as determined in accordance with Exhibit B hereof, and shall be comprised of: (i) the cost paid by Northwind pursuant to the EPC Contract; (ii) the Construction Financing Cost; (iii) Other Costs; and (iv) Development Costs, provided that the total of such Development Costs attributable to internal Northwind costs (such internal Northwind costs to include the internal costs of Northwind affiliates), including the 5 cost of the Project Manager, does not exceed $375,000 without the prior written approval of Aladdin. "Plant Schedule" shall mean the schedule for completion of the Work to be provided by Northwind to Aladdin as part of the Project Plan. "Plant Scope" shall mean the description of the Plant set forth in Exhibit A to the Energy Service Agreement, which description shall be agreed to by Aladdin and Northwind prior to Northwind's receipt of a Notice to Proceed. "Progress Report" shall mean the monthly report submitted by Northwind to Aladdin pursuant to Section 6 hereof. "Project Manager" shall mean that person or persons appointed and designated from time to time by Northwind for the purpose of providing management and daily supervision of all activities relating to the design, construction and operation of the Plant, as described further in Section 4(a) below. "Project Plan" shall have the meaning ascribed thereto in Section 4(b) below. "Reciprocal Easement Agreement" shall have the meaning ascribed thereto in Section 3(b) below. "Related Agreements" shall mean, collectively, the Energy Service Agreement, the Reciprocal Easement Agreement and Northwind Lease, as, from time to time, each may be amended, restated, modified or supplemented and in effect. "Scope Change" shall mean any material addition to, deletion from, suspension of or other modification to the quality, quantity, function or intent of the Work, including, without limitation, any such addition, deletion, suspension, or other modification which requires an increase in the Plant Price, a delay of the Substantial Completion Deadline or the Final Completion Deadline, and/or a change in the Project Plan or the Plant Plans and Specifications. A Minor Modification shall not constitute a Scope Change. "Scope Change Order" shall mean a written order to Northwind issued and signed by Aladdin authorizing a Scope Change, and an equitable adjustment in one or more of the Plant Price, the Substantial Completion Deadline, the Final Completion Deadline, the Project Plan, the Plant Plans and Specifications or any other amendment to the terms and conditions of this Agreement. "Services" shall have the meaning ascribed thereto in the Energy Service Agreement. 6 "Sound Asylum Owner" shall mean Aladdin Music, LLC, a Nevada limited- liability company. "Sound Asylum Project" shall mean the hotel, casino and entertainment complex to be built on a portion of the Aladdin Lands and owned by the Sound Asylum Owner. "Start-up" shall mean the preparation and execution of all activities required to place the Plant in operation, including without limitation, precommissioning, commissioning and performance of functional testing. "Substantial Completion" shall mean substantial completion of the Plant in accordance with Section 8(a) hereof. "Substantial Completion Certificate" shall have the meaning ascribed thereto in Section 8(a) below. "Substantial Completion Deadline" shall mean the date which is eighteen (18) months after the date upon which Northwind receives the Notice to Proceed, provided that Aladdin is willing and able to include all of Northwind's structural steel in Aladdin's mill order for structural steel and the steel fabricator will and does deliver Northwind's steel approximately one month after shop drawings therefor are provided to the steel fabricator; otherwise, "Substantial Completion Deadline" shall be determined based upon the committed delivery schedule for Northwind's structural steel agreed upon with the supplier thereof, but in any event, shall be not later than twenty (20) months after the date upon which Northwind receives the Notice to Proceed, as such date may be extended from time to time pursuant to the express provisions hereof. "Tax" shall have the meaning ascribed thereto in the Energy Service Agreement. "Unicom Guaranty" shall mean the guaranty appended hereto as Exhibit C, duly executed and delivered by Unicom Corporation. "Work" shall mean, except as otherwise stated herein, all acts or action required for the design, procurement, engineering, and construction of the Plant to Final Completion and for the performance of Northwind's obligations as further described herein, including, but not limited to, (i) designing the Plant, (ii) constructing the Plant in conformance with applicable Laws and Government Approvals, (iii) procuring and handling materials, (iv) Start-up and testing of the Plant, and (v) all other acts as may be necessary to achieve Final Completion. 7 2. GENERAL TERMS. (a) TERM. This Agreement shall be effective and binding on the Parties as of the date hereof and shall remain in effect until the Parties have completed their obligations in accordance with the terms hereof, unless earlier terminated in accordance with the terms of this Agreement. (b) PLANT LOCATION AND PURPOSE. The Plant shall be located on Aladdin Lands and shall be constructed, owned and operated by Northwind (or its agents, contractors or employees) in accordance with the terms of this Agreement in order to provide Services to the Buildings. (c) PURCHASE OF SERVICES. Services shall be sold by Northwind pursuant to the terms and conditions of the Energy Service Agreement and/or as otherwise permitted thereby and by the Lease. (d) DESIGN AND CONSTRUCTION OF THE PLANT. Except as expressly provided to the contrary in this Agreement (i) the design and construction of the Plant will be at the sole cost and expense of Northwind and (ii) Northwind agrees to perform all Work in accordance with the Agreement as shall be necessary to assure Substantial Completion on or before the Substantial Completion Deadline and Final Completion on or before the Final Completion Deadline. (e) ALADDIN NOT RESPONSIBLE FOR ACTS OF NORTHWIND. Aladdin will not be responsible for and will not have control over or charge of construction means, methods, techniques, sequences, or procedures, or for safety precautions and programs in connection with the Work, and Aladdin will not be responsible for Northwind's failure to carry out the Work in accordance with this Agreement. Aladdin will not be responsible for or have control or charge over the acts or omissions of Northwind (or its agents, contractors or employees). No inspection, or failure to inspect, by Aladdin shall be a waiver of Northwind's obligations, or be construed as approval or acceptance of the Work or any part thereof. (f) CLAIMS UPON FAILURE OF WORK. Aladdin assumes no responsibility for injury or claims resulting from (i) failure of such Work to comply with applicable Laws or Government Approvals or (ii) Defects or Deficiencies. Northwind's performance of the Work shall include the provision of all necessary permanent safety devices for the Plant required by applicable Government Authorities and applicable Laws or Government Approvals. Work performed hereunder will comply in every respect with all the requirements referred to above and the terms of the Agreement. 8 (g) ALADDIN'S ACCESS TO WORK. Aladdin shall at all times, consistent with Northwind's safety requirements, have access to the Work wherever it is in preparation and progress and Northwind shall provide for such access; provided, however, that Aladdin shall not interfere with or delay performance of the Work on account of such access. (h) RESPONSIBILITIES OF NORTHWIND. Subject to the terms of this Agreement, Northwind shall: (i) Prosecute the Work diligently in accordance with the Plant Schedule, using only qualified and competent personnel, and complete the Work in a manner that meets Good Engineering Practices and is in accordance with the provisions of this Agreement; (ii) Perform or cause to be performed the Work, including designing, engineering, procuring, constructing, Start-up, and performance testing of the Plant in accordance with Good Engineering Practices and standards of professional care, skill, diligence and competence applicable to engineering, construction and project management practices for similar facilities, and all Government Approvals so that (a) the Work is performed in accordance with and the Plant meets all requirements of applicable Laws and Government Approvals and Good Engineering Practices, (b) the Plant is safe and in accordance with the Plant Plans and Specifications, (c) consistent with a Plant Price estimate of $30 million which has been preliminarily identified by Northwind and Aladdin, Northwind designs the Plant to minimize, consistent with Good Engineering Practices, the amount of operation and maintenance expense, (d) the Plant is free from Defects and Deficiencies and (e) the Plant is capable of and does comply with all applicable Laws and Government Approvals, including, without limitation, environmental Laws and Government Approvals; (iii) Be responsible for all damages, fines and penalties which may arise because of Northwind's noncompliance with Laws or Government Approvals; provided, however, that Northwind shall be permitted to contest any such damages, fines or penalties provided that (i) Northwind does so in accordance with acceptable practices therefor and (ii) doing so does not materially delay or otherwise adversely affect the performance of the Work; (iv) Provide all required safeguards, signs, security services, fire protection, and the like, for the protection of the Work site, the Work and the 9 Plant and of all persons while on the Work site and other property related thereto; (v) Provide and pay for, in Northwind's name as an independent contractor and not as an agent for Aladdin, all construction materials, equipment, supplies, and facilities, and all contractor and subcontractor labor and manufacturing and related services; (vi) Provide or cause to be provided, at Northwind's expense, all labor and personnel required in connection with the performance of the Work. All personnel used by Northwind in the performance of the Work shall be qualified by training, licenses or certifications, and experience, as required to perform their assigned tasks; (vii) Replace any of Northwind's personnel performing the Work if Aladdin and Northwind mutually agree that such personnel are creating a risk to the timely completion of the Work in accordance with the Agreement; (viii) Protect any and all parallel, converging and intersecting electric lines and poles, telephone lines and poles, highways, waterways, railroads, sewer lines, natural gas pipelines, drainage ditches, culverts and any and all property of others, including, but not limited to, the Buildings, from damage as a result of its performance of the Work. In the event that any such property is damaged or destroyed in the course of Northwind's performance of the Work, Northwind, at its own expense, shall rebuild, restore or replace such damaged or destroyed property; (ix) Procure, as required, the appropriate proprietary rights, licenses, agreements, and permissions for materials, methods, processes and systems incorporated into the Plant; (x) Investigate as soon as reasonably practicable the Aladdin Lands and surrounding locations to familiarize itself with and satisfy itself with respect to the nature and location of the Work, and the general and local conditions with respect to environment, transportation, access, waste disposal, handling and storage of materials, availability and quality of electric power, availability and condition of roads, climatic conditions and seasons, physical conditions at the Work site and the surrounding area as a whole, topography and ground surface conditions, nature of surface materials to be encountered, location of underground utilities, and equipment and facilities needed prior to and during 10 performance of all of Northwind's obligations under this Agreement (collectively the "Work Site Conditions"); (xi) Provided that Aladdin shall have provided to Northwind the legal description of the portion of the Aladdin Lands upon which the Plant is to be located and a survey of such portion of the Aladdin Lands and information describing all underground rights of way affecting such portion of the Aladdin lands, prior to execution of the EPC Coontract, acknowledge and accept the Work Site Conditions and agree that neither the Substantial Completion Deadline nor the Final Completion Deadline shall be extended as a result of any Work Site Conditions unless Section 11 provides for such an extension; (xii) Confirm, by execution of this Agreement, that Northwind has knowledge of all of the legal requirements and business practices that must be followed in performing the Work and that the Work will be in conformance with such requirements and practices and in compliance with all Laws and applicable Government Approvals. All engineering services to be provided as part of the Work shall be provided by one or more engineers qualified to perform such services in the state in which the Plant is to be constructed; (xiii) Concurrently with execution of this Agreement, deliver the Unicom Guaranty, duly executed by Unicom Corporation; (xiv) Comply with and not contravene the provisions of any Law applicable to Northwind's execution and performance of this Agreement and obtain any and all Government Approvals. (xv) Acknowledge that the Aladdin Project is a union site and agree not to cause a job action at the site of the Aladdin Project. (i) REPRESENTATIONS AND WARRANTIES. Each party (the "Representing Party") represents and warrants to the other: (i) that it has the requisite limited-liability company capacity to enter into this Agreement and fulfill its obligations hereunder, that the execution and delivery by it of this Agreement and the performance by it of its obligations hereunder have been duly authorized by all requisite action of its members, and by its board of directors or other governing body, and that, subject to obtaining any applicable Government Approvals and compliance with any applicable Laws, the entering into of this Agreement and the fulfillment of its obligations hereunder does not contravene any law, statute or contractual obligation of the Representing Party; (ii) that no suit, action or arbitration, or legal, administrative or other proceeding is pending or has been threatened against the Representing Party that would affect the validity or enforceability of this Agreement or the ability of the Representing Party to fulfill its commitments hereunder, or that could 11 result in any material adverse change in the business or financial condition of the Representing Party; and (iii) the consummation of the transactions contemplated by the Agreement shall not result in a breach of any of the terms or conditions of, or constitute a default under, any indenture, mortgage, deed of trust, or other agreement to which the Representing Party is now a party, or violate any judgment, order, writ, injunction, or decree of any Government Authority to which the Representing Party is a party or by which it or any of its assets is bound. (j) INSURANCE. The respective insurance requirements for Aladdin and Northwind are set forth in Exhibit D attached hereto, and shall be maintained throughout the term of this Agreement. The liability of each party under this Agreement to the other party shall not be diminished by the insurance limitation set forth in said Exhibit D. All insurance policies required by this section shall provide that such policies may not be cancelled or terminated without 30 days prior written notice to both Aladdin and Northwind. Each party hereby releases and waives, to the extent legally possible for it to do so without invalidating its insurance coverages for itself and on behalf of its insurer, the other party hereto and its respective officers, directors, agents, members, partners, servants and employees from liability for any loss or damage to any or all property located on the Aladdin Lands which loss or damage is of the type and within the limits covered by the "all-risk" property damage insurance and other property / casualty insurance which the parties have agreed to obtain and maintain in effect pursuant to this Section 2(j) irrespective of any negligence on the part of the released party and its respective officers, directors, agents, members, partners, servants, or employees, which may have contributed to or caused such loss or damage. Each party covenants that it will, if available, obtain for the benefit of the other party and its officers, directors, agents, members, partners, servants and employees, a waiver of any right of subrogation which the insurer of such party may acquire against such party by virtue of the payment of any such loss covered by insurance. In the event a party is by law, statute or governmental regulation unable to obtain a waiver of the right of subrogation for the benefit of the other party (and its respective officers, directors, agents, members, partners, servants, or employees) or its insurance carriers will not give such a waiver or its property / casualty insurance will be invalidated by the waiver and release set forth in the fourth sentence of this Section 2(j), then during any period of time when such waiver is unobtainable, said party shall not have been deemed to have released any subrogated claim of its insurance carrier against such other party (or its respective officers, directors, agents, members, partners, servants, or employees), and during the same period of time, such other party shall not have been deemed to have released the party which has been unable to obtain such waiver (or such party's respective officers, directors, agents, 12 members, partners, servants, or employees) from any claims it or its insurance carrier may assert which otherwise would have been released pursuant to this Section 2(j). All policies of insurance provided for in Exhibit D shall name Mall Owner and its designated lender(s) as additional insureds. (k) CONDEMNATION. In the event of a condemnation or eminent domain taking of all or part of the site upon which the Plant is to be located (a "Taking"), Northwind shall, as soon as practicable, determine whether it is commercially reasonable and technically feasible in the circumstances for Northwind to proceed with construction of the Plant hereunder. In the event that Northwind determines that it is commercially reasonable and technically feasible, Northwind will so inform Aladdin and promptly will recommence the activities on its part contemplated hereby and this Agreement shall remain in force and, to the extent set forth in Section 8.2 of the Northwind Lease, Northwind shall be entitled to the award or awards from such Taking and the Contract Capacity Charges payable under the Energy Service Agreement thereafter may be adjusted. In such event, if necessary, equitable adjustments in the Substantial Completion Deadline, the Final Completion Deadline, the times for achievement of Critical Path Activities and all other time frames applicable to the obligations of the Parties hereunder shall be made. In the event that Northwind determines that it is not commercially reasonable or technically feasible in the circumstances to proceed with construction of the Plant hereunder, then Northwind shall so notify Aladdin and such notice shall also constitute termination of this Agreement, effective upon the date when such Taking becomes effective, and, to the extent set forth in Section 8.1 of the Northwind Lease, Northwind shall be entitled to the award or awards from such Taking. Notwithstanding the foregoing, in the event Northwind and Aladdin disagree as to whether it is commercially reasonably and technically feasible in the circumstances for Northwind to proceed with construction of the Plant hereunder, then Northwind and Aladdin shall promptly meet and use their best efforts to resolve such dispute. If the Parties are unable to resolve such dispute within ten (10) days, then the Parties shall refer such dispute to the Independent Engineer. The Independent Engineer's conclusion as to whether it is commercially reasonable and technically feasible in the circumstances for Northwind to proceed with construction of the Plant hereunder shall be accepted by and binding upon the Parties. (l) NO PRESUMPTION. Wherever in this Agreement it is provided that an activity or obligation is at Northwind's sole cost and expense, such provision shall not imply or be construed to imply or mean any limitation on any right which Northwind may have under the Energy Service Agreement to include such cost or expense (or some portion thereof) in charges payable to Northwind thereunder. 13 3. ADDITIONAL AGREEMENTS AND DOCUMENTS. (a) Aladdin and Northwind agree that the following agreements are being or will be executed and delivered: (i) an Energy Service Agreement (as executed and as it may be amended, restated, modified, or supplemented and in effect from time to time, the "Energy Service Agreement") between Aladdin and Northwind pursuant to which Northwind shall provide to the Aladdin Project Services produced by the Plant and (ii) a Lease (as executed and as it may be amended, restated, modified, or supplemented and in effect from time to time, the "Northwind Lease") between Aladdin and Northwind for the lease to Northwind of the portion of the Aladdin Lands on which the Plant shall be constructed and operated. (b) Aladdin and Northwind acknowledge that they intend to be parties, along with the Mall Owner and the Sound Asylum Owner, to a Reciprocal Easement Agreement, pursuant to which all such entities shall grant to each other easements with respect to their respective interests in the Aladdin Lands (such agreement, as executed and as it may be amended, restated, modified, or supplemented and in effect from time to time, being herein referred to as the "Reciprocal Easement Agreement"). Each of Northwind and Aladdin agrees that they shall use their best efforts to cause such agreement to be finalized, executed and delivered within one hundred (100) days following the date of execution of this Agreement. 4. PROJECT MANAGEMENT. (a) PROJECT MANAGER. Northwind shall establish a project construction management office in Clark County and shall appoint a project manager no later than forty-five (45) days after Northwind receives from Aladdin a Notice to Proceed. (i) The Project Manager shall report directly to Northwind and shall be responsible for daily supervision of all activities relating to the design and construction of the Plant. The Project Manager will have full authority to act for Northwind concerning performance of the Work, act as a single point of contact with Aladdin in all matters on behalf of Northwind concerning performance of the Work and furnish information to Aladdin; provided that no amendment or modification to this Agreement shall be effected except by an Amendment in accordance with Section 14(f) hereof. (ii) The Project Manager shall conduct biweekly meetings, at a time and day mutually acceptable to Northwind and Aladdin, at which meetings the Project Manager will (i) provide an update with respect to the Work and (ii) 14 answer any questions and address any comments Aladdin may have with respect to the Work. The Project Manager shall consider in good faith any and all comments made by Aladdin at such biweekly meetings. Comment or failure by Aladdin to comment at such biweekly meetings shall not in any way affect or reduce Northwind's obligations to complete the Work in accordance with the terms of this Agreement. (iii) The Project Manager (and any replacement Project Manager) must be reasonably satisfactory to Aladdin. If Aladdin believes a Project Manager appointed by Northwind to be unsatisfactory, the reasons for such belief must be stated in writing to Northwind within five (5) Business Days after Aladdin is notified of the name of such Project Manager (or any such replacement Project Manager). Failure by Aladdin to object to any such appointment within said five (5) Business Day period shall be deemed to be acceptance thereof. Northwind shall not voluntarily change the Project Manager, unless such change is for cause, without the prior written consent of Aladdin, which consent shall not be unreasonably withheld or delayed. In the event Northwind does change the Project Manager for cause, Northwind shall notify Aladdin of such change as soon as reasonably practicable. (b) PROJECT EXECUTION PLAN. (i) Northwind shall develop a project execution plan (the "Project Plan") that shall be comprised of a Plant Schedule and estimated Plant testing and Start-up dates. The Project Plan, which shall be based on the Plant Scope, shall include a definition of the construction work, major milestones, Critical Path Activities, and scheduled date of completion and shall state that the Plant is scheduled to commence operation no later than the Final Completion Deadline. (a) The Plant Schedule shall identify as Critical Path Activities those key milestones to be achieved in order to achieve Substantial Completion on or before the Substantial Completion Deadline. The Plant Schedule also shall indicate the proposed dates of starting and completion of the Work, including dates for fabrication, assembly, installation, testing and completion of the Critical Path Activities and other major components of the Work. In preparing the Plant Schedule and in order to complete the Work within the time required by this Agreement, Northwind will take into consideration and make allowance for customary delays and hindrances incident to such Work in accordance 15 with generally accepted construction management practices, whether growing out of delays of common carriers, delays in securing materials or workmen, delays in Northwind securing necessary approvals, Northwind delays or otherwise (excluding delays for which an extension of time is allowable under Section 11). Northwind, in consultation with Aladdin, shall update the Plant Schedule to reflect changes necessitated by Sections 9 and/or 11 hereof. (ii) An initial draft of the Project Plan shall be delivered by Northwind to Aladdin for Aladdin's review no later than thirty (30) days after receipt by Northwind from Aladdin of a Notice to Proceed. Aladdin agrees to provide any comments regarding the Project Plan to Northwind within ten (10) days of receipt thereof. Aladdin's failure to comment in writing within such period shall be deemed to constitute Aladdin's acceptance of the Project Plan. Review, comment or acceptance (or the lack thereof) by Aladdin shall not in any way affect or reduce Northwind's obligations to complete the Work in accordance with the terms of this Agreement. Northwind agrees to consider in good faith any and all comments made by Aladdin. Within ten (10) days of receipt of comments from Aladdin, Northwind and Aladdin shall meet at a mutually acceptable time and place to discuss Aladdin's comments. If Northwind has determined that revisions suggested by Aladdin are necessary in accordance with Good Engineering Practices, Northwind shall so inform Aladdin at the meeting and shall amend the Project Plan accordingly. If Northwind determines that revisions are not necessary, Northwind shall so inform Aladdin at the meeting, and orally shall explain the reasons why it proposes rejecting the revisions. Within fifteen (15) Business Days after the meeting, Northwind shall provide to Aladdin written minutes of the meeting, including a clear statement as to why any revisions suggested by Aladdin were not made. Northwind shall confirm the final Project Plan within ten (10) days after execution of the EPC Contract(s). (iii) Northwind may make Minor Modifications to the Project Plan; PROVIDED, HOWEVER, that Northwind shall notify Aladdin thereof in writing prior to, or if not reasonably practicable, as soon as reasonably practicable subsequent to, Northwind's effecting any such Northwind-initiated Minor Modification. All other revisions shall be subject to compliance with Section 9 hereof. (iv) In the event Northwind fails to achieve one or more Critical Path Activities in accordance with the Plant Schedule and Aladdin reasonably 16 and in good faith concludes that Northwind's failure to achieve such Critical Path Activity(ies) when and as set forth in the Plant Schedule is reasonably likely to prevent Northwind's ability to achieve Substantial Completion on or before the Substantial Completion Deadline and/or Final Completion on or before the Final Completion Deadline, Aladdin may, but shall not be obligated to, give Northwind notice of such conclusion and the basis for such conclusion. Within five (5) days of receipt of such notice, Northwind shall submit to Aladdin Northwind's proposal to improve performance of the Work to assure Northwind's ability to achieve Substantial Completion on or before the Substantial Completion Deadline and/or Final Completion on or before the Final Completion Deadline for approval by Aladdin. If within a reasonable period of time, as reasonably determined by Aladdin, Northwind does not improve performance to meet the Critical Path Activities, Aladdin may require an increase in Northwind's labor force, the number of shifts, overtime operations, additional days of work per week, and/or an increase in the amount of construction equipment, all costs of which shall be borne solely by Northwind. Neither such notice by Aladdin nor Aladdin's failure to issue such notice shall relieve Northwind of its obligation to achieve Substantial Completion on or before the Substantial Completion Deadline and/or Final Completion on or before the Final Completion Deadline. In the event Northwind fails to comply with Aladdin's instructions and Aladdin continues to believe, reasonably and in good faith, that because of such failure Northwind will not be able to achieve Substantial Completion on or before the Substantial Completion Deadline or Final Completion on or before the Final Completion Deadline, then Northwind shall be considered in default of this Agreement in accordance with Section 10(a) hereof and Aladdin may exercise its rights as set forth in Section 10(b) hereof. 5. PLANT DESIGN. (a) PLANT OVERSIGHT. Subject to the terms of this Agreement, Northwind shall oversee, administer and approve the design, construction and operation of the Plant. (b) SCOPE. Northwind and Aladdin will jointly develop and agree upon the Plant Scope. The Plant Scope will include a detailed description of the major components of the Plant (including energy transfer stations and the communications systems), respectively, and the details of the specific energy requirements of Aladdin and, together with the performance standards set forth in Exhibit A to the Energy 17 Service Agreement, prescribe the agreed upon performance and operating characteristics of the Plant. (c) PLANT PLANS AND SPECIFICATIONS. (i) In consultation with Aladdin, Northwind shall prepare a request for proposals ("RFP") from engineering, procurement and construction ("EPC") contractors to design and build the Plant. As part of such RFP preparation process, Aladdin shall, with the aid of a qualified engineering company, provide to Northwind within forty-five (45) days of execution of this Agreement all site interfaces, including an overall site plan, information on site soil conditions, overall Aladdin Complex arrangement drawings, underground rights of way, electrical connection requirements, hot and chilled water connection locations and all architectural requirements for the exterior of the Plant and maintenance buildings. Aladdin shall also provide, within forty-five (45) days of execution of this Agreement, specifications and related documentation for the energy transfer stations ("ETSs") to be included as part of the Plant, which specifications shall be reasonably acceptable to Northwind in its reasonable business judgment (taking into account the Substantial Completion Deadline). Once the RFP is complete (and provided that Aladdin has provided to Northwind the specifications and related documentation for the ETSs within forty-five (45) days of execution of this Agreement), Northwind shall solicit bids from at least three (3) qualified EPC contractors (except as to structural steel, which Northwind may purchase from Aladdin's supplier) and provided, however, that if in good faith and after consultation with its engineers and suppliers, Northwind determines that achievement of the Substantial Completion Deadline cannot be met unless a sole source contractor (including a sole source provider of structural steel other than Aladdin's supplier) is promptly engaged to construct the Plant, then Northwind shall so notify Aladdin and, unless Aladdin agrees to an equitable extension of the Substantial Completion Deadline, Northwind may dispense with submitting the RFP to multiple bidders and may proceed to negotiate and enter into an EPC Contract with a contractor of its choosing which contractor and EPC Contract shall be acceptable to Aladdin (such acceptance not to be unreasonably withheld). Northwind shall consider in good faith any EPC contractor suggested by Aladdin. From such bids as may be received and are acceptable to Aladdin and Northwind, Northwind shall retain a qualified EPC contractor (the "EPC Contractor") to design and build the Plant and shall enter into a contract with the EPC Contractor (the "EPC Contract") pursuant to which the EPC Contractor shall design and build the Plant in accordance with this Agreement. If based on bids received from the EPC contractors it appears that the Plant Price is likely to exceed $40 million, then Northwind shall have the right to terminate this Agreement without liability unless within ninety (90) days after receipt of bids from the prospective EPC contractors either (i) Aladdin and Northwind, using good faith efforts, are able to effect changes to the Project Scope or otherwise to effect 18 changes which result in a projected Plant Price of less than $40 million or (ii) Aladdin agrees to pay, in cash, the amount of the Plant Price in excess of $40 million, such payment to be made prior to the execution of the EPC Contract, provided that any amount so paid by Aladdin shall not be included in Total Project Investment for purposes of and as defined in the Energy Service Agreement. If this Agreement is terminated as provided in this Section, Aladdin shall pay to Northwind those costs and expenses described in the final sentence of Section 10(e) hereof; if this Agreement is not terminated, delays occasioned by clause (i) above shall extend the Substantial Completion Deadline and the Final Completion Deadline as appropriate. The EPC Contractor, together with Northwind, shall prepare design development plans and specifications for the Plant (the "Plant Plans and Specifications") consistent with the Plant Scope and mindful of the preliminary Plant Price estimate of $ 30 million. Copies of the Plant Plans and Specifications shall be delivered to Aladdin for Aladdin's review no later than one hundred and twenty (120) days after Northwind receives from Aladdin a Notice to Proceed. Aladdin agrees to provide any comments regarding the Plant Plans and Specifications within ten (10) days of receipt thereof. Aladdin's failure to comment in writing within such period shall be deemed to constitute Aladdin's acceptance of the Plant Plans and Specifications. Review, comment or acceptance (or the lack thereof) by Aladdin shall not in any way affect or reduce Northwind's obligations to complete the Work in accordance with the terms of this Agreement. Northwind agrees to consider in good faith any and all comments made by Aladdin. Within ten (10) days of receipt of comments from Aladdin, Northwind and Aladdin shall meet at a mutually acceptable time and place to discuss Aladdin's comments. If Northwind has determined that revisions suggested by Aladdin are necessary in accordance with Good Engineering Practices, Northwind shall so inform Aladdin at the meeting and shall amend the Plant Plans and Specifications accordingly. If Northwind determines that revisions are not necessary, Northwind shall so inform Aladdin at the meeting, and orally shall explain the reasons why it proposes rejecting the revisions. Within fifteen (15) Business Days after the meeting, Northwind shall provide to Aladdin written minutes of the meeting, including a clear statement as to why any revisions suggested by Aladdin were not made. (ii) Sixty (60) days following Northwind's finalizing the Plant Plans and Specifications pursuant to clause (c)(i) above, Northwind shall have detailed design drawings prepared, five (5) copies of which shall be provided to Aladdin for Aladdin's review. Aladdin agrees to provide any comments regarding the detailed design drawings within ten (10) days of receipt thereof. 19 Aladdin's failure to comment in writing within such period shall be deemed to constitute Aladdin's acceptance of the detailed design drawings. Review, comment or acceptance (or the lack thereof) by Aladdin shall not in any way affect or reduce Northwind's obligations to complete the Work in accordance with the terms of this Agreement. Northwind agrees to consider in good faith any and all comments made by Aladdin. Within ten (10) days of receipt of comments from Aladdin, Northwind and Aladdin shall meet at a mutually acceptable time and place to discuss Aladdin's comments. If Northwind has determined that revisions suggested by Aladdin are necessary in accordance with Good Engineering Practices, Northwind shall so inform Aladdin at the meeting and shall amend the detailed design drawings and accordingly. If Northwind determines that revisions are not necessary, Northwind shall so inform Aladdin at the meeting, and orally shall explain the reasons why it proposes rejecting the revisions. Within fifteen (15) Business Days after the meeting, Northwind shall provide to Aladdin written minutes of the meeting, including a clear statement as to why any revisions suggested by Aladdin were not made. (iii) Two hundred and forty (240) days following Northwind's finalizing the Plant Plans and Specifications pursuant to clause (c)(i) above, Northwind shall have detailed operation manuals prepared, five (5) copies of which shall be provided to Aladdin for Aladdin's review. Aladdin agrees to provide any comments regarding the detailed operation manuals within ten (10) days of receipt thereof. Aladdin's failure to comment in writing within such period shall be deemed to constitute Aladdin's acceptance of the detailed operation manuals. Review, comment or acceptance (or the lack thereof) by Aladdin shall not in any way affect or reduce Northwind's obligations to complete the Work in accordance with the terms of this Agreement. Northwind agrees to consider in good faith any and all comments made by Aladdin. Within ten (10) days of receipt of comments from Aladdin, Northwind and Aladdin shall meet at a mutually acceptable time and place to discuss Aladdin's comments. If Northwind has determined that revisions suggested by Aladdin are necessary in accordance with Good Engineering Practices, Northwind shall so inform Aladdin at the meeting and shall amend the detailed operation manuals accordingly. If Northwind determines that revisions are not necessary, Northwind shall so inform Aladdin at the meeting, and orally shall explain the reasons why it proposes rejecting the revisions. Within fifteen (15) Business Days after the meeting, Northwind shall provide to Aladdin written minutes of the meeting, including a clear statement as to why any revisions suggested by Aladdin were not made. 20 (iv) Northwind may make Minor Modifications to the Plant Plans and Specifications; PROVIDED, HOWEVER, that Northwind shall notify Aladdin thereof in writing prior to or, if not reasonably practicable, as soon as reasonably practicable after Northwind's effecting any such Northwind-initiated Minor Modification. All other revisions shall be subject to Section 9 hereof. (v) The review and approval by Aladdin of the Plant Plans and Specifications shall not relieve Northwind of any of its duties, liabilities or obligations under this Agreement or any Related Agreement. 6. PLANT CONSTRUCTION; CONSTRUCTION REPORTS AND MEETINGS. The EPC Contractor retained by Northwind shall construct the Plant in accordance with the Plant Plans and Specifications. Northwind shall provide monthly construction progress reports to Aladdin, in a form reasonably satisfactory to Aladdin (which reports shall be provided on the fifth (5th) day of each calendar month and shall include, with respect to the prior month, a work progress statement and a schedule report showing project milestones and critical path activity and shall also include a schedule report showing future project milestones and critical path activity and the future construction schedule). A representative of Aladdin may attend (but not actively participate in) construction meetings between the EPC Contractor and Northwind (or the Project Manager). If Aladdin believes that the Plant is not being constructed in a manner consistent with the Plant Plans and Specifications (as the same may be modified from time to time in accordance with the terms of Section 5 above), or has any additional comments with respect to the construction of the Plant, Aladdin shall inform Northwind (or the Project Manager) of such belief or additional comments at the biweekly meetings conducted by the Project Manager pursuant to Section 4(a) hereof. Northwind shall consider promptly and in good faith any and all comments made by Aladdin. Northwind shall determine whether corrective measures are necessary in response to Aladdin's comments using a reasonable standard applicable to construction practices for energy producing facilities similar to the Plant, taking into account Codes and Standards, Good Engineering Practices and the Plant Plans and Specifications. If Northwind agrees with Aladdin, Northwind shall so inform Aladdin at the earliest possible biweekly meeting, and shall take (or cause to be taken) appropriate corrective measures. If Northwind, after consultation with the EPC Contractor, does not agree with Aladdin, Northwind shall so inform Aladdin at the earliest possible biweekly meeting and shall provide a clear written statement explaining Northwind's disagreement in the next monthly construction progress report to be provided by Northwind to Aladdin pursuant to Section 6 hereof. Comments by Aladdin (or the absence thereof) with respect to the construction of the Plant shall not in any way affect or reduce 21 Northwind's obligations to complete the Work in accordance with the provisions of this Agreement. 7. QUALITY CONTROL AND INSPECTION. (a) IN GENERAL. Northwind shall perform all quality control and inspection activities related to the Work as required by Northwind's Quality Control and Inspection Program (as defined below), this Agreement and Good Engineering Practices. Northwind shall inspect and test the Work on a continuing basis. Northwind shall correct all Defaults or Deficiencies in a reasonable time. All Defects or Deficiencies identified by such inspection or testing shall be the subject of a monthly report to Aladdin. The report shall describe in detail (i) all Defects or Deficiencies identified which are reasonably likely to have an adverse impact on the Plant Schedule, (ii) all corrections, all Work that was re-performed and related services rendered during the immediately preceding month and (iii) all Defects not then corrected or re-performed. (b) QUALITY CONTROL AND INSPECTION PROGRAM. Within one hundred (100) days of receipt by Northwind of the Notice to Proceed, Northwind shall prepare and deliver to Aladdin a formal program for inspecting and testing the Work ("Quality Control and Inspection Program"). The person responsible for implementing the Quality Control and Inspection Program shall be identified by Northwind to Aladdin. The Quality Control and Inspection Program must be adequate to meet all the quality control and inspection needs of the Work. Aladdin agrees to provide its comments within thirty (30) days of receipt of such program. Aladdin's failure to comment within such period shall be deemed to constitute Aladdin's approval. Review, comment or acceptance (or the lack thereof) by Aladdin shall not in any way affect or reduce Northwind's obligations to complete the Work in accordance with the terms of this Agreement. Northwind agrees to consider in good faith any and all comments made by Aladdin. Within ten (10) days of receipt of comments from Aladdin, Northwind and Aladdin shall meet at a mutually acceptable time and place to discuss Aladdin's comments. If Northwind has determined that revisions suggested by Aladdin are necessary in accordance with Good Engineering Practices, Northwind shall so inform Aladdin orally at the meeting and shall amend the Quality Control and Inspection Program accordingly. If Northwind determines that revisions are not necessary, Northwind shall so inform Aladdin orally at the meeting, and shall orally explain the reasons why it proposes rejecting the revisions. Within fifteen (15) Business Days after the meeting, Northwind shall provide to Aladdin written minutes of the meeting, including a clear statement as to why any revisions suggested by Aladdin were not made. 22 (c) INSPECTION RIGHTS. Aladdin shall have the right to inspect all Work performed and witness all tests hereunder, and Northwind shall arrange such inspection, upon reasonable notice from Aladdin; provided, however, that Aladdin's inspection shall not interfere with or delay performance of the Work. Aladdin shall have the right to comment to Northwind, in writing, at any time, regarding any portion of the Work, including, without limitation, any design, engineering, materials, equipment, installation, tools, or supplies, which in Aladdin's reasonable judgment does not conform to this Agreement, the Work or the Plant Plans and Specifications, or which contains Defects or Deficiencies. Aladdin shall inform Northwind (or the Project Manager) of such belief or additional comments at the biweekly meetings conducted by the Project Manager pursuant to Section 4(a) hereof. Northwind shall consider promptly and in good faith any and all comments made by Aladdin. Northwind shall determine whether corrective measures are necessary in response to Aladdin's comments using a reasonable standard applicable to construction practices for energy producing facilities similar to the Plant, taking into account Codes and Standards, Good Engineering Practices and the Plant Plans and Specifications. If Northwind agrees with Aladdin, Northwind shall so inform Aladdin at the earliest possible biweekly meeting, and shall take (or cause to be taken) appropriate corrective measures. If Northwind, after consultation with the Design and Specifications Engineer, does not agree with Aladdin, Northwind shall so inform Aladdin at the earliest possible biweekly meeting and shall provide a clear written statement explaining Northwind's disagreement in the next monthly construction progress report to be provided by Northwind to Aladdin pursuant to Section 6 hereof. Comments by Aladdin (or the absence thereof) with respect to the construction of the Plant shall not in any way affect or reduce Northwind's obligations to complete the Work in accordance with the provisions of this Agreement. (d) EFFECT OF WAIVER OF INSPECTION RIGHTS. If Aladdin shall waive or fail to exercise its right to inspect and witness any test as herein provided, Northwind in no way shall be relieved of liability for the quality, character, proper operation, and performance of the Work, nor shall the rights of Aladdin set forth in this Agreement be prejudiced or affected. Nor shall any witness of any test or inspection by Aladdin or any failure to witness any test or inspection be construed as an approval or acceptance of the Work. 8. COMPLETION. (a) SUBSTANTIAL COMPLETION. Upon a determination by Northwind that the Plant has been substantially completed in accordance with the Plant Plans and Specifications, which shall only be when (i) the Plant has demonstrated performance in 23 accordance with the design requirements, all applicable Laws and Government Approvals, the Quality Control and Inspection Program, and the Performance Tests, and Northwind has so certified to Aladdin, (ii) Northwind has further certified to Aladdin that the Plant has been designed and constructed and is operating in accordance with the Work and this Agreement and (iii) Northwind has performed all obligations under this Agreement to be then performed by Northwind, Northwind shall deliver to Aladdin a certificate of substantial completion (the "Substantial Completion Certificate"), which shall be in the form agreed to, initialed by the Parties and attached hereto as Exhibit E by not later than thirty (30) days after Notice to Proceed is received by Northwind. If Aladdin believes, at the time of such certification by Northwind, that the Plant has not reached Substantial Completion, then, within ten (10) Business Days after Aladdin receives the Substantial Completion Certificate, Aladdin shall provide Northwind with written notice clearly setting forth the basis for Aladdin's belief. Any portions of the Plant to which timely objection is not made by Aladdin shall be considered substantially complete. Failure by Aladdin to deliver any notice within said ten (10) Business Day period shall be deemed to be acceptance of the Plant as substantially complete. If Aladdin delivers a notice as aforesaid, Northwind shall determine whether it agrees with such notice, and if Northwind does so agree, Northwind shall complete the Plant in the manner required by the terms of this Agreement diligently and in good faith. If Northwind does not agree with Aladdin's notice, Northwind shall so inform Aladdin and Northwind and Aladdin promptly shall confer and exert their best efforts in good faith to reach a reasonable and equitable resolution of the issue. If Northwind and Aladdin are unable to resolve the issue within five (5) Business Days, then the matter shall be referred to the Independent Engineer, and the Parties agree to accept the Independent Engineer's determination as binding, and act accordingly. (b) FINAL COMPLETION. In order to achieve Final Completion, Northwind must have: (i) achieved Substantial Completion, (ii) corrected all conditions constituting Defects and Deficiencies identified in writing by Aladdin to Northwind, (iii) performed all other obligations of Northwind under this Agreement to be then performed, in a manner reasonably satisfactory to Aladdin, and (iv) delivered to Aladdin a certificate of final completion (the "Final Completion Certificate"), which shall be in the form agreed to by the Parties, initialed by the Parties and attached hereto as Exhibit F by not later than thirty (30) days after Notice to Proceed is received by Northwind. If Aladdin believes, at the time of such certification by Northwind, that the Plant has not reached Final Completion, then within ten (10) Business Days of Aladdin's receipt of the Final Completion Certificate, Aladdin shall provide Northwind with written notice clearly setting forth the basis for Aladdin's belief. Any portions of the Plant to which timely objection is not made by Aladdin shall be 24 considered to have reached Final Completion. Failure by Aladdin to deliver any notice within such ten (10) Business Day period shall be deemed acknowledgment by Aladdin that Final Completion has occurred. If Aladdin delivers a notice to Northwind as aforesaid, Northwind shall determine whether it agrees with Aladdin's notice. If Northwind agrees with Aladdin's notice, Northwind shall take the actions necessary to bring the Plant to Final Completion. In the event Northwind contests Aladdin's notification that Final Completion has not been achieved, Aladdin and Northwind shall promptly confer and exert their best efforts in good faith to reach a reasonable and equitable resolution of the issue. If Aladdin and Northwind are unable to resolve the issue within five (5) Business Days, the matter shall be referred to the Independent Engineer. The Parties agree to accept the determination made by the Independent Engineer with respect to whether Final Completion has been achieved and to act accordingly. (c) TIMELY COMPLETION OF THE PLANT. TIME IS OF THE ESSENCE WITH RESPECT TO NORTHWIND'S PERFORMANCE OF THE WORK. In accordance with and subject to the terms of this Agreement, Northwind guarantees that Substantial Completion shall occur not later than the Substantial Completion Deadline, as it may be extended time to time pursuant to this Agreement, and further guarantees that Final Completion shall not occur later than the Final Completion Deadline, as it may be extended from time to time pursuant to this Agreement. Northwind will design the Plant, specify and procure equipment and schedule its activities taking into account good and generally accepted construction management practices and take all reasonably necessary measures to complete the Plant on or before the Substantial Completion Deadline. (d) CONTINGENCY PLAN. Northwind shall have a contingency plan that conforms with Codes and Standards and Good Engineering Practices which provides for the rental by Northwind of transportable boiler and chiller plants to ensure delivery of hot and chilled water in accordance with the Energy Service Agreement if completion of the Plant is delayed for any reason and (i) such delay is expected to prevent Northwind from commencing the delivery of the Chilled Water Services and/or the Hot Water Services in accordance with the terms of the Energy Service Agreement, and (ii) Aladdin would otherwise be capable of receiving and using the Services if the Plant had been completed. In the event of such a delay, the contingency plan shall be instituted by Northwind at Northwind's sole cost, except that (1) implementation of the Contingency Plan in order to provide Initial Services (as defined in the Energy Service Agreement) to the Customer during the period from the Initial Services Date through but not including the Substantial Completion Deadline shall be at Aladdin's sole cost and expense, and (2) if such delay is caused by an 25 event described in Section 11 hereof or by the acts or omissions of Aladdin, the Mall Owner or the Sound Asylum Owner, then the Contingency Plan will be implemented at Aladdin's sole cost. Northwind shall implement the contingency plan to ensure that there is no delay and/or lapse in the delivery of hot and chilled water. If Aladdin determines, in its sole discretion, that Northwind is failing to implement the contingency plan in a timely manner, and Northwind's failure to implement the contingency plan is not caused by a breach by Aladdin of its obligations under this Agreement or the acts of the Mall Owner or the Sound Asylum Owner, Aladdin may implement the contingency plan, and Northwind agrees that it will pay all the costs thereof except as otherwise set forth above in this Section 8(d). 9. SCOPE CHANGES. (a) FURTHER REFINEMENT, CORRECTIONS AND DETAILING NOT SCOPE CHANGES. It is understood and agreed that the Work shall be subject to further refinement, correction and detailing by the Parties from time to time, and that Northwind shall receive no additional compensation for such refinement, correction or detailing that does not constitute Scope Changes. (b) SCOPE CHANGES. (i) From time to time prior to completion of the Work, Northwind shall have the right, without obtaining the prior approval of Aladdin, to effect Scope Changes (each, a "Northwind Allowed Scope Change" and collectively, "Northwind Allowed Scope Changes"), on and subject to the following conditions and limitations, and the cost of all such Northwind Allowed Scope Changes shall be included in the Plant Price: (a) Each Northwind Allowed Scope Change shall be expected by Northwind, in good faith and in accordance with Good Engineering Practices, to enhance the reliability, efficiency or longevity of the Plant or to have a beneficial effect on the operation or maintenance of the Plant; (b) It cannot reasonably be expected by Northwind that such Northwind Allowed Scope Change will delay Substantial Completion beyond the Substantial Completion Deadline or Final Completion beyond the Final Completion Deadline; 26 (c) The Northwind Allowed Scope Change shall be compatible with the Plant Scope; (d) Northwind shall notify Aladdin in detail of the Northwind Allowed Scope Change as soon as reasonably practicable, and in any event, prior to performance of the work contemplated thereby; and (e) The additional cost of the Work attributable to (i) any single Northwind Allowed Scope Change shall not exceed fifty (50) percent of the Available Pool (as hereinafter defined) and (ii) all Northwind Allowed Scope Changes in the aggregate shall not exceed one hundred (100) percent of the Available Pool. For purposes of this Section 9(b), the term "Available Pool" shall mean, as of any date of determination, the excess of (i) the GMP and Other Costs plus a reasonable contingency amount for discretionary changes by Aladdin (which amount shall be established by Northwind and provided to Aladdin within thirty (30) days after execution of the EPC Contract(s)), such contingency amount to be reasonably acceptable to Aladdin, as increased by the Cost of Scope Changes theretofore approved by Aladdin over (ii) the estimated total cost of the Work as reflected in Northwind's forecast therefor prepared not more than thirty (30) days preceding the date of authorization of such Northwind Approved Scope Change, which forecast shall reflect all costs theretofore incurred, the cost of then unperformed portions of the Work for which contracts exist and a good faith estimate, in accordance with applicable Codes and Standards, of the costs of all portions of the Work, if any, for which Northwind has not made contractual arrangements. (ii) Aladdin may order Scope Changes to the Work, in which event one or more of the Plant Price, the Substantial Completion Deadline, the Final Completion Deadline, the Project Plan, the Plant Plans and Specifications and other terms and conditions of the Agreement shall be adjusted accordingly, if and to the extent necessary. All Scope Changes (but not Northwind Allowed Scope Changes) shall be authorized by a Scope Change Order. (c) PROCEDURE FOR SCOPE CHANGES. (i) In addition to the right of Northwind to effect Northwind Allowed Scope Changes, as soon as Northwind becomes aware of any circumstance which Northwind has reason to believe may necessitate a Scope 27 Change, Northwind shall issue to Aladdin a written notice thereof (a "Scope Change Order Notice"). All Scope Change Order Notices shall include documentation sufficient to enable Aladdin to determine: (i) the factors necessitating the possibility of a Scope Change; (ii) the impact which the Scope Change is likely to have on the Plant Price; (iii) the impact which the Scope Change is likely to have on scheduling and the Substantial and Final Completion Deadlines; and (iv) such other information which Aladdin may reasonably request in connection with evaluating such Scope Change. (ii) If Aladdin desires to make a Scope Change (other than pursuant to a Scope Change Order Notice), Aladdin shall submit a written proposal requesting a Scope Change (a "Scope Change Order Request") to Northwind. (a) Northwind shall promptly review the Scope Change Order Request and notify Aladdin in writing of its preliminary good faith view of the options for implementing the proposed Scope Change and of Northwind's good faith estimate of the effect, if any, each option would have on the Plant Price, the Substantial and Final Completion Deadlines, the Project Plan, and the Plant Plans and Specifications. (b) After receipt of Northwind's preliminary estimates, Aladdin shall inform Northwind, within five (5) Business Days, whether Northwind shall provide cost, schedule and performance level guarantee impacts to Aladdin for the Scope Changes proposed by Aladdin. Northwind's costs for preparing such guarantee impacts shall not exceed a price mutually agreed upon by the Parties prior to Northwind's undertaking such analysis. Aladdin may, but shall not be obligated to, issue a Scope Change Order covering such proposed Scope Change, in which event the contents of Northwind's notice of impacts described in this Section 9(c)(ii)(b) shall be binding on Northwind, and Northwind's reasonable costs in preparing such notice of impacts, subject to the maximum price agreed to by the Parties, shall be included in any Plant Price change. (c) In the event Aladdin disagrees with Northwind's statement of the cost, schedule and performance level guarantee impacts of such proposed Scope Change, and Northwind has estimated that the proposed Scope Change would increase the Plant Price by $100,000 or more, Aladdin and Northwind shall promptly confer and exert their best efforts in good faith to agree upon the cost, schedule and performance 28 level guarantee impacts of the proposed Scope Change. If Aladdin and Northwind are unable to agree on the cost, schedule or performance level guarantee impacts of the proposed Scope Change, and if the difference is (1) a difference in the Parties' estimates of the costs of the proposed Scope Change and such difference is greater than $10,000 or (2) a difference in the Parties' estimate of the effect on the schedule or the performance level guarantee impacts of the proposed Scope Change, then the Parties shall refer the issue to the Independent Engineer. The Independent Engineer's estimate of the cost, schedule or performance level impacts of the proposed Scope Change (as applicable) shall be accepted by the Parties. In the event Aladdin disagrees with Northwind's statement of the cost of such proposed Scope Change, and Northwind has estimated that the proposed Scope Change would increase the Plant Price by less than $100,000 in the specific instance or by less than $250,000 when aggregated with all other Scope Changes under this Section 9(c), Aladdin may proceed with issuance of the Scope Change Order and the dispute shall be resolved as provided in this Agreement. (d) In the event Aladdin declines to issue the Scope Change Order, Northwind's reasonable costs in preparing the cost, schedule and performance level guarantee impacts, subject to the maximum price therefor agreed to by the Parties pursuant to Section 9(c)(ii)(b), shall be added to the Plant Price. (e) The cost of Scope Changes initiated by Aladdin, the costs of which shall be included in the Plant Price, shall not exceed five (5) percent of the GMP established pursuant to Exhibit B. (f) Any reasonable delays in Substantial Completion or Final Completion of the Plant arising by reason of investigation of any Scope Change proposed by Aladdin that are reasonably consistent with Northwind's preliminary good faith view, as set forth in Section 9(c)(ii)(a)hereof, shall extend the Substantial Completion Deadline or the Final Completion Deadline accordingly. (d) SCOPE CHANGES DUE TO NORTHWIND ERROR. Notwithstanding anything in this section to the contrary, no Scope Change Order shall be issued and no adjustment of the Plant Price, the Substantial and Final Completion Deadlines, the Project Plan, or the Plant Plans and Specifications shall be made in connection with any correction 29 of errors, omission, deficiencies or improper or defective work on the part of Northwind or any of its subcontractors in the performance of the Work. (e) SCOPE CHANGES DUE TO FORCE MAJEURE AND CHANGE IN LAW. Any change in the Plant Plans and Specifications or the Work which is necessitated by a change in applicable Law that became effective after the date of this Agreement or a Force Majeure Event and is not a Minor Modification shall be treated as a Scope Change under Section 9(b) hereof which Aladdin shall not have the right to approve and Northwind shall implement without obtaining Aladdin's approval, provided that (i) Northwind shall notify Aladdin in detail thereof as soon as reasonably practicable and in any event prior to performance of the work contemplated thereby, (ii) Northwind otherwise complies with the requirements of Section 9(b)(i)(c) hereof with respect to such Scope Change, (iii) Northwind's determination that such change in the Plant Plans or Specifications or the Work is necessary and Northwind's implementation of such change both shall be made in good faith and in accordance with Good Engineering Practices; provided, however, that this Section 9(e) shall not apply to any change in any applicable Law resulting directly or indirectly from the negligent acts, errors or omissions of Northwind. 10. DEFAULT; TERMINATION. (a) NORTHWIND EVENTS OF DEFAULT. Northwind shall be in default of its obligations pursuant to this Agreement should any of the following events or conditions arise or exist and Northwind shall fail to remedy the same within ten (10) days, or, if such remedy cannot reasonably be completed within ten (10) days, Northwind shall fail promptly to provide Aladdin with evidence reasonably satisfactory to Aladdin that such default can be cured by Northwind in a time period reasonably satisfactory to Aladdin and promptly to commence and diligently pursue and conclude remedial action within such agreed period: (i) Admitted abandonment of the Plant by Northwind or failure to prosecute the Plant with reasonable diligence after notice from Aladdin stating that it believes that Northwind has abandoned the Plant; (ii) Northwind assigns or transfers this Agreement or its right or interest herein, except as expressly permitted under Section 14(e) of this Agreement; (iii) Northwind fails, neglects, refuses, or, other than because of a Force Majeure Event, is unable at any time during the course of the performance of the Work, to provide sufficient material, equipment, services, or labor to perform the Work in accordance with this Agreement; 30 (iv) Any representation or warranty made by Northwind was materially incorrect when made and as a result thereof it reasonably is expected that Northwind will be unable to observe and perform its material obligations hereunder and such inability will not be cured within a reasonable period of time; (v) Northwind defaults, in any material respect, in its observance of or performance under any material provision of this Agreement (provided that such failure does not arise when Northwind has refused to proceed with a proposed Scope Change when Northwind is not obligated at that time to proceed with such proposed Scope Change); (vi) Unicom Corporation repudiates or disavows its obligations under the Unicom Guaranty; (vii) Northwind fails to comply with any Law or Government Approval applicable to the Work or to Northwind's performance of its obligations under this Agreement; (viii) Unless otherwise permitted pursuant to this Agreement, a material change or deviation in the Project Plan or Plant Plans and Specifications shall be made or authorized by Northwind without the prior approval of Aladdin; or (ix) The failure by Northwind to provide the Project Plan or Plant Plans and Specifications to Aladdin in accordance with this Agreement. (b) TERMINATION OPTION AND OTHER REMEDIES FOR NORTHWIND DEFAULT. If a Northwind Event of Default has occurred, Aladdin may terminate this Agreement by written notice to Northwind of the termination hereof. Upon such termination, Aladdin shall demand performance of the Unicom Guaranty and, unless within three (3) Business Days of such demand Unicom Corporation, the Guarantor, informs Aladdin in writing that Unicom Corporation shall perform the obligations of Northwind as set forth in this Agreement, Aladdin may cause the obligations of Northwind pursuant to this Agreement to be performed at the sole expense of Unicom Corporation in accordance with the terms of the Unicom Guaranty. In the event Unicom Corporation elects to perform the obligations of Northwind, Unicom Corporation shall perform the Work and shall meet the Substantial Completion Deadline and the Final Completion Deadline in accordance with the terms of this Agreement, and shall have the right to perform Northwind's obligations under the Related Agreements 31 pursuant to the terms thereof. In the event Aladdin shall cause the obligations of Northwind pursuant to this Agreement to be performed at Unicom Corporation's sole expense, Northwind promptly shall withdraw from the Work site and transfer its rights, title and interest in the Plant and the Plant Plans and Specifications to Aladdin. In addition, Northwind promptly shall assign to Aladdin such of its contracts, including but not limited to warranties and guarantees, related to the Plant and the Work as Aladdin may request, and promptly remove such materials, equipment, tools, and instruments used by, and any debris or waste materials generated by, Northwind in the performance of the Work as Aladdin may direct, and Aladdin may take possession of any and all designs, materials, equipment, tools, and facilities of Northwind which are on the Work site. If Aladdin exercises such option, (i) Aladdin shall assume the obligations of Northwind under any contracts assigned to Aladdin pursuant to this section which are not in default by Northwind, (ii) upon completion of the Plant, Aladdin shall pay to Northwind an amount equal to the Plant Price less the cost to Aladdin to complete the Plant, provided that such amount does not exceed an amount equal to (x) the amount actually spent to date by Northwind in accordance with the terms of this Agreement plus (y) all amounts which Northwind is then contractually obligated to pay in respect of equipment and materials previously delivered to the Plant Site and labor and services previously performed in connection with the construction of the Plant, or which Aladdin subsequently elects, in its sole discretion, to accept from Northwind's suppliers pursuant to Northwind's purchase commitments therefor, and provided further that the payment amount shall not provide for any return on Northwind's investment in the Plant and (iii) the Energy Service Agreement and the Northwind Lease shall concurrently terminate. Aladdin shall have the right to have the Work finished without incurring any liability to Northwind or assuming any liabilities incurred by Northwind. (c) ALADDIN EVENTS OF DEFAULT. Aladdin shall be in default of its obligations pursuant to this Agreement should any of the following events or conditions arise or exist and Aladdin shall fail to remedy the same within ten (10) days, or Aladdin shall fail promptly to provide Northwind with evidence reasonably satisfactory to Northwind that such default can be cured by Aladdin in a time period reasonably satisfactory to Northwind and promptly to commence and diligently pursue and conclude remedial action within such agreed period: (i) The Notice to Proceed shall not have been received by Northwind by May 1, 1998; (ii) Abandonment of the Aladdin Project by Aladdin after May 1, 1998; 32 (iii) Aladdin assigns or transfers this Agreement or its right or interest herein, except as expressly permitted by Section 14(e) hereof; or (iv) Any representation or warranty made by Aladdin in Section 2(i) hereof was materially incorrect when made and as a result thereof it is reasonably expected that Aladdin will be unable to perform its material obligations hereunder, and such inability will not be cured within a reasonable period of time. (d) TERMINATION OPTION AND OTHER REMEDIES FOR ALADDIN DEFAULT. If an Aladdin Event of Default has occurred pursuant to Section 10(c) of this Agreement, Northwind may terminate this Agreement by written notice to Aladdin of such termination. If Northwind terminates this Agreement because an Aladdin Event of Default has occurred pursuant to Section 10(c) of this Agreement, Aladdin shall be liable for and shall pay to Northwind all costs and expenses reasonably incurred by Northwind in connection with Northwind's obligations under this Agreement for the time period from and including the date hereof to the effective date of such termination and all third party engineering and consulting costs and expenses incurred prior to the date hereof through the effective date of termination. If Northwind terminates this Agreement because an Aladdin Event of Default has occurred pursuant to Section 10(c)(ii), (iii) or (iv) of this Agreement, Aladdin shall also pay to Northwind a twenty (20) percent return on the unfinanced portion of such costs and expenses, such portion not to exceed forty (40) percent of the total of such costs and expenses. (e) Northwind shall be permitted to terminate this Agreement at any time after March 1, 1998 if Aladdin shall not have acquired fee title to the Aladdin Lands by such date or if the Financial Closing shall not have occurred by such date. Either Party hereto may terminate this Agreement at any time after January 31, 1998 if the Energy Service Agreement, in substantially the form attached hereto as Exhibit G (with such changes as the Parties may agree upon) has not been executed by such date, provided that such Party has acted in good faith to execute the Energy Service Agreement by such date. Any termination of this Agreement pursuant to this Section 10(e) shall be in writing and shall be effective when given (unless such termination expressly provides for effectiveness at a later date, in which case such termination shall be effective on the stated date). If this Agreement is so terminated, Aladdin shall be liable for and shall pay to Northwind all costs and expenses reasonably incurred by Northwind in connection with Northwind's obligations under this Agreement for the time period from and including the date hereof to the effective date of such termination and all third party engineering and consulting costs and expenses incurred prior to the date hereof through the effective date of such termination. 33 (f) CONSEQUENTIAL DAMAGES DISCLAIMER. Notwithstanding anything to the contrary contained in this Agreement, neither Party shall be liable to the other Party, whether in contract, tort, negligence, indemnity, strict liability, or otherwise, for any special, indirect, incidental, or consequential damages in connection with or arising out of the Work, or the performance, non-performance or breach of this Agreement. 11. FORCE MAJEURE EVENT. If either Aladdin or Northwind shall be actually delayed in or is prevented from performing any of its obligations hereunder due to a Force Majeure Event, including an "Unforeseen Site Condition" as defined below, and to the extent such delay in or prevention of performance could not be avoided or mitigated by any reasonable method, the party claiming such delay or prevention shall be excused from performing its obligations hereunder for the period of delay or interruption caused by such Force Majeure Event. (i) Within 72 hours after a party becomes aware or should, with due diligence, have become aware of the occurrence of a Force Majeure Event, such party shall deliver to the other a notice of such event stating the nature thereof. Within seven (7) days of such notice, the party claiming the occurrence of a Force Majeure Event shall deliver to the other party a notice describing the anticipated impact of such delay on the performance or the party's obligations hereunder, and within ten (10) days following the end of such Force Majeure Event shall provide a written notice of extension of performance of such party's obligations. Such notice shall describe in detail the event causing the delay, the precise effect thereof on the performance of such party's obligations, the length of delay, and the measures taken or to be taken to minimize such delay. In the event that a Party receiving a notice of delay caused by a Force Majeure Event disagrees with such notice, the Parties shall promptly meet and attempt to resolve such dispute. If the Parties are not able to resolve such dispute within five (5) Business Days, then the dispute shall be resolved pursuant to Section 13 hereof. (ii) If after a Force Majeure Event has caused Northwind to suspend or delay performance of the Work, Northwind has failed to take such action as Aladdin could and would lawfully and reasonably initiate to remove or relieve either the cause thereof or its direct or indirect effects, Aladdin may, in its sole discretion and, after notice to Northwind, initiate, at Aladdin's sole expense, such reasonable measures as will be designed to remove or relieve such Force Majeure Event or its direct or indirect effects and thereafter require Northwind to resume full or partial performance of the Work. 34 For purposes of this Section 11, "Unforeseen Site Conditions" shall mean conditions, not caused by Northwind (including, but not limited to, Northwind's agents, subcontractors or any other contractor affiliated with Northwind), existing as of the date upon which Northwind receives the Notice to Proceed, or thereafter caused by Aladdin or third parties unrelated to Northwind, which, notwithstanding Northwind's investigation of the Site (and provided that Northwind's investigation of the Site is in accordance with Good Engineering Practices), was not disclosed or discovered prior to the execution of the EPC Contract(s). 12. CONFIDENTIAL INFORMATION. Northwind and Aladdin each agree to treat in confidence all information regarding this Agreement and the performance by the parties of their obligations hereunder and all information which either Northwind or Aladdin will have obtained from the other party in contemplation of entering into, or in the performance of, this Agreement and not make any use of any of such information for any purpose other than complying with its obligations under this Agreement and the Related Agreements. Such information will not be communicated to any person other than Northwind or Aladdin and their respective affiliates, officers, directors, employees, agents, attorneys, and professional consultants, except to the extent disclosure of such information: 1. is required by law or governmental authority; 2. is made by a Party pursuant to litigation in which such Party is a party; or 3. is made to any lender or prospective lender to such party (PROVIDED such lender or prospective lender agrees in writing to keep such information confidential on the terms set forth in this Section 12). If either party is required to disclose confidential information pursuant to clause (a) above, such party will take reasonable steps to limit the extent of the disclosure and to make such disclosure confidential under the circumstances and will, to the extent it reasonably can do so in the circumstances, afford the other party hereto notice of such request for disclosure so as to permit such other party to seek an appropriate protective order or other means by which such information may be maintained in confidence pursuant to such disclosure. Information provided by a party hereunder will remain the sole property of the party providing such information. The obligation of each party to treat in confidence, and not to use, information which it will have obtained from the other party will not apply to any information which (x) is or becomes available to such party from a source not otherwise under obligations of confidentiality with respect thereto, other than the party providing such information, or (y) is or becomes available to the public other than as a result of disclosure by such party or its agents in breach of this Section 12. 35 13. DISPUTE RESOLUTION. If a dispute between the parties arises concerning the design or construction of the Plant, the parties may jointly request that such dispute be resolved by arbitration in accordance with the provisions of the Commercial Arbitration Rules of the American Arbitration Association, as in effect at the time. If the parties do not agree to submit such dispute to arbitration and are not otherwise able to resolve such dispute, either party may bring such dispute to any court of competent jurisdiction for resolution. Notwithstanding the foregoing, neither party hereto shall seek resolution of a dispute in a manner that delays or hinders the orderly and continuous construction of the Plant. Notwithstanding any litigation or any dispute or controversy, and regardless of the basis thereof or grounds therefor, Northwind agrees that it will, for so long as the Agreement has not been terminated, diligently prosecute the Work to Final Completion, all in accordance with the terms of this Agreement. 14. GENERAL. (a) NO PARTNERSHIP. Northwind is an independent contractor and this Agreement shall not be construed to create a partnership, agency, joint venture, lease, license, or any other relationship between Aladdin and Northwind save as expressly contemplated herein and solely for the limited purposes noted. (b) REMEDIES AND LIMITATIONS. Remedies of the parties outlined or referred herein are not intended to be exclusive and shall be in addition to any other remedies at law or in equity which may be available to an aggrieved party, except as limited by this Agreement. (c) NOTICES. Notices shall be delivered under this Agreement in the same manner as set forth in Section 10.1 of the Energy Service Agreement. (d) APPROVALS AND OBJECTIONS. In cases where either party in any part of this Agreement is given the right or option to review, approve or object to any matter, provide a notice or attend a meeting, the exercise of (or failure to exercise) such right or option shall not relieve Aladdin or Northwind from their respective obligations and duties under this Agreement or any Related Agreement. (e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns. Neither Party shall assign its interest or delegate its duties under this Agreement without the prior written consent of the other party (which consent shall not be unreasonably withheld) except that either Party may assign its interest hereunder in connection with a concurrent assignment of its interest in the Energy Service Agreement 36 made in accordance with the provisions of such agreement, provided that such assignment hereunder is being made to the same entity to which assignment is being made under the Energy Service Agreement. In the event of such assignment, the assignee shall have the same notice, cure and assumption rights under this Agreement as is provided to such assignee under Section 10.2(a)(ii) of the Energy Service Agreement. (f) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits referred to herein and the Related Agreements and the documents delivered pursuant hereto and thereto contain the entire understanding of the parties hereto with regard to the subject matter contained herein or therein, and supersede all prior agreements or understandings between or among any of the parties hereto. This Agreement will not be amended, restated, modified, or supplemented except by a written instrument signed by an authorized representative of each of the parties hereto. (g) INTERPRETATION. Article titles and headings to sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. (h) WAIVERS. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver will be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement will not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement will be held to constitute a waiver of any other or subsequent breach. (i) EXPENSES. Each party hereto will pay all costs and expenses incident to its negotiation and preparation of this Agreement and, except as set forth herein, to its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel and accountants. 37 (j) PARTIAL INVALIDITY. Wherever possible, each provision hereof will be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein will, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision will be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. Upon any such determination that any term or other provision hereof is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to affect the original intent of the parties as closely as possible in an acceptable manner, to the end that the transactions contemplated hereby are fulfilled to the extent possible in the circumstances. (k) OPERATION OF THIS AGREEMENT. Aladdin and Northwind desire that this Agreement operate between them fairly and reasonably, and agree to cooperate and to communicate with each other concerning the terms hereof and concerning matters relating to the Plant during the term of this Agreement. (l) EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be considered an original instrument, but all of which will be considered one and the same agreement, and will become binding when one or more counterparts have been signed by each of the parties hereto and delivered to Aladdin and Northwind. (m) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the internal laws and decisions of the State of Nevada. (n) TIME. Time is of the essence hereof. [Balance of page intentionally left blank; signature page follows.] 38 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above. NORTHWIND ALADDIN, LLC ALADDIN GAMING, LLC By: UTT Las Vegas, Inc., its manager By: /s/ Donald Petkus By: /s/ Ronald Dictrow ---------------------- ----------------------------- Name: Donald Petkus Name: Ronald Dictrow Title: President Title: Exec. Vice President 39 Aladdin Holdings, LLC, a Nevada limited liability company ("AH") hereby (i) executes the Development Agreement to which this signature page is attached for the purpose of confirming that it is jointly and severally liable with Aladdin until the earlier of (i) Financial Closing or (ii) the acquisition of fee title to the Aladdin Lands by Aladdin, to Northwind for payment due to Northwind under Sections 5(c)(i), 10(d) and 10(e) of such Development Agreement on account of an Aladdin Event of Default under Section 10(c) of such Development Agreement or under Section 5(c)(i) or Section 10(e) pursuant to the terms thereof and (ii) represents and warrants to Northwind, as an inducement to Northwind to execute such Development Agreement, that as of the date hereof, AH is the sole and exclusive owner of fee title to the Aladdin Lands (as defined in the Northwind Lease) and all improvements thereto free and clear of all liens, claims, encumbrances, and rights of others, other than (i) a deed of trust (a copy of which is attached hereto) securing the note (a copy of which is attached hereto) in the initial amount of $65 million and (ii) matters attached hereto in Attachment A. Dated: December 3, 1997 ALADDIN HOLDINGS, LLC By: Aladdin Management Corporation By: /s/ Ronald Dictrow ------------------------ Ronald Dictrow Title: Treasurer EXHIBIT A DESCRIPTION OF ALADDIN LANDS EXHIBIT B PLANT PRICE AND GMPP EXHIBIT C UNICOM GUARANTY EXHIBIT D INSURANCE 1. Northwind will maintain: (i) Workers' compensation insurance, with limits of liability at least equal to the statutory requirements therefor; (ii) Employer's liability insurance of not less than $1,000,000; (iii) Comprehensive general liability insurance against liability for injury to or death of any person or damage to property in connection with the use, operation or condition of the Plant of not less that $2,000,000 combined single limit per occurrence and annual aggregate; (iv) "All-risk" property insurance covering the Plant to the extent of the full replacement cost thereof and, during construction of the Plant, "all-risk builder's risk" insurance covering the Plant to the extent of the full replacement thereof; (v) During any and all periods of construction of the Plant, Northwind shall cause its general contractors (including all contractors who contract directly with Northwind) to obtain (i) commercial general liability insurance with a minimum limit of liability of $5,000,000 combined single limit for bodily injury, personal injury and property damage and include Aladdin and Aladdin's lenders as additional insureds and (ii) workers' compensation insurance, with limits of liability at least equal to the statutory requirements therefor and employer's liability insurance of not less than $1,000,000; and (vi ) Excess liability umbrella coverage of at least $50,000,000. 2. Aladdin shall maintain: (i) Workers' compensation insurance, with limits of liability at least equal to the statutory requirements therefor; (ii) Employer's liability insurance of not less than $1,000,000; (iii) Comprehensive general liability (including public liability and property damage) insurance coverage covering occurrences, accidents and incidents on the Aladdin Lands that (1) occur from and after the date hereof (regardless of when the claim is filed) and (2) result in bodily injury, personal injury or death to any person or entity and/or damage or destruction of property. Said insurance shall have a combined single limit of liability per occurrence of not less than $1,000,000 on a primary basis and not less than $50,000,000 on an excess/umbrella basis, or such greater amounts as are typical for similar casino-hotel projects in Las Vegas; and (iv) "All-risk" property insurance covering the Aladdin Lands and improvements thereon to the extent of the full replacement cost thereof. Each party hereto agrees that the insurance described above to be provided by the other party may be provided by and through blanket coverages which may be provided in whole or in part through a policy or policies covering other liabilities and locations of the party obligated to provide such insurance and its affiliates. EXHIBIT E SUBSTANTIAL COMPLETION CERTIFICATE FORM EXHIBIT F FINAL COMPLETION CERTIFICATE FORM EXHIBIT G ENERGY SERVICE AGREEMENT TABLE OF CONTENTS PAGE 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2. General Terms. . . . . . . . . . . . . . . . . . . . . . . . . . .8 (a) Term . . . . . . . . . . . . . . . . . . . . . . . . . . .8 (b) Plant Location and Purpose . . . . . . . . . . . . . . . .8 (c) Purchase of Services . . . . . . . . . . . . . . . . . . .8 (d) Design and Construction of the Plant . . . . . . . . . . .8 (e) Aladdin Not Responsible for Acts of Northwind. . . . . . .8 (f) Claims Upon Failure of Work. . . . . . . . . . . . . . . .9 (g) Aladdin's Access to Work . . . . . . . . . . . . . . . . .9 (h) Responsibilities of Northwind. . . . . . . . . . . . . . .9 (i) Representations and Warranties . . . . . . . . . . . . . 11 (j) Insurance. . . . . . . . . . . . . . . . . . . . . . . . 12 (k) Condemnation . . . . . . . . . . . . . . . . . . . . . . 13 3. Additional Agreements and Documents. . . . . . . . . . . . . . . 14 4. Project Management . . . . . . . . . . . . . . . . . . . . . . . 14 (a) Project Manager. . . . . . . . . . . . . . . . . . . . . 14 (b) Project Execution Plan . . . . . . . . . . . . . . . . . 15 5. Plant Design . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (a) Plant Oversight. . . . . . . . . . . . . . . . . . . . . 18 (b) Scope. . . . . . . . . . . . . . . . . . . . . . . . . . 18 (c) Plant Plans and Specifications . . . . . . . . . . . . . 18 6. Plant Construction; Construction Reports and Meetings. . . . . . 21 7. Quality Control and Inspection . . . . . . . . . . . . . . . . . 22 (a) In General . . . . . . . . . . . . . . . . . . . . . . . 22 (b) Quality Control and Inspection Program . . . . . . . . . 22 (c) Inspection Rights. . . . . . . . . . . . . . . . . . . . 23 (d) Effect of Waiver of Inspection Rights. . . . . . . . . . 24 8. Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (a) Substantial Completion . . . . . . . . . . . . . . . . . 24 (b) Final Completion . . . . . . . . . . . . . . . . . . . . 25 (c) Timely Completion of the Plant . . . . . . . . . . . . . 25 (d) Contingency Plan . . . . . . . . . . . . . . . . . . . . 26 9. Scope Changes. . . . . . . . . . . . . . . . . . . . . . . . . . 26 (a) Further Refinement, Corrections and Detailing Not Scope Changes. . . . . . . . . . . . . . . . . . . . . . . . 26 (b) Scope Changes. . . . . . . . . . . . . . . . . . . . . . 26 (c) Procedure for Scope Changes. . . . . . . . . . . . . . . 28 (d) Scope Changes Due to Northwind Error . . . . . . . . . . 30 (e) Scope Changes Due to Change in Law . . . . . . . . . . . 30 10. Default; Termination . . . . . . . . . . . . . . . . . . . . . . 30 (a) Northwind Events of Default. . . . . . . . . . . . . . . 30 (b) Termination Option and Other Remedies for Northwind Default. . . . . . . . . . . . . . . . . . . . . . . . 32 (c) Aladdin Events of Default. . . . . . . . . . . . . . . . 33 (d) Termination Option and Other Remedies for Aladdin Default. . . . . . . . . . . . . . . . . . . . . . . . 33 (f) Consequential Damages Disclaimer . . . . . . . . . . . . 34 11. Force Majeure Event. . . . . . . . . . . . . . . . . . . . . . . 34 12. Confidential Information . . . . . . . . . . . . . . . . . . . . 35 13. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . 36 14. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 (a) No Partnership . . . . . . . . . . . . . . . . . . . . . 36 (b) Remedies and Limitations . . . . . . . . . . . . . . . . 37 (c) Notices. . . . . . . . . . . . . . . . . . . . . . . . . 37 (d) Approvals and Objections . . . . . . . . . . . . . . . . 37 (e) Successors and Assigns . . . . . . . . . . . . . . . . . 37 (f) Entire Agreement; Amendments . . . . . . . . . . . . . . 37 (g) Interpretation . . . . . . . . . . . . . . . . . . . . . 38 (h) Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 38 (i) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 38 (j) Partial Invalidity . . . . . . . . . . . . . . . . . . . 38 (k) Operation of this Agreement. . . . . . . . . . . . . . . 38 (l) Execution in Counterparts. . . . . . . . . . . . . . . . 39 (m) Governing Law. . . . . . . . . . . . . . . . . . . . . . 39 (n) Time . . . . . . . . . . . . . . . . . . . . . . . . . . 39 EX-10.28 22 ENERGY LEASE LEASE THIS LEASE (as amended, restated, modified, and supplemented and in effect from time to time, this "Lease") is made as of the 3rd day of December, 1997, by and between ALADDIN GAMING, LLC, a Nevada limited-liability company ("Landlord"), and NORTHWIND ALADDIN, LLC, a Nevada limited-liability company ("Tenant"). RECITALS: A. Landlord is constructing a casino, hotel, theater, shopping and parking complex in Las Vegas, Nevada (the "Aladdin Complex"), and has selected Tenant to develop, construct, own and operate an energy production facility to supply hot water, chilled water and electricity to said complex. B. The site on which the aforementioned energy facility shall be constructed shall be leased by Landlord to Tenant pursuant to the terms and conditions of this Lease. Additionally, Landlord and Tenant are executing concurrently herewith a certain Development Agreement of even date herewith (as amended, restated, modified, or supplemented and in effect from time to time, the "Development Agreement") regarding the construction of such facility and have agreed in substance to the form of an Energy Service Agreement (which form is attached to the Development Agreement, such Energy Service Agreement, in the form in which it shall finally be executed and delivered, and as it may thereafter be amended, restated, modified, or supplemented and in effect from time to time, being herein referred to as the "ESA") regarding the terms and conditions of the sale by Tenant to Landlord of hot water, chilled water and electricity. NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed between Tenant and Landlord as follows: Article 1. REPRESENTATIONS AND WARRANTIES. 1.1 Landlord hereby represents and warrants to Tenant as follows: 1.1.1 Landlord is a limited-liability company duly organized and existing in good standing under the laws of the State of Nevada; 1.1.2 Landlord possesses all requisite limited liability company power and authority to enter into and perform this Lease and to carry out the transaction contemplated herein; 1.1.3 Landlord's execution, delivery and performance of this Lease have been duly authorized by, or are in accordance with, its organic instruments; this Lease has been duly executed and delivered for it by the signatories so authorized; this Lease constitutes Landlord's legal, valid and binding obligation; Landlord's execution, delivery and performance of this Lease will not result in a breach or violation of, or constitute a default under, any agreement, lease, or instrument to which it is a party or by which it or its properties may be bound or affected; and 1.1.4 No suit, action or arbitration, or legal, administrative or other proceedings is pending or has been threatened against Landlord that would affect the validity or enforceability of this Lease or the ability of Landlord to fulfill its commitments hereunder, or that could result in any material adverse change in the business or financial condition of Landlord. 1.2 Tenant hereby represents and warrants to Landlord as follows: 1.2.1 Tenant is a limited liability company duly organized and existing in good standing under the laws of the State of Nevada; 1.2.2 Tenant possesses all requisite limited liability company power and authority to enter into and perform this Lease and to carry out the transaction contemplated herein; 1.2.3 Tenant's execution, delivery and performance of this Lease have been duly authorized by, or are in accordance with, its organic instruments; this Lease has been duly executed and delivered for it by the signatories so authorized; this Lease constitutes Tenant's legal, valid and binding obligation; Tenant's execution, delivery and performance of this Lease will not result in a breach or violation of, or constitute a default under, any agreement, lease, or instrument to which it is a party or by which it or its properties may be bound or affected; 1.2.4 No suit, action or arbitration, or legal, administrative or other proceedings is pending or has been threatened against Tenant that would affect the validity or enforceability of this Lease or the ability of Tenant to fulfill its commitments hereunder, or that could result in any material adverse change in the business or financial condition of Tenant; and 2 1.2.5 Tenant agrees not to permit any transfer of any membership interest in Tenant by the sole member of Tenant as of the date of this Lease, and not to issue any new membership interest in Tenant, without the prior written consent of Landlord, such consent not to be unreasonably withheld; provided, however, that upon prior notice to Landlord and without Landlord's prior consent, Tenant shall be permitted to allow Nevada Electric Investment Company (which is a wholly-owned subsidiary of Nevada Power Company), Boston Edison, Ontario Hydro or Houston Industries to own a membership interest in Tenant, such interest to be less than or equal to the interest retained by UTT Las Vegas Inc., a Nevada corporation and a wholly-owned, indirect subsidiary of Unicom Corporation, that, as of the date of execution of this Lease, owns a 100% interest in Tenant. Article 2. GRANT AND TERM. 2.1 GRANT. For and in consideration of the rents herein reserved and of the covenants and agreements herein contained on the part of Tenant to be performed: 2.1.1 Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the real property located in Clark County, Nevada that is legally described on Exhibit A (the "Project Site"), which exhibit shall be attached hereto by Landlord no later than ten (10) days after Notice to Proceed is received by Northwind pursuant to the Development Agreement. 2.1.2 Landlord hereby grants to Tenant and its successors and assigns a non-exclusive easement in the real property described on Exhibit B (the "Landlord's Property"), which exhibit shall be attached hereto by Landlord no later than ten (10) days after Notice to Proceed is received by Northwind pursuant to the Development Agreement (i) for the purpose of providing access to the Project Site, and the other property of Tenant located on, in or under the Landlord's Property, and (ii) to permit access for, such access not to be unreasonably denied, and the installation, maintenance, repair, security and replacement of, pipes, ducts, cables, conduit and other equipment and apparatus (including the energy transfer stations) used or to be used by Tenant in the operation of the Project (as defined in Article 4 below) and the provision of Services (as defined in Article 4 below) to users, distributors and/or vendors. Any such use by Tenant of the Landlord's Property shall be in accordance with all safety and security rules, regulations and policies then in effect on Landlord's Property or such other reasonable rules or requirements which Landlord imposes, and provided further that such use by Tenant shall in no way have an adverse effect on 3 Landlord's other activities. Landlord agrees that Landlord's activities shall not have an adverse effect on Tenant's activities. For the purposes of this paragraph, "adverse effect" means a materially detrimental effect on the ownership, construction, maintenance, repair, or operation of the Project, in the case of Tenant, or the Aladdin Complex, in the case of Landlord. The easements granted in this Section shall continue so long as this Lease remains in effect and shall expire and be of no further force or effect upon the earlier of the execution of the Reciprocal Easement Agreement (as defined in the Development Agreement) or the expiration or termination of this Lease. Each easement granted under this Lease shall exist by virtue of this Lease, without the necessity of or confirmation by any other document, and shall run with the Landlord's Property. Upon the expiration, termination (in whole or in part) or the release of any such easement in accordance with the provisions of this Lease, the same shall be deemed to have expired, or have been terminated or released without the necessity of confirmation by any other document. 2.1 TERM. The terms and conditions of this Lease shall be effective as of the date of this Lease. The initial term of this Lease (the "Initial Term") shall commence on the earlier of March 1, 2000 or the date upon which the Aladdin Complex is first opened for business to the public (the "Commencement Date"). Except as otherwise provided in this Lease to the contrary, the Initial Term of this Lease shall end on the day immediately preceding the twentieth anniversary of the Commencement Date and the Initial Term shall be subject to extension and renewal as provided for in Section 2.3 below. The term of this Lease, as the same may be extended or renewed is referred to herein as the "Term". 2.3 RENEWAL TERMS. 2.3.1 The Initial Term of this Lease shall be automatically extended for a period of five years commencing on the twentieth anniversary of the Commencement Date and expiring on the day immediately preceding the twenty-fifth anniversary of the Commencement Date unless either party gives the other party written notice not later than twelve (12) months before the twentieth anniversary of the Commencement Date that such party is terminating the Lease as of the twentieth anniversary of the Commencement Date. The five year renewal period for in this Section 2.3.1 and each subsequent five year renewal period provided for in Section 2.3.2 below are hereinafter referred to as "Renewal Terms". 2.3.2 The first Renewal Term shall be automatically extended and renewed for a five year period commencing upon the expiration of the first Renewal Term, and each subsequent Renewal Term shall be automatically extended for an additional five year renewal period commencing upon the 4 expiration of the then existing Renewal Term and expiring on the day preceding the fifth anniversary thereof, unless either party gives the other party written notice not later than twelve (12) months prior to the scheduled expiration of the then existing Renewal Term that such party is terminating this Lease as of the scheduled expiration of such then existing Renewal Term. 2.3.3. Notwithstanding anything herein to the contrary, the Term shall automatically continue or be extended for so long as the ESA (as defined in Section 2.4 hereof) shall continue in effect. 2.4 EARLY TERMINATION RIGHTS. Subject to the terms of Article 18.2 below, if either the ESA or the Development Agreement is terminated in accordance with the terms thereof, then each party hereto shall have the right to terminate this Lease on the effective date of the termination of the ESA or the Development Agreement, as applicable, by notifying the other party hereto in writing of such termination, provided, however, that Landlord may not terminate this Lease by reason of termination of the ESA or the Development Agreement if such termination of the ESA or the Development Agreement was by the Tenant pursuant to the Landlord's default thereunder and the Landlord did not acquire the Project pursuant to such termination. 2.5 ACCEPTANCE OF PROJECT SITE. Tenant hereby acknowledges (a) that it has been advised to satisfy itself with respect to the condition of the Project Site (including but not limited to the environmental aspects, compliance with Applicable Law, (as defined in Section 4.2), and the level of utilities and services available to the Project Site), (b) that Tenant will make such investigation as it deems necessary with reference to such matters and, subject to the provisions of the Development Agreement and the Energy Service Agreement governing the cost of the Project and the charges payable in respect of Services, assumes all responsibility therefor as the same relate to Tenant's occupancy of the Project Site and/or the Term of this Lease, except with respect to any Hazardous Material located on the Project Site as of the date hereof or any other conditions of the Project Site existing as of the date hereof which violate any Environmental Requirements, as to which Landlord shall have responsibility and from and against which Landlord agrees to indemnify, defend and hold Tenant harmless, and (c) that neither Landlord, nor any of Landlord's agents, has made any oral or written representations or warranties with respect to said matters, other than as set forth in this Lease, and Landlord has no obligation and has made no promises to alter, remodel, improve, repair or renovate the Project Site or any part thereof, other than as expressly set forth in this Lease, the ESA or the Development Agreement. 5 Article 3. RENT. 3.1 BASE RENT. Tenant shall pay to Landlord a fixed monthly base rent equal to $1.00 (the "Base Rent") per month throughout the Term. Landlord hereby acknowledges receipt of $240 as prepayment of the Base Rent for the entire Initial Term. 3.2 NET LEASE. Except as provided below, this Lease shall be deemed to be a "net" lease, and Tenant shall pay, as provided herein, all Impositions (as hereinafter defined). Tenant shall pay to Landlord, absolutely net throughout the Term, the Base Rent and other payments hereunder, free of any charges, assessments, impositions or deductions of any kind, and, except as contemplated by the Development Agreement and the ESA with respect to the cost of construction, maintenance, service, repair, ownership, and operation of the energy production facility, under no circumstances or conditions, whether now existing or hereafter arising, or whether beyond the present contemplation of the parties, shall Landlord be expected or required to make any payment of any kind whatsoever relating to the Project Site. As used herein, "Impositions" shall mean all operating, maintenance, repair and improvement costs and insurance premiums owing with respect to the improvements being constructed by Tenant, in accordance with the terms of the Development Agreement and the ESA, on the Project Site (collectively, the "Improvements") and the property being installed by Tenant, in accordance with the terms of the Development Agreement and the ESA, on, in or under the Landlord's Property (collectively, the "Additional Property") and all taxes, levies and assessments; use and occupancy taxes; water and water assessments, fees and use charges; charges for public utilities; excises; levies; license and permit fees; transit taxes; real estate taxes; taxes on rentals; intangible and other personal property taxes; business and occupation taxes; gross sales taxes; occupational license taxes; and all other governmental impositions and charges of every kind and nature whatsoever, whether the same are extraordinary or ordinary, general or special, or unforeseen or foreseen, which at any time from and after the date hereof shall be or become due and payable, but shall not include any general income taxes or franchise fees assessed against Landlord; provided, however, that notwithstanding the foregoing, nothing herein is intended to require Tenant to pay any charges, fees, costs or expenses that Landlord is required to pay under the ESA or the Development Agreement, and the term "Impositions" shall not be deemed to include any of such charges, fees, costs or expenses. 3.3 RENT. As used herein the term "Rent" shall mean the sum of the Base Rent and any and all other amounts which are due from Tenant pursuant to the provisions of this Lease. Rent which has not been prepaid as of the date hereof shall be due and payable to Landlord on the last day of each month and shall be paid to Landlord at Las Vegas, Nevada or at such other place as Landlord may designate from time to time. All payments of Rent shall be made in lawful money of the United States. 6 3.4 NO PRESUMPTION. Wherever in this Lease it is provided that an activity or obligation is at Tenant's cost or expense, such provision shall not imply or be construed to imply or mean any limitation on any right which Tenant may have under the ESA and/or the Development Agreement to include such cost or expense (or some portion thereof) in charges payable to Tenant thereunder. Article 4. USE AND POSSESSION. 4.1 USE AND POSSESSION. In accordance with the terms of the Development Agreement and the ESA, Tenant shall construct on, in and/or under the Project Site, and shall operate and maintain thereon, an energy facility (such facility, including the Improvements and the Additional Property, is referred to herein as the "Project") that will provide hot water, cold water and electricity (collectively, the "Services") for the Landlord's Property, as described more fully in the ESA. The Project shall include fiber optic cable and conduit and related equipment installed by Tenant for use in connection with providing and monitoring the Services. In accordance with the terms of the Development Agreement and the ESA, equipment and other improvements necessary to control and monitor the Project may also be located at the Project Site and on, in or under the Landlord's Property. Title to the Improvements and to all of the personal property owned by Tenant and used in connection with the construction, operation and maintenance of the Project is now and shall be and remain in Tenant from and after the date hereof, subject to Landlord's potential future interest in the Improvements, which shall become a possessory interest upon the expiration or earlier termination of the Term and subject to the other terms and conditions contained in this Lease. 4.2 LIMITATIONS ON USE. Tenant shall not use or occupy the Project Site, or permit the use or occupancy of the Project Site, in any manner or for any purpose which: (a) would violate any law, statute, ordinance or other federal, state or local governmental rule, regulation or requirement ("Applicable Law") including, without limitation, those with respect to hazardous or toxic materials, or the provisions of any applicable governmental permit or document related to the Project Site; (b) would violate any safety, security or other rule, regulation or policy of Landlord; (c) would in any way cause an adverse effect on any of Landlord's activities or Landlord's use of Landlord's property (provided that the handling of interruptions of Services is exclusively addressed in the ESA); or (d) would cause the cancellation or ineffectiveness of any fire or other insurance maintained or required hereunder to be maintained by Tenant. Tenant shall not use the Project Site for any purpose other than those intended by the Development Agreement and the ESA or as otherwise permitted by this Lease. 7 4.3 APPLICABLE LAW. Tenant shall not do anything or suffer anything to be done in or about the Project Site which conflicts with or violates any Applicable Law then in effect. At its sole cost and expense, Tenant shall promptly comply with all requirements of Applicable Law relating to or arising out of the use, occupancy, repair or alteration of the Project Site and the improvements located thereon (provided that Tenant's compliance obligations in respect of matters addressed by Section 5.7 of the ESA shall be governed thereby and not hereby). 4.4 OTHER USES. 4.4.1 Tenant may not use the Project Site to provide services other than the Services without obtaining the prior written consent of Landlord, and provided that such consent, if granted, will result in an equitable adjustment to the Base Rent and/or consumption and capacity charges under the ESA and other reasonable modifications to this Lease and/or the ESA. When Tenant presents Landlord with a proposal pursuant to which Tenant would provide services other than the Services, Landlord shall consider such proposal promptly (and with respect to a proposal by Tenant to provide services to Bally's, Paris, and/or Flamingo within seven (7) days of receipt of such proposal) and in good faith. 4.4.2 Notwithstanding the foregoing, Landlord agrees that Tenant may network the Project with another energy production facility (or facilities) provided that: (i) Landlord determines, in its sole discretion, that such networking will not adversely affect the ability of the Project to provide the Services for the Landlord's Property and (ii) the customer(s) of the energy production facility or facilities to which the Project is networked are not charged rates for hot water, cold water and/or electricity services provided by the Project which are less than those charged for the Services pursuant to the terms of the ESA; provided, that if Tenant disagrees with Landlord as to whether the charges to third parties for services are less than those payable by Landlord for Services under the ESA, then the matter shall be referred to the "Independent Engineer" (as defined in the Development Agreement) or another mutually acceptable arbitrator, whose decision shall be final and binding on the parties, and provided further that Tenant shall have the right to remedy any discrepancy in such charges by decreasing the charges payable under the ESA and/or by agreeing to increase the charges for services paid by third parties. 4.4.3 Notwithstanding the foregoing, in the event Tenant terminates the ESA in accordance with the terms thereof because of a Landlord default under the ESA or the Development Agreement, and Landlord does not acquire the energy production facility at Tenant's request pursuant to such termination, then without Landlord's 8 consent, Tenant may provide and sell to third parties services, provided, however, that Tenant's provision of such services other than the Services will result in an equitable adjustment to the Base Rent and/or consumption and capacity charges under the ESA and other reasonable modifications to this Lease and/or the ESA. Article 5. POSSESSION AND CONSTRUCTION OF IMPROVEMENTS. 5.1 POSSESSION; ACCESS. In addition to the interests and rights granted by Landlord to Tenant in Section 2.1 above, Landlord shall deliver to Tenant, within five (5) days of Landlord's issuance of a Notice to Proceed pursuant to the Development Agreement, possession of the Project Site and reasonable and necessary access to the Landlord's Property as is necessary to enable Tenant to construct the Project and install and secure Tenant's equipment and fixtures and otherwise to make the Project Site ready for Tenant use and occupancy in the manner described herein and in the ESA and the Development Agreement. In addition, Landlord shall permit Tenant access to the Project Site at all reasonable times after execution of this Lease for the purposes of investigating surface and subsurface conditions on and around the Project Site, including taking soil samples and borings. Such entry to the Landlord's Property shall be subject to all the terms and conditions of this Lease, excluding payment of Base Rent, during the period commencing on the date of Tenant's entry and ending on the earlier of (i) the Commencement Date or (ii) the commencement of operation of Tenant's business from the Project Site or any part thereof. 5.2 TENANT'S WORK. For purposes of this Article 5, the term "Tenant's Work" shall mean and refer to the construction and installation of all aspects of the Project as set forth in detail in the Development Agreement, including the Improvements, and all other equipment, fixtures, pipes, wiring, mechanical systems and other property and systems necessary to the operation of the Project. All of Tenant's work shall be done in the manner required by the Development Agreement and shall be completely lien-free (except as provided in Sections 11.1 and 11.2 hereof, and except as otherwise permitted by the Development Agreement and the ESA). Tenant shall use commercially reasonable efforts to obtain warranties for Tenant's Work from its contractors and to enforce such warranties so that defects in Tenant's Work are corrected. If any warranties are not assignable to Landlord, Tenant shall nevertheless use reasonable diligence to keep such warranties in effect and to enforce the same. Tenant further agrees that if it determines that any portion of the Tenant's Work contains a material defect, it shall promptly notify Landlord of such defect and of the action which Tenant proposes to take or requires its contractors to take to remedy the same, provided that Tenant shall not take any action that may prejudice Landlord's ability to assert its warranty rights (if any) without Landlord's prior written consent. Without limiting the foregoing, Tenant reserves the right to install its own security system on the 9 Project Site and Landlord, notwithstanding any other provision of this Lease to the contrary, understands and agrees that Tenant shall have the right to limit or restrict Landlord's access to the Project Site for reasonable safety and security purposes, but subject to Landlord's rights under Section 14.1 below and as provided for in the ESA and the Development Agreement. Subject to the rights of Tenant under Sections 11.1 and 11.2 hereof, and except as permitted by the Development Agreement and the ESA, all of Tenant's Work shall be completed lien-free and in accordance with all Applicable Law. At Landlord's election, all Tenant's Work shall be coordinated with Landlord's construction manager (who shall not unreasonably interfere with the rendition of Tenant's Work). 5.3 LANDLORD'S WORK. The work to be performed by Landlord in connection with the construction and development of the Project is described in detail in the Development Agreement (such work being referred to herein as the "Landlord's Work"). The Landlord's Work shall be performed in accordance with all Applicable Law and in accordance with the Development Agreement. Landlord shall use commercially reasonable efforts to obtain warranties for Landlord's Work from its contractors and to enforce such warranties so that defects in Landlord's Work are corrected. 5.4 LAYDOWN AND STAGING AREAS. Landlord shall give Tenant the right to use, at no cost to Tenant and at such times as reasonably required by Tenant before or after the Commencement Date, such portion of the property of Landlord reasonably needed by Tenant for staging of construction of the Project, storing materials and parking for Tenant's contractors and subcontractors and their respective employees, such portion of the property to be designated by the Landlord. 5.5 MUTUAL COOPERATION. Landlord and Tenant, both acting reasonably, agree to cooperate with each other so that the Landlord's Work and Tenant's Work can be completed in a timely manner. Article 6. INSURANCE AND WAIVER OF SUBROGATION. 6.1 INSURANCE. (a) At all times from and after the date hereof, Tenant shall, at its sole expense, purchase and maintain in full force and effect, the following insurance coverages: (i) Workers' compensation insurance, with limits of liability at least equal to the statutory requirements therefor; 10 (ii) Employer's liability insurance of not less than $1,000,000; (iii) Comprehensive general liability insurance against liability for injury to or death of any person or damage to property in connection with the use, operation or condition of the Project of not less that $2,000,000 combined single limit per occurrence and annual aggregate; (iv) "All-risk" property insurance covering the Project to the extent of the full replacement cost thereof and, during construction of the Project, "all-risk builder's risk" insurance covering the Project to the extent of the full replacement thereof; (v) During any and all periods of construction of the Project, Tenant shall cause its general contractors (including all contractors who contract directly with Tenant) to obtain (i) commercial general liability insurance with a minimum limit of liability of $5,000,000 combined single limit for bodily injury, personal injury and property damage and include Landlord and Landlord's lenders as additional insureds and (ii) workers' compensation insurance, with limits of liability at least equal to the statutory requirements therefor and employer's liability insurance of not less than $1,000,000; and (vi) Excess liability umbrella coverage of at least $50,000,000. (b) At all times from and after the date hereof, Landlord shall, at its sole expense, purchase and maintain in full force and effect, the following insurance coverages: (i) Comprehensive general liability (including public liability and property damage) insurance coverage covering occurrences, accidents and incidents on the Landlord's Property that (1) occur from and after the date hereof (regardless of when the claim is filed) and (2) result in bodily injury, personal injury or death to any person or entity and/or damage or destruction of property. Said insurance shall have a combined single limit of liability per occurrence of not less than $1,000,000 on a primary basis and not less than $50,000,000 on an excess/umbrella basis, or such greater amounts as are typical for similar casino-hotel projects in Las Vegas; and 11 (ii) "All-risk" property insurance covering the Landlord's Property and improvements thereon to the extent of the full replacement cost thereof. (c) Each party hereto agrees that the insurance described above to be provided by the other party may be provided by and through blanket coverages which may be provided in whole or in part through a policy or policies covering other liabilities and locations of the party obligated to provide such insurance and its affiliates. Except as otherwise set forth in Articles 13 and 15 hereof, Tenant shall be liable for any deductible amount in the event of any loss under the policies required by Section 6.1. 6.2 ADDITIONAL REQUIREMENTS. All insurance required to be purchased by Tenant pursuant to this Article 6 shall be placed with reputable companies licensed to do business in the State of Nevada and shall provide for deductibles reasonably acceptable to Landlord. Prior to the Commencement Date, Tenant shall deliver to Landlord certificates of insurance evidencing the insurance required hereby. All such insurance will require not less than thirty (30) days prior written notice to both parties in the event of modification or cancellation of coverage. 6.3 WAIVER OF SUBROGATION RIGHTS; DEFAULT. Each party hereby releases and waives, to the extent legally possible for it to do so without invalidating its insurance coverages, for itself and on behalf of its insurer, the other party hereto and its respective officers, directors, agents, members, partners, servants, and employees from liability for any loss or damage to any or all property located on the Aladdin Lands (as defined in the Development Agreement) which loss or damage is of the type and within the limits covered by the "all-risk" property damage insurance and other property / casualty insurance which the parties have agreed to obtain and maintain in effect pursuant to clauses (a) and (b) of Section 6.1, irrespective of any negligence on the part of the released party and its respective officers, directors, agents, partners, members, servants, or employees, which may have contributed to or cause such loss or damage. Each party covenants that it will, if available, obtain for the benefit of the other party and its officers, directors, agents, members, partners, servants, and employees, a waiver of any right of subrogation which the insurer of such party may acquire against such party by virtue of the payment of any such loss covered by insurance. In the event a party is by law, statute or governmental regulation unable to obtain a waiver of the right of subrogation for the benefit of the other party (and its respective, officers, directors, agents, members, partners, servants, and employees) or its insurance carriers will not give such a waiver or its property / casualty insurance will be invalidated or terminated by the waiver and release set forth in the first sentence of this Section 6.3, then, during any period of time when such waiver is unobtainable, said party shall not have been deemed to have released any subrogated claim of its insurance carrier against such other party (or its respective officers, directors, agents, members, partners, servants, or employees), and during the same period of time, such other party shall not have been deemed to have released the party which has been 12 unable to obtain such waiver (or such party's respective officers, directors, agents, members, partners, servants, or employees) from any claims it or its insurance carrier may assert which otherwise would have been released pursuant to this Section 6.3. If Tenant at any time fails to provide the insurance coverage required by this Article 6, Landlord will be entitled to purchase such coverage, after written notice of Landlord's intent, and to collect the cost of such coverage from Tenant. Notwithstanding anything to the contrary in this Lease, in no event shall Landlord or Tenant be liable to the other for any lost business, loss of profits or other special and/or consequential damages, whether direct or indirect, in respect of which each hereby excuses the other and waives any and all such claims against the other, provided that the foregoing is not intended to be a waiver of any rights or obligations of Tenant or Landlord under the ESA or the Development Agreement. Article 7. DAMAGE OR DESTRUCTION. In the event the Project or any part thereof is damaged or destroyed by fire, explosion or other casualty, except as otherwise provided below in this Article 7, Tenant shall repair, restore or rebuild with due diligence the damaged portion of the Project. Said damage and destruction shall not affect in any way the obligation of Tenant to pay Rent or release Tenant of or from any obligation imposed on Tenant under this Lease. Tenant shall commence the repair, restoration or rebuilding of the Project as soon as is reasonably practicable after such damage or destruction occurs and shall complete such repair, restoration or rebuilding as promptly as is reasonably possible in order to comply with its obligations under the ESA, and shall in the course thereof comply with the terms of the Development Agreement and with Section 5.2 hereof, provided that Tenant may make such revisions and changes to the Tenant's Work as Tenant deems appropriate under the circumstances, after obtaining Landlord's prior approval, which shall not be unreasonably withheld or delayed, to such revisions and changes; provided, however, that any such changes are made in accordance with the terms of the Development Agreement during the term thereof. In the event that the net proceeds of insurance payable in respect of such casualty is not sufficient to fully restore the damaged portion of the Project (and provided that such shortfall is not attributable to any failure by Tenant to maintain the property / casualty insurance coverage required by this Lease), such that Tenant shall have to provide additional funds in order to comply with its obligations under this Article 7, then the "Investment in Northwind Facilities" under the ESA shall be increased by the amount of such additional funds in excess of net proceeds of insurance and Landlord's obligation to pay the Contract Capacity Charge under the ESA during the balance of the term thereof then in effect shall be modified in accordance therewith. Article 8. CONDEMNATION. 8.1 COMPLETE TAKING. If, at any time during the Term, title to all or substantially all of the Project Site shall be taken in condemnation proceedings or by any right of eminent domain, this Lease shall terminate and expire on the date of such taking and the Rent payable hereunder shall be apportioned and paid to the date of such taking. For purposes of this Article, substantially all of the Project Site shall be deemed to have been taken if the untaken portion cannot be practically and economically used or converted for use by Tenant for the Project in a manner permitting Tenant to comply with its obligations under the ESA and the Development Agreement. Upon the occurrence of any such taking and the 13 termination of this Lease, Landlord and Tenant shall share any award or awards as follows: (i) if the aggregate amount of such award or awards equals or exceeds (x) the purchase price then payable under Section 9.3 of the ESA plus (y) the fair value of the portion of the Project Site being taken, then Landlord shall be entitled to receive an amount equal to the fair value of the Project Site being taken and Tenant shall be entitled to receive an amount equal to the purchase price which would then be payable under Section 9 of the ESA if the Project were then purchased by Landlord from Tenant pursuant to such section, and Landlord and Tenant shall each be entitled to receive an amount equal to fifty (50) percent of the amount (if any) by which the aggregate awards exceeds the amount described in clauses (x) and (y) immediately preceding; and (ii) if the aggregate awards are less than an amount equal to the aggregate amount under clauses (i)(x) and (i)(y) preceding, then Landlord shall be entitled to receive an amount equal to the fair value of the portion of the Project Site being taken multiplied by a fraction, the numerator of which is the aggregate awards and the denominator of which is the aggregate of the amounts described in clauses (i)(x) and (i)(y) preceding, and the Tenant shall be entitled to receive the balance of the aggregate awards. In either case, Tenant shall be entitled to collect the entire award and withhold therefrom the portion thereof to which Tenant is entitled pursuant to this Section 8.1 and pay to Landlord the portion thereof to which Landlord is entitled. Tenant shall execute any and all documents that may be required in order to facilitate the collection and distribution of the award in accordance with the terms of this section. In the event of a dispute between Landlord and Tenant as to whether or not the untaken portion of the Project Site can be practically and economically used or converted by Tenant as aforesaid, and the parties cannot agree within thirty days after such taking, such dispute shall be resolved in the manner provided in Section 7.1(c) of the ESA. 8.2 PARTIAL TAKING. Upon any such taking of less than the whole or substantially all of the Project Site, as promptly as possible a determination under the ESA shall be made as to whether the ESA shall be terminated pursuant to Section 7.1(c) thereof. (a) If the ESA is terminated as a result of such partial taking, then this Lease shall be terminated concurrently with the termination of the ESA and Landlord and Tenant shall share any award or awards as follows: (i) if the aggregate amount of such awards equals or exceeds (x) the purchase price then payable under Section 9.3 of the ESA plus (y) the fair value of the portion of the Project Site being taken, then Landlord shall be entitled to receive an amount equal to the fair value of the Project Site being taken and Tenant shall be entitled to receive an amount equal to the purchase price which would then be payable under Section 9 of the ESA if the Project were then purchased by Landlord from Tenant pursuant to such section, and Landlord and Tenant shall each be entitled to receive an amount equal to fifty (50) percent of the amount (if any) by which the aggregate awards exceed the amount described in clauses (x) and (y) immediately preceding; and (ii) if the aggregate awards are less than an amount equal to the aggregate amount under clauses (i)(x) and (i)(y) preceding, 14 then Landlord shall be entitled to receive an amount equal to the fair value of the portion of the Project Site being taken multiplied by a fraction, the numerator of which is the aggregate awards and the denominator of which is the aggregate of the amounts described in clauses (i)(x) and (i)(y) preceding, and the Tenant shall be entitled to receive the balance of the aggregate awards. In either case, Tenant shall be entitled to collect the entire award and withhold therefrom the portion thereof to which Tenant is entitled pursuant to this Section 8.2(a) and pay to Landlord the portion thereof to which Landlord is entitled. Tenant shall execute any and all documents that may be required in order to facilitate the collection and distribution of the award in accordance with the terms of this section. (b) If the ESA is not terminated as a result of such partial taking, then (i) Tenant, at its sole cost and expense, shall complete Tenant's Work and comply with its obligations in respect of restoring the Project set forth in Section 7.1(a) of the ESA; (ii) this Lease shall continue and the Term shall not be reduced or affected in any way; and (iii) at Tenant's election, the award or awards made in connection with such taking shall be distributed to Tenant in whole or in part and the amount which Tenant receives shall be applied to the cost and expense of restoring the Project, with any excess deemed to be a payment in reduction of the "Investment in the Northwind Facilities" under the ESA. In the event such excess is applied to reduce the "Investment in the Northwind Facilities," the Contract Capacity Charge payable by Landlord under the ESA shall be reduced to reflect such payment (such reduction to be determined by assuming that such payment is applied 60% in reduction of debt incurred to finance the Project and 40% as a return of Tenant's capital). If the ESA is not terminated, then, to the extent (if any) that the cost of restoring the Project exceeds any award or awards which are received by Tenant, the "Investment in the Northwind Facilities" shall be adjusted accordingly and Landlord's obligation to pay the Contract Capacity Charge under the ESA during the balance of the term thereof then in effect shall be modified in accordance therewith. 8.3 SETTLEMENT. Landlord and Tenant shall each be entitled to participate at their own expense in the negotiation and settlement of any amounts or other compensation resulting from or in connection with the condemnation or other taking of the Project Site or any part thereof. Article 9. MAINTENANCE AND ALTERATIONS. 9.1 LANDLORD'S MAINTENANCE. During the Term, Landlord shall keep and maintain, repair and replace the Landlord's Work and the Landlord's Property in good working order and repair in compliance with all Applicable Law and in the manner necessary to enable Tenant to perform its obligations under the Development Agreement and the ESA. 9.2 TENANT'S MAINTENANCE. During the Term, Tenant shall keep and maintain, repair and replace, at Tenant's sole cost and expense (subject to the provisions of 15 the Development Agreement and the ESA governing the cost of the Project and the charges payable in respect of Services), the Project and the Project Site in good working order and repair in compliance with all Applicable Law. 9.3 ALTERATIONS. Tenant shall have the right to make additions, improvements and alterations in and to the Project and the Project Site (collectively, "Alterations") from time to time during the Term, provided such Alterations comply with the terms of the Development Agreement, the ESA and this Lease, and provided that for material Alterations Tenant first obtains Landlord's consent, which consent may be withheld in Landlord's sole discretion, except as otherwise provided in Section 4.4 hereof. Tenant agrees that any Alterations made shall be made in a good and workmanlike manner and shall be made in accordance with the terms of the Development Agreement, the ESA, all Applicable Law, and the requirements of Section 5.2 herein and will be completed on a lien-free basis (except as provided in Section 11.1 hereof.) Article 10. ASSIGNMENT AND SUBLETTING. 10.1 ASSIGNMENT AND SUBLETTING. Except for a "Permitted Transfer" (as such term is herein defined) or an assignment made in accordance with the terms of Section 11.2 below, any of which shall be permitted at any time without Landlord's consent, but only after prior written notice to Landlord, Tenant shall not, either prior or subsequent to the commencement of the Term, (i) assign this Lease or any interest under this Lease, or (ii) sublet the Project Site or any part thereof, without Landlord's prior written consent, which shall not be unreasonably withheld or delayed. 10.1.1 For purposes of this Article 10, the term "Permitted Transfer" shall mean any transfer or assignment of Tenant's interest in this Lease made in connection with a transfer of Tenant's interest in the ESA or the Development Agreement which is permitted under the terms thereof. Landlord acknowledges and agrees that the transferee under any assignment or transfer to which Landlord has consented as aforesaid, as well as the transferee or assignee under any Permitted Transfer, shall be deemed to be the "Tenant" for purposes of this Lease and shall be afforded all of the rights, benefits and obligations of Tenant hereunder (regardless of whether or not such assignment occurs concurrently with a transfer, sale or assignment of all or a portion of Tenant's right, title and interest in the Project). In the event of an assignment, transfer or sublease, other than a Permitted Transfer, the transferee shall expressly assume the obligations of Tenant in writing, and the terms of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Any assignment or sublease in violation of this Article 10 shall be null and void. 16 10.2 CONSENT NOT A RELEASE. Neither a Permitted Transfer nor the consent by Landlord to any assignment or subletting shall operate to relieve Tenant from any covenant or obligation hereunder except to the extent, if any, expressly provided for in such consent and except, with respect to a Permitted Transfer, to the extent that Tenant is relieved of its obligations under the ESA and the Development Agreement, or be deemed to be a consent to or relieve Tenant from obtaining Landlord's consent to any subsequent assignment or subletting requiring consent under Section 10.1 above. Article 11. LIENS AND ENCUMBRANCES. 11.1 ENCUMBERING LANDLORD'S TITLE. Tenant shall make all payments and take all actions at its own cost and expense as may be necessary to ensure that no lien, charge, or order for payment of money is registered against Landlord's interest in and to the Project Site that results from any work, services or materials supplied to Tenant or the Project Site or any act or omission of Tenant and that is not discharged or vacated (or with respect to which payment has not been secured by the placement of a bond in an amount, form and content reasonably acceptable to Landlord) within ten (10) business days after Tenant receives notice of such registration. Tenant shall indemnify and save harmless Landlord against any and all costs, liabilities, suits, penalties, claims and demands, including reasonable attorney's fees, arising therefrom. Any claim to, or lien upon, the Project Site arising from the acts or omissions of Tenant shall accrue only against the leasehold estate of Tenant. If Tenant fails to cause such lien, charge or order to be discharged of record or bonded within twenty (20) days after Tenant receives notice of such registration, then Landlord shall have the right to cause the same to be discharged. All amounts paid by Landlord to cause any such lien, charge or order to be discharged shall constitute additional rent payable by Tenant to Landlord, or, at Landlord's option, may be recovered from Tenant in an appropriate proceeding. 11.2 COLLATERAL ASSIGNMENT AND LIENS. Landlord agrees that Tenant shall have the right to grant to a lender a security interest in Tenant's interest in this Lease for collateral purposes and to grant to such lender security interests in and liens on the personal property, machinery and equipment of Tenant located at the Project Site. Article 3. UTILITIES; SERVICES. Tenant shall purchase the water, gas and sewage services necessary for the operation of the Project directly from the utility, authority or municipality providing such service, and shall pay for such services when such payments are due. Tenant covenants to pay all such charges for these utility services and any others required in the operation of its business on or before their due date. 17 Article 13. INDEMNITY. 13.1 GENERALLY. Subject to Section 13.2 below, each party hereto shall protect, indemnify and save the other party and its agents and employees harmless from and against all liabilities, obligations, claims, damages (other than lost business, lost profits and other special and/or consequential damages, whether direct or indirect, all claims for which are hereby irrevocably waived, provided that this shall not be deemed to waive any rights or obligations of Tenant or Landlord under the ESA or the Development Agreement), penalties, causes of action, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) imposed upon or asserted against such other party by reason of any accident, physical injury to or death of persons or physical loss of or physical damage to property arising (i) from the indemnifying party's entry upon or occupancy of the Project Site or conduct of such party's business in or from the Project Site; (ii) from any breach or default on the part of the indemnifying party in the performance of any covenant or agreement on the part of such party to be performed pursuant to the terms of this Lease; (iii) any violation of Federal, state or local law, regulation or action governing environmental or safety statutes applicable to the Project; or (iv) due to any other legally actionable act or omission of the indemnifying party or its agents, contractors or employees. In case any action, suit or proceeding is brought against a party hereto by reason of any such occurrence, the other party shall, at the indemnified party's option, at the indemnifying party's expense, by counsel selected by the indemnifying party (which counsel must be reasonably satisfactory to the indemnified party), defend such action, suit or proceeding, or cause the same to be defended. 13.2 EFFECT OF WAIVER. The indemnities of either party contained in this Lease shall not apply or pertain to liabilities, obligations, claims, damages, penalties, causes of action, costs or expenses to the extent such party has waived claims in respect thereto pursuant to Section 6.3 above. 13.3 SURVIVAL OF OBLIGATION. The duty to indemnify under this Article will continue in full force and effect notwithstanding the expiration or termination of this Lease, with respect to any loss, liability, damage or other expense based on factors and conditions which occurred prior to such termination. Article 14. RIGHTS RESERVED TO LANDLORD; ADDITIONAL LANDLORD REPRESENTATIONS, WARRANTIES AND COVENANTS. 14.1 INSPECTION. Landlord shall have the right, upon reasonable advance written notice to Tenant, except in case of emergency, when no notice shall be required, to inspect the operation of the Project during normal business hours to determine whether it is being operated in compliance with all Applicable Law and in the manner required under this 18 Lease and to enable Landlord to perform its obligations hereunder. Tenant or its designated representative shall have the right to be present during any such inspection. 14.2 REPRESENTATIONS AND WARRANTIES. Landlord hereby represents and warrants to Tenant that: 14.2.1 There are no leasing or rental agreements in effect demising the Project Site other than the Lease, and there are no executory contracts, options or agreements in existence which relate to the purchase of all or any portion of the Project Site or any interest therein. 14.2.2 Landlord has no knowledge of any outstanding violations of any applicable pollution, zoning, Environmental Protection Agency, health, safety, OSHA, fire, environmental, sewerage and building codes, statutes, ordinances and regulations pertaining to the Project Site. 14.2.3 Landlord has no knowledge of any special taxes or assessments against the Project Site, or any portion thereof. 14.2.4 Landlord has no knowledge of any increase in the real estate tax assessment of the Project Site or any portion thereof. 14.2.5 To Landlord's knowledge, during Landlord's ownership of the Project Site, (i) no "Hazardous Materials" (as hereinafter defined) have been located on the Project Site or have been released into the environment, or discharged, placed or disposed of at, on or under the Project Site; (ii) no underground storage tanks have been located on the Project Site; (iii) the Project Site has never been used as a dump for waste material; (iv) no portion of the Project Site is located in an area that has been designated a wetlands or other environmental protection area; and (v) the Project Site and its prior uses comply with and at all times have complied with, any applicable governmental law, regulation or requirement relating to environmental and occupational health and safety matters and Hazardous Materials. 14.2.6 Landlord believes it has not misstated any material fact, or failed to disclose any material fact, relating to the Project Site or Landlord's Property. 14.3 SECURITY; NO OBSTRUCTION. Landlord, at its sole expense, shall at all times from and after the date hereof provide reasonable security for and protection of all 19 property of Tenant located on, in or under the Landlord's Property in accordance with the terms of this Lease. Article 15. ENVIRONMENTAL MATTERS. 15.1 DEFINITIONS. For the purposes of this Article 15, the following terms shall have the following meanings: (i) the term "Hazardous Material" shall mean any material or substance that, whether by its nature or use, is now or hereafter defined as a hazardous waste, hazardous substance, pollutant or contaminant under any Environmental Requirement, or which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and which is now or hereafter regulated under any Environmental Requirement, or which is or contains ammonia, petroleum, gasoline, diesel fuel or any other petroleum hydrocarbon product or material, (ii) the term "Environmental Requirements" shall collectively mean all present and future laws, statutes, ordinances, rules, regulations, orders, codes, licenses, permits, decrees, judgments, directives or the equivalent of or by any Governmental Authority and relating to or addressing the protection of the environment or human health or safety, and (iii) the term "Governmental Authority" shall mean any of the following having jurisdiction over the Project Site, the Project or any part of either thereof: the federal or state government or any political subdivision thereof, or any agency, court or body of the federal or state government or any political subdivision thereof, exercising executive, legislative, judicial, regulatory or administrative functions. 15.2 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Each party to this Agreement agrees that it will not use, store or bring onto the Project Site any Hazardous Material in violation of Environmental Requirements without first obtaining the prior written consent of the other party. Each party shall comply in all material respects with all Environmental Requirements, and will not generate, store, handle, process, dispose of or otherwise use Hazardous Materials at, in, on, under or about the Project Site in a manner that causes the imposition on Tenant, Landlord, the Project Site or any part thereof of any liability or lien of any nature whatsoever under any Environmental Requirement. Each party shall notify the other party promptly in the event that such party receives notice of any spill or other release of any Hazardous Material at, in, on, under or about the Project Site which is required to be reported to a Governmental Authority under any Environmental Requirement, will promptly forward to the other party copies of any notices received by such party relating to alleged violations by such party of any Environmental Requirement. If at any time it is determined by a Governmental Authority that a party's operation or use of the Project Site violates any applicable Environmental Requirement or that as a consequence of such party's action or inaction there are Hazardous Materials located at, in, on, under or about the Project Site which, under any Environmental Requirement, require special handling in collection, 20 storage, treatment or disposal, or any other form of cleanup or corrective action, such party shall, within thirty days after receipt of notice from any Governmental Authority, or sooner if required by such notice, take, at the sole cost and expense of such party (except as otherwise set forth in the ESA), such actions as may be necessary to fully comply in all respects with all Environmental Requirements; provided, however, that if such compliance cannot reasonably be completed within such thirty day period, such party shall commence such necessary action within such thirty-day period and shall thereafter diligently and expeditiously proceed to fully comply in all respects and in a timely fashion with all Environmental Requirements. 15.3 ENVIRONMENTAL INDEMNITY. Subject to the terms of Article 13 above, each party (the "Indemnifying Party") shall defend, indemnify, and hold harmless the other party, its members, employees, agents, officers, and directors (the "Indemnified Parties"), from and against any and all claims, demands, penalties, causes of action, fines, liabilities, settlements, damages (other than lost business, lost profits and other special and/or consequential damages, whether direct or indirect, all claims for which are hereby irrevocably waived), costs, or expenses of whatever kind or nature, known or unknown, foreseen or unforeseen, contingent or otherwise (including, without limitation, reasonable counsel and consultant fees and expenses, investigation and laboratory fees and expenses, court costs, and litigation expenses) arising out of, or in any way related to, (i) any breach by the Indemnifying Party of the provisions of Section 15.2 above or by Landlord of the representations and warranties contained in Section 14.2.5 above, (ii) the presence, disposal, spillage, discharge, emission, leakage, release, or threatened release of any Hazardous Material which is at, in, on, under, about, from or affecting the Project Site or any portion thereof, including, without limitation, any damage or injury resulting from any such Hazardous Material to or affecting the Project Site or the soil, water, air, vegetation, buildings, personal property, persons or animals located on the Project Site or on any other property or otherwise, which arose or occurred through the act or omission of the Indemnifying Party or resulted from the Indemnifying Party's use or occupancy of the Project Site, (iii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to the generation, storage, handling, processing, disposal of or use of any such Hazardous Material by the Indemnifying Party, (iv) any lawsuit brought, settlement reached, or order or directive of or by any Governmental Authority relating to the Indemnifying Party's use of such Hazardous Material, or (v) any violation by the Indemnifying Party of any Environmental Requirement. 15.4 LIMITATION ON INDEMNITY. The aforesaid indemnification shall not be applicable to any claim, demand, penalty, cause of action, fine, liability, settlement, damage, cost or other expense of any type whatsoever occasioned, arising and caused solely and directly as the result of the negligence or willful misconduct of a party claiming a right to be 21 indemnified, or, with respect to Tenant's indemnification obligations, arising in connection with (i) an environmental condition occurring prior to the date upon which Tenant enters upon the Project Site, or (ii) an environmental condition occurring subsequent to the date upon which Landlord acquires possession of the Project Site if such claim, demand, penalty, cause of action, fine, liability, settlement, damage, cost or other expense was not caused by an act or omission of Tenant or an employee, agent or contractor of Tenant, and Landlord shall be solely responsible for all claims and other expenses resulting from the conditions described in the preceding clauses (i) and (ii). 15.5 SURVIVAL OF INDEMNITY. Except as hereinabove specifically provided to the contrary in this Article 15, the obligations and liabilities of Landlord and Tenant under this Article 15 in respect to a claim which arises or accrues prior to the expiration or termination of the Term shall survive and continue in full force and effect and shall not be terminated, discharged or released, in whole or in part, irrespective of whether the Lease has terminated pursuant to the provisions of this Lease or acceptance by Landlord of possession of the Project Site. Article 16. TITLE; SUBORDINATION. Landlord represents and warrants to Tenant that prior to the date upon which the Notice to Proceed (as defined in the Development Agreement) is received by Northwind, Landlord will hold fee simple title to the Aladdin Lands and the Project Site. Landlord will promptly notify Tenant in writing if any mortgage, trust deed or ground lease encumbers the Project Site. If at any time the Project Site shall become subject to any mortgage, trust deed or ground lease, then within thirty (30) days after the creation of such lien or the commencement of the term of such ground lease, as the case may be, Landlord shall deliver to Tenant a recordable non-disturbance agreement (pursuant to which, among other things, the Lease, and Tenant's right of possession of the Project Site and the Landlord's Property on the terms and conditions set forth in the Lease, would be honored by any lender, ground lessor or person or entity claiming by, through or under such lender or ground lessor, in the event a foreclosure or deed-in-lieu of foreclosure occurred or a ground lease was terminated and no Tenant Default then existed) satisfactory in form and substance to Tenant acting in a commercially reasonable manner (herein called a "Non-Disturbance Agreement") signed by such lender or ground lessor, as the case may be. Without limiting the foregoing, if the mortgagee or trustee in any first mortgage or first trust deed hereafter made desires this Lease to be subject and subordinate to its first mortgage or first trust deed, then all or a portion of the rights and interests of Tenant under this Lease (other than rights in respect of any casualty loss of the Project or under Sections 8.1 and 8.2 hereof) shall be subject and subordinate to such first mortgage or first trust deed and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions 22 thereof, if and only if such mortgagee or trust deed holder or such ground lessor, as the case may be, has theretofore delivered to Tenant a Non-Disturbance Agreement signed by such lender or ground lessor, as the case may be. Any mortgagee or trustee in any first mortgage or trust deed may elect that, instead of making this Lease subject and subordinate to its first mortgage or first trust deed, the rights and interest of Tenant under this Lease shall have priority over the lien of its mortgage or trust deed. Tenant agrees that in the event that any trustee or mortgagee or ground lessor elects to make this Lease subordinate to its mortgage, trust deed or ground lease, and Tenant has received from such lender or ground lessor a signed Non-Disturbance Agreement, Tenant shall, upon the request thereof, attorn to any such trustee or mortgagee who becomes owner of the Project Site through foreclosure or deed in lieu of foreclosure or to any other purchaser of the Project Site at a foreclosure sale or to such ground lessor, as the case may be. Article 17. SURRENDER AND HOLDOVER. 17.1 SURRENDER AND REMOVAL OF IMPROVEMENTS. In the event that Landlord requires Tenant to remove the "Northwind Facilities" pursuant to Section 9.2 of the ESA, then no later than the 180th day following the date on which this Lease expires or is terminated in accordance with the terms hereof, Tenant shall surrender the Project Site and shall remove therefrom any and all machinery, equipment and personal property at Landlord's expense, except that in the event Tenant negligently performs such removal or willfully causes any damage in the course of performing such removal, Tenant shall be responsible at its sole expense for repairing all damage it negligently or willfully caused. Otherwise Tenant shall surrender the Project Site immediately following the date of expiration or termination and Tenant shall not remove such property if Landlord or its assignee has exercised any rights it may have to acquire the same under the terms and conditions of the Development Agreement or the ESA. Tenant shall restore the Project Site to a condition approved by Landlord, which approval shall not be unreasonably withheld or delayed, and Tenant shall repair any damage to Landlord's Property which is due to Tenant's use thereof. Tenant's interest in all improvements remaining on the Project Site after the expiration or earlier termination of the Lease shall be vacated and surrendered by Tenant to Landlord and shall automatically become the property of Landlord except to the extent that Landlord requires Tenant to remove the same, and Tenant agrees to execute and deliver to Landlord such deeds, bills of sale, assignments or other instruments of conveyance as Landlord may deem reasonably necessary to evidence such transfer of such improvements to Landlord. 17.2 HOLDING OVER. Except as necessary to comply with its obligations under Section 17.1 hereof, Tenant shall have no right to occupy the Project Site or any portion thereof after the expiration of the Term or after termination of the Lease or of Tenant's right to possession. In the event Tenant holds over, Landlord may exercise any and 23 all remedies available to it at law or in equity to recover possession of the Project Site and for any damages resulting from such holdover. Article 18. DEFAULT AND REMEDIES. 18.1 TENANT DEFAULTS. Tenant agrees that any one or more of the following events shall be considered "Tenant Defaults" as said term is used herein: 18.1.1 Tenant shall fail to pay any Rent or other charge owing by Tenant pursuant to the terms of this Lease within thirty days after receipt of written notice from Landlord that such amount is due and payable; 18.1.2 Tenant shall fail to keep, observe or perform any of the other covenants or agreements herein contained to be kept, observed and performed by Tenant, and such failure shall continue for thirty days (or such shorter period as is specifically referred to in this Lease for any particular breach) after notice thereof in writing to Tenant; PROVIDED, however, in the event that such failure cannot reasonably be cured within the aforesaid thirty day period (or shorter period, if applicable), and Tenant shall within said period commence to cure said default and diligently thereafter prosecutes to correction said failure, the period for completion shall be extended for so long as is reasonably required to cure said default; 18.1.3 The estate or interest of Tenant in the Project Site or the Project is levied upon or attached in any proceeding and such process is not stayed, vacated or discharged within ninety (90) days after such levy or attachment; 18.1.4 Any representation or warranty made by Tenant to Landlord in connection with this Lease is false or misleading in any material respect when made; or 18.1.5 Tenant is in default under the ESA or the Development Agreement. 18.2 LANDLORD REMEDIES; TERMINATION EVENT. Upon the occurrence of any one or more of such Tenant Defaults, Landlord shall be entitled to recover as damages all past due Rent and other sums then due and payable by Tenant including costs and expenses reasonably incurred in the exercise of Landlord's remedy (including reasonable attorney's fees), to seek appropriate equitable relief including the termination of this Lease (but only if 24 the Development Agreement and the ESA also are terminated in accordance with their respective terms) and to pursue any and all remedies available at law, in equity, in bankruptcy or in other appropriate proceedings and to seek appropriate equitable relief. Upon the effective date of such termination (but subject to the rights and obligations of Tenant under Section 17.1 above and to Landlord's payment to Tenant of any amounts payable under the ESA and the Development Agreement pursuant to termination thereof), Tenant shall surrender possession of the Project Site to Landlord. If the Lease is terminated by Landlord due to the occurrence of the events described in this Section, Landlord shall be entitled to recover as damages all past due Rent and other sums due and payable by Tenant on the date of termination including costs and expenses reasonably incurred in the exercise of Landlord's remedy (including reasonable attorney's fees). Subject to the foregoing, Landlord shall have such rights and remedies for Tenant defaults as provided elsewhere in this Lease and at law and in equity, and all remedies shall be cumulative such that Landlord's exercise or failure to exercise of any remedy shall not limit or prevent Landlord from exercising any other remedy available to Landlord. 18.3 PERFORMANCE BY TENANT'S LENDER. Landlord agrees and acknowledges that in the event that Tenant grants a security interest in the Project and/or Tenant's leasehold interest in or to the Project Site to a third party lender, Landlord shall negotiate and enter into an agreement by which such lender will be given notice and an opportunity to cure Tenant Defaults under this Lease. Without limiting the foregoing, Landlord shall reasonably cooperate with all commercially customary requests by such lender as such lender may reasonably request. 18.4 LANDLORD DEFAULT; TENANT REMEDIES. In the event Landlord shall fail to keep, observe or perform any of its covenants or agreements contained in this Lease, and such failure shall continue for thirty (30) days (if such failure is a monetary duty or obligation) or forty-five (45) days (if such failure is a non-monetary duty or obligation) after written notice from Tenant to Landlord, then Tenant shall have the right to exercise all remedies available to Tenant at law and in equity (excluding the termination of the Lease); provided, however, that Tenant may, at its election by written notice to Landlord, terminate this Lease if and only if the ESA and/or Development Agreement has been terminated or otherwise expires in accordance with its terms. The effective date of such termination shall be the later of the effective termination date of the ESA or Development Agreement. Subject to the foregoing, Tenant shall have such rights and remedies for a breach by Landlord of its obligations under this Lease as are set forth herein, and all remedies shall be cumulative such that Tenant's exercise or failure to exercise of any remedy shall not limit or prevent Tenant from exercising any other remedy available to Tenant. 25 Article 19. MISCELLANEOUS. 19.1 ESTOPPEL CERTIFICATES. 19.1.1 Tenant shall, at any time and from time to time upon not less than thirty days' prior written request from Landlord, execute, acknowledge and deliver to Landlord, in form reasonably satisfactory to Landlord, a written statement certifying (if true) that Tenant has accepted the Project Site, that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), that, to the best of Tenant's knowledge, Landlord is not in default hereunder (or if there is a default, stating the nature of said default), the date to which the rental and other charges have been paid, and such other accurate certifications as may reasonably be required by Landlord or Landlord's mortgagee. Any statement delivered by Tenant pursuant to this Section may be relied upon by Landlord and Landlord's lenders and prospective lenders. 19.1.2 Landlord shall, at any time and from time to time upon not less than thirty days' prior written request from Tenant, execute, acknowledge and deliver to Tenant, in form reasonably satisfactory to Tenant, a written statement certifying (if true) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), that, to the best of Landlord's knowledge, no Tenant Default then exists (or if there is a Tenant Default, stating the nature thereof), the date to which the rental and other charges have been paid and such other accurate certifications as may reasonably be required by Tenant or by such other person or entity, as the case may be. Any statement delivered by Landlord pursuant to this Section may be relied upon by Tenant and Tenant's lenders and prospective lenders. 19.2 AMENDMENTS MUST BE IN WRITING. None of the covenants, terms or conditions of this Lease, to be kept and performed by either party, shall in any manner be altered, waived, modified, changed or abandoned except by a written instrument, duly signed by both parties and delivered. 19.3 NOTICES. All notices or other communications required or permitted hereunder shall be in writing addressed to the respective party as set forth below and shall be 26 personally served, telecopied or sent by reputable overnight courier service and shall be deemed to have been given: (a) if delivered in person, when delivered; (b) if delivered by telecopy, on the date of transmission if transmitted on a Business Day before 4:00 p.m. Chicago time, otherwise on the next Business Day (provided, in either case, that receipt of such transmission is confirmed); and (c) if delivered by overnight courier, one day after delivery to the courier service properly addressed. Notices and other communications shall be addressed to the applicable party as follows: If to Landlord, then to: Aladdin Gaming, LLC c/o Aladdin Management Corporation 280 Park Avenue, 38th Floor New York, New York 10017 Attention: Ronald Dictrow Fax: 212-661-0844 If to Tenant, then to: Northwind Aladdin, LLC c/o Unicom Thermal Technologies Inc. 30 West Monroe Street, Suite 500 Chicago, IL 60603 Attention: President Fax: 312-346-3201 Any party hereto may change its address for notices and other communications hereunder by a notice delivered to the other party hereto in accordance with this Section as then in effect. 19.4 TIME OF ESSENCE. Time is of the essence of this Lease, and all provisions herein relating thereto shall be strictly construed. 19.5 RELATIONSHIP OF PARTIES. Nothing contained herein shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership, or of joint venture, between Landlord and Tenant, it being understood and agreed that no provision in this Lease or any acts of the parties hereto shall be deemed to create any relationship other than the relationship of landlord and tenant. 27 19.6 CAPTIONS. The captions of this Lease are for convenience only and are not to be construed as part of this Lease and shall not be construed as defining or limiting in any way the scope or intent of the provisions hereof. 19.7 SEVERABILITY. If any term or provision of this Lease shall to any extent be held invalid or unenforceable, or shall be in conflict with the requirements of any law, such term or provision shall be deemed to be inapplicable and the remaining terms and provisions of this Lease shall not be affected thereby, but each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 19.8 LAW APPLICABLE. This Lease shall be construed and enforced in accordance with the law of the State of Nevada. 19.9 COVENANTS BINDING ON SUCCESSORS; NO THIRD PARTY BENEFICIARIES. All of the covenants, agreements, conditions and undertakings contained in this Lease shall extend and inure to and be binding upon the successors and permitted assigns of the respective parties hereto, the same as if they were in every case specifically named, and wherever in this Lease reference is made to either of the parties hereto, it shall be held to include and apply to, wherever applicable, the successors and permitted assigns of such party. Nothing herein contained shall be construed to grant or confer upon any person or persons, firm, corporation or governmental authority, other than the parties hereto and their successors and permitted assigns, any right, claim or privilege by virtue of any covenant, agreement, condition or undertaking in this Lease contained. 19.10 RECORDING OF LEASE. A short form notice of this Lease and the easements created hereby (but not the Lease itself) may be recorded against the Project Site by either party hereto, provided the form thereof has received the prior approval of Landlord, which approval shall not be unreasonably delayed or withheld. 19.11 DEFAULT RATE OF INTEREST. Any amount owing by either party under this Lease that is not paid on or before the 15th day after the due date of such amount shall bear interest at a rate equal to one and one-half percent (1.50%) per month, or the maximum legal rate, whichever is less, from such date through and including the date of payment thereof (calculated using actual days elapsed and a year of 365 or 366 days, as applicable). 19.12 ARBITRATION. Landlord and Tenant shall negotiate in good faith and attempt to resolve promptly any dispute between them which may develop under this Lease; however, if Landlord and Tenant are unable to resolve any such dispute, then Landlord and Tenant jointly may request that such dispute be resolved by arbitration in accordance with the provisions of the Commercial Arbitration Rules of the American Arbitration Association. If 28 Landlord and Tenant do not agree to submit such dispute to arbitration and are not otherwise able to resolve such dispute, either Landlord or Tenant may bring such dispute to any court of competent jurisdiction for resolution. The provisions of this Section shall survive the termination or expiration of this Lease. 19.13 SELF-HELP. Landlord may, but shall not be obligated to, perform any duty or obligation of the Tenant under this Lease (including, without limitation, the performance of maintenance, repairs and replacements pursuant to Section 9) if and to the extent Tenant fails to perform such duty or obligation and such failure continues for thirty days after written notice thereof (which thirty day period shall not apply or pertain to any such failure which creates an emergency situation). If Landlord so elects to cure or attempt to cure such failure of the Tenant, then all reasonable costs and expenses incurred by Landlord in curing or attempting to cure such failure, including without limitation reasonable attorneys' fees and court costs (all such costs and expenses being hereinafter referred to collectively as the "Self-Help Expenses") shall be repaid by the Tenant within five business days after a written request therefor (together with an invoice and reasonable back-up therefor). The rights and remedies provided for in this Section are non-exclusive, and nothing herein shall prevent Landlord from exercising any other right or remedy available to it under this Lease or at law or in equity (subject to the limitations set forth in this Lease). 19.14 NO MERGER. There shall be no merger of this Lease nor of the leasehold estate created by this Lease with the fee estate in the Project Site or any part thereof by reason of the fact that the same person may own or acquire or hold, directly or indirectly (a) this Lease or the leasehold estate created by this Lease or any interest in this Lease or in any such leasehold estate and (b) the fee estate in the Project Site or any part thereof or any interest in such fee estate and no such merger shall occur unless and until Landlord, Tenant, each holder of a mortgage on the fee estate in the Project Site and each holder of a mortgage on the leasehold estate created by this Lease shall join in a written instrument effecting such merger. 19.15 NOTICE OF TRANSFER. This Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Neither party shall assign its interest or delegate its duties under this Lease without the prior written consent of the other party (which consent shall not be unreasonably withheld) except that either party may assign its interest hereunder in connection with a concurrent assignment of its interest in the ESA made in accordance with the provisions of the ESA, provided that such assignment hereunder is being made to the same entity to which assignment is being made under the ESA. In the event of such assignment by Landlord, the assignee shall have the same notice, cure and assumption rights under this Lease as is provided to such assignee under Section 10.2(a)(ii) of the ESA. Subject to the foregoing, the term "Landlord" as used herein means the owner of the Project Site, and in the event of the sale, assignment or transfer by such owner of its interest in the Project Site, the Landlord shall promptly give notice of the fact to Tenant setting forth the name and address of the transferee, and thereupon, except as otherwise required in connection with any concurrent assignment of the Landlord's interest in the ESA, the owner selling, assigning or transferring its interest in the Project Site shall be released and discharged as Landlord herein from all liabilities and obligations thereafter accruing and thereupon all such liabilities and obligations shall be binding upon the transferee. 19.16 NON-LIABILITY. Neither Landlord nor any partner, joint venturer, director, officer, agent, servant or employee of Landlord shall be liable to Tenant for any 29 loss, injury or damage to Tenant, or to its property, unless the cause of such injury, damage or loss was the gross negligence or willful misconduct of Landlord, its agents, contractors, shareholders, servants or employees. Landlord's total liability under this Lease shall in all events be limited to Landlord's interest in the Project Site, or, if applicable, net proceeds derived from the sale thereof. [Balance of page intentionally left blank; signature page follows.] 30 IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease as of the day and year first above written. ALADDIN GAMING LLC, a NORTHWIND ALADDIN, LLC, a Nevada limited-liability company Nevada limited-liability company By: /s/ Ronald Dictrow By: UTT Las Vegas Inc., ------------------------------ a Nevada corporation, its manager Ronald Dictrow Title: Exec. Vice President By: /s/ Donald Petkus ----------------------------------- Name: Donald Petkus Title: President 31 EXHIBIT A Description of Project Site 32 EXHIBIT B Description of Landlord's Property 33 EX-10.29 23 UNICOM GUARANTY DATED 12/03/97 GUARANTY THIS GUARANTY is dated as of December 3, 1997, by UNICOM CORPORATION, an Illinois corporation (the "Guarantor") to and for the benefit of Aladdin Gaming, LLC, a Nevada limited-liability company (the "Customer"). RECITALS: WHEREAS, the Customer is in the process of constructing the Aladdin Hotel and Casino, the Sound Asylum Hotel & Casino, a performing arts theater, a conference center, and a Retail Mall and service courts (collectively, the "Aladdin Complex") in Las Vegas, Nevada, and desires that Northwind Aladdin, LLC, a Nevada limited-liability company ("Northwind") construct and operate district heating and cooling and cogeneration facilities for the production and distribution to the Aladdin Complex of hot water, chilled water and electricity, and further agree to procure additional electrical energy for the Aladdin Complex, all on the terms and conditions set forth in a Development Agreement and an Energy Service Agreement of even date herewith, each, between the Customer and Northwind; WHEREAS, it is a condition precedent to the Customer's entering into such Development Agreement and Energy Service Agreement that the Guarantor agree to guaranty certain obligations of Northwind to the Customer on the terms of this Guaranty; WHEREAS, as of the date hereof the Guarantor is the indirect parent of Northwind and the Guarantor will derive benefit from the Customer's entering into the Development Agreement and the Energy Service Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as follows: 1. Guaranty. Subject to the limitation set forth in Section 15 below, the Guarantor hereby unconditionally and irrevocably guaranties to the Customer and its successors, transferees, and assigns the obligations and duties of Northwind under the Development Agreement and the Energy Services Agreement to construct and demonstrate "Final Completion" of the "Plant" (as such terms are defined in the Development Agreement) (such obligations and duties are hereinafter collectively referred to as "Northwind's Obligations"). The Guarantor agrees that the Guaranty described in this Section 1 is a present and continuing guaranty of payment and performance and that the Customer shall not be required to prosecute enforcement or other remedies against Northwind or any other guarantor of Northwind's Obligations before calling on the Guarantor for performance and observance. The Guarantor agrees that if for any reason Northwind shall fail or be unable to punctually and fully perform any of Northwind's Obligations, the Guarantor shall perform or cause to be performed such obligations promptly upon demand. The Guarantor agrees that one or more successive actions may be brought against the Guarantor, as often as the Customer deems advisable, until all of Northwind's Obligations are performed in full. 2. Representations and Warranties. The Guarantor represents and warrants to the Customer that the Guarantor has all requisite corporate power and authority to enter into and perform its obligations under this Guaranty and that this guaranty has been duly and validly executed and delivered by the Guarantor and constitutes the valid and binding obligation of the Guarantor, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights generally, and except as enforcement may be limited by general principles of equity. 3. Continuing guaranty. The Guarantor agrees that the obligations of the Guarantor under this Guaranty shall be primary, absolute and unconditional irrespective of, and unaffected by: (a) The existence of any claim, set-off, defense, counterclaim or other right which the Guarantor may have against the Customer or any other natural person, governmental entity or any other entity whether acting in an individual fiduciary or other capacity (each, a "Person"); (b) the occurence or continuance of any event of bankruptcy, reorganization or insolvency proceeding with respect to Northwind or any other Person (other than the Customer where such bankruptcy is not voluntary and such bankruptcy, reorganization or insolvency proceeding remains undismissed for more than sixty (60) days after the commencement thereof); (c) any amendment, change, or other modification to the Development Agreement, the Energy Service Agreement and/or this Guaranty made pursuant to the terms thereof; (d) the exercise, non-exercise or delay in exercising by the Customer of any of its rights or remedies under this Guaranty; 2 (e) any permitted assignment or other permitted transfer of this Guaranty by the Customer or any permitted assignment or other permitted transfer of the Development Agreement and/or the Energy Service Agreement; (f) the absence of any notice to, or knowledge by, Guarantor of the existence or occurrence of any of the matters or events set forth in the foregoing clauses; or (g) any other similar circumstance, condition or event that might constitute or give rise to a defense to performance by Guarantor of its obligations under this Guaranty. 4. Waiver. The Guarantor: (a) waives, and agrees it shall not at any time insist upon, plead, claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by the Guarantor of its obligations under, or the enforcement by the Customer of, this Guaranty; (b) waives, and agrees that it shall not at any time claim or take the benefit or advantage of Section 365(e)(2) of the Title 11, United States Code or any other state or federal insolvency, reorganization, moratorium or similar law for the relief of debtors; provided, however, that, except as provided in this paragraph 4(b), this waiver shall not apply with respect to any bankruptcy by or against the Customer or any of its affiliates, it being the express intent of the parties that, in the event of a bankruptcy by or against the Customer, this Guaranty may not be enforced by the Customer (or any affiliate of the Customer) as a debtor-in-possession, or by any trustee appointed with respect to the Customer or any affiliate of the Customer or any of their respective assets unless the party seeking enforcement has elected to affirm and assume all obligations of the Customer under the Development Agreement, the Energy Service Agreement and that certain Lease between the Customer and Northwind dated of even date with the Development Agreement and has complied with all applicable conditions to affirming and assuming such agreements under all applicable laws, regulations and bankruptcy rules, including, without limitation, curing of any defaults thereunder and providing adequate assurances of performance thereunder; 3 (c) waives all notices, diligence, presentment and demand (whether for non-payment or protest or of acceptance, maturity, extension of time, change in nature or form of Northwind's Obligations, acceptance of security, release of security, composition or agreement arrived at as to the amount of, or the terms of, Northwind's Obligations, notice of adverse change in Northwind's financial condition or any other fact which might materially increase the risk to the Guarantor hereunder) with respect to any of Northwind's Obligations, other than any notices or demands required to be given to Northwind under the Energy Service Agreement or the Development Agreement, and all other demands whatsoever and waives the benefit of all provisions of law which are or might be in conflict with the terms of this Guaranty; (d) agrees that its obligations under this Guaranty shall be unaffected by the existence of any claim, set-off, defense, counterclaim or other right which the Guarantor may have against the Customer or any other natural person, governmental authority or any other entity whether acting in an individual fiduciary or other capacity (each, a "Person"); (e) irrevocably waives until Northwind's Obligations have been satisfied (i) any rights which it may have acquired against Northwind by way of subrogation under this Guaranty or otherwise, (ii) any rights to seek any reimbursement from Northwind in respect of payments made by the Guarantor hereunder, and (iii) any claim, counterclaim or set-off which it may have against Northwind and the right to exercise any rights or remedies or commence any proceedings with respect thereto; (f) irrevocably waives any right to require the Customer to proceed against Northwind or any other guarantor at any time, to proceed against or exhaust any security held by the Customer at any time, and except to the extent that Northwind has or would have had any such a right under the Development Agreement and/or the Energy Service Agreement, the right to require the Customer to mitigate damages or to pursue any other remedy whatsoever at any time; and (g) irrevocably waives any defense based upon an election of remedies by the Customer, including any election to proceed by judicial or nonjudicial foreclosure of any security, whether real property or personal property security, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, or any election of remedies, including but not limited to remedies relating to real property or personal property security, that 4 destroys or otherwise impairs the right of the Guarantor against Northwind for reimbursement. 5. Term of Guaranty. This Guaranty is a continuing guaranty and shall remain in full force and effect until the date on which all Northwind's Obligations have been performed and paid in full; provided that the Guarantor has obtained the prior written consent of the Customer to such termination, such consent not to be unreasonably withheld. Each and every default in the payment or performance of Northwind's Obligations shall give rise to a separate cause of action hereunder and separate causes of action may be brought hereunder as each such cause of action arises. 6. Reinstatement. The obligations of the Guarantor pursuant to this Guaranty shall continue to be effective or automatically be reinstated, as the case may be, if at any time satisfaction of any of Northwind's Obligations or the Guarantor's obligations under this Guaranty is rescinded or otherwise must be restored or returned by the Customer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Guarantor or otherwise, all as though such satisfaction had not been made. 7. Bankruptcy No Discharge; Repayments; Reinstatement. (a) Bankruptcy Proceedings. The Guarantor shall not commence or join with any other party in commencing any bankruptcy, reorganization, or insolvency proceedings of or against Northwind. The Guarantor understands and acknowledges that by virtue of this Guaranty, the Guarantor has specifically assumed any and all risks of a bankruptcy or reorganization case or similar proceeding with respect to Northwind. As an example and not in any way a limitation, a subsequent modification of Northwind's Obligations or any rejection or disaffirmance thereof by any trustee, receiver or liquidating agency of Northwind or of any of its properties, or any settlement or compromise of any claim made in any such case, in any reorganization case concerning Northwind shall not affect the obligation of the Guarantor to pay and perform Northwind's Obligations in accordance with their original terms. (b) Repayment and Reinstatement. If any claim is made upon the Customer or any Person claiming through the Customer for repayment or disgorgement of any amount or amounts received by the Customer in payment of Northwind's Obligations and the Customer or such Person, as the case may be, is compelled by law to repay or disgorge all or any part of said amount, then, notwith- 5 standing any revocation or termination of this Guaranty, the Guarantor shall be and remain liable to the Customer or such Person, as the case may be, for the amount so repaid, to the same extent as if such amount had never originally been received by the Customer or such Person, as the case may be. 8. Successors and Assigns. This Guaranty shall inure to the benefit of the Customer and its successors and assigns and not to any third party, nor shall any third party have recourse to the Guarantor in connection with this Guaranty. This Guaranty shall be binding on the Guarantor and shall not be assigned without the prior written consent of the Guarantor, such consent not to be unreasonably withheld. Notwithstanding anything to the contrary contained herein, Guarantor's consent shall not be required for an assignment of this Guaranty to one or more of the Customer's lenders and Customer's Affiliates (as defined in the Energy Service Agreement) (and one or more of the Affiliates' lenders) provided that any such assignee(s) (including any of such lenders) shall (i) have a fee interest or a leasehold interest of not less than twenty (20) years in and to a substantial portion of the Aladdin Lands (as such term is defined in the Development Agreement), (ii) be diligently pursuing to completion its respective portion of the Aladdin Complex (i.e., the Aladdin Hotel and Casino, the Mall and/or the Sound Asylum Project (the "Mall" and the "Sound Asylum Project" as defined in the Development Agreement)), and (iii) be required to assume the Customer's obligations under the Development Agreement and the Energy Service Agreement prior to and at the time of enforcing Guarantor's obligations under this Guaranty. 9. Amendments; Waivers, etc. Neither this instrument nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Customer and the Guarantor. No delay or failure by the Customer to exercise any remedy against Northwind or the Guarantor will be construed as a waiver of that right or remedy. No failure on the part of the Customer to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by any applicable governmental rule. 10. Joinder. The Guarantor agrees that any action to enforce this Guaranty may be brought against the Guarantor without any reimbursement or joinder of Northwind or any other guarantor of Northwind's Obligations in such action. 6 11. Severability. In the event that any provision of this Guaranty is deemed to be invalid by reason of the operation of law, or by reason of the interpretation placed thereon by any administrative agency or any court, the Guarantor and the Customer shall negotiate an equitable adjustment in the provisions of the same in order to effect, to the maximum extent permitted by law, the purpose of this Guaranty and the validity and enforceability of the remaining provisions, or portions or applications thereof, shall not be affected thereby and shall remain in full force and effect. 12. Applicable Law. This Guaranty shall be governed as to validity, interpretation, effect and in all other respects by the laws and decisions of the State of Illinois. 13. Waiver of Jury Trial. The Guarantor and the Customer irrevocably waive all right of trial by jury in any action, proceeding or counterclaim arising out of or in connection with this Guaranty or any matter arising hereunder. 14. Notice. All notices, communications and waivers under this Guaranty shall be in writing and shall be (i) delivered in person or (ii) mailed, postage prepaid, either by registered or certified mail, return receipt requested, or (iii) by overnight express carrier, addressed in each case as follows: If to the Customer, to: Aladdin Gaming, LLC c/o Aladdin Management Corporation 280 Park Avenue, 38th Floor New York, New York 10017 Attention: Ronald Dictrow Fax: (212) 661-0844 If to the Guarantor, to: Unicom Corporation P.O. Box 767 One First National Plaza, Suite 3700 Chicago, Illinois 60690 Attention: Treasurer Fax: (312) 394-3110 7 or to any other address as to any of the parties hereto, as such party shall designate in a written notice to the other party hereto. All notices sent pursuant to the terms of this Section 14 shall be deemed received (i) if personally delivered, then on the date of delivery, (ii) if sent by overnight, express carrier, then on the next business day immediately following the day sent, or (iii) if sent by registered or certified mail, then on the earlier of the third business day following the day sent or when actually received. 15. Limitation of Liability. Notwithstanding anything hereinabove set forth to the contrary the aggregate liability of the Guarantor under this Guaranty shall be limited to an amount equal to (a) the lesser of (i) Thirty Million Dollars ($30,000,000) or (ii) the GMP, as finally determined and agreed upon pursuant to the Development Agreement, plus interim operating costs up to the Substantial Completion Date, minus (b) the aggregate dollar amount of any "Substitute Performance Assurances" (as defined below) which are hereafter provided in favor of the Customer with respect to Northwind's Obligations and are in effect from time to time. For purposes hereof, "Substitute Performance Assurances" means: (i) a guaranty of Northwind's Obligations in favor of the Customer in form and substance satisfactory to the Customer in its sole discretion and provided by a general contractor for the Project, a manufacturer of major components for the Project, or by an entity having a direct or indirect ownership interest in Northwind and, in either case, also having a commercial paper rating comparable to the commercial paper rating of the Guarantor at the time such guaranty is issued; and/or (ii) a letter of credit issued in favor of the Customer by a financial institution reasonably satisfactory to the Customer providing that the Customer may draw thereunder in the event that Northwind shall default in performance of Northwind's Obligations and otherwise in form and substance reasonably satisfactory to the Customer. Upon Substantial Completion, the Guarantor's liability under this Guaranty shall decrease by the amount of debt and equity contributed by Northwind towards completion of the Plant, minus ten percent (10%) which shall be retained by the Customer pending Final Completion. 8 IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the date first above written. UNICOM CORPORATION By: /s/ Donald A. Petkus ----------------------------- Name: Donald A. Petkus Title: Senior Vice President 9 EX-10.30 24 LIMITED LIABILITY AGREEMENT LIMITED LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC ------------------- THIS LIMITED LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC, is entered into effective as of September 3, 1997, by and between TH BAZAAR CENTERS INC., a Delaware corporation ("TRIZECHAHN"), and ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company ("HOLDINGS II"). The capitalized terms used herein shall have the respective meanings assigned to such terms in Article XII. R E C I T A L S : A. The Members desire to jointly develop a themed entertainment shopping center (the "CENTER") on the site (the "MASTER SITE") of the renovated and expanded Aladdin Hotel and Casino in Las Vegas, Nevada containing approximately 2,600 rooms and a an approximately 100,000 to 125,000 square foot casino, together with related and physically attached facilities (the "ALADDIN HOTEL AND CASINO") including an 800 room, themed casino/hotel on the corner of Harmon Avenue and Audrie Street (the "AUDRIE/HARMON HOTEL"), (collectively, the "REDEVELOPED ALADDIN") and a structured parking facility with spaces for approximately 5,000 cars (the "PARKING FACILITIES"). In addition to the Parking Facilities there will be an additional structured parking beneath the Aladdin Hotel and Casino for approximately five hundred (500) cars (the "OTHER PARKING"). B. The Center and the Parking Facilities, are together referred to herein as the "BAZAAR IMPROVEMENTS." The Redeveloped Aladdin, the Other Parking and the Bazaar Improvements are together referred to as the "MASTER DEVELOPMENT". EXHIBIT "A", attached hereto and incorporated herein, contains the site plans and renderings of the Master Development as envisioned as of the date hereof. ARTICLE I FORMATION 1.01 FORMATION The Members shall form a Delaware limited liability company pursuant to the provisions of the Delaware Act and this Agreement. In connection therewith, a duly authorized representative of the Company shall execute a Certificate of Formation for the Company in accordance with the Delaware Act, which shall be duly filed with the Secretary of State of the State of Delaware. Such duly authorized representative also shall execute, acknowledge and/or verify such other documents and/or instruments as may be necessary and/or appropriate in order to form the Company under the Delaware Act and/or to continue its existence in accordance with the provisions of the Delaware Act and/or to register, qualify to do business and/or operate its business as a foreign limited liability company in any other state in which the Company conducts business. 1.02 NAMES AND ADDRESSES The name of the Company is "Aladdin Bazaar, LLC" The registered office of the Company in the State of Delaware shall be at 1013 Centre Road, Wilmington, Delaware 19805-1297. The name and address registered agent for the Company in the State of Delaware shall be The Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, Delaware 19805-1297. The name and address of the resident agent for the Company in the State of Nevada shall be CSC Services of Nevada, Inc., 501 E. John Street, Room E, Carson City, Nevada 89706-3078. The name, address and facsimile number of TrizecHahn are as follows: TH Bazaar Centers Inc. 4350 La Jolla Village Drive, Suite 400 San Diego, California 92122-1233 Attention: Mr. Wayne Finley and Wendy Godoy (619) 546-3307 With a copy to: TH Bazaar Centers Inc. 4350 La Jolla Village Drive, Suite 400 San Diego, California 92122-1233 Attention: General Counsel The name, address and facsimile number of Holdings II are as follows: Aladdin Bazaar Holdings, LLC c/o Mr. Jack Sommer 2810 W. Charleston Boulevard, Suite 58 Las Vegas, Nevada 89102 (702) 870-8733 With a copy to: Mr. Ronald B. Dictrow Sigmund Sommer Properties 280 Park Avenue New York, New York 10017 (212) 661-0844 1.03 NATURE OF BUSINESS The express, limited and only purposes of the Company are (i) acquire a ground lease (the "LEASE") for approximately 17.5 acres located within the Master Site upon which the Bazaar Improvements are to be developed (the "PROPERTY") and enter into a Reciprocal Easement Agreement with the owners and certain lessees of the Master Development; (ii) develop and construct the Bazaar Improvements, consisting of approximately 450,000 square feet of gross leasable area and the Parking Facilities; (iii) to own, renovate, rehabilitate, market, operate, lease, manage, hold for investment, finance, refinance, hypothecate sell and/or otherwise realize the economic benefit from the Bazaar Improvements; and (iv) to engage in such other activities as are necessary and/or appropriate to accomplish the foregoing purposes. 1.04 FIDUCIARY DUTIES (a) During the period commencing as of the date hereof and ending upon the earlier of (i) five (5) years after the opening of the Bazaar Improvements to the public ("OPENING"), (ii) the failure to satisfy the Conditions Precedent and the abandonment of the Bazaar Improvements by the Members pursuant to Section 3.06, (iii) TrizecHahn's failure to approve a Satisfaction Notice pursuant to Section 3.06, (iv) the sale by TrizecHahn of its Interest to a bona fide third party (and not an Affiliate of TrizecHahn) and not for the purpose of circumventing this Section 1.04(a) through such sale, or (v) the dissolution of the Company (the "NON-COMPETITION PERIOD"), TrizecHahn hereby agrees that TrizecHahn and any Affiliate of TrizecHahn shall not, without the prior written consent of Holdings II, which consent may be withheld in Holdings II's sole discretion, directly or indirectly (other than through its ownership interest in the Company), develop any "Competing Retail Project", as defined below, which competes with the Bazaar Improvements within the "Non-Competition Area", as defined below. For purposes of this Section 1.04(a), the term "COMPETING RETAIL PROJECT" shall mean a shopping center attached to a casino hotel. Any expansions, remodels or acquisitions of the Fashion Show or interests therein are specifically excluded from the definition of a "Competing Retail Project" (in the event that a casino hotel at some later date may attach to the Fashion Show). For purposes of this Section 1.04(a), the term "NON-COMPETITION AREA" shall mean only that portion of the Las Vegas strip north of the Aladdin Hotel to Spring Mountain Road, and south of the Aladdin Hotel to Hacienda Avenue. Notwithstanding the foregoing, the Members hereby acknowledge and agree that the prohibitions contained in this Section 1.04(a) shall not apply to (i) the acquisition (including interests therein) or management of a Competing Retail Project within the Non-Competition Period and within the Non-Competition Area, (ii) any other type of retail development which is not a Competing Retail Project within the Non-Competition Area, (iii) any activity conducted outside of the Non-Competition Area, or (iv) any activity conducted after the Non-Competition Period. (b) In view of the limited purposes of the Company, but subject to Section 1.04(a) above, no Member shall have any obligations (fiduciary or otherwise) with respect to the Company or to the other Member insofar as making other investment opportunities available to the Company or to the other Member. Each Member may, notwithstanding the existence of this Agreement, engage in whatever activities such Member may choose, whether the same are competitive with the Company or otherwise, without having or incurring any obligation to offer any interest in such activities to the Company or to the other Member. Neither this Agreement nor any activities undertaken pursuant hereto shall prevent any Member from engaging in such activities, and the fiduciary duties of the Members to each other and to the Company shall be limited solely to those arising from the purposes of the Company described in Section 1.03 above. 1.05 TERM OF COMPANY The term of the Agreement shall commence on the date the Articles of Organization for the Company is filed with the Delaware Secretary of State and shall continue until December 31, 2099, unless dissolved pursuant to Article IX or unless extended by the unanimous agreement of the Members. ARTICLE II MANAGEMENT OF THE COMPANY 2.01 DEVELOPMENT PLAN The Members have approved a preliminary development plan (the "DEVELOPMENT PLAN") for the development and construction of the Bazaar Improvements, a copy of which is attached hereto as EXHIBIT "B." The Development Plan includes, without limitation, (i) a pro forma development budget (the "DEVELOPMENT BUDGET") containing a cost breakdown setting forth the estimated development and construction costs that will be incurred by the Members in connection with the development and construction of the Improvements, together with projected revenues for the applicable period; and (ii) a leasing plan ("LEASING PLAN"). When approved by the Members, the Development Plan shall be updated to include (i) a preliminary site plan for the Bazaar Improvements (the "SITE PLAN") showing the location of all improvements, parking, drives and points of ingress and egress; (ii) an estimated time schedule for the completion of the Improvements (the "CONSTRUCTION SCHEDULE"); (iii) an updated Leasing Plan setting forth in reasonable detail the following items: (A) a description of the proposed size of, type of tenants for and rent proforma for each tenant space and tenant improvement allowances; and (B) a statement of projected operating costs and lease revenues stated for the first calendar year following the Opening, and (iv) the plans and specifications for the development and construction of the Improvements (the "PLANS AND SPECIFICATIONS"). Upon the earlier of (i) approval by the Board of the final Development Plan, or (ii) commencement of construction, any changes to the Development Plan may only be proposed by TrizecHahn. 2.02 DAY TO DAY OPERATIONS TrizecHahn shall be responsible for, and shall make any and all decisions relating to, the day-to-day operations of the Company. Any and all agreements, contracts and other documents or instruments affecting or relating to the day-to-day development and operational business and affairs of the Company may be executed on the Company's behalf by TrizecHahn alone and without execution by Holdings II provided that the amount involved for any such agreement or other document is within the parameters established in the Development Budget (as the same may be revised in accordance with the provisions of Section 2.04 below) or in the Operating Budget (as the same may be revised in accordance with the provisions of Section 2.05 below), or otherwise approved by Holdings II. TrizecHahn shall use its reasonable efforts to carry out the day-to-day business and affairs of the Company and shall devote such time to the Company as is necessary, in the reasonable discretion of TrizecHahn, for the efficient operation of the day-to-day business and affairs of the Company. Without limiting TrizecHahn's authority set forth above in this Section 2.02, but subject to the restrictions on TrizecHahn's authority set forth below in Section 2.04, TrizecHahn (on behalf and at the expense of the Company) shall have the right, power, and authority to undertake (or cause to be undertaken) any and all of the following: (a) Act as representative of the Company with respect to any authorization or approval required pursuant to any agreement entered into by the Company, including, but not limited to, the Development Agreement, the Management Agreement, the Site Work Agreement, the Development Agreement between Clark County and Holdings, the Lease, the Reciprocal Easement Agreement and the Parking Use Agreement unless such approval or action constitutes a decision exclusively reserved to the Board pursuant to the provisions of Section 2.04 below. It is understood that TrizecHahn alone may execute on behalf of the Company any documents, agreements or approvals pursuant to the Development Agreement or the Management Agreement, to the extent that such items are within the parameters established in the Development Budget or Operating Budget, as the case may be. (b) Prepare, pursuant to the provisions of Section 2.05 hereof, and regularly update, the Development Plan and Operating Budget for the Bazaar Improvements. Upon the earlier of (i) approval by the Board of the final Development Plan, or (ii) commencement of construction, changes to the Development Plan may only be proposed by TrizecHahn. 2.03 BOARD OF MANAGERS Except as otherwise provided in this Agreement, all aspects of the business and affairs of the Company shall be managed, and all decisions affecting the business and affairs of the Company shall be made, by a board of managers (the "BOARD") composed of four (4) representatives in accordance with the following: (a) Subject to Section 2.03(o) and Section 3.02, TrizecHahn shall be entitled to select two (2) representatives of the Board and Holdings II shall be entitled to select two (2) representatives of the Board. TrizecHahn hereby designates Wayne Finley and Wendy Godoy as its initial representatives of the Board; and Holdings II hereby designates Jack Sommer and Ronald Dictrow as its initial representatives of the Board. Each Member may, from time to time, change such Member's designated representative(s) of the Board by giving written notice thereof to the other Member, provided that either (i) any replacement representative is a partner, trustee, member, managing member, shareholder, officer or director of such Member or an Affiliate thereof, or (ii) such replacement representative is approved by the other Member, which approval shall not be unreasonably withheld. The Board shall have the authority to make all decisions affecting the business and affairs of the Company as fully and completely as if the Members were themselves making such decisions. (b) The number of representatives of the Board may be increased or decreased from time to time by the Board so long as an equal number of the representatives of the Board are appointed by each of TrizecHahn and Holdings II. (c) Regular meetings of the Board shall be held at the principal office of the Company in Nevada (or at such other place(s) as are designated by the Board) at such times as shall be designated from time to time by the Board. (d) Special meetings of the Board may be called by or at the request of any representative of the Board and shall be held at the principal office of the Company in Nevada (or at such other place(s) as are designated by the Board). The person(s) authorized to call any special meeting of the Board may designate any reasonable time for holding of the special meeting. (e) Representatives of the Board may participate in any regularly scheduled or special meetings of the Board telephonically or through other similar communications equipment, as long as all of the representatives participating in the meeting can hear one another. Participation in a meeting pursuant to the preceding sentence shall constitute presence in person at such meeting for all purposes of this Agreement. (f) Except for any regularly scheduled or special meeting of the representatives of the Board, it is the express intent of the Members that there shall not be any required (or regularly scheduled) meetings of the Members. (g) Notice of any meeting of the Board shall be given no fewer than ten (10) business days and no more than thirty (30) days prior to the date of the meeting. The attendance of a representative of the Board at a meeting of the Board shall constitute a waiver of notice of such meeting, except where a representative of the Board attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not properly called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting. (h) Provided that notice of a meeting has been given or waived in the manner set forth herein, a majority (in number) of the members of the Board shall constitute a quorum for the transaction of business at any meeting of the Board, provided that if less than a majority of such number of representatives of the Board are present at such meeting, a majority of the representatives of the Board present may adjourn the meeting at any time without further notice. (i) Provided that notice of a meeting has been given or waived in the manner set forth herein, the act of a majority (in number) of the representatives of the Board present shall be the act of the Board and shall constitute a decision of the Board and such decision shall be binding upon the Company and on each Member. (j) Any action required or permitted to be taken at a meeting of the Board may be taken without a meeting if a consent in writing, setting forth the actions so taken, shall be signed by a majority (in number) of the representatives of the Board entitled to vote with respect to the subject matter thereof provided that each Member shall be provided with at least one (1) business day prior notice of such proposed action. Provided that such notice is given or waived in writing, any such consent signed by a majority (in number) of the representatives of the Board shall have the same effect as an act of a majority (in number) of the representatives of the Board at a properly called and constituted meeting of the Board at which all of the representatives of the Board were present and voting. (k) Except as otherwise determined by the Board or as approved as part of the Development Budget or Operating Budget, no representative of the Board nor any officer of the Company shall be entitled to receive any salary or remuneration from the Company for services as a representative of the Board or an officer of the Company. (l) The Board may, by resolution, designate one (1) or more individuals as employees or agents of the Company in furtherance of its business and purposes. No such employee or agent need be a Member of the Company. Each employee or agent shall have the authority and shall perform the duties as designated by the Board from time to time. Any employee or agent so appointed by the Board may be removed by the Board for any reason or no reason whatsoever, with or without cause. (m) Except as provided in Section 2.02, or as authorized pursuant to the Development Agreement or the Management Agreement, all contracts, agreements and other documents or instruments affecting or relating to the business and affairs of the Company may be executed on the Company's behalf only by the Member(s), officer(s) or such other authorized person(s) as are designated in writing by the Board and without execution by any other Member. (n) Except as provided in Section 2.02 or elsewhere in this Agreement, none of the Members or officers of the Company, without the prior consent of the Board, shall take any action on behalf of or in the name of the Company, or enter into any commitment or obligation binding upon the Company, except for (i) actions expressly authorized by this Agreement, (ii) actions on or after the date of this Agreement by any Member (or officer) within the scope of such Member's (or officer's) authority granted hereunder except as set forth in Schedule 2.14(d) or otherwise authorized pursuant to Section 3.01, and (iii) actions authorized by the Board in the manner set forth herein. Each Member hereby indemnifies, defends, protects and holds harmless the other Member and each such other Member's Affiliates, shareholders, officers, directors, partners, members, employees, agents, and representatives (including the representative(s) to the Board appointed by such Member) from and against any and all losses, liability, damages, costs and/or expenses (including attorneys' fees) arising out of the breach of any of the foregoing provisions by such indemnifying Member, any representative of the Board selected by such Member or such Member's Affiliates, shareholders, officers, directors, constituent partners, members, managers, employees, agents, or representatives. (o) Notwithstanding the provisions of this Section 2.03 to the contrary, to the extent that any Member acquires or obtains more than fifty percent (50%) of the Percentage Interests of the Company (I.E., as a result of a permitted transfer of a portion of a Member's Interest or, subject to the sole discretion approval of the Members, the admission of an additional Member to the Company), then such controlling Member shall have the right at all times to appoint a majority in number of the representatives of the Board, and the number of representatives selected by the minority Members of the Company shall be reduced proportionately. For example, in the event that a Member acquires more than fifty percent (50%) of the Percentage Interest of the Company (either as a result of the permitted transfer of a portion of a Member's Interest or, subject to the sole discretion approval of the Members, the admission of an additional Member to the Company), then such controlling Member shall have the right to appoint three (3) of the representatives to the Board, and the non-controlling Member shall have the right to appoint one (1) representative to the Board. 2.04 AUTHORITY OF THE BOARD Without limiting the generality of Section 2.02, and except as otherwise provided by this Agreement, the consent of the Board shall be required for, and the Board shall have the sole and exclusive right, power and authority to approve the following: (a) Any financing, refinancing or securitization of all or any portion of the Bazaar Improvements and the use of any proceeds therefrom, including, without limitation, interim, construction and permanent financing, and any other financing or refinancing of the Company's indebtedness and the execution and delivery of any documents, agreements or instruments evidencing, securing or relating to any such financing, refinancing and/or securitization; (b) Subject to Section 2.02(b), approve any major development decision, including but not limited to any material change to the Development Plan, except for change orders which are consistent with the ordinary course of construction of projects similar in scope and use to the Bazaar Improvements; (c) Any lease of space within the Bazaar Improvements in excess of Twelve Thousand Five Hundred (12,500) square feet; (d) The making of any expenditure by the Company that is not specifically included or contemplated under the Development Budget or the applicable Operating Budget, other than as permitted within any parameters agreed to by the Members in any such Budget (e.g., application of line item cost savings, contingency line item amounts, etc., except that TrizecHahn shall not have the authority to increase the tenant improvement and theming line items without Board approval); provided, however that TrizecHahn shall have the authority to make any expenditure necessary to comply with previously approved obligations of the Company; (e) The Construction Contract for the development of the Bazaar Improvements; and (f) The delivery of a notice of default pursuant to the Management Agreement or the Development Agreement. In the event that the Board shall become deadlocked concerning any of the major decisions listed above, then any Board member shall have the right to institute arbitration proceedings pursuant to Section 11.13. 2.05 OPERATING BUDGET THCM or its successors and assigns, as property manager of the Bazaar Improvements, shall prepare and submit to the Board, for the Board's review and approval, prior to the issuance of a certificate of occupancy for the Bazaar Improvements and thereafter at least thirty (30) days prior to the end of each fiscal year of the Partnership, a budget ("OPERATING BUDGET") for the ensuing fiscal year or portion thereof. Following the approval of an Operating Budget, TrizecHahn acting alone shall have the power to authorize THCM to incur any expenditures authorized to be incurred under such approved Operating Budget for the period covered by such approved Operating Budget, without the consent of the Board. If the Board does not approve any proposed Operating Budget for any fiscal year of the Company, then the last approved Operating Budget (as previously increased, if applicable, pursuant to the following provisions of this sentence) shall be deemed to apply with respect to such fiscal year until a revised Operating Budget is approved for such fiscal year; provided, however, (i) appropriate adjustments to such last approved Operating Budget shall automatically be made to reflect actual increases in real property taxes, insurance premiums, utility charges, and similar items over which the Company has no control, and (ii) each other item other than any non-recurring items (e.g., capital expenditures, including tenant improvements in excess of the applicable amount set forth in the last approved Operating Budget) in such last approved Operating Budget shall be increased by ten percent (10%) annually until such time as the Board is able to agree upon a revised Operating Budget. In addition, TrizecHahn acting alone shall be authorized without the consent of the Board to incur, or authorize THCM to incur, expenditures on behalf of the Company in excess of the various line item amounts that TrizecHahn is authorized to incur in the last approved Operating Budget provided the sum of such expenditures and the expenses projected to be incurred in the future under such Operating Budget in the aggregate do not exceed one hundred five percent (105%) of the aggregate estimated expenditures set forth in, and with respect to the period covered by, such approved Operating Budget. Following the Opening, THCM's responsibilities shall be as follows: (a) THCM shall establish an on-site property management team to manage, market, operate, lease and maintain the Bazaar Improvements. (b) The Company shall provide THCM on-site office space (with respect only for the management and leasing of the Center) at the Center for a management office without any fee or charge for such space not to exceed six thousand (6,000) square feet. (c) THCM shall perform, or cause to be performed, all duties of the Company as lessor under the leases with tenants leasing space in the Center. (d) THCM shall collect all rent and other monies due from tenants and any sums otherwise due the Company with respect to the Center in the ordinary course of business. (e) THCM shall coordinate the leasing of space in the Center (including the initial leasing of space in the Center, as well as all subsequent re-leasing of space), and shall procure new leases and lease renewals for the Company on terms and conditions which are in general accordance with the approved leasing plan. When appropriate, THCM will delegate the leasing of space in the Center, or a portion thereof, to third-party independent leasing agents or brokers; provided, however, that the total leasing commission shall not exceed the fees set forth pursuant to Section 2.08. Any leasing commission payable to third-party independent leasing agents or brokers previously in communication with Holdings II or representing tenants (and not engaged by THCM on behalf of the Company) shall not reduce the fees payable to THCM or its affiliates as set forth pursuant to Section 2.08 under Leasing Fees. It is the understanding of the parties that third party brokers previously in communication with Holdings II shall be paid as third party brokers if and when appropriate in accordance with the provisions of this Agreement. (f) Upon the Company's approval by the Board of the Leasing Plan or updated Leasing Plan, THCM shall negotiate and execute on behalf of and as the agent of the Company all new leases, lease renewals and any assignments, amendments or terminations thereof that are consistent with the Leasing Plan, provided, however, that leases for space in excess of 12,500 square feet shall be submitted to the Board for approval prior to execution. (g) THCM shall prepare all documentation for any lease transaction at the agreed-upon lease documentation rate. (h) THCM shall, at the Company's cost and expense and subject to the approval of the Board, retain the services of a Marketing Director who shall provide specialized marketing services for the Center. (i) THCM shall, on behalf of and at the Company's cost and expense, enforce all lease provisions to be performed by tenants of the Center. (j) THCM shall coordinate the security for the Center. (k) THCM shall, at the Company's cost and expense, operate and maintain the Center as a first-class regional shopping center and cause the Company to comply with its Operating Covenant under the REA. 2.06 DEVELOPMENT FEES As consideration for providing developments services in connection with the project, THCM shall be paid a development fee ("DEVELOPMENT FEE") pursuant to the terms of a separate development agreement ("DEVELOPMENT AGREEMENT"), entered into between the Company and THCM in the form of EXHIBIT "C" attached hereto. Pursuant to the Development Agreement, the Company shall pay THCM a Development Fee in an amount equal to four percent (4%) of all costs and expenses identified as "Construction Contracts", "Building Owner", "Site Work and Utilities Contribution" costs, and total Parking Facilities costs, prior to the reduction for the "Parking Facilities Contribution from Hotel/Casino" (collectively, "HARD CONSTRUCTION COSTS") identified as such in the Development Budget for the Bazaar Improvements. Development administration costs shall be charged directly to the Company. Upon execution of the Development Agreement in form approved by the Company and THCM, then the provisions of this Section 2.06 shall be of no further force and effect. 2.07 MANAGEMENT FEES As consideration for providing property management services for the project, THCM shall be paid a management fee pursuant to the terms of the management agreement ("MANAGEMENT AGREEMENT"), entered into between the Company and THCM in the form attached hereto as EXHIBIT "D." The Company shall pay THCM a fee based on four percent (4%) of rents and miscellaneous (operating) income paid to the Company, or THCM on behalf of the Company, by tenants or other individuals or entities associated with the Center (but not by Aladdin Gaming in connection with the Use Agreement) during each calendar year or any partial calendar year including, but not limited to, minimum rental, percentage rental, and additional rental paid by tenants for the right to lease space in the Center but excluding CAM charges, marketing charges and other "pass-through" charges paid by tenants. Upon execution of the Management Agreement in form approved by the Company and THCM, then the provisions of this Section 2.07 and Section 2.08 (below) shall be of no further force and effect. 2.08 LEASING FEES In connection with leasing of the Center undertaken by THCM or its affiliates, the Company will pay to THCM a leasing commission equal to five percent (5%) of minimum annual rental for the first five years of any lease plus two percent (2%) of minimum annual rental thereafter, with a fifty percent (50%) discount on renewed space as more fully set forth in the Management Agreement. In addition, the Company will pay to THCM a leasing commission equal to ten percent (10%) of the minimum annual rental and percentage rental (if applicable) for temporary tenants (I.E., a lease/license agreement for less than or equal to twelve [12] months). 2.09 LIABILITY AND INDEMNITY No Member, officer of the Company, representative of the Board or other authorized representative of the Company ("INDEMNIFIED PARTY") shall be liable or accountable in damages or otherwise to the Company or to the other Member for any error of judgment or any mistake of fact or law or for anything that such Indemnified Party may do or refrain from doing hereafter, except in the case of fraud, willful misconduct or gross negligence in performing or failing to perform such Indemnified Party's duties hereunder. To the fullest extent permitted by law, the Company hereby indemnifies, defends, protects and agrees to hold each Indemnified Party wholly harmless from and against any and all loss, expense or damage suffered by such Indemnified Party by reason of anything which such Indemnified Party may do or refrain from doing hereafter for and on behalf of the Company and in furtherance of its interest; provided, however, (i) no Indemnified Party shall be indemnified, defended and/or held harmless from any loss, cost, expense or damage which such Indemnified Party may suffer as a result of such Indemnified Party's fraud, willful misconduct or gross negligence in performing or in failing to perform such Indemnified Party's duties hereunder, and (ii) any such indemnity shall be recoverable only from the assets of the Company. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Member (and/or an officer or representative thereof) otherwise existing at law or in equity, are agreed by the Members to replace such duties and liabilities of such Member (and/or such officer or representative). 2.10 DESIGNATION OF OFFICERS The Board may, from time to time, designate officers of the Company and delegate to such officers such authority and duties as the Board may deem advisable and may assign titles (including, without limitation, chief executive officer, president, vice-president, secretary and/or treasurer) to any such officer. Unless the Board otherwise determines, if the title assigned to an officer of the Company is one commonly used for officers of a business corporation formed under the Delaware Corporation Law, then the assignment of such title shall constitute the delegation to such officer of the authority and duties that are customarily associated with such office pursuant to the Delaware Corporation Law. Any number of titles may be held by the same officer. Any officer to whom a delegation is made pursuant to the foregoing shall serve in the capacity delegated unless and until such delegation is revoked by the Board or such officer resigns. The Company shall not have any managers within the meaning of the Delaware Act. 2.11 COMPENSATION Except as otherwise expressly provided in this Agreement or as provided in any applicable Development Budget or Operating Budget, no Member or any constituent partner, member, shareholder, officer, director, employee, agent, trustee or representative of a Member, or any Affiliate thereof, shall incur any obligation or make any expenditures on behalf of the Company, or be entitled to receive any remuneration for services rendered to the Company or to be reimbursed for general administrative and overhead expenses. 2.12 TREATMENT OF FEES AND REIMBURSEMENTS For financial and income tax reporting purposes, any and all fees paid by the Company to any Member and/or any Affiliate thereof shall be treated as expenses of the Company and, if paid to any Member, as guaranteed payments within the meaning of Section 707(c) of the Code. To the extent any accrued portion of any such fee is not paid in full prior to the liquidation of the Company, such unpaid portion of such fee shall constitute a debt of the Company payable upon such liquidation. 2.13 APPROVAL RIGHTS OVER RELATED ALADDIN DEVELOPMENT TrizecHahn shall have reasonable approval of the quality of development and planning for the development of the Redeveloped Aladdin. This approval right shall also be contained in the Reciprocal Easement Agreement. It is the intention of Holdings II that such development shall be equal to or better than the general quality of the Mirage, including but not limited to interior finish, theming and attraction package, and standard hotel room, with a higher percentage of suites and king parlors. Such standards are intended to attract as a primary target the upper middle market segment, with an ambiance equal to or better than Bally's and Mirage. Upon the opening, the Redeveloped Aladdin is intended to be one of the top five hotels on the Las Vegas strip taking into consideration for such purposes the hotels existing and/or announced as of the date hereof in terms of market segment, average daily room rate, and overall ambiance and market perception. Additionally, it is contemplated that London Clubs International will market a five-star international premium class Salle Privee facility, including a restaurant, 15,000 square foot casino and high-end hotel suites. Attached hereto as EXHIBIT "E" is a preliminary construction proforma and plans and drawings for the Redeveloped Aladdin. The preliminary construction pro forma indicates a total project costs of approximately Seven Hundred Million Dollars ($700,000,000), including a theming budget of Thirty-Five Million Dollars ($35,000,000), for the Redeveloped Aladdin (excluding the Audrie/Harmon Hotel). TrizecHahn acknowledges that nothing contained herein is intended to be a guaranty of the economic performance of the Redeveloped Aladdin or the Center, and none of the parties hereto shall have any liability with respect to such economic performance. Such approval by TrizecHahn shall include, but not be limited to, quality of traffic and pedestrian circulation, ingress and egress, contractors, plans, drawings and construction schedule. Aladdin Holdings, LLC and Aladdin Gaming will cause the Redeveloped Aladdin, containing approximately 2,600 rooms and an approximately 100,000 to 125,000 square foot casino, to be developed on the Master Site together with related facilities and infrastructure as depicted in EXHIBIT "A" and shall have the right at a later date to construct the "Optional Improvements" (as such term is defined in the current draft of the REA). 2.14 HOLDINGS II'S REPRESENTATIONS AND WARRANTIES Holdings II hereby makes the following representations and warranties to the Company and to TrizecHahn, with the understanding that each such representation and warranty is material and is being relied upon by the Company and by TrizecHahn. Any reference in this Section to "HOLDINGS II'S BEST KNOWLEDGE" or words to similar effect means the actual knowledge of Jack Sommer, Mel Lacquement and Ronald Dictrow (collectively, the "HOLDINGS II PRIMARY INDIVIDUALS"), after the Holdings II Primary Individuals have reviewed their files and the files maintained by Holdings II with respect to the Property. (a) DEFINITION OF BEST KNOWLEDGE. The Holdings II Primary Individuals are officers or employees of Holdings II or a Holdings II Affiliate, and are the individuals who collectively have primary responsibility for managing the ownership, operation and development of the Property and overseeing the business activities of Holdings II, including but not limited to the supervision, directly or indirectly, of the employees and agents of Holdings II and Holdings II Affiliates with respect to the Property. To Holdings II's best knowledge, no other officer or employee of Holdings II or an Holdings II Affiliate is likely to possess material information or knowledge with respect to the Property which is not also possessed or known by one of the Holdings II Primary Individuals. (b) AUTHORITY AND DUE FORMATION. Holdings II has the requisite power and authority to own its assets and conduct business as and how the same are now owned or conducted and as and how the same will be conducted under the Agreement. Holdings II is duly organized, validly existing and in good standing under the laws of the State of its formation, and the execution, delivery and performance of this Agreement, and when delivered, the other documents contemplated by this Agreement to be executed by Holdings II, as applicable, have been or will have been, when delivered, duly and validly authorized by all necessary action and proceedings, and no further action or authorization is necessary on the part of Holdings II in order to consummate the transactions contemplated herein. Neither the execution and delivery of this Agreement, nor the execution and delivery of the documents referenced herein or the incurrence of the obligations set forth herein or therein, nor the consummation of the transactions contemplated herein, conflict with or result in the material breach of any terms, conditions or provisions of, or constitute a default under, any loan documents or other evidence of indebtedness, or any contract, lease, permit, or other agreements or instruments to which Holdings II is a party or by which the Property is bound. This Agreement is, and when delivered, the other documents to be executed by Holdings II in connection herewith, will be, legal, valid and binding obligations of Holdings II, as applicable, enforceable in accordance with their respective terms, except as such enforceability may be limited by the effect of bankruptcy and similar laws relating to creditors' rights and the availability of equitable remedies. (c) ENTITLEMENTS, PERMITS AND LICENSES. Attached hereto as SCHEDULE 2.14(C) is a list of all entitlements, development agreements, maps, permits, licenses, certificates, franchises, consents, and other approvals granted as of the date hereof by any Governmental Authority claiming jurisdiction over the Property or Holdings II, together with any and all development rights, licenses, easements, rights of way, consents and other approvals required from private parties to own, develop, market and operate the Property (collectively, the "EXISTING ENTITLEMENTS"). Except as described on SCHEDULE 2.14(C): (i) the Existing Entitlements are fully vested, are not subject to challenge, further approval, or revocation, and are currently in full force and effect; (ii) no fees, penalties or other payments are due or will be payable in connection with the Existing Entitlements; (iii) the Existing Entitlements will not expire other than those which are periodic in nature and renewable upon satisfaction of ministerial conditions; and (iv) no consent from any Governmental Authority or private party must be obtained in order for the Holdings II or its Affiliates to transfer to the Company all right, title and interest of Holdings II in and to the Existing Entitlements. Other than the Existing Entitlements, to Holding's best knowledge the only entitlements, development agreements, maps, permits, licenses, certificates, franchises, consents and other approvals which must be obtained from Governmental Authorities claiming jurisdiction over the Property, together with all development rights, licenses, easements, rights of way, consents and other approvals required from private parties, in order to own, develop, market, and operate the Property as contemplated by the Development Plan are listed on SCHEDULE 2.14(C) attached hereto (collectively, the "REMAINING ENTITLEMENTS"). As of the projected commencement of construction of the Project as set forth in the Development Plan and except as described on SCHEDULE 2.14(C): (w) the Remaining Entitlements will be fully vested, will not be subject to challenge, further appeal or revocation, and will be in full force and effect; (x) no fees, penalties or other payments will be payable in connection with the Remaining Entitlements; (y) the Remaining Entitlements will not expire other than those which are periodic in nature and renewable upon satisfaction of ministerial conditions; and (z) no consent from any Governmental Authority or private party must be obtained in order for Holdings II or its Affiliates to transfer to the Company all right, title and interest of Holdings II or its Affiliates in and to the Remaining Entitlements. (d) CONTRACTS. There are no agreements or other obligations to which Holdings II is party or by which it or the Property is or may be bound in connection with the ownership, management, maintenance, operation, development, construction or financing of the Property. (e) NO CONSENT. Neither the execution and delivery of this Agreement or the other documents to be executed by Holdings II in connection herewith, nor performance of any of Holdings II's obligations hereunder, nor consummation of the transactions contemplated hereby, including but not limited to the assignment of the Contracts to the Company: (i) will require any authorization, consent, approval, license, exemption of, filing with or notice to any Governmental Authority or private party; (ii) will result in the imposition of a lien on all or any portion of the Property; or (iii) will conflict with, result in a breach of, or constitute a default under, the terms and conditions of the organizational documents pursuant to which Holdings II was organized, or any indenture, mortgage, deed of trust, agreement, undertaking, instrument or document to which Holdings II or any Holdings II Affiliate is a party or is bound, or any order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over Holdings II. (f) HAZARDOUS MATERIALS. Except as otherwise disclosed in the environmental reports described on SCHEDULE 2.14(F) attached hereto: (i) the Property and all existing uses and conditions of the Property are in compliance with all Environmental Laws, and neither Holdings II nor, to Holdings II's best knowledge, any previous owners of any of the Property has received any written notice of violation issued pursuant to any Environmental Law with respect to the Property or any portion thereof or any use or condition thereof. (ii) there are no Hazardous Materials present on, in or under the Property and no Hazardous Materials are stored on the Property by Holdings II or, to Holdings II's best knowledge, by any other previous owner thereof. (iii) neither Holdings II nor, to Holdings II's best knowledge, any present or former owner, tenant, occupant or user of all or any portion of the Property has used, handled, generated, produced, manufactured, treated, stored, transported, released, discharged or disposed of any Hazardous Material in on, under or from the Property. (iv) there is no Release or threatened Release of any Hazardous Material existing on, beneath or from or in the surface or ground water associated with the Property, and, to Holdings II's best knowledge, no Release or threatened Release of Hazardous Materials on, beneath or from the Property has occurred at any time in the past. (v) there exists no writ, injunction, decree, order or judgment outstanding, nor any lawsuit, claim, proceeding, citation, directive, summons or investigation pending or, to Holdings II's best knowledge, threatened pursuant to any Environmental Law relating to (i) the use, ownership, management, maintenance, operation or development of the Property, (ii) any alleged violation of any Environmental Law by Holdings II or, to Holdings II's best knowledge, any other current or former owner, tenant, occupant or user of any portion of the Property or (iii) the suspected presence, Release or threatened Release of any Hazardous Material on, under, in or from any portion of the Property. (vi) there are no above-ground or underground tanks located on the Property used or formerly used for the purpose of storing any Hazardous Material, and, to Holdings II's knowledge, there have never been any. (vii) there are no asbestos-containing building materials on or in the Property, and no asbestos abatement or remediation work has been performed on the Property. (viii) there is no PCB-containing equipment or PCB-containing material located on or in the Property. (g) ENVIRONMENTAL AND SOILS REPORTS. Attached hereto as SCHEDULE 2.14(G) is a complete list of all environmental, soils, seismic and geologic reports, studies and certificates relating to the Property. (h) LITIGATION. Attached hereto as SCHEDULE 2.14(H) is a complete list of all pleadings, filings and other papers filed in connection with any pending lawsuit affecting the Property or Holdings II. To Holdings II's best knowledge, no other litigation affecting the Property or Holdings II is threatened or contemplated. To the fullest extent permitted by law, Holdings II, Aladdin Holdings and the Sommer Trust, by their execution hereof hereby, jointly and severally, agree to indemnify, defend, protect and agree to hold the Company and TrizecHahn wholly harmless from and against any and all loss, expense or damage suffered by the Company or by TrizecHahn arising or relating directly or indirectly to that certain litigation filed in the Supreme Court of the State of New York, County of New York, Index No. 112618/95 entitled "Joseph Aronow, et al., vs. Jack Sommer, et al," or any subsequent claims made by the parties thereto. (i) TAXES AND CONDEMNATION. Except as otherwise disclosed on Schedule 2.14(i) attached hereto, there are no presently pending or, to Holdings II's knowledge, contemplated special taxes or assessments which will affect the Property. There are no presently pending or, to Holdings II's knowledge, contemplated proceedings to condemn all or any portion of the Property. (j) TITLE MATTERS. Holdings II has not created any, and to Holdings II's best knowledge there are no, rights of purchase, rights of first refusal, rights of reverter, ground lease interests or options relating to all or any portion of the Property or any interest therein (except as set forth in this Agreement or pursuant to that certain Option Agreement and Purchase and Sale Agreement between the Sommer Trust and GW Vegas, L.L.C., a Delaware limited liability company, dated December 2, 1996). To Holdings II's best knowledge, there are no unrecorded or undisclosed documents or other matters which affect title to the Property which are not disclosed on the Preliminary Title Report prepared by Stewart Title, dated March 17, 1997. (k) BANKRUPTCY. Neither Holdings II nor any Holdings II Affiliate has (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets; (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets; (v) admitted in writing its inability to pay its debts as they become due; or (vi) made an offer of settlement, extension or composition to its creditors generally. (l) BROKERS. All negotiations relating to this Agreement and the other documents to be executed in connection herewith and the transactions contemplated thereby have been conducted without the involvement of any person or entity acting or purporting to act on behalf of Holdings II or any Holdings II Affiliate in such manner as to give rise to any claim for a broker's commission or finder's fee or similar compensation. (m) ACCURACY OF INFORMATION. No representation, warranty, certification or statement of Holdings II in this Agreement or any other agreement, statement, certificate, exhibit or schedule furnished or to be furnished by Holdings II in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make not misleading the statement or facts contained therein. 2.15 TRIZECHAHN'S REPRESENTATIONS AND WARRANTIES TrizecHahn hereby makes the following representations and warranties to the Company and to Holdings II, with the understanding that each such representation and warranty is material and is being relied upon by the Company and by Holdings II. Any reference in this Section to "TRIZECHAHN'S BEST KNOWLEDGE" or words to similar effect means the actual knowledge of Lee Wagman, Wayne Finley, Wendy Godoy, John Bedard and Doug Hageman (collectively, the "TRIZECHAHN'S PRIMARY INDIVIDUALS"), after the TrizecHahn Primary Individuals have reviewed their files and the files maintained by TrizecHahn with respect to the Property. (a) DEFINITION OF BEST KNOWLEDGE. The TrizecHahn Primary Individuals are officers or employees of TrizecHahn or an TrizecHahn Affiliate, and are the individuals who collectively have primary responsibility for managing the ownership, operation and development of the Property and overseeing the business activities of TrizecHahn, including but not limited to the supervision, directly or indirectly, of the employees and agents of TrizecHahn and TrizecHahn Affiliates with respect to the Property. To TrizecHahn's best knowledge, no other officer or employee of TrizecHahn or a TrizecHahn Affiliate is likely to possess material information or knowledge with respect to the Property which is not also possessed or known by one of the TrizecHahn Primary Individuals. (b) AUTHORITY AND DUE FORMATION. TrizecHahn has the requisite power and authority to own its assets and conduct business as and how the same are now owned or conducted and as and how the same will be conducted under the Agreement. TrizecHahn is duly organized, validly existing and in good standing under the laws of the State of its formation, and the execution, delivery and performance of this Agreement, and when delivered, the other documents contemplated by this Agreement to be executed by TrizecHahn, as applicable, have been or will have been, when delivered, duly and validly authorized by all necessary action and proceedings, and no further action or authorization is necessary on the part of TrizecHahn in order to consummate the transactions contemplated herein. Neither the execution and delivery of this Agreement, nor the execution and delivery of the documents referenced herein or the incurrence of the obligations set forth herein or therein, nor the consummation of the transactions contemplated herein, conflict with or result in the material breach of any terms, conditions or provisions of, or constitute a default under, any loan documents or other evidence of indebtedness, or any contract, lease, permit, or other agreements or instruments to which TrizecHahn is a party or by which the Property is bound. This Agreement is, and when delivered, the other documents to be executed by TrizecHahn in connection herewith, will be, legal, valid and binding obligations of TrizecHahn, as applicable, enforceable in accordance with their respective terms, except as such enforceability may be limited by the effect of bankruptcy and similar laws relating to creditors' rights and the availability of equitable remedies. (c) NO CONSENT. Neither the execution and delivery of this Agreement or the other documents to be executed by TrizecHahn in connection herewith, nor performance of any of TrizecHahn' obligations hereunder, nor consummation of the transactions contemplated hereby: (i) will require any authorization, consent, approval, license, exemption of, filing with or notice to any Governmental Authority or private party; (ii) will result in the imposition of a lien on all or any portion of the Property; or (iii) will conflict with, result in a breach of, or constitute a default under, the terms and conditions of the organizational documents pursuant to which TrizecHahn was organized, or any indenture, mortgage, deed of trust, agreement, undertaking, instrument or document to which TrizecHahn or any TrizecHahn Affiliate is a party or is bound, or any order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over TrizecHahn. (d) LITIGATION. To TrizecHahn's best knowledge, no litigation affecting TrizecHahn is pending, threatened or contemplated. (e) BANKRUPTCY. Neither TrizecHahn nor any TrizecHahn Affiliate has (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets; (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets; (v) admitted in writing its inability to pay its debts as they become due; or (vi) made an offer of settlement, extension or composition to its creditors generally. (f) BROKERS. All negotiations relating to this Agreement and the other documents to be executed in connection herewith and the transactions contemplated thereby have been conducted without the involvement of any person or entity acting or purporting to act on behalf of TrizecHahn or any TrizecHahn Affiliate in such manner as to give rise to any claim for a broker's commission or finder's fee or similar compensation. (g) ACCURACY OF INFORMATION. No representation, warranty, certification or statement of TrizecHahn in this Agreement or any other agreement, statement, certificate, exhibit or schedule furnished or to be furnished by TrizecHahn in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make not misleading the statement or facts contained therein. ARTICLE III MEMBERS' CONTRIBUTIONS TO COMPANY 3.01 CAPITAL CONTRIBUTIONS FOR PRE-DEVELOPMENT COSTS Commencing as of the date hereof, approved Predevelopment Costs for the Center including, but not limited to, architectural, engineering and design services (but excluding predevelopment-stage fees to either Holdings II or TrizecHahn) will be funded by Holdings II and TrizecHahn in accordance with their Percentage Interests in an amount not to exceed the amount set forth in the Pre-Development Budget attached hereto as EXHIBIT "F". Commencing as of the date hereof, Predevelopment Costs for the Parking Facilities will be funded by Holdings and Holdings II and the Company based on a parking space prorata allocation; the Company's allocation to be funded by Holdings II and TrizecHahn in accordance with their respective Percentage Interests. Predevelopment costs incurred by Aladdin Holdings, LLC or by its affiliates which have accrued prior to (but not after) March 17, 1997, and which are reasonably allocable to the Center and the Parking Facilities as reasonably determined by TrizecHahn shall be credited to the amount Holdings II is required to contribute pursuant to the Pre-Development Budget following TrizecHahn's receipt and approval of paid invoices from Aladdin Holdings, LLC; provided, however, in no event shall such amount exceed Two Hundred Thousand Dollars ($200,000). Accordingly, commencing as of the date hereof, TrizecHahn shall fund one hundred percent (100%) of Predevelopment Costs until such time as its funding of such costs shall be equal to that of Holdings II, and thereafter all such costs shall be funded equally by TrizecHahn and Holdings II, in accordance with the provisions hereof. If the Redeveloped Aladdin improvements plan is abandoned by Aladdin Holdings, LLC, then Holdings II shall promptly reimburse TrizecHahn for its share of the Bazaar Improvements Predevelopment Costs pursuant to Section 3.06 below. The parties acknowledge that Predevelopment Costs may also constitute costs included within the Bazaar Company's Site Work and Utilities Contribution or costs allocable to the Parking Facilities (as such terms are defined below). As used herein, the term "PREDEVELOPMENT COSTS" means the types, categories and amounts of pre-development costs and/or expenses approved in the Development Plan attached hereto including, without limitation, architectural fees, engineering fees, and other similar fees and expenses incurred in connection with the pre-development of the Bazaar Improvements. A preliminary estimate of the approximate amounts for the items comprising the Pre-Development Costs is set forth in the Development Plan. Any and all contributions required to be made by any Member to the capital of the Company for Pre-Development Costs pursuant to this Section 3.01 or pursuant to Section 3.02, (i) shall be made within ten (10) business days following the effective date of written notice delivered to the Members by TrizecHahn requesting such amounts (which notice shall include, without limitation, reasonably supporting documentation for such Pre-Development Costs), and (ii) shall be credited to the Capital Account and Unrecovered Contribution Account of such Member as and when any such contribution is made. 3.02 ADDITIONAL CAPITAL CONTRIBUTIONS Once all Conditions Precedent (as defined in the Glossary) required to begin construction are satisfied and the Company has obtained financing approved by the Members, (i) TrizecHahn shall contribute, as and when required by the Bazaar Company, the TrizecHahn Investment, less a credit for predevelopment expenditures incurred by TrizecHahn and approved by the Company, and (ii) the Company and Holdings shall execute the Lease in form approved by the Board, and Holdings II's Capital Account and Unrecovered Contribution Account shall be credited with the amount of Ten Million Dollars ($10,000,000) reflecting the arrangement by Holdings II for the Company to obtain the Lease of the Property with below market rate ground rent. The contribution of the TrizecHahn Investment shall be guaranteed by TrizecHahn Centers Inc., in the form attached hereto as EXHIBIT "G." In structuring the economics of this transaction, TrizecHahn has assumed that the Company will be able to obtain mortgage indebtedness, at market rates and on market terms based upon market terms and conditions typically obtained by TrizecHahn, for the balance of the construction costs. If the mortgage indebtedness together with the original capital contributions is not sufficient to pay all construction costs, the Company will first attempt to obtain additional indebtedness if available at reasonable market rates and market terms as mutually determined by TrizecHahn and Holdings II before requiring additional capital contributions. To the extent additional capital ("ADDITIONAL CAPITAL") is required, Holdings II and TrizecHahn shall each contribute such capital in the ratio of their Percentage Interests pursuant to Section 3.04. Holdings II and TrizecHahn may elect to bring in a third-party investor as an additional Member of the Company, subject to the sole discretion approval of the other Member, to contribute their Additional Capital. If such third-party investor is admitted as a member, the non-contributing party or parties shall bear a dilution of its or their Percentage Interest. Additionally, the two seats each on the Board may be divided between the non-contributing party and its third-party investor, or if an additional seat is added for the third-party investor, an additional seat will be added for the contributing party. 3.03 CONSTRUCTION FINANCING TrizecHahn and Holdings II will each use reasonable/diligent efforts to obtain the construction financing for the Bazaar Improvements. It is the intent of both parties to obtain construction/mini-perm financing from third-party, institutional sources in an amount equal to at least 70% of the costs of the development of the Bazaar Improvements. TrizecHahn Centers Inc. ("TrizecHahn Centers"), Aladdin Holdings, LLC, a Delaware limited liability company ("ALADDIN HOLDINGS") and the Trust Under Article Sixth U/W/O Sigmund Sommer ("SOMMER TRUST") shall jointly and severally assume recourse liability and enter into a completion guarantee in favor of the lender for the construction loan (but neither party shall be obligated to assume recourse liability with respect to any permanent or "take-out" financing). During any period of time in which any such guarantee by TrizecHahn Centers, Aladdin Holdings and/or the Sommer Trust in favor of the Company's lender is in effect, TrizecHahn Centers shall guarantee the obligations of TrizecHahn to contribute capital to the Company, and Aladdin Holdings and the Sommer Trust shall jointly and severally guarantee the obligations of Holdings II to contribute capital to the Company, each in the respective form of guaranty attached hereto as EXHIBITS "G" and EXHIBIT "H," respectively ("MEMBER CAPITAL OBLIGATION GUARANTEE"). Once nonrecourse financing is obtained by the Company and the Company's lender fully and unconditionally releases all guarantors, then in such event, the Member Capital Obligation Guarantee shall automatically be of no further force and effect. TrizecHahn and Holdings II anticipate that a commitment for the construction financing for the Bazaar Improvements will be entered into substantially concurrently with the financing obtained by Aladdin Holdings, LLC and its affiliates with respect to the Redeveloped Aladdin. Both parties agree to exercise reasonable/diligent efforts to coordinate the two financing efforts, including but not limited to facilitating inter-creditor agreements and the delivery of attornment and nondisturbance agreements. Any and all amounts required to be paid by any Member pursuant to any recourse liability to a lender to the Company shall be deemed to be contributed by such Member to the capital of the Company and credited to such Member's Capital Account and Unrecovered Contribution Account as and when any such payment is made. 3.04 CASH FLOW DEFICIT CONTRIBUTION If TrizecHahn determines that additional funds are necessary for the Company to meet its current or projected financial requirements, including, without limitation, any financial requirements attributable to any Construction Overruns and/or any operating shortfalls, then TrizecHahn may elect any one (1) or more of the following: (i) to cause any such amounts to be obtained from one (1) or more third-party lenders on such terms and conditions as are determined in the reasonable discretion of the Board, (ii) to deliver written notice of such actual or projected cash deficit to the Members, which notice shall include a contribution date ("CONTRIBUTION DATE") (which shall not be less than ten (10) business days following the Effective Date of such notice) upon which the Members shall be obligated to contribute to the capital of the Company, in cash, the entire amount of such cash deficit in proportion to their Percentage Interests. Any and all contributions made to the capital of the Company by any Member pursuant to this Section 3.04 shall be credited to the Capital Account and the Unrecovered Contribution Account of such Member as and when any such contribution is made. 3.05 REMEDY FOR FAILURE TO CONTRIBUTE CAPITAL If a Member (the "NON-CONTRIBUTING MEMBER") fails to contribute all or any portion of any additional capital such Member is required to contribute pursuant to Sections 3.01, 3.02 and/or 3.04 (the "DELINQUENT CONTRIBUTION"), then the other Member (the "CONTRIBUTING MEMBER") in addition to any and all other rights and/or remedies the Contributing Member may have at law and/or in equity, shall have the right to select one (1) or more of the following options in accordance with the terms and conditions set forth below in this Section 3.05: (a) The Contributing Member may advance to the Company, in cash, within thirty (30) days following the Contribution Date, an amount equal to the Delinquent Contribution, and such advance shall be treated as a recourse loan ("MEMBER LOAN") by the Contributing Member to the Non-Contributing Member, bearing interest at a rate equal to the lesser of (i) fifteen percent (15%) per annum, compounded monthly, or (ii) the maximum, nonusurious rate then permitted by law for such loans. Each Member Loan shall be payable upon the first to occur of the written demand by the Contributing Member or the liquidation of the Company. As of the Effective Date of any advance of a Member Loan, the Non-Contributing Member shall be deemed to have contributed an amount equal to the principal amount of such Member Loan to the capital of the Company, and the Capital Account and the Unrecovered Contribution Account of the Non-Contributing Member shall be credited with a like amount. Notwithstanding the provisions of Articles II, V and IX, until any and all Member Loans are repaid in full the Non-Contributing Member shall draw no further distributions from the Company, and all cash or property otherwise distributable with respect to the Non-Contributing Member's Interest shall be distributed to the Contributing Member in repayment of the outstanding balance of the Member Loan, with such funds being applied first to reduce any and all interest accrued on such Member Loan and then to reduce the principal amount thereof. Any amounts so applied shall be treated, for all purposes under this Agreement, as having actually been distributed to the Non-Contributing Member and applied by the Non-Contributing Member to repay the outstanding Member Loan. In order to secure the repayment of any and all Member Loans made on behalf of the Non-Contributing Member, the Non-Contributing Member hereby grants a security interest in favor of the Contributing Member in and to all distributions to which the Non-Contributing Member may be entitled to receive under this Agreement, and hereby irrevocably appoints the Contributing Member, and any of the Contributing Member's respective agents, officers, or employees, as the Non-Contributing Member's attorney(s)-in-fact, with full power to prepare, execute, acknowledge, and deliver, as applicable, all documents, instruments, and/or agreements memorializing and/or securing such Member Loan(s) including, without limitation, such Uniform Commercial Code financing and continuation statements, pledge and/or security agreements, mortgages and other security instruments as may be reasonably appropriate to perfect and continue the security interest in favor of the Contributing Member. If, upon any demand for the repayment of a Member Loan, any principal thereof and/or accrued interest thereon remains outstanding ten (10) Business Days following such demand, the Contributing Member may elect any one (1) of the following options: (i) to continue to have such Member Loan (or portion thereof) be payable upon demand pursuant to the terms and provisions of this Section 3.05(a); (ii) to contribute all or any portion of such outstanding principal of and accrued, unpaid interest on such Member Loan (or portion thereof) to the capital of the Company and dilute the Percentage Interest of the Non-Contributing Member in accordance with the provisions of Section 3.05(b); or (iii) to institute legal (or other) proceedings against the Non- Contributing Member to collect such loan which may include, without limitation, foreclosing upon the security interest granted above. The Contributing Member may elect any of the options set forth in the immediately preceding sentence by giving written notice of such election to the Non-Contributing Member at any time after the expiration of the ten (10) Business Day period set forth above. (b) The Contributing Member may contribute to the capital of the Company, in cash, within thirty (30) days following the Contribution Date and by delivering written notice ("DILUTION NOTICE") thereof to the Non-Contributing Member, an amount equal to the Delinquent Contribution, and the Contributing Member's Capital Account and the Unrecovered Contribution Account each shall be credited with the amount so contributed. In addition, if a Member Loan is not fully repaid within the ten (10) Business Day period set forth above, then the Contributing Member may at any time thereafter deliver a Dilution Notice to the Non-Contributing Member and thereby contribute to the capital of the Company, in accordance with the provisions of Section 3.05(a) above, all or any portion of the outstanding principal of and/or accrued, unpaid interest on such Member Loan (or portion thereof). In the event of any such contribution, (i) the amount of such outstanding principal and/or interest so contributed shall be deemed repaid and satisfied, (ii) the Capital Account and the Unrecovered Contribution Account of the Non-Contributing Member shall be decreased, by the amount of such outstanding principal and/or interest so contributed, (iii) the Capital Account and the Additional Unrecovered Contribution Account, of the Contributing Member shall be increased by the amount of such outstanding principal and/or interest so contributed; and (iv) distributions of Cash Flow shall thereafter be made in accordance with Sections 5.03 and 5.04. In the event of the contribution of the Delinquent Contribution and/or the outstanding balance of a Member Loan by the Contributing Member pursuant to the foregoing provisions of this Section 3.05(b), the Percentage Interest of the Non-Contributing Member shall be decreased, as of the Effective Date of the Dilution Notice, by an amount (expressed in percentage points) equal to the a fraction, (i) the numerator of which is the Delinquent Contribution (or the outstanding principal of, and accrued, unpaid interest on, a Member Loan, as the case may be), and (ii) the denominator of which is the sum of the Members' Unrecovered Contribution Accounts and Additional Unrecovered Contribution Accounts; provided, however, for purposes of this Section 3.05(b) only, Holdings II initial Unrecovered Contribution Account shall be increased by Twenty Million Dollars ($20,000,000). The Percentage Interest of the Contributing Partner shall be correspondingly increased by a like amount of percentage points. In addition, the Non-Contributing Member shall not be entitled to appoint any representatives to the Board, and the Contributing Member alone shall appoint all representatives of the Board. (c) If the Contributing Member advances any amount to the Company pursuant to this Section 3.05 but fails to specify which of the foregoing options such Contributing Member has elected within ten (10) days after the Effective Date that such Contributing Member makes such advance, then such Contributing Member shall be deemed to have elected the option set forth in Section 3.05(a) above with respect to such advance. Any and all adjustments to the Non-Contributing Member's Percentage Interest shall be rounded to the nearest one one-hundredth of one percentage point (.01%) and the Contributing Member shall not succeed to all or any portion of the Capital Account, Unrecovered Contribution Account and/or accrued, unpaid Preferred Return of the Non-Contributing Member as the result of any such adjustment. Notwithstanding any other term of this Agreement, the Non-Contributing Member shall have no right to participate in the management or control of the Company and/or any other decisions relating to the Company from and after the date that such Member Loan remains outstanding (unless subsequently repaid in full) or such Member's Percentage Interest is reduced pursuant to Section 3.05(b). 3.06 FAILURE TO SATISFY CONDITIONS PRECEDENT TrizecHahn and Holdings II acknowledge that at the date of the execution hereof there remains a substantial question as to whether or not Aladdin Gaming can, or is prepared to, construct the Audrie/Harmon Hotel, on a schedule that will permit the Audrie/Harmon Hotel to open prior to or simultaneously with the Bazaar Improvements. The parties have proposed alternative plans in connection with the development of the Audrie/Harmon Hotel which the parties are in the process of reviewing as of the date hereof. Holdings II or its Affiliates has entered into a non-binding letter of intent with Planet Hollywood International to enter into a joint development for the Audrie/Harmon Hotel, which contemplates a music-themed hotel/casino. However, the letter of intent is subject to mutual due diligence and documentation. It is further acknowledged that the delay or failure to develop the Audrie/Harmon Hotel will have an adverse impact on the leasing of the Center. Furthermore, the parties acknowledge that Aladdin Holdings, LLC and its Affiliates may seek construction financing with respect to the Redeveloped Aladdin prior to the time that sufficient progress has been made in the Center's leasing effort to satisfy TrizecHahn in its sole discretion. It is understood that TrizecHahn is seeking commitment from tenants evidenced by letters of intent for a minimum of twenty-five percent (25%) of the leaseable area of the Center and leases for at least two of the primary "strip-front end-cap" spaces of the Center, which are in each case approved by TrizecHahn. Accordingly, TrizecHahn and Holdings II agree to enter into good faith negotiations to resolve the matter. In the event that the parties have not entered into an amendment to this Agreement with respect to the Audrie/Harmon Hotel and the pre-leasing requirement which is satisfactory to each party, in each party's sole discretion, on or before the earlier of (i) thirty (30) days after the delivery of a Satisfaction Notice as described below, or (ii) thirty (30) days after either Member delivers notice that it reasonably believes that the Conditions Precedent have been satisfied, or (iii) September 30, 1997, then either Member may at any time deliver a notice to the other Member ("AUDRIE/HARMON TERMINATION NOTICE"), in which event the Company shall promptly reimburse TrizecHahn for all of its Predevelopment Costs (whereupon the Company shall own the work product for which such Predevelopment Costs have been paid), and this Agreement shall automatically become null and void and the parties and their Affiliates shall have no further rights, duties or obligations to each other whatsoever (other than the reimbursement provisions provided in this Section 3.06). The parties expressly acknowledge and agree that either party shall have no obligation or liability to approve the proposal made by the other, and that the sole and exclusive remedy for the failure to approve such proposal shall be to terminate this Agreement. Holdings II shall deliver to TrizecHahn a notice ("SATISFACTION NOTICE") at such time as Aladdin Gaming and Holdings II are prepared to proceed with the Project and that, but for the resolution of the issues relating to the Audrie/Harmon Hotel and the pre-leasing requirement, the Conditions Precedent set forth in Section 12.10 are satisfied. The Satisfaction Notice shall include reasonable supporting evidence that the Conditions Precedent are satisfied. The Satisfaction Notice shall indicate that (a) Holdings II believes that the development of the Bazaar Improvements, as contemplated in the Plans and Specifications, is economically feasible and desirable; (b) Holdings II has approved the level of pre-leasing existing as of that date; (c) Holdings II has approved the Site Work Agreement, the Development Agreement, the Lease, the Reciprocal Easement Agreement and the Parking Use Agreement, and an agreement has been entered into to construct and operate a central utility plant or to cause to be constructed and operated a cogeneration facility for the Master Development; (d) all necessary permits and governmental approvals to begin construction of the Aladdin Hotel and Casino have been received; (e) subject to completion of certain leasing requirements and other customary conditions, there is an irrevocable commitment (which has been fully negotiated, approved by the lender and ready for signature) to fund at least seventy percent (70%) of the costs of construction of the Bazaar Improvements upon competitive market rate terms and conditions which is satisfactory to Holdings II; (f) the construction contract and architect/engineer contract with respect to the Aladdin Hotel and Casino is satisfactory to Holdings II; and (g) subject to payment of any applicable financing fees and other customary conditions, there are irrevocable commitments to fund (and Holdings II and its underwriters are prepared to immediately print and distribute to investors offering documents) all equity and debt financing necessary to construct the Aladdin Hotel and Casino, the Other Parking and the costs of the Parking Facilities allocable to the Aladdin Hotel and Casino, and to operate the same through the Opening which is satisfactory to Holdings II. In such event, TrizecHahn shall notify Holdings II within five (5) business days thereafter that it approves or disapproves of the satisfaction of the conditions as provided in the Satisfaction Notice. If TrizecHahn does not approve or if TrizecHahn shall not respond within said five (5) business days, time being of the essence, then the Company shall promptly reimburse TrizecHahn for all of its Predevelopment Costs, and this Agreement shall automatically become null and void and the parties and their Affiliates shall have no further rights, duties or obligations to each other whatsoever (other than the reimbursement provisions provided in this Section 3.06). In the event that the Conditions Precedent are not satisfied or construction has not commenced by the third anniversary of the date of this Agreement, then the Company shall promptly reimburse TrizecHahn for all of its Predevelopment Costs, unless TrizecHahn elects to extend the deadline for satisfaction of the Conditions Precedent to the fourth anniversary of the date of this Agreement. If the project is abandoned by Holdings and the Aladdin Hotel is to be sold, then the Company shall promptly reimburse TrizecHahn for all of its Predevelopment Costs, and during the period of one (1) year after such abandonment, TrizecHahn shall have an exclusive thirty (30) day right of first negotiation to acquire the fee underlying the Center and/or the entire Aladdin Hotel, at TrizecHahn's election; provided, however, that such right of first negotiation shall be subordinate to any similar rights held by equity investors of Holdings. After the end of said thirty (30) day period, TrizecHahn's right of first negotiation shall expire. If TrizecHahn abandons the Project prior to the expiration of the third (3rd) anniversary date of this Agreement, then the Company shall have no further reimbursement obligation. Aladdin Holdings, LLC, a Delaware limited liability company ("Holdings"), and the owner of the fee estate underlying the Lease, hereby guarantees the reimbursement obligation set forth in this Section 3.06 pursuant to the terms of the guarantee attached hereto as EXHIBIT "I". 3.07 CAPITAL CONTRIBUTIONS IN GENERAL Except as otherwise expressly provided in this Agreement, (a) no part of the contributions of any Member to the capital of the Company may be withdrawn by such Member, (b) no Member shall be entitled to receive interest on such Member's contributions to the capital of the Company, (c) no Member shall have the right to demand or receive property other than cash in return for such Member's contribution to the Company, and (d) no Member shall be required or be entitled to contribute additional capital to the Company other than as permitted or required by this Article III. ARTICLE IV ALLOCATION OF PROFITS AND LOSSES 4.01 NET LOSSES FROM OPERATIONS PRIOR TO DILUTION Net Losses resulting from the operations of the Company (as distinguished from an Extraordinary Event) prior to any dilution pursuant to Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the Members at the end of such fiscal year (or part thereof) in the following order of priority: (a) First, to the Members to the extent of, and in proportion to, the amount by which the cumulative Net Profits allocated to each such Member pursuant to Section 4.03(d) exceeds the cumulative Net Losses allocated to each such Member pursuant to this Section 4.01(a); (b) Second, to the Members to the extent of, and in proportion to, the amount by which the cumulative Net Profits allocated to each such Member pursuant to Section 4.03(c) exceeds the cumulative Net Losses allocated to each such Member pursuant to this Section 4.01(b); (c) Third, to the Members to the extent of, and in proportion to, their respective positive Capital Account balances, if any; and (d) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.02 NET LOSSES FROM EXTRAORDINARY EVENTS PRIOR TO DILUTION Net Losses of the Company resulting from an Extraordinary Event prior to any dilution pursuant to Section 3.05(b) shall be allocated to the Members: (i) after adjusting the Capital Accounts of the Members for all previous allocations of Net Profits and Net Losses resulting from the operations of the Company and all previous distributions of Ordinary Cash Flow for the fiscal year of such Extraordinary Event, but prior to the distribution of the proceeds derived from such Extraordinary Event, or (ii) at the end of the fiscal year in which such event occurred but following the adjustments to the Members' respective Capital Accounts referenced in clause (i) above of this Section, whichever occurs earlier: (a) First, to the Members in proportion to, and to the extent of, the amount necessary to cause each Member's positive Capital Account balance, if any, to equal the sum, if any, of such Member's positive Unrecovered Contribution Account balance and such Member's accrued and unpaid Preferred Return; (b) Second, to the Members in proportion to, and to the extent of, the amount necessary to cause each Member's positive Capital Account balance, if any, to equal such Member's accrued and unpaid Preferred Return; (c) Third, to the Members to the extent of, and in proportion to, their respective positive Capital Account balances, if any; and (d) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.03 NET PROFITS FROM OPERATIONS PRIOR TO DILUTION Net Profits resulting from the operations of the Company (as distinguished from an Extraordinary Event) prior to any dilution pursuant to Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the Members at the end of such fiscal year (or part thereof) in the following order of priority: (a) First, to the Members to the extent of, and in proportion to, the amount by which the cumulative Net Losses allocated to each such Member pursuant to Section 4.01(d) exceeds the cumulative Net Profits allocated to each such Member pursuant to this Section 4.03(a); (b) Second, to the Members to the extent of, and in proportion to, the amount by which the cumulative Net Losses allocated to each such Member pursuant to Section 4.01(c) exceeds the cumulative Net Profits allocated to each such Member pursuant to this Section 4.03(b); (c) Third, to the Members to the extent of, and in proportion to, the amount by which the cumulative accrued Preferred Return, if any, of each such Member exceeds the amount, if any, by which (i) the cumulative Net Profits previously allocated to each such Member pursuant to this Section 4.03(c), exceeds (ii) the cumulative Net Losses allocated to each such Member pursuant to Section 4.01(b); and (d) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.04 NET PROFITS FROM EXTRAORDINARY EVENTS PRIOR TO DILUTION Net Profits of the Company resulting from an Extraordinary Event prior to any dilution pursuant to Section 3.05(b) shall be allocated to the Members: (i) after adjusting the Capital Accounts of the Members for all previous allocations of Net Profits and Net Losses resulting from the operations of the Company and all previous distributions of Ordinary Cash Flow for the fiscal year of such Extraordinary Event, but prior to the distribution of the proceeds derived from such Extraordinary Event, or (ii) at the end of the fiscal year in which such event occurred but following the adjustments to the Members' respective Capital Accounts referenced in clause (i) above of this Section, whichever occurs earlier: (a) First, to the Members to the extent of, and in proportion to, their respective negative Capital Account balances, if any; (b) Second, if the Capital Account balance of any Member is less than such Member's accrued and unpaid Preferred Return, then to each such Member to the extent of, and in proportion to, such variances; (c) Third, if the Capital Account balance of any Member is less than the sum, if any, of such Member's accrued and unpaid Preferred Return and such Member's positive Unrecovered Contribution Account balance, then to each such Member to the extent of, and in proportion to, such variances; and (d) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.05 NET LOSSES FROM OPERATIONS FOLLOWING DILUTION Net Losses resulting from the operations of the Company (as distinguished from an Extraordinary Event) following any dilution pursuant to Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the Members at the end of such fiscal year (or part thereof) in the following order of priority: (a) First, to the Members to the extent of, and in proportion to, the amount by which the cumulative Net Profits allocated to each such Member pursuant to Sections 4.03(d) and 4.07(f) exceeds the cumulative Net Losses allocated to each such Member pursuant to Section 4.01(a) and this Section 4.05(a); (b) Second, to the Non-Contributing Member to the extent of the amount by which the cumulative Net Profits allocated to such Member pursuant to Sections 4.03(c) and 4.07(e) exceeds the cumulative Net Losses allocated to such Member pursuant to Section 4.01(b) and this Section 4.05(b); (c) Third, to the Non-Contributing Member to the extent of such Member's positive Capital Account balance, if any; (d) Fourth, to the Contributing Member to the extent of the amount by which the cumulative Net Profits allocated to such Member pursuant to Sections 4.03(c) and 4.07(c) exceeds the cumulative Net Losses allocated to such Member pursuant to Section 4.01(b) and this Section 4.05(c); (e) Fifth, to the Contributing Members to the extent of such Member's positive Capital Account balances, if any; and (f) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.06 NET LOSSES FROM EXTRAORDINARY EVENTS FOLLOWING DILUTION Net Losses of the Company resulting from an Extraordinary Event following any dilution pursuant to Section 3.05(b) shall be allocated to the Members: (i) after adjusting the Capital Accounts of the Members for all previous allocations of Net Profits and Net Losses resulting from the operations of the Company and all previous distributions of Ordinary Cash Flow for the fiscal year of such Extraordinary Event, but prior to the distribution of the proceeds derived from such Extraordinary Event, or (ii) at the end of the fiscal year in which such event occurred but following the adjustments to the Members' respective Capital Accounts referenced in clause (i) above of this Section, whichever occurs earlier: (a) First, to the Members in proportion to, and to the extent of, (i) in the case of the Contributing Member, the amount necessary to cause such Member's positive Capital Account balance, if any, to equal the sum of such Member's positive Additional Unrecovered Contribution Account balance, Unrecovered Contribution Account balance, and accrued and unpaid Preferred Return, and (ii) in the case of the Non-Contributing Member, the amount necessary to cause such Member's positive Capital Account balance, if any, to equal the sum, if any, of such Member's positive Unrecovered Contribution Account balance and such Member's accrued and unpaid Preferred Return; (b) Second, to the Non-Contributing Member to the extent of such Member's positive Capital Account balance, if any; (c) Third, to the Contributing Member to the extent of such Member's positive Capital Account balance, if any; and (d) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.07 NET PROFITS FROM OPERATIONS FOLLOWING DILUTION Net Profits resulting from the operations of the Company (as distinguished from an Extraordinary Event) following any dilution pursuant to Section 3.05(b) for each fiscal year (or part thereof) shall be allocated to the Members at the end of such fiscal year (or part thereof) in the following order of priority: (a) First, to the Members to the extent of, and in proportion to, the amount by which the cumulative Net Losses allocated to each such Member pursuant to Sections 4.01(d) and 4.05(f) exceeds the cumulative Net Profits allocated to each such Member pursuant to Section 4.03(a) and this Section 4.07(a); (b) Second, to the Contributing Member to the extent of the amount by which the cumulative Net Losses allocated to such Member pursuant to Sections 4.01(c) and 4.05(e) exceeds the cumulative Net Profits allocated to such Member pursuant to Section 4.03(b) and this Section 4.07(b); (c) Third, to the Contributing Member to the extent of the amount by which the cumulative accrued Preferred Return, if any, of such Member exceeds the amount, if any, by which (i) the cumulative Net Profits previously allocated to such Member pursuant to Section 4.03(c) and this Section 4.07(c), exceeds (ii) the cumulative Net Losses allocated to such Member pursuant to Sections 4.01(b) and 4.05(d); (d) Fourth, to the Non-Contributing Member to the extent of the amount by which the cumulative Net Losses allocated to such Member pursuant to Sections 4.01(c) and 4.05(c) exceeds the cumulative Net Profits allocated to such Member pursuant to Section 4.03(b) and this Section 4.07(d); (e) Fifth, to the Non-Contributing Member to the extent of the amount by which the cumulative accrued Preferred Return, if any, of such Member exceeds the amount, if any, by which (i) the cumulative Net Profits previously allocated to such Member pursuant to Section 4.03(c) and this Section 4.07(e), exceeds (ii) the cumulative Net Losses allocated to such Member pursuant to Sections 4.01(b) and 4.05(b); and (f) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.08 NET PROFITS FROM EXTRAORDINARY EVENTS FOLLOWING DILUTION Net Profits of the Company resulting from an Extraordinary Event following any dilution pursuant to Section 3.05(b) shall be allocated to the Members: (i) after adjusting the Capital Accounts of the Members for all previous allocations of Net Profits and Net Losses resulting from the operations of the Company and all previous distributions of Ordinary Cash Flow for the fiscal year of such Extraordinary Event, but prior to the distribution of the proceeds derived from such Extraordinary Event, or (ii) at the end of the fiscal year in which such event occurred but following the adjustments to the Members' respective Capital Accounts referenced in clause (i) above of this Section, whichever occurs earlier: (a) First, to the Members to the extent of, and in proportion to, their respective negative Capital Account balances, if any; (b) Second, if the Capital Account balance of the Contributing Member is less than the sum, if any, of (i) such Member's accrued and unpaid Preferred Return, (ii) such Member's positive Additional Unrecovered Contribution Account balance, and (iii) such Member's positive Unrecovered Contribution Account balance, then to such Member to the extent of such variance; (c) Third, if the Capital Account balance of the Non-Contributing Member is less than the sum, if any, of (i) such Member's accrued and unpaid Preferred Return, and (ii) such Member's positive Unrecovered Contribution Account balance, then to such Member to the extent of such variance; and (d) Thereafter, to the Members in proportion to their respective Percentage Interests. 4.09 SPECIAL ALLOCATIONS Notwithstanding any other provision of this Agreement, no allocation of Net Losses shall be made to any Member to the extent such an allocation would cause or increase a deficit balance standing in such Member's Capital Account (in excess of such Member's allocable share of minimum gain and after taking into account any adjustments set forth in Treasury Regulation Section 1.704(b)-1(b)(2)(ii)(D)) and any such Net Losses instead shall be allocated one hundred percent (100%) to the other Member. If any such allocation of Net Losses would cause or increase a deficit balance standing in both Members' respective Capital Accounts (in excess of such Members' respective allocable shares of minimum gain and after taking into account any adjustments set forth in Treasury Regulation Section 1.704(b)-1(b)(2)(ii)(D)), then such Net Losses shall be allocated to the Members in proportion to their respective Percentage Interests. In addition, items of income and gain shall be specially allocated to the Members in accordance with the qualified income offset provisions set forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(D). Notwithstanding any other provision in this Article IV, (i) any and all "partnership nonrecourse deductions" (as defined in Treasury Regulation Section 1.704-2(b)(1)) of the Company for any fiscal year or other period shall be allocated to the Members in proportion to their respective Percentage Interests; (ii) any and all "partner nonrecourse deductions" (as such term is defined in Treasury Regulation Sections 1.704-2(i)(2)) attributable to any "partner nonrecourse debt" (as such term is defined in Treasury Regulation Section 1.70-2(b)(4)) shall be allocated to the Member that bears the "economic risk of loss" (as determined under Treasury Regulation Section 1.752-2) for such "partner nonrecourse debt" in accordance with Treasury Regulation Section 1.704-2(i)(l); (iii) each Member shall be specially allocated items of Company income and gain in accordance with the partnership minimum gain chargeback requirements set forth in Treasury Regulation Sections 1.704-2(f) and 1.704-2(g); and (iv) each Member with a share of the minimum gain attributable to any "partner nonrecourse debt" (as defined above in this Section 4.09) shall be specially allocated items of Company income and gain in accordance with the partner minimum chargeback requirements of Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(i)(5). For purposes of determining the Members' respective shares of Company nonrecourse liabilities pursuant to Section 752 of the Code and the Treasury Regulations promulgated thereunder, (i) a Member's interest in Company profits shall be deemed to include the allocable share of minimum gain (as determined under Treasury Regulation Section 1.704-2(g)), Code Section 704(c) gain and any Net Profits allocable to such Member pursuant to this Article IV, and (ii) such Company profits shall be deemed allocable to the Members in the following order of priority: (a) first, to the Members to the extent of, and in proportion to, their respective allocable shares of minimum gain, (b) second, to the Members to the extent of, and in proportion to, their respective shares of Code Section 704(c) gain, (c) third, to the Members to the extent of, and in proportion to, their respective negative Capital Account balances, if any; and (d) thereafter, to the Members in proportion to their respective Percentage Interests. 4.10 CURATIVE ALLOCATIONS The effect of the limitation on the amount of Net Losses and the qualified income offset provision set forth in the first two (2) sentences of Section 4.09 above shall be taken into account in calculating subsequent allocations of Net Profits and Net Losses pursuant to this Article IV, so that the net amount of any items so allocated and the Net Profits, Net Losses and all other items allocated to each Member pursuant to this Article IV shall, to the extent possible, be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of this Article IV if such special allocations had not occurred. 4.11 DIFFERING TAX BASIS; TAX ALLOCATION The Members shall cause depreciation and/or cost recovery deductions and gain or loss with respect to each item of property treated as contributed to the capital of the Company to be allocated between the Members for federal income tax purposes in accordance with the principles of Section 704(c) of the Code and the Treasury Regulations promulgated thereunder, and for state income tax purposes in accordance with comparable provisions of applicable state law, so as to take into account the variation, if any, between the adjusted tax basis of such property and its book value (as determined for purposes of the maintenance of Capital Accounts in accordance with this Agreement and Treasury Regulation Section 1.704-1(b)(2)(iv)(g)). In the event that any property of the Company is revalued pursuant to Treasury Regulation 1.704-1(b)(2)(iv)(f), subsequent allocations of income, gain, loss and deduction with respect to such property shall take into account any variation between the adjusted basis of such property for federal income tax purposes and its book value in the same manner as under Section 704(c) of the Code and the Treasury Regulations promulgated thereunder. ARTICLE V DISTRIBUTIONS 5.01 DISTRIBUTION OF ORDINARY CASH FLOW Subject to Section 5.03, Ordinary Cash Flow shall be determined and distributed monthly in the following order of priority: (a) First, to the Members to the extent of, and in proportion to, each such Member's accrued and unpaid Preferred Return; and (b) Thereafter, to the Members in proportion to their respective Percentage Interests. 5.02 DISTRIBUTION OF EXTRAORDINARY CASH FLOW Subject to Sections 5.04 and 9.02, Extraordinary Cash Flow shall be distributed to the Members as soon as practicable following the Company's receipt thereof in the following order of priority: (a) First to the Members to the extent of, and in proportion to, each such Member's accrued and unpaid Preferred Return, if any; (b) Second, to the Members to the extent of, and in proportion to, the positive balance standing in each such Member's Unrecovered Contribution Account, if any; and (c) Thereafter, to the Members in proportion to their respective Percentage Interests. 5.03 DISTRIBUTION OF ORDINARY CASH FLOW FOLLOWING DILUTION Notwithstanding Section 5.01 above, in the event that a Contributing Member makes a Delinquent Contribution on behalf of a Non-Contributing Member and elects to dilute the Percentage Interest of the Non-Contributing Member pursuant to Section 3.05(b) above, then Ordinary Cash Flow shall be determined and distributed monthly, in the following order of priority: (a) First, to the Contributing Member to the extent of the Contributing Member's accrued and unpaid Preferred Return; (b) Second, to the Contributing Member to the extent of the Contributing Member's Additional Unrecovered Contribution Account; (c) Third, to the Non-Contributing Member to the extent of the Non-Contributing Member's accrued and unpaid Preferred Return; and (d) Thereafter, to the Members in proportion to their respective Percentage Interests. 5.04 DISTRIBUTION OF EXTRAORDINARY CASH FLOW FOLLOWING DILUTION Notwithstanding Section 5.02 above, in the event that a Contributing Member makes a Delinquent contribution on behalf of a Non-Contributing Member and elects to dilute the Percentage Interest of the Non-Contributing Member pursuant to Section 3.05(b) above, then, subject to Section 9.02, Extraordinary Cash Flow shall be distributed to the Members as soon as practicable following the Company's receipt thereof in the following order of priority: (a) First, to the Contributing Member to the extent of the Contributing Member's accrued and unpaid and Preferred Return; (b) Second, to the Contributing Member to the extent of the positive balance standing in the Contributing Member's Additional Unrecovered Contribution Account, if any; (c) Third, to the Contributing Member to the extent of the positive balance standing in the Contributing Member's Unrecovered Contribution Account, if any; (d) Fourth, to the Non-Contributing Member to the extent of the Non-Contributing Member's accrued and unpaid Preferred Return; (e) Fifth, to the Non-Contributing Member to the extent of the positive balance standing in the Non-Contributing Member's Unrecovered Contribution Account, if any; and (f) Thereafter, to the Members in proportion to their respective Percentage Interests. 5.05 LIMITATIONS ON DISTRIBUTIONS Notwithstanding any other provision contained in this Agreement, the Company shall not make a distribution of Cash Flow (or other proceeds) to any Member if such distribution would violate Section 18-607 of the Delaware Act or other applicable law. 5.06 IN-KIND DISTRIBUTION Assets of the Company (other than cash) shall not be distributed in kind to the Members without the prior written approval of both Members. If any assets of the Company are distributed to the Members in kind, then for purposes of this Agreement, such assets shall be valued on the basis of the agreed upon fair market value thereof (taking into account Section 7701(g) of the Code) on the date of distribution, and any Member entitled to any interest in such assets shall receive such interest as a tenant-in-common with the other Members(s) so entitled with an undivided interest in such assets in proportion to their respective Capital Accounts (after taking into account all Capital Account adjustments, including any book-up or book-down caused by such distribution) or as such Members may otherwise unanimously agree. Upon such distribution, the Capital Accounts of the Members shall be adjusted to reflect the amount of gain or loss that would have been allocated to the Members pursuant to the appropriate provisions of this Agreement had the Company sold the assets being distributed for their agreed upon fair market value (taking into account Section 7701(g) of the Code) immediately prior to their distribution. ARTICLE VI RESTRICTIONS ON TRANSFERS OF INTERESTS 6.01 LIMITATIONS ON TRANSFER Except as otherwise expressly permitted pursuant to this Article VI, Article VII and/or Article VIII, no Member shall be entitled to sell, exchange, assign, transfer, or otherwise dispose of, pledge, hypothecate, encumber or otherwise grant a security interest in, directly or indirectly, all or any part of such Member's Interest, without the prior written consent of the other Member, which consent may be withheld in such other Member's sole discretion. Any transfer or encumbrance by any constituent owner of any Member of all or any portion of such owner's ownership interest in such Member shall constitute a transfer or encumbrance by such Member of its Interest for purposes of this Article VI. Any attempted transfer, encumbrance or withdrawal in violation of the restrictions set forth in this Article VI shall be null and void AB INITIO and of no force or effect. 6.02 PERMITTED TRANSFERS Any Member may transfer all or any portion of such Member's Interest to any of the following (collectively, "PERMITTED TRANSFEREES") without complying with the provisions of Section 6.01: (a) Any Affiliate of such Member; (b) Any other Member of the Company, subject to any applicable rights of first offer and/or refusal in accordance with the provisions of Section 6.03; (c) At any time on or after the Opening, any person or entity other than a Prohibited Transferee, subject to any applicable rights of first offer and/or refusal in accordance with the provisions of Section 6.03; (d) To an institutional lender as a pledge or security for any loan; and the Members agree to execute any separate consent to assignment reasonably required by such institutional lender; or (e) Any transferee approved in the sole discretion of the other Member, provided that it is not a Prohibited Transferee. In addition, any Member may transfer ownership interests in such Member (which transfers would otherwise be a prohibited indirect transfer pursuant to Section 6.01 above), without complying with the provisions of Section 6.01, provided that all of the following conditions are satisfied: (1) The transfer of interests in such Member is made solely for the purposes of raising capital to be contributed by the Member to the Company pursuant to a Contribution Notice, and such transfer is made within the three hundred sixty (360) day period beginning one hundred eighty (180) days before a Contribution Notice and ending one hundred eighty (180) days after a Contribution Notice; (2) The owners of the Member transfer an interest in such Member continue to control the management interests of such Member following the transfers, with the result that the Board representatives appointed by such Member transferring indirect interests shall remain unchanged following such transfers; (3) The transfer is not to a Prohibited Transferee; (4) The Non-Transferring Member reasonably approves of such transfer, unless such transferee is an Institutional Investor; and (5) The Transferring Member gives the Non-Transferring Member advance notice of such intended transfer, and for a period of thirty (30) days the Non-Transferring Member shall have an exclusive right of first negotiation with respect to such transfer. After the end of said thirty (30) day period, the Non-Transferring Member's right of first negotiation shall expire. As used herein the term "PROHIBITED TRANSFEREE" means any of the following: (i) any owner, operator or manager of any "resort hotel" (as defined in Clark County Code Section 8.04.010) located in Clark County, Nevada, (ii) any shopping center owner, manager and/or developer if TrizecHahn will continue to be a Member of the Company following the transfer, (iii) any "non-profit" or "not-for-profit" corporation, association, trust, fund, foundation or other similar entity organized and operated exclusively for charitable purposes that qualifies as a tax-exempt entity under applicable federal and state tax law, (iv) any federal, state or local governmental agency, instrumentality or other similar entity, (v) any person or entity primarily engaged in the business of owning or operating a casino or other similar type of gambling facility, (vi) any person or entity that has been convicted of a felony, (vii) any person or entity regularly engaged in or affiliated with the production or distribution of alcoholic beverages, (viii) any person who has been found unsuitable or has withdrawn an application to be found suitable by the gaming authorities of the State of Nevada, or (ix) FOCUS 2000, Inc., a Nevada corporation, or the then current owner or lessee (unless such owner or lessee is an Affiliate of a Member) of the real property located at the northeast corner of Las Vegas Boulevard and Harmon Avenue, in the City of Las Vegas, County of Clark, State of Nevada, or (x) to any person or entity if the consummation of such transfer would result in a breach of or violation in any transfer restrictions contained in any loan documentation (and/or guaranty) relative to any indebtedness encumbering all or any portion of the Bazaar Improvements, and such transfer restrictions are not waived by the non-transferring Member and the applicable lender. Any Permitted Transferee shall receive and hold such Interest or portion thereof subject to the terms of this Agreement and to the obligations hereunder of the transferor and there shall be no further transfer of such Interest or portion thereof except to a person or entity to whom such Permitted Transferee could have transferred Interest, ownership interest or portion thereof in accordance with this Section 6.02 had such Permitted Transferee originally been a Member or otherwise in accordance with the terms of this Agreement. 6.03 RIGHT OF FIRST OFFER/RIGHT OF FIRST REFUSAL (a) If any Member (the "TRANSFERRING MEMBER") desires to transfer all or any portion of such Member's Interest (the "OFFERED INTEREST") to any person or entity other than a Prohibited Transferee at any time on or after the date of the Opening, then the Transferring Member shall give written notice (the "FIRST OFFERING NOTICE") thereof to the other Member (the "NON-TRANSFERRING MEMBER"). The First Offering Notice shall specify the Offered Interest to be transferred, the purchase price and the other terms upon which the Transferring Member intends to so transfer. For a period of thirty (30) days following the effective date of the First Offering Notice, the Non-Transferring Member shall have the right, but not the obligation, to elect to purchase all, but not less than all, of the Offered Interest for the purchase price (and on the other terms) specified in the First Offering Notice by delivering written notice of such election to the Transferring Member. (b) If the Non-Transferring Member fails to timely and validly elect to purchase the Offered Interest in accordance with the terms of the First Offering Notice (or rejects the opportunity to purchase), time being of the essence, then, notwithstanding the failure of the Transferring Member to obtain the consent required for the transfer of the Offered Interest pursuant to Section 6.01, the Transferring Member may offer the Offered Interest for sale on the open market for a period of one (1) year following the effective date of the First Offering Notice. If, during such one (1) year period, an offer is received from an independent third party that is not directly or indirectly affiliated with either Member and is not a Prohibited Transferee ("THIRD PARTY") and if the net effective purchase price offered by such Third Party is equal to or greater than the price previously offered to the Transferring Member and the Third Party is a Pre-Approved Transferee, then the Transferring Member shall be permitted to transfer the Offered Interest to such Pre-Approved Transferee without any further consent or rights of first offer and/or refusal in favor of the Non-Transferring Member. If the net effective purchase price offered by such Third Party is less than the purchase price previously offered to the Non-Transferring Member or if the purchase price is equal to or greater than the purchase price previously offered to the Non-Transferring Member and the Third Party is not a Pre-Approved Transferee, then the Transferring Member shall deliver written notice (the "SECOND OFFERING NOTICE") thereof to the Non-Transferring Member. The Second Offering Notice shall specify the identity of the Third Party, the purchase price made in the offer by such Third Party and the other terms of purchase. For a period of thirty (30) days following the effective date of the Second Offering Notice, the Non-Transferring Member shall have the right, but not the obligation, to elect to purchase all, but not less than all, of the Offered Interest for the purchase price (and on the other terms) specified in the Second Offering Notice by delivering written notice of such election to the Transferring Member. (c) If the Non-Transferring Member fails to timely and validly elect to purchase the Offered Interest in accordance with the terms of the Second Offering Notice (or rejects the opportunity to purchase), then the Transferring Member may transfer the Offered Interest to the Third Party identified in the Second Offering Notice at the same price and on the same terms as are specified in the Second Offering Notice for a period of one (1) year following the date of the Second Offering Notice without any further consent or rights of first offer and/or refusal in favor of the Non-Transferring Member. (d) If the Non-Transferring Member timely and validly elects to purchase the Offered Interest in accordance with the provisions of Section 6.03(a) or 6.03(b) above, then the closing for such purchase shall be held at the principal office of the Company in Nevada within sixty (60) days following the effective date of the First Offering Notice or the Second Offering Notice, as the case may be. (e) If the Non-Transferring Member timely and validly elects to acquire the Offered Interest in accordance with the foregoing provisions of this Section 6.03, but fails to consummate such purchase, then the Offered Interest shall thereafter be freely transferable by the Non-Transferring Member to any Third Party without any further consent or rights of first offer and/or refusal in favor of the Non-Transferring Member. (f) The Members acknowledge and agree that either Member may assign such Member's rights of first offer and/or rights of first refusal set forth above in this Section 6.02 to any Affiliate of such Member (which shall include, without limitation, Aladdin Gaming, in the case of Holdings II) without the consent of the other Member so as to enable any such Affiliate to acquire the Offered Interest. (g) This Section 6.03 shall not apply to a transfer described in Article VII or Article VIII below. The term "PRE-APPROVED TRANSFEREE" means any publicly-traded real estate investment trust, any financial institution or pension fund, any mutual fund or other institutional investor, any investment bank, and any publicly-traded real estate ownership or operating company with experience in the ownership of shopping centers, in each case with assets in excess of One Hundred Million Dollars ($100,000,000), and any corporation, partnership, limited liability company, trust or private fund in which any of the foregoing is an investor or advisor, provided that such entity also has assets in excess of One Hundred Million Dollars ($100,000,000.00) or is guaranteed by any one of the foregoing entities having assets in excess of One Hundred Million Dollars ($100,000,000.00). 6.04 REGULATORY AND LENDER PROHIBITIONS Notwithstanding any other provision of this Agreement, no Member may transfer all or any portion of such Member's Interest if (i) such transfer would result in a breach of or violation of the Nevada gaming laws or in the regulatory requirements of the Nevada gaming authorities, or (ii) such transfer would result in a breach of or violation in any loan documentation (and/or guaranty) relative to any indebtedness governing all or any portion of the Bazaar Improvements (and such restrictions are not waived by the applicable lender). 6.05 ADMISSION OF SUBSTITUTED MEMBERS If any Member transfers such Member's Interest to a transferee in accordance with Sections 6.01, 6.02, 6.03 and/or Article VII, then such transferee shall only be entitled to be admitted into the Company as a substituted member if (a) this Agreement is amended to reflect such admission in accordance with the provisions of the Nevada Act, (b) the non-transferring Member reasonably approves the form and content of the instrument of transfer; (c) the transferor and transferee named therein execute and acknowledge such other instruments as the non-transferring Member may deem reasonably necessary to effectuate such admission; (d) the transferee in writing accepts and adopts all of the terms and conditions of this Agreement, as the same may have been amended; and (e) the transferor pays, as the non-transferring Member may reasonably determine, all reasonable expenses incurred in connection with such admission, including, without limitation, legal fees and costs. To the fullest extent permitted by law, any transferee of an Interest who does not become a substituted member shall have no right to require any information or account of the Company's transactions, to inspect the Company books, or to vote on any of the matters as to which a Member would be entitled to vote under this Agreement. Any such transferee shall only be entitled to share in such Net Profits and Net Losses, to receive such distributions, and to receive such allocations of income, gain, loss, deduction or credit or similar items to which the transferor was entitled, to the extent assigned. A Member that transfers its Interest shall not cease to be a member of the Company until the admission of the transferee as a substituted member of the Company and, except as provided in the preceding sentence, shall continue to be entitled to exercise, and shall continue to be subject to, all of the rights, duties and obligations of such Member under this Agreement. 6.06 ELECTION; ALLOCATIONS BETWEEN TRANSFEROR AND TRANSFEREE In the event of the transfer of the Interest of any Member or the distribution of any property of the Company to a Member, the Company may file, in the reasonable discretion of the Board, an election in accordance with applicable Treasury Regulations, to cause the basis of the Company property to be adjusted for federal income tax purposes as provided by Sections 734 and 743 of the Code. Upon the transfer of all or any part of the Interest of a Member as hereinabove provided, Net Profits and Net Losses shall be allocated between the transferor and transferee on the basis of the computation method which in the reasonable discretion of TrizecHahn, is in the best interests of the Company, provided such method is in conformity with the methods prescribed by Section 706 of the Code and Treasury Regulation Section 1.706-1(c)(2)(ii). 6.07 PARTITION No Member shall have the right to partition any assets of the Company or any interest therein, nor shall a Member make application or proceeding for a partition thereto and, upon any breach of the provisions of this Section 6.07 by any Member, the other Member (in addition to all rights and remedies afforded by law or equity) shall be entitled to a decree or order restraining or enjoining such application, action or proceeding. 6.08 WAIVER OF WITHDRAWAL AND PURCHASE RIGHTS Except in connection with any transfer permitted pursuant to Sections 6.01, 6.02, 6.03 and/or Article VII, no Member may voluntarily withdraw, resign or retire from the Company without the prior written consent of the other Member, which consent may be withheld in such other Member's sole discretion. Each Member hereby waives any and all rights such Member may have to withdraw and/or resign from the Company pursuant to Section 18-603 of the Delaware Act and hereby waives any and all rights such Member may have to receive the fair value of such Member's Interest in the Company upon such withdrawal, resignation and/or retirement pursuant to Section 18-604 of the Delaware Act. ARTICLE VII MARKETING AND SALE OF THE BAZAAR IMPROVEMENTS 7.01 RIGHT TO MARKET DURING YEARS FIVE THROUGH TEN (a) At any time during the period commencing on the fifth (5th) anniversary of the Opening and expiring on the last day prior to the tenth (10th) anniversary of the Opening (the "INITIAL SALE PERIOD"), any Member holding fifty percent (50%) or more of the Interests (the "SELLING MEMBER") shall have the right to cause the Company to offer all, but not less than all, of the Bazaar Improvements for sale on the open market by delivering written notice thereof to the other Member (the "NON-SELLING MEMBER"). (b) If any offer is received by the Company and/or the Selling Member for the Bazaar Improvements and the Selling Member desires to sell on such terms, but the Non-Selling Member does not, then the Selling Member shall deliver written notice thereof (the "FIRST SALE NOTICE") to the Non-Selling Member. The First Sale Notice shall specify the identity of the Third Party, the purchase price made in the offer by such Third Party and the other terms of purchase. For a period of thirty (30) days following the effective date of the First Sale Notice, the Non-Selling Member shall have the right, but not the obligation, to elect to purchase the entire Interest of the Selling Member (which right may be assigned to an Affiliate) on the terms and conditions set forth in the First Sale Notice for a purchase price (the "SELLING MEMBER'S PURCHASE PRICE") equal to the amount that would be distributed to the Selling Member pursuant to Section 9.02(b) if the Bazaar Improvements had been sold to the Third Party for cash at the price set forth in the First Sale Notice, net of the Sales Costs, and the Company was liquidated. As used herein, the term "SALES COSTS" means any and all third-party costs and/or expenses reasonably expected to be incurred in connection with the sale of the Bazaar Improvements, including, without limitation, brokerage and/or sales commissions, escrow fees, title, documentary and other transfer taxes and the like. If the Non-Selling Member fails to timely and validly elect to purchase the Interest of the Selling Member or rejects the opportunity to purchase, then the Selling Member shall have the right, but not the obligation, to elect to purchase from the Non-Selling Member a one percent (1%) residual ownership interest in the Net Profits, Net Losses and Cash Flow of the Company (the "CONTROL INTEREST") for a purchase price equal to the Control Premium. The Members acknowledge and agree that the Control Interest shall not include any portion of the Capital Account, the Unrecovered Contribution Account and/or the accrued, unpaid Preferred Return of the Non-Selling Member. As used herein, the term "CONTROL PREMIUM" means an amount equal to the product of (i) five percent (5%) multiplied by (ii) the purchase price offered by the Third Party for the Bazaar Improvements, net of any indebtedness encumbering the Bazaar Improvements and the Sales Costs. If the Selling Member timely and validly elects to purchase the Control Interest, then the closing of the purchase and sale shall be held at the principal office of the Company in Nevada concurrently with the close of the Selling Member's Interest in the Company to the Third Party identified in the First Sale Notice. If the Non-Selling Member fails to timely and validly elect to purchase the Interest of the Selling Member, then for a period of one hundred eighty (180) days following the expiration of the thirty (30) day period following the First Sale Notice, the Selling Member shall thereafter have the right, but not the obligation, to sell such Member's entire Interest in the Company (including, without limitation, the Control Interest) to the Third Party identified in the First Sale Notice for a purchase price equal to the Selling Member's Purchase Price, plus the Control Premium without any further consent or rights of first offer and/or refusal in favor of the Non-Selling Member. From and after the date of the acquisition of the Control Premium, (i) the Third Party identified in the First Sale Notice shall have the right, but not the obligation, to appoint one (1) additional voting representative to the Board and (ii) the Non-Selling Member shall have no right to appoint any representatives to the Board, and the voting rights of the Non-Selling Member under the Agreement shall be limited solely to those expressly mandated by the Delaware Act. 7.02 RIGHT TO REQUIRE SALE AFTER YEAR TEN (a) At any time after the expiration of the Initial Sale Period, either Member shall have the right to cause the Company to offer all, but not less than all, of the Bazaar Improvements for sale on the open market by delivering written notice thereof to the other Member. (b) If any offer is received by the Company and/or the Selling Member for the Bazaar Improvements and the Selling Member desires to sell on such terms but the Non-Selling member does not, then the Selling Member shall deliver written notice thereof (the "PROJECT SALE NOTICE") to the Non-Selling Member. The Project Sale Notice shall specify the identity of the Third Party, the purchase price made in the offer by such Third Party and the other terms of purchase. For a period of thirty (30) days following the effective date of the Project Sale Notice, the Non-Selling Member shall have the right, but not the obligation, to elect to purchase the entire Interest of the Selling Member on the terms and conditions set forth in the Project Sale Notice for a purchase price equal to the amount that would be distributed to the Selling Member pursuant to Section 9.02(b) if the Bazaar Improvements had been sold to the Third Party for cash at the price set forth in the Project Sale Notice, net of the Sales Costs, and the Company was liquidated. If the Non-Selling Member fails to timely and validly elect to purchase the Selling Member's Interest (or rejects the opportunity to purchase), then the Selling Member shall have the right, but not the obligation, to cause the Company to sell the Bazaar Improvements to the Third Party specified in the Project Sale Notice at the same price and on the same terms specified in the Project Sale Notice without any further consent or rights of first offer and/or refusal in favor of the Non-Selling Member. 7.03 GENERAL SALES PROCEDURES (a) If the Non-Selling Member timely and validly elects to purchase the Interest of the Selling Member in accordance with the provisions of Section 7.01 or 7.02 above, then the closing for such purchase shall be held at the principal office of the Company in Nevada within sixty (60) days following the effective date of the First Sale Notice or the Project Sale Notice, as the case may be. (b) If the Non-Selling Member timely and validly elects to acquire the Interest of the Selling Member in accordance with the provisions of Section 7.01 or 7.02 above, but fails to consummate such purchase, then the Selling Member shall thereafter be entitled to cause the sale of the Bazaar Improvements and/or the Selling Member's Interest to any Third Party without any further consent or rights of first offer and/or refusal in favor of the Non-Selling Member. (c) The Members acknowledge and agree that the Non-Selling Member may assign such Member's rights of first refusal set forth above in this Article VII to any Affiliate of such Member without the consent of the other Member so as to enable any such Affiliate to acquire the Interest of the Selling Member. ARTICLE VIII DEFAULT BUY/SELL AGREEMENT 8.01 BUY/SELL EVENTS For purposes of this Article VIII, the following shall constitute "BUY/SELL EVENTS": (a) PROHIBITED WITHDRAWAL OR RETIREMENT. The withdrawal, retirement, or other cessation to serve as a member of the Company by any Member in violation of the terms of this Agreement; (b) PROHIBITED TRANSFER OR ENCUMBRANCE. Any transfer or encumbrance or attempted transfer or encumbrance by any Member of such Member's Interest contrary to the provisions of Article VI or Article VII, which has not been cured or withdrawn within ten (10) business days after receipt of the Default Notice; (c) BANKRUPTCY OR INSOLVENCY. The rendering, by a court with appropriate jurisdiction, of a decree or order (i) adjudging a Member bankrupt or insolvent; or (ii) approving as properly filed a petition seeking reorganization, readjustment, arrangement, composition, or similar relief for a Member under the federal bankruptcy laws or any other similar applicable law or practice, and if such decree or order referred to in this Section 8.01(c) shall have continued undischarged and unstayed for a period of sixty (60) days; (d) APPOINTMENT OF RECEIVER. The rendering, by a court with appropriate jurisdiction, of a decree or order (i) for the appointment of a receiver, a liquidator, or a trustee or assignee in bankruptcy or insolvency of a Member, or for the winding up and liquidation of a Member's affairs, provided that such decree or order shall have remained in force undischarged and unstayed for a period of sixty (60) days; or (ii) for the sequestration or attachment of any property of a Member without its return to the possession of such Member or its release from such sequestration or attachment within sixty (60) days thereafter; or (e) BANKRUPTCY PROCEEDINGS. A Member (i) institutes proceedings to be adjudicated a voluntary bankrupt or an insolvent; (ii) consents to the filing of a bankruptcy proceeding against such Member; (iii) files a petition or answer or consent seeking reorganization, readjustment, arrangement, composition, or similar relief for such Member under the federal bankruptcy laws or any other similar applicable law or practice; (iv) consents to the filing of any such petition, or to the appointment of a receiver, a liquidator, or a trustee or assignee in bankruptcy or insolvency for such Member or a substantial part of such Member's property; (v) makes an assignment for the benefit of such Member's creditors; (vi) is unable to or admits in writing such Member's inability to pay such Member's debts generally as they become due; or (vii) takes any action in furtherance of any of the aforesaid purposes. For the purposes of implementing the provisions contained in this Article VIII, the "DEFAULTING MEMBER" shall be (i) in the case of the occurrence of the event referenced in Section 8.01(a), the Member that has withdrawn, retired or ceased to serve as a Member of the Company in violation of the terms of this Agreement; (ii) in the case of the occurrence of the event referenced in Section 8.01(b), the Member that has transferred such Member's rights or interests contrary to the provisions of Article VI or Article VII; and (iii) in the case of any of the events referenced in Section 8.01(c), (d), or (e), the Member who is the subject of such court decree or order or has instituted such proceedings or filed such petitions or who is insolvent, etc. The "NON-DEFAULTING MEMBER" is the Member that is not the Defaulting Member. 8.02 RIGHTS ARISING FROM A BUY/SELL EVENT At any time following one (1) year after the date that the Non-Defaulting Members obtain actual knowledge of the occurrence of a Buy/Sell Event, the Non-Defaulting Member shall have the right, but not the obligation, to implement the buy/sell procedures set forth in this Article VIII by delivering written notice ("DEFAULT NOTICE") thereof to the Defaulting Member. For a period of ten (10) days following the Effective Date of the Default Notice, the Members shall attempt to agree upon a purchase price for the Defaulting Member's Interest (the "PURCHASE PRICE"). If the Members are unable to agree, then the Purchase Price shall be determined in accordance with the provisions of Section 8.03. 8.03 DETERMINATION OF PURCHASE PRICE Within thirty (30) days after the determination of the Appraised Value of the assets of the Company, the Members shall for a period of ten (10) days attempt to jointly determine the amount of cash which would be distributed to each Member pursuant to Section 5.04, if applicable, or Section 5.02 (if no dilution event has occurred) if (i) the assets of the Company were sold for the Appraised Value thereof as of the Effective Date of the Default Notice; (ii) the liabilities of the Company were liquidated in accordance with Section 9.02, (iii) reasonable reserves for any contingent, conditional or unmatured liabilities of the Company were established by the Non-Defaulting Member; and (iv) the Company made its required distributions to the Members pursuant to Section 5.04, if applicable, or Section 5.02 (if no dilution event has occurred). If the Members are unable to agree upon such determination within the applicable ten (10) day period, then the accountants regularly employed by the Company shall make such determination and shall give each Member written notice ("PRICE DETERMINATION NOTICE") thereof. The determination by the accountants of such amounts, including all components thereof, shall be deemed conclusive absent any material computational error. Ninety percent (90%) of the amount that would be distributed to the Defaulting Member pursuant to clause (iv) above shall be deemed to be the Purchase Price for purposes of this Article VIII. (a) DETERMINATION OF APPRAISED VALUE. For purposes of this Article VIII, the appraised value ("APPRAISED VALUE") of the assets of the Company shall be determined by real estate appraiser(s) all of whom shall be independent qualified M.A.I. appraisers. The Non-Defaulting Member shall select one (1) appraiser. The Defaulting Member shall either agree to the appraiser selected by the Non-Defaulting Member or select a second appraiser within fifteen (15) days of the Effective Date of the Default Notice and give written notice to the Non-Defaulting Member of the person so selected. In the event of the failure of the Defaulting Member to appoint such an appraiser within the times specified and after expiration of five (5) days following the Effective Date of written demand that an appraiser be appointed, the appraiser duly appointed by the Non-Defaulting Member shall proceed to make the appraisal as herein set forth and the determination thereof shall be conclusive on all the Members. If two (2) appraisers are selected, then such selected appraisers shall thereafter appoint a third (3rd) appraiser. If the two (2) selected appraisers fail to appoint a third (3rd) appraiser within ten (10) days following the Effective Date of written notice from the Defaulting Member notifying the Non-Defaulting Member of the selection of the second (2nd) appraiser, then any Member may petition a court of competent jurisdiction to appoint a third (3rd) appraiser in the same manner as provided for the appointment of an arbitrator pursuant to Section 11.14. The appraiser or three appraisers, as the case may be, shall promptly fix a time for the completion of the appraisal which shall not be later than thirty (30) days from the date of appointment of the last appraiser. The appraiser(s) shall determine the Appraised Value by determining the fair market value of the assets of the Company, such fair market value being the fairest price estimated in terms of money which the Company could obtain if such assets were sold in the open market, allowing a reasonable time to find a purchaser who purchases with knowledge of the uses which such assets in their then condition are adapted and for which such assets are capable of being used as of the Effective Date of the Default Notice. Upon submission of the appraisals setting forth the opinions as to the appraised value of the assets of the Company, (A) if only one (1) appraiser is selected, then such appraisal shall constitute the Appraised Value of the assets of the Company, or (B) if three (3) appraisers are selected, then the two (2) such appraisals which are nearest in amount shall be retained, and the third appraisal shall be discarded. The average of the two (2) retained appraisals shall constitute the Appraised Value of the assets of the Company, unless one (1) appraisal is the mean of the other two (2) appraisals in which case such appraisal shall constitute the Appraised Value. (b) PAYMENT OF COSTS. The Defaulting Member shall pay for the services of the accountant and the services of all appraisers appointed pursuant to this Section 8.03 (the "APPRAISAL COSTS"), or at the Non-Defaulting Member's election, the Non-Defaulting Member may pay such costs and reduce the Purchase Price by such amount. 8.04 NON-DEFAULTING MEMBER'S OPTION For a period of thirty (30) days following the Effective Date of the Price Determination Notice, the Non-Defaulting Member shall have the right, but not the obligation, to elect to purchase the entire Defaulting Member's Interest for the Purchase Price thereof (as adjusted pursuant to Section 8.08), and on the terms and conditions set forth in this Article VIII by giving written notice thereof to the Defaulting Member within such thirty (30)-day period. 8.05 CLOSING OF PURCHASE AND SALE The closing of a purchase pursuant to this Article VIII shall be held at the principal office of the Company in Nevada on or before the ninetieth (90th) day after the expiration of the thirty (30)-day period set forth in Section 8.04, or such longer period if reasonably necessary in order to obtain any required bankruptcy court approval. The Defaulting Member shall transfer to the Non-Defaulting Member (or such Member's nominee(s)) the entire Interest of the Defaulting Member free and clear of all liens, security interests, and competing claims and shall deliver to the Non-Defaulting Member (or such Member's nominee(s)) such instruments of transfer and such evidence of due authorization, execution, and delivery, and of the absence of any such liens, security interests, or competing claims as such Non-Defaulting Member (or such Member's nominee(s)) shall reasonably request. 8.06 PAYMENT OF PURCHASE PRICE The Purchase Price (as adjusted pursuant to Section 8.08) shall be paid by the Non-Defaulting Member (or such Member's nominee(s)) at the closing, in cash or one (1) or more certified or bank cashier's checks drawn and made payable to the order of the Defaulting Member for an amount equal to twenty percent (20%) (or more at the election of the Non-Defaulting Member) of the Purchase Price and a nonrecourse promissory note in an amount equal to the balance of such Purchase Price executed by the Non-Defaulting Member (or such Member's nominee(s)). Any promissory note shall bear simple (non-compounded) interest at the then current prime rate as most recently reported by the Western Edition of the Wall Street Journal (or, if less, the maximum non-usurious rate then permitted by law for such loans), and shall be repayable only from such funds as may thereafter be received by the Non-Defaulting Member on account of the Non-Defaulting Member's purchase of the Interest of the Defaulting Member hereunder, which funds would otherwise have been received by the Defaulting Member from the Company but for such purchase. Except for the Non-Defaulting Member's proportionate share of such funds, the Defaulting Member shall have no recourse whatsoever against any other property or assets of the Non-Defaulting Member for the repayment of such promissory note. Until such time as all principal and accrued interest under such promissory note has been paid in full, payments thereunder shall be made quarterly, commencing with the first calendar quarter from the date of closing. Each such quarterly payment shall be equal to the Non-Defaulting Member's proportionate share of the aggregate amount of such funds received and collected by the Non-Defaulting Member (if any) that would have otherwise been received by the Defaulting Member but for such purchase during the calendar quarter period immediately preceding the date of such payment. All payments under such promissory note shall first be credited against accrued interest and thereafter against principal. Notwithstanding anything contained hereinabove to the contrary, if any such promissory note has not been paid in full (together with all accrued interest thereon) on or before the expiration of five (5) years from the date of closing, such promissory note shall be deemed canceled in full, and the Defaulting Member shall be entitled to no further payments of principal or interest thereunder. 8.07 RELEASE On or before the closing of a purchase held pursuant to this Article VIII, the Non-Defaulting Member shall use such Member's reasonable efforts (without the obligation to incur additional costs or liabilities) to obtain written releases of the Defaulting Member (and/or such Member's Affiliates) from all liabilities of the Company and from all guarantees of such liabilities of the Company previously executed by the Defaulting Member (and/or its Affiliates). 8.08 REPAYMENT OF MEMBER LOANS The Purchase Price to be paid by the Non-Defaulting Member for the Interest of the Defaulting Member shall be offset at the closing of such purchase by the then outstanding principal balance of any and all Member Loan(s) (together with all accrued, unpaid interest thereon) made by the Non-Defaulting Member to the Defaulting Member. Such Member Loan(s) (together with all accrued, unpaid interest thereon) shall be deemed paid to the extent of such offset, with such deemed payment to be applied first to the accrued interest thereon and thereafter to the payment of the outstanding principal amount thereof. If the Purchase Price for the Defaulting Member's Interest is insufficient to fully offset the then unpaid principal balance of any and all Default Loans (together with all accrued, unpaid interest thereon) made by the Non-Defaulting Member to the Defaulting Member, then the portion of any such Member Loan(s) (and accrued, unpaid interest thereon) that remains outstanding following such offset shall be due and payable in full at the closing of the purchase of the Defaulting Member's Interest pursuant to this Article VIII. Any Member Loans offset against the Purchase Price to be paid by the Non-Defaulting Member shall be applied first to reduce the portion of the Purchase Price, if any, to be paid with cash or by certified or bank cashier's check and thereafter to reduce the portion of the Purchase Price, if any, to be paid by the delivery of a promissory note. 8.09 VOTING RIGHTS FOLLOWING BUY/SELL EVENT From and after the occurrence of a Buy/Sell Event, (i) the Defaulting Member shall not be entitled to participate in the management of the Company or appoint a representative to the Board, or otherwise vote upon, any matter affecting the business and affairs of, the Company or any matter that such Member is entitled to vote upon under this Agreement, and (ii) the rights of the Defaulting Member shall be limited solely to those of an assignee as set forth in Section 6.05. ARTICLE IX DISSOLUTION AND WINDING UP OF THE COMPANY 9.01 EVENTS CAUSING DISSOLUTION OF THE COMPANY If any Member retires, resigns or otherwise ceases to serve in compliance with the terms of this Agreement, then the Company shall be dissolved and its affairs wound up, unless the remaining Member(s) (or their successor(s)-in-interest), within ninety (90) days after such retirement, reorganization or other event of non-compliance with this Agreement, unanimously elect to continue the business of the Company. In addition, the Company shall be dissolved upon the first to occur of: (a) the expiration of the term of the Company unless such term has been extended by the unanimous agreement of the Members; (b) the sale, transfer or other disposition by the Company of all or substantially all of its assets and the collection by the Company of any and all Cash Flow derived therefrom; (c) the failure to satisfy the Conditions Precedent and the reimbursement of TrizecHahn of its Predevelopment Costs (if applicable) pursuant to Section 3.06; or (d) the affirmative election of all of the Members to dissolve the Company. Except as permitted above in this Section 9.01, no Member shall have the right to, and each Member hereby agrees that it shall not, seek to dissolve or cause the dissolution of the Company or to seek to cause a partial or whole distribution or sale of Company assets whether by court action or otherwise, it being agreed that any actual or attempted dissolution, distribution or sale would cause a substantial hardship to the Company and the remaining Member(s) and shall constitute a breach and contravention of this Agreement. The admission of any new Member into the Company shall not dissolve the Company, but the business of the Company shall continue without interruption and without any break in continuity. 9.02 WINDING UP OF THE COMPANY Upon the Liquidation of the Company caused by other than the termination of the Company under Section 708(b)(1)(B) of the Code (in which latter case the Company shall remain in existence in accordance with the provisions of such Section of the Code), TrizecHahn shall proceed to the winding up of the affairs of the Company. During such winding up process, the Net Profits, Net Losses and Cash Flow distributions shall continue to be shared by the Members in accordance with this Agreement. The assets shall be liquidated as promptly as consistent with obtaining a fair value therefor, and the proceeds therefrom, to the extent available, shall be applied and distributed by the Company on or before the end of the taxable year of such Liquidation or, if later, within ninety (90) days after such Liquidation, in the following order: (a) first, to creditors of the Company (including Members who are creditors), in the order of priority as provided by law, including, without limitation, to the setting up of any reasonable reserves which TrizecHahn deems reasonably necessary for any contingent, conditional or unmatured liabilities or obligations of the Company (which shall be distributed as soon as reasonably practicable to the Members in the order of priority set forth in Section 5.04, if applicable, or Section 5.02 if no dilution event has occurred), and (b) thereafter, after giving effect to all contributions, distributions and allocations for all periods to the Members in accordance with their relative positive Capital Account balances. 9.03 NEGATIVE CAPITAL ACCOUNT RESTORATION No Member shall have any obligation whatsoever upon the Liquidation of such Member's Interest, the Liquidation of the Company or in any other event, to contribute all or any portion of any negative balance standing in such Member's Capital Account to the Company, to any other Member or to any other person or entity. ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS 10.01 COMPANY BOOKS TrizecHahn shall cause to be kept, at the principal place of business of TrizecHahn, or at such other location as TrizecHahn shall reasonably deem appropriate, full and proper ledgers, other books of account, and records of all receipts and disbursements, other financial activities, and the internal affairs of the Company for at least the current and past four fiscal years. 10.02 DELIVERY OF RECORDS; INSPECTION Upon the reasonable written request of any Member for any purpose reasonably related to such Member's Interest, TrizecHahn shall deliver to such requesting Member (or, to the extent so directed, to its agent or attorney) a copy of the following information, to the extent such is requested in writing: (a) true and full information regarding the status of the business and financial condition of the Company (including, without limitation, the annual financial reports and all reasonable supporting calculations and information for such reports); (b) promptly after becoming available, a copy of the Company's federal, state and local income or information tax returns for the year; (c) a current list of the name and last known-business, residence or mailing address of each Member; (d) a copy of this Agreement, as amended, and Certificates, together with executed copies of any written powers of attorney pursuant to which this Agreement, as amended, and any Certificate have been executed; and (e) true and full information regarding the amount of cash and a description and statement of the agreed value of any other property or services contributed by each Member and which each Member has agreed to contribute in the future, and the date on which each became a Member. Any Member (personally or through an authorized representative) may, for any purpose reasonably related to such Member's Interest, inspect and copy (at their own cost and expense) the books and records of the Company at all reasonable business hours. 10.03 REPORTS AND TAX INFORMATION TrizecHahn shall cause to be prepared, at the expense of the Company, and delivered to each Member at such times as are determined by the Board (or otherwise in accordance with the terms of this Agreement), the Development Plan, the Development Budget, the Operating Budgets, any and all construction reports and budgets, monthly operating reports, and any and all other financial statements and/or reports requested from time to time by the Board. In addition, TrizecHahn shall cause to be prepared, at the expense of the Company, and delivered to each Member, within ninety (90) days after the end of each tax year, the information necessary for such Member to complete its federal, state and local income tax or information returns. 10.04 COMPANY TAX ELECTIONS; TAX CONTROVERSIES TrizecHahn shall have the right to make elections for the Company provided for in the Code, including, but not limited to, the elections provided for in Section 754 of the Code. TrizecHahn is hereby designated as the "TAX MATTERS MEMBER" pursuant to the requirements of Section 6231(a)(7) of the Code and the Treasury Regulations promulgated thereunder. In its capacity as Tax Matters Member, TrizecHahn shall represent the Company in any disputes, controversies or proceedings with the Internal Revenue Service. 10.05 ACCOUNTING AND FISCAL YEAR Subject to Section 448 of the Code, the books of the Company shall be kept on such method of accounting for tax purposes as determined by the Board, and for financial reporting purposes in accordance with generally accepted accounting principles. The fiscal year of the Company shall be the calendar year. 10.06 CONFIDENTIALITY OF INFORMATION Each party hereto agrees that the provisions of this Agreement, all understandings, agreements and other arrangements between and among the parties, and all other non-public information received from or otherwise relating to, the Company shall be confidential, and shall not be disclosed or otherwise released to any other person or entity (other than another party hereto), without the written consent of the Board. Accordingly, each party hereto shall, and shall cause its agents and attorneys to, hold in confidence all such information. ARTICLE XI MISCELLANEOUS 11.01 INVESTMENT INTEREST; NATURE OF INVESTMENT Each Member hereby represents and warrants to the Company and to each other Member that such Member is acquiring its Interest in the Company for its own account and not with a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any applicable state securities laws. Such Member also understands that its Membership Interest may not be transferred absent compliance with the registration requirements of the Securities Act and applicable state securities laws or pursuant to an exemption therefrom and otherwise in compliance with the terms of this Agreement. Each Member understands the meaning and consequences of the representations, warranties and covenants made by such Member set forth herein and that the Company has relied upon such representations, warranties and covenants. Each Member hereby indemnifies, defends, protects and holds wholly free and harmless the Company from and against any and all losses, damages, expenses or liabilities arising out of the breach and/or inaccuracy of any such representation, warranty and/or covenant. All representations, warranties and covenants contained herein shall survive the execution of this Agreement, the formation of the Company, and the liquidation of the Company. 11.02 AMENDMENT Except as otherwise provided by this Agreement, the written consent of each Member shall be required to amend or waive any provision of this Agreement, which consent may be given, withheld or made subject to such conditions as are determined by each such Member in such Member's sole and absolute discretion. 11.03 NO ASSIGNMENTS; BINDING EFFECT This Agreement shall not be assigned or otherwise transferred (by operation of law or otherwise) by any Member except as is otherwise permitted in Articles VI, VII and VIII. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and assigns permitted in accordance with this Agreement and the Nevada Act. 11.04 FURTHER ASSURANCES Each of the parties hereby does hereby covenant and agree on behalf of itself, its successors, and its assigns, without further consideration, to prepare, execute, acknowledge, verify file, record, publish and deliver such other instruments, documents and statements, and to take such other action as may be required by law or reasonably necessary to effectively carry out the purposes of this Agreement. 11.05 NOTICES Any notice, approval, consent, payment, demand or communication required or permitted to be given to any Member under this Agreement shall be in writing and delivered at the address specified in Section 1.02, and shall be deemed to have been duly given or made as of the date (the "EFFECTIVE DATE") set forth below: (i) if delivered personally by courier or otherwise, then as of the date delivered or if delivery is refused, then as of the date presented; (ii) if sent or mailed by Federal Express, Express Mail or other overnight mail service to the Company at its principal office and to each Member at its address appearing in the current records of the Company, then as of the first Business Day after the date so mailed; (ii) if sent or mailed by certified U.S. Mail, return receipt requested, to the Company at its principal office in California and to each Member at its address appearing in the current records of the Company, then as of the third Business Day after the date so mailed; or (iv) if sent by facsimile to the Company at its facsimile telephone number or to any Member at its facsimile telephone number appearing in the current records of the Company, then either (x) as of the date on which the appropriate electronic confirmation of receipt is received by the sending party at or before 5:00 p.m. (receiver's time) on any Business Day or (y) as of the next Business Day if the time of the appropriate electronic confirmation of receipt is received by the sending party after 5:00 p.m. (receiver's time). 11.06 WAIVERS No waiver by any Member of any default with respect to any provision, condition or requirement hereof shall be deemed to be a waiver of any other provision, condition or requirement hereof; nor shall any delay or omission of any Member to exercise any right hereunder in any manner impair the exercise of any such right accruing to it hereafter. 11.07 PRESERVATION OF INTENT If any provision of this Agreement is determined by an arbitrator or any court having jurisdiction to be illegal or in conflict with any laws of any state or jurisdiction, then the Members agree that such provision shall be modified to the extent legally possible so that the intent of this Agreement may be legally carried out. If any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect or for any reason, then the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Members' rights and privileges shall be enforceable to the fullest extent permitted by law. 11.08 ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereto and fully supersedes any and all prior or contemporaneous agreements or understandings between the parties thereto pertaining to the subject matter hereof, except for any written (but not oral) agreements executed by the parties contemporaneously herewith. 11.09 CERTAIN RULES OF CONSTRUCTION Any ambiguities shall be resolved without reference to which party may have drafted this Agreement. All Article or Section titles or other captions in this Agreement are for convenience only, and they shall not be deemed part of this Agreement and in no way defined, limit, extend or describe the scope or intent of any provisions hereof. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and words in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "herein", "hereof" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (vii) all references to "clauses", "Sections" or "Articles" refer to clauses, Sections or Articles of this Agreement; and (viii) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms. 11.10 COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same instrument. 11.11 CERTAIN OTHER MATTERS Time is of the essence of this Agreement. The provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Nevada, and all rights, duties, obligations and remedies shall be governed by the laws of the State of Nevada without regard to principles of conflict of laws (except to the extent the dispute requires the interpretation or operation of this Agreement under the Delaware Act, the substantive laws of the State of Delaware). If any proceeding is brought by any Member against any other Member that arises out of, or is connected with, this Agreement, then such action shall be brought in Clark County, Nevada and the prevailing Member in such proceeding shall be entitled to recover reasonable attorneys' fees and costs. Any agreement to pay any amount and any assumption of liability herein contained, express or implied, shall be only for the benefit of the Members and their respective successors and assigns, and such agreements and assumptions shall not inure to the benefit of the obligees of any indebtedness or any other party, whomsoever, deemed to be a third-party beneficiary of this Agreement. 11.12 COMPANY INTENDED SOLELY FOR TAX PURPOSES. The Members have formed the Company as a Delaware limited liability company under the Delaware Act, and do not intend to form a corporation or a general or limited partnership under Delaware or any other state law. The Members do not intend to be shareholders and/or partners to one another. The Members intend the Company to be classified and treated as a partnership solely for federal and state income taxation purposes. Each Member agrees to act consistently with the foregoing provisions of this Section 11.12 for all purposes, including, without limitation, for purposes of reporting the transactions contemplated herein to the Internal Revenue Service and all state and local taxing authorities. 11.13 ARBITRATION OF DISPUTES Any controversy or claim arising out of or relating to this Agreement, or the claimed breach or interpretation thereof, including, but not limited to, any impasse reached by the Board pursuant to Section 2.04, shall be resolved by binding arbitration, subject to the following additional provisions: (a) The Member seeking arbitration ("DEMANDING MEMBER") shall deliver a written notice of demand to resolve dispute (the "DEMAND") to the other Member ("NON-DEMANDING MEMBER"). The demand shall include a brief statement of the Demanding Member's claim or controversy, the amount thereof, and the name of the proposed arbitrator to decide the dispute ("ARBITRATOR"). Within ten (10) days after receipt of the demand, the Non-Demanding Member against whom a demand is made shall deliver a written response to the Demanding Member. Such response shall include a short and plain statement of the Non-Demanding Member's defenses to the claim and shall also state whether such Member agrees to the arbitrator chosen by the Demanding Member. If the Non-Demanding Member fails to agree to the arbitrator chosen by the Demanding Member, then such Non-Demanding Member shall state in its response the name of the proposed arbitrator chosen by such Non-Demanding Member as the proposed arbitrator. If the Non-Demanding Member fails to deliver its written response to the Demanding Member within ten (10) days after receipt of the demand, or if the Non-Demanding Member fails to select in its written response a proposed arbitrator, then the arbitrator selected by the Demanding Member shall serve as the arbitrator. An arbitrator shall not be employed by any Member or its Affiliate, directly, indirectly or as an agent, except in connection with the arbitration proceeding. Any person appointed as an arbitrator shall be knowledgeable and experienced in the matters sought to be arbitrated. As examples, if the arbitrable dispute deals with construction issues, the arbitrator so appointed shall be experienced and knowledgeable as to construction practice of shopping centers. (b) The locale of the arbitration shall be in Las Vegas, Nevada. (c) If the Non-Demanding Member selects a proposed arbitrator different than the arbitrator selected by the Demanding Member, and such selection is indicated by the Non-Demanding Member in its written response to the Demanding Member made within ten (10) days after receipt of the demand, then the parties shall, for ten (10) days after the Demanding Member's receipt of the Non-Demanding Member's written response to the demand, attempt to agree upon an arbitrator. If the parties cannot agree upon an arbitrator within said ten (10) day period, then a single neutral arbitrator shall be appointed by the then Presiding Judge of the Eighth Judicial District Court of the State of Nevada, acting in his individual and nonofficial capacity on the application of the Demanding Member. (d) The arbitrator's powers shall be limited as follows: the arbitrator shall follow the substantive laws of the State of Nevada (or, to the extent the dispute requires the interpretation or operation of this Agreement under the Delaware Act, the substantive laws of the State of Delaware), and the Rules of Evidence of Nevada, and his/her decision shall be subject to review thereon as would the decision of the Presiding Judge of the Eighth Judicial District Court of the State of Nevada sitting without a jury. (e) The costs of the resolution (including all reporter costs) shall be split between the Members prorata in accordance with their Percentage Interests, provided, however, that such costs, along with all other costs and expenses, including attorneys' fees, shall be subject to award, in full or in part, by the arbitrator, in his/her discretion, to the prevailing party. Unless the arbitrator so awards attorneys' fees, each Member shall be responsible for its own attorneys' fees. (f) To the extent possible, the arbitration hearings shall be conducted on consecutive days, excluding Saturdays, Sundays and holidays, until the completion of the hearings. (g) In connection with any arbitration proceedings commenced hereunder, either Member shall have the right to join any third parties in such proceedings in order to resolve any other disputes, the facts of which are related to the matters submitted for arbitration hereunder. (h) The arbitrator shall render her/his decision(s) concerning the substantive issue(s) in dispute in writing. The written decision shall be sent to the parties no later than thirty (30) days following the last hearing date. (i) All hearings shall be concluded within ninety (90) days from the day the arbitrator is selected or appointed, unless the arbitrator determines that this deadline is impractical. (j) Notwithstanding the foregoing, in the event the dispute concerns a deadlock by the Board to deliver a notice of default under the Management Agreement or Development Agreement pursuant to Section 2.04(f) above, then all hearings shall be concluded and the arbitrator shall render his/her decision within thirty (30) days of the date of the Demand, unless the arbitrator determines that this deadline is impractical. (k) If any of the provisions relating to arbitration are not adhered to or complied with either party may petition the Presiding Judge of the Eighth Judicial District Court of the State of Nevada, for appropriate relief. (l) The award of the arbitrator may be entered as a judgment in a court of competent jurisdiction. All arbitration conducted under this Section 11.13 shall be in accordance with the rules of the American Arbitration Association to the extent such rules do not conflict with the procedures herein set forth. To the extent permitted by law, compliance with this Section 11.13 is a condition precedent to the commencement by any Member of a judicial proceeding arising out of any dispute relating directly or indirectly to this Agreement. ARTICLE XII DEFINITIONS 12.01 ADDITIONAL UNRECOVERED CONTRIBUTION ACCOUNT The term "ADDITIONAL UNRECOVERED CONTRIBUTION ACCOUNT" means with respect to each Member, the amount of money contributed by such Member to the capital of the Company pursuant to Section 3.05 (both on its own account and on behalf of a Non-Contributing Member), and DECREASED by the amount of money distributed (or deemed distributed) by the Company to such Member pursuant to Section 5.03(b) and 5.04(b). 12.02 AFFILIATE The term "AFFILIATE" means any person or entity which, directly or indirectly through one (1) or more intermediaries, controls or is controlled by or is under common control with another person or entity. The term "control" as used herein (including the terms "controlling," "controlled by," and "under common control with") means the possession, direct or indirect, of the power to (i) vote fifty-one percent (51%) or more of the outstanding voting securities of such person or entity, or (ii) otherwise direct management policies of such person by contract or otherwise. With respect to Holdings II, the term "Affiliate" also means any member of the family of Viola Sommer or any trust for the exclusive benefit of any of them. 12.03 AGREEMENT The term "AGREEMENT" means this Limited Liability Company Agreement of Aladdin Bazaar, LLC. 12.04 BUSINESS DAY The term "BUSINESS DAY" means any weekday excluding any legal holiday observed pursuant to United States federal law or Nevada state law or regulation. 12.05 CAPITAL ACCOUNT The term "CAPITAL ACCOUNT" means with respect to each Member the amount of money contributed by such Member to the capital of the Company, INCREASED by the aggregate fair market value at the time of contribution (as determined by the Board) of all property contributed by such Member to the capital of the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), the aggregate amount of all Net Profits allocated to such Member, and any and all items of gross income or gain specially allocated to such Member pursuant to Section 4.04, and DECREASED by the amount of money distributed to such Member by the Company (exclusive of any guaranteed payment within the meaning of Section 707(c) of the Code paid to such Member), the aggregate fair market value at the time of distribution (as determined by the Board) of all property distributed to such Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), the amount of any Net Losses charged to such Member, and any and all partnership and/or partner "nonrecourse deductions" specially allocated to such Member pursuant to Section 4.04. For purposes of Section 4.04 only, each Member's Capital Account shall be further adjusted in the manner set forth in the second and third sentences of Treasury Regulation Section 1.704-1(b)(2)(ii)(D) and shall be INCREASED for (i) such member's allocable share of minimum gain (as determined pursuant to Treasury Regulation Section 1.704-2(g)) that is attributable to the Capital Account and (ii) the amount such Member is unconditionally obligated to contribute to the capital of the Company pursuant to this Agreement. Each member's Capital Account shall be further adjusted in accordance with, and upon the occurrence of an event described in, Treasury Regulation Section 1.704-1(b)(2)(iv)(f) to reflect a revaluation of the Company's property on the Company's books. Such adjustments to the Members' Capital Accounts shall be made in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain or loss with respect to such revalued property. 12.06 CAPITAL CONTRIBUTION The term "CAPITAL CONTRIBUTION" means with respect to each Member the aggregate amount of any and all amounts credited to such Member's Unrecovered Contribution Account in accordance with the terms of this Agreement. 12.07 CASH FLOW The term "CASH FLOW" means the sum of any and all Ordinary Cash Flow and Extraordinary Cash Flow. 12.08 CODE The term "CODE" means the Internal Revenue Code of 1986, as heretofore and hereafter amended from time to time (and/or any corresponding provision of any superseding revenue law). 12.09 COMPANY The term "COMPANY" means the limited liability company created pursuant to this Agreement and the filing of a Certificate of Formation with the Delaware Secretary of State in accordance with the provisions of the Delaware Act. 12.10 CONDITIONS PRECEDENT The term "CONDITIONS PRECEDENT" means: (a) the approval by TrizecHahn and Holdings II, in each party's reasonable discretion, not to be unreasonably delayed, that the development of the Bazaar Improvements is economically feasible and desirable (including each party's judgment as to the progress of the leasing effort and pro forma rents achievable as of the date such judgment is made); (b) the parties have entered into an amendment pursuant to Section 3.06 above, which amendment is approved by the parties in each party's sole discretion; (c) the approval by the TrizecHahn and Holdings II, in each party's reasonable discretion, not to be unreasonably delayed, of the terms and conditions of the Site Work Agreement, the Development Agreement between Clark County and Holdings, the Lease, the Reciprocal Easement Agreement and the Parking Use Agreement; (d) the receipt of all necessary permits and governmental approvals to begin construction of the initial planned floor area; (e) the achievement of space leases or letters of intent to enter into space leases for a gross leasable area of the Bazaar Improvements sufficient to induce a construction lender (offering competitive market rate terms and conditions based upon market rate terms and conditions typically obtained by TrizecHahn or its Affiliates) to enter into a construction loan necessary to build the Bazaar Improvements, which construction loan shall cover at least seventy percent (70%) of the costs of the Bazaar Improvements; (f) the execution by each of Aladdin Gaming and the Company of separate contracts with the project contractor and the project architect/engineer, each reasonably satisfactory to the other party, which approval shall not be unreasonably withheld or delayed, upon economic terms in conformance with the proforma Development Budget attached hereto as EXHIBIT "F"; (g) the closing of a construction loan covering at least seventy percent (70%) of the costs of the Bazaar Improvements; and (h) evidence reasonably satisfactory to TrizecHahn and Holdings II that Aladdin Gaming or its Affiliates have received funds or irrevocable commitments from debt and equity sources in sufficient amounts to fund the construction of the initial planned floor area of the Redevelopment Aladdin and to operate same through the Opening Date. 12.11 DELAWARE ACT The term "DELAWARE ACT" means the Delaware Limited Liability Company Act (6 Del. C. Section 18-101, ET SEQ.), as hereafter amended from time to time. 12.12 EXTRAORDINARY CASH FLOW The term "EXTRAORDINARY CASH FLOW" means the cash proceeds (including, without limitation, any insurance proceeds, recoveries, damages and awards) realized by the Company, directly or indirectly, as a result of the occurrence of an Extraordinary Event, plus cash interest payments received with respect to such proceeds, DECREASED by the sum of (i) the amount of such proceeds applied by the Company to pay debts and liabilities of the Company which are then due and payable (inclusive of any guaranteed payment within the meaning of Section 707(c) of the Code paid to any Member); (ii) the amount of such proceeds used, set aside or committed by the Company or required to be used by any secured lender for the Bazaar Improvements for restoration and repair of any property in the event of damage or destruction to such property; (iii) any incidental or ancillary expenses, costs or liabilities incurred by the Company in effecting or obtaining any such Extraordinary Event, or the proceeds thereof (including, without limitation, attorneys' fees, expert witness' fees, accountants' fees, court costs, recording fees, transfer taxes and fees, appraisal costs and the like) all of which expenses, costs and liabilities shall be paid from the gross amount of such cash proceeds to the extent thereof; (iv) the payment of such other Company debts and liabilities as are determined in the reasonable discretion of TrizecHahn; and (v) a reserve, established in the reasonable discretion of TrizecHahn, for anticipated cash disbursements that will have to be made before additional cash receipts from third parties will provide funds therefor. 12.13 EXTRAORDINARY EVENT The term "EXTRAORDINARY EVENT" means the sale, financing, refinancing or other disposition, condemnation or acquisition by an entity with the power of eminent domain in lieu of formal condemnation proceedings, damage or destruction, of all or any portion of the Bazaar Improvements, but excluding any incidental sales or exchanges of tangible personal property and fixtures. 12.14 INSTITUTIONAL INVESTOR The term "INSTITUTIONAL INVESTOR" means any financial institution, pension fund, mutual fund, investment bank, or banking institution, which is a non-operating company with a net worth in excess of One Hundred Million Dollars ($100,000,000.00). 12.15 INTEREST The term "INTEREST" means in respect to any Member, all of such Member's right, title and interest in and to the Net Profits, Net Losses, Cash Flow, distributions and capital of the Company, and any and all other interests therein in accordance with the provision of this Agreement and the Delaware Act. 12.16 LIQUIDATION The term "LIQUIDATION" means, (i) in respect to the Company the earlier of the date upon which the Company is terminated under Section 708(b)(1) of the Code or the date upon which the Company ceases to be a going concern (even though it may continue in existence for the purpose of winding up its affairs, paying its debts and distributing any remaining balance to its Members), and (ii) in respect to a Member wherein the Company is not in Liquidation, means the liquidation of a Member's interest in the Company under Treasury Regulation Section 1.761-1(d). 12.17 MEMBER(S) The term "MEMBERS" means TrizecHahn and Holdings II; collectively; the term "MEMBER" means any one (1) of the Members. 12.18 NET PROFITS AND NET LOSSES The terms "NET PROFITS" and "NET LOSSES" mean, for each fiscal year or other period, an amount equal to the Company's taxable income or loss, as the case may be, for such year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss and deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss); provided, however, for purposes of computing such taxable income or loss, (i) such taxable income or loss shall be adjusted by any and all adjustments required to be made in order to maintain Capital Account balances in compliance with Treasury Regulation Sections 1.704-1(b) and (ii) any and all items of gross income or gain and partnership and/or partner "nonrecourse deductions" specially allocated to any Member pursuant to Section 4.04 shall not be taken into account in calculating such taxable income or loss. 12.19 ORDINARY CASH FLOW The term "ORDINARY CASH FLOW" means the amount, if any, of all cash receipts of the Company (exclusive of the proceeds of an Extraordinary Event; inclusive, however, of the proceeds from any rent or business interruption insurance) as of any applicable determination date in excess of the sum of (i) all cash disbursements (inclusive of any guaranteed payment within the meaning of Code Section 707(c) paid to any Member but exclusive of disbursements made from the proceeds of an Extraordinary Event and/or disbursements made to the Members in their capacities as such) of the Company prior to that date; and (ii) a reserve, established in the reasonable discretion of TrizecHahn for anticipated cash disbursements that will have to be made before additional cash receipts from third parties that are attributable to such Bazaar Improvements will provide the funds therefor. 12.20 PERCENTAGE INTEREST The term "PERCENTAGE INTEREST" means in respect to TrizecHahn, fifty percent (50%), and in respect to Holdings II, fifty percent (50%); subject to adjustment as provided in this Agreement. 12.21 PREFERRED RETURN The term "PREFERRED RETURN" means, with respect to each Member, an amount calculated like interest and accrued on the sum of the balances standing from time to time in such Member's Unrecovered Contribution Account and Additional Unrecovered Contribution Account, if any, at a rate equal to twelve percent (12%) per annum, compounded monthly, and determined on a cumulative basis. For financial and income tax reporting purposes, neither accrual nor payment of the Preferred Return shall be treated as an expense of the Company or as a guaranteed payment under Section 707(c) of the Code. 12.22 TREASURY REGULATION The term "TREASURY REGULATION" means any proposed, temporary, and/or final federal income tax regulation promulgated by the United States Department of the Treasury as heretofore and hereafter amended from time to time (and/or any corresponding provisions of any superseding revenue law and/or regulation). 12.23 TRIZECHAHN INVESTMENT The term "TRIZECHAHN INVESTMENT" means the sum of Thirty Million Dollars ($30,000,000), as reduced by the amount of all capital contributions made from time to time by TrizecHahn to the Company. Once the TrizecHahn Investment has been contributed to the Company (or such lesser amount in the event that the full TrizecHahn Investment is not needed to complete construction of the Bazaar Improvements), then the TrizecHahn Investment shall be reduced to zero (0) with the intent that TrizecHahn's obligation to contribute the TrizecHahn Investment shall not be a revolving obligation. 12.24 UNRECOVERED CONTRIBUTION ACCOUNT The term "UNRECOVERED CONTRIBUTION ACCOUNT" means with respect to each Member, the amount of money and/or the agreed upon fair market value (as mutually determined by the Members) of any property contributed (or deemed contributed) by such Member to the capital of the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to pursuant to Section 752 of the Code), and DECREASED by the amount of money distributed (or deemed distributed) by the Company to such Member pursuant to Section 5.02(b) and Section 5.04(c) and the agreed upon fair market value (as mutually determined by the Members) of any property distributed to such Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code) pursuant to Section 5.02(b) and Section 5.04(c). Notwithstanding the foregoing, in no event shall property be contributed by the Members to the Company (other than the Ground lease) or distributed by the Company to the Members without the prior written consent of all Members. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. "TrizecHahn" TH BAZAAR CENTERS INC., a Delaware corporation By: --------------------------------- Name: ---------------------------- Title: --------------------------- By: --------------------------------- Name: ---------------------------- Title: --------------------------- "Holdings II" ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company By: ALADDIN MANAGEMENT CORPORATION, its Manager By: ----------------------------- Viola Sommer President By: ----------------------------- Jack Sommer Vice President By their execution hereof, Aladdin Holdings and the Sommer Trust consent and agree to be bound by the obligations contained in Section 2.14(h) and Section 3.06 (as to Aladdin Holdings only and not the Sommer Trust) of this Agreement. ALADDIN HOLDINGS, LLC, a Delaware limited liability company By: ALADDIN MANAGEMENT CORPORATION, its Manager By: /s/ Viola Sommer ----------------------------- Viola Sommer President By: /s/ Jack Sommer ----------------------------- Jack Sommer Vice President TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER By: /s/ Viola Sommer ---------------------------------- Viola Sommer, as Trustee and not an individual By: /s/ Eugene Landsberg ---------------------------------- Eugene Landsberg, as Trustee and not an individual By: /s/ Jack Sommer ---------------------------------- Jack Sommer, as Trustee and not an individual EXHIBIT "A" MASTER DEVELOPMENT SITE PLANS AND RENDERINGS EXHIBIT "B" DEVELOPMENT PLAN EXHIBIT "C" DEVELOPMENT AGREEMENT EXHIBIT "D" MANAGEMENT AGREEMENT EXHIBIT "E" PRELIMINARY CONSTRUCTION PROFORMA AND PLANS AND DRAWINGS FOR THE REDEVELOPED ALADDIN [To Be Attached] EXHIBIT "F" PRE-DEVELOPMENT BUDGET [To Be Attached] EXHIBIT "G" GUARANTY OF TRIZECHAHN CENTERS INC. ----------------------------------- 1. GUARANTY. In consideration of the covenants, terms and conditions of the Limited Liability Company Agreement ("AGREEMENT") of Aladdin Bazaar, LLC, a Delaware limited liability company ("COMPANY") to which this Guaranty is attached, and as a material inducement to Aladdin Holdings, LLC, a Delaware limited liability company ("HOLDINGS"), to enter into the Agreement, TrizecHahn Centers Inc., a California corporation ("GUARANTOR"), hereby absolutely, presently, continually, unconditionally, irrevocably and jointly and severally guarantees to and for the benefit of Holdings and the Company that TH Bazaar Centers Inc., a Delaware corporation ("TRIZECHAHN") shall perform its obligation to contribute capital to the Company pursuant to the Agreement. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. 2. STANDARD PROVISIONS. A separate action may be brought or prosecuted against Guarantor whether or not the action is brought or prosecuted against TrizecHahn. If TrizecHahn defaults under the Agreement, Holdings or the Company may proceed immediately against Guarantor or TrizecHahn, or both, or Holdings or the Company may enforce against Guarantor or TrizecHahn, or both, any rights that it has under the Agreement or against Guarantor pursuant to this Guaranty. If the Agreement terminates Holdings may enforce any remaining rights thereunder against Guarantor without giving previous notice to TrizecHahn or Guarantor, and without making any demand on either of them. This Guaranty shall not be affected by Holdings' failure or delay to enforce any of its rights hereunder or under the Agreement. TrizecHahn hereby waives notice of or the giving of its consent to any amendments which may hereafter be made to the terms of the Agreement, and this Guaranty shall guarantee the performance of the Agreement as amended, or as the same may be assigned from time to time. Guarantor waives the right to require Holdings or the Company to (i) proceed against TrizecHahn; (ii) proceed against or exhaust any security that Holdings or the Company holds from TrizecHahn; or (iii) pursue any remedy in Holdings' or the Company's power. Guarantor waives any defense by reason of any disability of TrizecHahn, the statute of limitations and any other defense based on the termination of TrizecHahn's liability from any cause. Until all of TrizecHahn's obligations to the Company and Holdings have been discharged in full, Guarantor shall have no right of subrogation against TrizecHahn. Guarantor waives its right to enforce any remedies that Holdings or the Company now has, or later may have, against TrizecHahn. Guarantor waives any right to participate in any security now or later held by Holdings or the Company. Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty, and waives all notices of existence, creation, or incurring of new or additional obligations from TrizecHahn to the Company. If Holdings disposes of its interest in the Agreement, "Holdings," as used in this Guaranty, shall mean Holdings' successors in interest and assigns. If Holdings is required to enforce Guarantor's obligations by legal proceedings, Guarantor shall pay to Holdings all costs incurred, including, without limitation, Holdings' reasonable attorneys' fees and all costs and other expenses incurred in any collection or attempted collection or in any negotiations relative to the obligations hereby guaranteed, or in enforcing this Guaranty against the undersigned, individually and jointly. This Guaranty will continue unchanged by any bankruptcy, reorganization or insolvency of the TrizecHahn or any successor or assignee thereof or by any disaffirmance or abandonment by a trustee of TrizecHahn. Guarantor's obligations under this Guaranty may not be assigned and shall be binding upon Guarantor's heirs and successors. This Guaranty shall be governed by the laws of, and may be enforced in the courts of, the State of Nevada. 3. TERMINATION OF GUARANTY. This Guaranty shall automatically terminate, and shall be of no further force or effect, upon the date that the Company first obtains financing for the Bazaar Improvements which does not require a guarantee by either The Trust under Article Sixth u/w/o Sigmund Sommer or Guarantor, and the Company's lender fully and unconditionally releases all guarantors thereunder. 4. NOTICES. Any notice to Guarantor or to the Holdings given under this Guaranty shall be delivered in the manner specified in the Agreement for the delivery of notices to the Holdings, and if to Guarantor, as follows: Guarantor: Douglas L. Hageman, Esq. Sr. Vice President, General Counsel TrizecHahn Centers 4350 La Jolla Village Drive, Suite 400 San Diego, California 92122 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of this _____ day of ____________, 1997. "Guarantor" TRIZECHAHN CENTERS INC., a Delaware corporation By: --------------------------------- Name: ---------------------------- Title: --------------------------- By: --------------------------------- Name: ---------------------------- Title: --------------------------- EXHIBIT "H" GUARANTY OF TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER -------------------- 1. GUARANTY. In consideration of the covenants, terms and conditions of the Limited Liability Company Agreement ("AGREEMENT") of Aladdin Bazaar, LLC, a Delaware limited liability company ("COMPANY") to which this Guaranty is attached, and as a material inducement to TH Bazaar Centers Inc., a Delaware corporation ("TRIZECHAHN"), to enter into the Agreement, The Trust under Article Sixth u/w/o Sigmund Sommer ("GUARANTOR"), hereby absolutely, presently, continually, unconditionally, irrevocably and jointly and severally guarantees to and for the benefit of TrizecHahn and the Company that Aladdin Bazaar Holdings, LLC, a Nevada limited liability company ("HOLDINGS") shall perform its obligation to contribute capital to the Company pursuant to the Agreement. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. 2. STANDARD PROVISIONS. A separate action may be brought or prosecuted against Guarantor whether or not the action is brought or prosecuted against Holdings. If Holdings defaults under the Agreement, TrizecHahn or the Company may proceed immediately against Guarantor or Holdings, or both, or TrizecHahn or the Company may enforce against Guarantor or Holdings, or both, any rights that it has under the Agreement or against Guarantor pursuant to this Guaranty. If the Agreement terminates TrizecHahn may enforce any remaining rights thereunder against Guarantor without giving previous notice to Holdings or Guarantor, and without making any demand on either of them. This Guaranty shall not be affected by TrizecHahn's failure or delay to enforce any of its rights hereunder or under the Agreement. Guarantor hereby waives notice of or the giving of its consent to any amendments which may hereafter be made to the terms of the Agreement, and this Guaranty shall guarantee the performance of the Agreement as amended, or as the same may be assigned from time to time. Guarantor waives the right to require TrizecHahn or the Company to (i) proceed against Holdings; (ii) proceed against or exhaust any security that TrizecHahn or the Company holds from Holdings; or (iii) pursue any remedy in TrizecHahn's or the Company's power. Guarantor waives any defense by reason of any disability of Holdings, the statute of limitations and any other defense based on the termination of Holdings' liability from any cause. Until all of Holdings' obligations to the Company and TrizecHahn have been discharged in full, Guarantor shall have no right of subrogation against Holdings. Guarantor waives its right to enforce any remedies that TrizecHahn or the Company now has, or later may have, against Holdings. Guarantor waives any right to participate in any security now or later held by TrizecHahn or the Company. Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty, and waives all notices of existence, creation, or incurring of new or additional obligations from Holdings to the Company. If TrizecHahn disposes of its interest in the Agreement, "TrizecHahn," as used in this Guaranty, shall mean TrizecHahn's successors in interest and assigns. If TrizecHahn is required to enforce Guarantor's obligations by legal proceedings, Guarantor shall pay to TrizecHahn all costs incurred, including, without limitation, TrizecHahn's reasonable attorneys' fees and all costs and other expenses incurred in any collection or attempted collection or in any negotiations relative to the obligations hereby guaranteed, or in enforcing this Guaranty against the undersigned, individually and jointly. This Guaranty will continue unchanged by any bankruptcy, reorganization or insolvency of Holdings or any successor or assignee thereof or by any disaffirmance or abandonment by a trustee of Holdings. Guarantor's obligations under this Guaranty may not be assigned and shall be binding upon Guarantor's heirs and successors. This Guaranty shall be governed by the laws of, and may be enforced in the courts of, the State of Nevada. 3. TERMINATION OF GUARANTY. This Guaranty shall automatically terminate, and shall be of no further force or effect, upon the date that the Company first obtains financing for the Bazaar Improvements which does not require a guarantee by either TrizecHahn Centers Inc., a California corporation, or Guarantor, and the Company's lender fully and unconditionally releases all guarantors thereunder. 4. NOTICES. Any notice to Guarantor or to the TrizecHahn given under this Guaranty shall, in the case of TrizecHahn, be delivered in the manner specified in the Agreement for the delivery of notices to the TrizecHahn, and if to Guarantor, as follows: Guarantor: Mr. Ronald B. Dictrow c/o Sigmund Sommer Properties 280 Park Avenue New York, NY 10017 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of this _____ day of ____________, 1997. "Guarantor" TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER By: ---------------------------------- Viola Sommer, as Trustee and not an individual By: ---------------------------------- Eugene Landsberg, as Trustee and not an individual By: ---------------------------------- Jack Sommer, as Trustee and not an individual EXHIBIT "I" GUARANTY OF ALADDIN HOLDINGS LLC 1. GUARANTY. In consideration of the covenants, terms and conditions of the Limited Liability Company Agreement ("AGREEMENT") of Aladdin Bazaar, LLC, a Delaware limited liability company ("COMPANY") to which this Guaranty is attached, and as a material inducement to TH Bazaar Centers Inc., a Delaware corporation ("TRIZECHAHN"), to enter into the Agreement, Aladdin Holdings, LLC, a Delaware limited liability company ("GUARANTOR"), hereby absolutely, presently, continually, unconditionally, irrevocably and jointly and severally guarantees to and for the benefit of TrizecHahn and the Company that Aladdin Bazaar Holdings, LLC, a Nevada limited liability company ("HOLDINGS") shall perform its obligation to reimburse TrizecHahn its share of Predevelopment Costs pursuant to Section 3.06 of the Agreement. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. 2. STANDARD PROVISIONS. A separate action may be brought or prosecuted against Guarantor whether or not the action is brought or prosecuted against Holdings. If Holdings defaults under the Agreement, TrizecHahn or the Company may proceed immediately against Guarantor or Holdings, or both, or TrizecHahn or the Company may enforce against Guarantor or Holdings, or both, any rights that it has under the Agreement or against Guarantor pursuant to this Guaranty. If the Agreement terminates TrizecHahn may enforce any remaining rights thereunder against Guarantor without giving previous notice to Holdings or Guarantor, and without making any demand on either of them. This Guaranty shall not be affected by TrizecHahn's failure or delay to enforce any of its rights hereunder or under the Agreement. Guarantor hereby waives notice of or the giving of its consent to any amendments which may hereafter be made to the terms of the Agreement, and this Guaranty shall guarantee the performance of the Agreement as amended, or as the same may be assigned from time to time. Guarantor waives the right to require TrizecHahn or the Company to (i) proceed against Holdings; (ii) proceed against or exhaust any security that TrizecHahn or the Company holds from Holdings; or (iii) pursue any remedy in TrizecHahn's or the Company's power. Guarantor waives any defense by reason of any disability of Holdings, the statute of limitations and any other defense based on the termination of Holdings' liability from any cause. Until all of Holdings' obligations to the Company and TrizecHahn have been discharged in full, Guarantor shall have no right of subrogation against Holdings. Guarantor waives its right to enforce any remedies that TrizecHahn or the Company now has, or later may have, against Holdings. Guarantor waives any right to participate in any security now or later held by TrizecHahn or the Company. Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty, and waives all notices of existence, creation, or incurring of new or additional obligations from Holdings to the Company. If TrizecHahn disposes of its interest in the Agreement, "TrizecHahn," as used in this Guaranty, shall mean TrizecHahn's successors in interest and assigns. If TrizecHahn is required to enforce Guarantor's obligations by legal proceedings, Guarantor shall pay to TrizecHahn all costs incurred, including, without limitation, TrizecHahn's reasonable attorneys' fees and all costs and other expenses incurred in any collection or attempted collection or in any negotiations relative to the obligations hereby guaranteed, or in enforcing this Guaranty against the undersigned, individually and jointly. This Guaranty will continue unchanged by any bankruptcy, reorganization or insolvency of Holdings or any successor or assignee thereof or by any disaffirmance or abandonment by a trustee of Holdings. Guarantor's obligations under this Guaranty may not be assigned and shall be binding upon Guarantor's heirs and successors. This Guaranty shall be governed by the laws of, and may be enforced in the courts of, the State of Nevada. 3. TERMINATION OF GUARANTY. This Guaranty shall automatically terminate, and shall be of no further force or effect, upon the date that the Company first obtains financing for the Bazaar Improvements which does not require a guarantee by either TrizecHahn Centers Inc., a California corporation, or Guarantor, and the Company's lender fully and unconditionally releases all guarantors thereunder. 4. NOTICES. Any notice to Guarantor or to the TrizecHahn given under this Guaranty shall, in the case of TrizecHahn, be delivered in the manner specified in the Agreement for the delivery of notices to the TrizecHahn, and if to Guarantor, as follows: Guarantor: Aladdin Holdings LLC c/o Mr. Jack Sommer 2810 W. Charleston Boulevard, Suite 58 Las Vegas, Nevada 89102 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of this _____ day of ____________, 1997. "Guarantor" ALADDIN HOLDINGS, LLC, a Delaware limited liability company By: ALADDIN MANAGEMENT CORPORATION, its Manager By: ----------------------------- Viola Sommer President By: ----------------------------- Jack Sommer Vice President LIMITED LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, 15 U.S.C. Section 15b ET SEQ., AS AMENDED (THE "FEDERAL ACT"), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL ACT. IN ADDITION, THE ISSUANCE OF THIS SECURITY HAS NOT BEEN QUALIFIED UNDER THE DELAWARE SECURITIES ACT, THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968 OR ANY OTHER STATE SECURITIES LAWS (COLLECTIVELY, THE "STATE ACTS"), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION PROVISIONS OF THE STATE ACTS. IT IS UNLAWFUL TO CONSUMMATE A SALE OR OTHER TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN TO, OR TO RECEIVE ANY CONSIDERATION THEREFOR FROM, ANY PERSON OR ENTITY WITHOUT THE OPINION OF COUNSEL FOR THE COMPANY THAT THE PROPOSED SALE OR OTHER TRANSFER OF THIS SECURITY DOES NOT AFFECT THE AVAILABILITY TO THE COMPANY OF SUCH EXEMPTIONS FROM REGISTRATION AND QUALIFICATION, AND THAT SUCH PROPOSED SALE OR OTHER TRANSFER IS IN COMPLIANCE WITH ALL APPLICABLE STATE AND FEDERAL SECURITIES LAWS. THE TRANSFER OF THIS SECURITY IS FURTHER RESTRICTED UNDER THE TERMS OF THE LIMITED LIABILITY COMPANY AGREEMENT GOVERNING THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE COMPANY. LIMITED LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC TABLE OF CONTENTS Page ARTICLE I FORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.01 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.02 Names and Addresses. . . . . . . . . . . . . . . . . . . . . . . .2 1.03 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . .3 1.04 Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . . . . .3 1.05 Term of Company. . . . . . . . . . . . . . . . . . . . . . . . . .4 ARTICLE II MANAGEMENT OF THE COMPANY. . . . . . . . . . . . . . . . . . . .4 2.01 Development Plan . . . . . . . . . . . . . . . . . . . . . . . . .4 2.02 Day to Day Operations. . . . . . . . . . . . . . . . . . . . . . .4 2.03 Board of Managers. . . . . . . . . . . . . . . . . . . . . . . . .5 2.04 Authority of the Board . . . . . . . . . . . . . . . . . . . . . .8 2.05 Operating Budget . . . . . . . . . . . . . . . . . . . . . . . . .9 2.06 Development Fees . . . . . . . . . . . . . . . . . . . . . . . . 11 2.07 Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . 11 2.08 Leasing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.09 Liability and Indemnity. . . . . . . . . . . . . . . . . . . . . 12 2.10 Designation of Officers. . . . . . . . . . . . . . . . . . . . . 12 2.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.12 Treatment of Fees and Reimbursements . . . . . . . . . . . . . . 13 2.13 Approval Rights Over Related Aladdin Development . . . . . . . . 13 2.14 Holdings II's Representations and Warranties . . . . . . . . . . 13 2.15 TrizecHahn's Representations and Warranties. . . . . . . . . . . 18 ARTICLE III MEMBERS' CONTRIBUTIONS TO COMPANY. . . . . . . . . . . . . . . 19 3.01 Capital Contributions for Pre-Development Costs. . . . . . . . . 19 3.02 Additional Capital Contributions . . . . . . . . . . . . . . . . 20 3.03 Construction Financing . . . . . . . . . . . . . . . . . . . . . 21 3.04 Cash Flow Deficit Contribution . . . . . . . . . . . . . . . . . 22 3.05 Remedy For Failure to Contribute Capital . . . . . . . . . . . . 22 3.06 Failure to Satisfy Conditions Precedent. . . . . . . . . . . . . 24 3.07 Capital Contributions in General . . . . . . . . . . . . . . . . 26 ARTICLE IV ALLOCATION OF PROFITS AND LOSSES . . . . . . . . . . . . . . . 27 4.01 Net Losses from Operations Prior to Dilution . . . . . . . . . . 27 4.02 Net Losses from Extraordinary Events Prior to Dilution . . . . . 27 4.03 Net Profits from Operations Prior to Dilution. . . . . . . . . . 28 4.04 Net Profits From Extraordinary Events Prior to Dilution. . . . . 28 4.05 Net Losses from Operations Following Dilution. . . . . . . . . . 29 4.06 Net Losses from Extraordinary Events Following Dilution. . . . . 29 4.07 Net Profits from Operations Following Dilution . . . . . . . . . 30 4.08 Net Profits From Extraordinary Events Following Dilution . . . . 31 4.09 Special Allocations. . . . . . . . . . . . . . . . . . . . . . . 31 4.10 Curative Allocations . . . . . . . . . . . . . . . . . . . . . . 32 4.11 Differing Tax Basis; Tax Allocation. . . . . . . . . . . . . . . 33 ARTICLE V DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 33 5.01 Distribution of Ordinary Cash Flow . . . . . . . . . . . . . . . 33 5.02 Distribution of Extraordinary Cash Flow. . . . . . . . . . . . . 33 5.03 Distribution of Ordinary Cash Flow Following Dilution. . . . . . 34 5.04 Distribution of Extraordinary Cash Flow Following Dilution . . . 34 5.05 Limitations on Distributions . . . . . . . . . . . . . . . . . . 35 5.06 In-Kind Distribution . . . . . . . . . . . . . . . . . . . . . . 35 6.01 Limitations on Transfer. . . . . . . . . . . . . . . . . . . . . 35 6.02 Permitted Transfers. . . . . . . . . . . . . . . . . . . . . . . 35 6.03 Right of First Offer/Right of First Refusal. . . . . . . . . . . 37 6.04 Regulatory and Lender Prohibitions . . . . . . . . . . . . . . . 39 6.05 Admission of Substituted Members . . . . . . . . . . . . . . . . 39 6.06 Election; Allocations Between Transferor and Transferee. . . . . 40 6.07 Partition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.08 Waiver of Withdrawal and Purchase Rights . . . . . . . . . . . . 40 ARTICLE VII MARKETING AND SALE OF THE BAZAAR IMPROVEMENTS. . . . . . . . . 40 7.01 Right to Market During Years Five Through Ten. . . . . . . . . . 40 7.02 Right to Require Sale After Year Ten . . . . . . . . . . . . . . 42 7.03 General Sales Procedures . . . . . . . . . . . . . . . . . . . . 42 ARTICLE VIII DEFAULT BUY/SELL AGREEMENT . . . . . . . . . . . . . . . . . . 43 8.01 Buy/Sell Events. . . . . . . . . . . . . . . . . . . . . . . . . 43 8.02 Rights Arising From a Buy/Sell Event . . . . . . . . . . . . . . 44 8.03 Determination of Purchase Price. . . . . . . . . . . . . . . . . 44 8.04 Non-Defaulting Member's Option . . . . . . . . . . . . . . . . . 45 8.05 Closing of Purchase and Sale . . . . . . . . . . . . . . . . . . 46 8.06 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . 46 8.07 Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 8.08 Repayment of Member Loans. . . . . . . . . . . . . . . . . . . . 47 8.09 Voting Rights Following Buy/Sell Event . . . . . . . . . . . . . 47 ARTICLE IX DISSOLUTION AND WINDING UP OF THE COMPANY. . . . . . . . . . . 47 9.01 Events Causing Dissolution of the Company. . . . . . . . . . . . 47 9.02 Winding Up of the Company. . . . . . . . . . . . . . . . . . . . 48 9.03 Negative Capital Account Restoration . . . . . . . . . . . . . . 48 ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS . . . . . . . . . 49 10.01 Company Books. . . . . . . . . . . . . . . . . . . . . . . . . . 49 10.02 Delivery of Records; Inspection. . . . . . . . . . . . . . . . . 49 10.03 Reports and Tax Information. . . . . . . . . . . . . . . . . . . 49 10.04 Company Tax Elections; Tax Controversies . . . . . . . . . . . . 50 10.05 Accounting and Fiscal Year . . . . . . . . . . . . . . . . . . . 50 10.06 Confidentiality of Information . . . . . . . . . . . . . . . . . 50 ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 50 11.01 Investment Interest; Nature of Investment. . . . . . . . . . . . 50 11.02 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 11.03 No Assignments; Binding Effect . . . . . . . . . . . . . . . . . 51 11.04 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 51 11.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 11.06 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 11.07 Preservation of Intent . . . . . . . . . . . . . . . . . . . . . 52 11.08 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 52 11.09 Certain Rules of Construction. . . . . . . . . . . . . . . . . . 52 11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 53 11.11 Certain Other Matters. . . . . . . . . . . . . . . . . . . . . . 53 11.12 Company Intended Solely for Tax Purposes.. . . . . . . . . . . . 53 11.13 Arbitration of Disputes. . . . . . . . . . . . . . . . . . . . . 53 ARTICLE XII DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 55 12.01 Additional Unrecovered Contribution Account. . . . . . . . . . . 55 12.02 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 12.03 Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 12.04 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . 56 12.05 Capital Account. . . . . . . . . . . . . . . . . . . . . . . . . 56 12.06 Capital Contribution . . . . . . . . . . . . . . . . . . . . . . 57 12.07 Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 12.08 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 12.09 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 12.10 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 57 12.11 Delaware Act . . . . . . . . . . . . . . . . . . . . . . . . . . 58 12.12 Extraordinary Cash Flow. . . . . . . . . . . . . . . . . . . . . 58 12.13 Extraordinary Event. . . . . . . . . . . . . . . . . . . . . . . 58 12.14 Institutional Investor . . . . . . . . . . . . . . . . . . . . . 58 12.15 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 12.16 Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . 59 12.17 Member(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 12.18 Net Profits and Net Losses . . . . . . . . . . . . . . . . . . . 59 12.19 Ordinary Cash Flow . . . . . . . . . . . . . . . . . . . . . . . 59 12.20 Percentage Interest. . . . . . . . . . . . . . . . . . . . . . . 60 12.21 Preferred Return . . . . . . . . . . . . . . . . . . . . . . . . 60 12.22 Treasury Regulation. . . . . . . . . . . . . . . . . . . . . . . 60 12.23 TrizecHahn Investment. . . . . . . . . . . . . . . . . . . . . . 60 12.24 Unrecovered Contribution Account . . . . . . . . . . . . . . . . 60 SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 EXHIBITS: - --------- EXHIBIT "A" MASTER DEVELOPMENT SITE PLANS AND RENDERINGS EXHIBIT "B" DEVELOPMENT PLAN EXHIBIT "C" DEVELOPMENT AGREEMENT EXHIBIT "D" MANAGEMENT AGREEMENT EXHIBIT "E" PRELIMINARY CONSTRUCTION PROFORMA AND PLANS AND DRAWINGS FOR THE REDEVELOPED ALADDIN EXHIBIT "F" PRE-DEVELOPMENT BUDGET EXHIBIT "G" GUARANTY OF TRIZECHAHN CENTERS INC. EXHIBIT "H" GUARANTY OF TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER EXHIBIT "I" GUARANTY OF ALADDIN HOLDINGS, LLC GLOSSARY OF TERMS Page Additional Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Additional Unrecovered Contribution Account . . . . . . . . . . . . . . 55 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Aladdin Holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Aladdin Hotel and Casino. . . . . . . . . . . . . . . . . . . . . . . . .1 Appraisal Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Appraised Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Audrie/Harmon Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Audrie/Harmon Termination Notice. . . . . . . . . . . . . . . . . . . . 25 Bazaar Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Buy/Sell Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Capital Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . 57 Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Competing Retail Project. . . . . . . . . . . . . . . . . . . . . . . . .3 Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . 57 Construction Schedule . . . . . . . . . . . . . . . . . . . . . . . . . .4 Contributing Member . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Contribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Control Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Control Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Default Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Defaulting Member . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Delaware Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Delinquent Contribution . . . . . . . . . . . . . . . . . . . . . . . . 22 Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Demanding Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Development Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 11 Development Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Development Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Development Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Dilution Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Existing Entitlements . . . . . . . . . . . . . . . . . . . . . . . . . 14 Extraordinary Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . 58 Extraordinary Event . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Federal Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 First Offering Notice . . . . . . . . . . . . . . . . . . . . . . . . . 37 First Sale Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Hard Construction Costs . . . . . . . . . . . . . . . . . . . . . . . . 11 Holdings II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Holdings II Primary Individuals . . . . . . . . . . . . . . . . . . . . 14 Holdings II's best knowledge. . . . . . . . . . . . . . . . . . . . . . 13 Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Initial Sale Period . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Institutional Investor. . . . . . . . . . . . . . . . . . . . . . . . . 58 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Leasing Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 11 Master Development. . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Master Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Member Capital Obligation Guarantee . . . . . . . . . . . . . . . . . . 21 Member Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Net Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Net Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Non-Competition Area. . . . . . . . . . . . . . . . . . . . . . . . . . .3 Non-Competition Period. . . . . . . . . . . . . . . . . . . . . . . . . .3 Non-Contributing Member . . . . . . . . . . . . . . . . . . . . . . . . 22 Non-Defaulting Member . . . . . . . . . . . . . . . . . . . . . . . . . 44 Non-Demanding Member. . . . . . . . . . . . . . . . . . . . . . . . . . 53 Non-Selling Member. . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Non-Transferring Member . . . . . . . . . . . . . . . . . . . . . . . . 37 Offered Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Opening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Operating Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Ordinary Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Other Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Parking Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Permitted Transferees . . . . . . . . . . . . . . . . . . . . . . . . . 35 Plans and Specifications. . . . . . . . . . . . . . . . . . . . . . . . .4 Pre-Approved Transferee . . . . . . . . . . . . . . . . . . . . . . . . 39 Predevelopment Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 20 Preferred Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Price Determination Notice. . . . . . . . . . . . . . . . . . . . . . . 44 Prohibited Transferee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Project Sale Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Redeveloped Aladdin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Remaining Entitlements . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Sales Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Satisfaction Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Second Offering Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Selling Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Selling Member's Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 41 Site Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Sommer Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 State Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Third Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Transferring Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Treasury Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 TrizecHahn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 TrizecHahn Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 TrizecHahn's best knowledge. . . . . . . . . . . . . . . . . . . . . . . . . 18 TrizecHahn's Primary Individuals . . . . . . . . . . . . . . . . . . . . . . 18 Unrecovered Contribution Account . . . . . . . . . . . . . . . . . . . . . . 60 EX-10.31 25 1ST AMEND TO THE LIMITED LIABILITY AGREEMENT FIRST AMENDMENT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF ALADDIN BAZAAR, LLC THIS FIRST AMENDMENT (the "Amendment") is entered into effective as of October 16, 1997, by and between TH BAZAAR CENTERS INC., a Delaware corporation ("TrizecHahn"), and ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company ("Holdings II"). The capitalized terms used herein shall have the respective meanings assigned to such terms in the Limited Liability Company Agreement (the "Agreement") of ALADDIN BAZAAR, LLC (the "Company"), dated as of September 3, 1997, between TrizecHahn and Holdings II. R E C I T A L S : A. Pursuant to Section 3.06 of the Agreement, TrizecHahn and Holdings II agreed to enter into good faith negotiations regarding a number of issues which were unresolved on the date the Agreement was executed. The parties have since completed such negotiations and agree to amend the Agreement as follows: 1. AGREEMENT REGARDING COMMITMENT TO FUND AND CONSTRUCT THE CENTER. Holdings II has requested that TrizecHahn be required to commit as of the date it is provided with a Satisfaction Notice (as such term is modified below), irrevocably and subject only to the TrizecHahn Investment Conditions (defined below) to (a) contribute to the Company the TrizecHahn Investment as and when required by the terms of the Construction Loan; (b) commence construction of the Center by May 31, 1998 (or on such later date mutually agreed by the parties as being appropriate in order to complete construction of the Center contemporaneously with the completion of the Aladdin Hotel and Casino, in either case the "Construction Commencement Date"); and (c) together with the Sommer Trust, execute such guarantees as are necessary (pursuant to the terms of the Agreement) to obtain construction financing for the Center at competitive market rate terms and conditions and with no pre-leasing requirements. The Satisfaction Notice shall include, in addition to the requirements set forth in Section 3.06 of the Agreement, reasonable supporting evidence that the additional Conditions Precedent added as Section 12.10(i) through (k), inclusive, pursuant to Paragraph 3 of this Amendment have been satisfied, which shall include, but not be limited to, true, correct and complete copies of all agreements between Aladdin Gaming, LLC ("Gaming") and Planet Hollywood International, Inc. ("PH"), and each of their Affiliates. In addition, the Satisfaction Notice may only be validly given if Holdings II has previously delivered to TrizecHahn a notice ("Pre-Satisfaction Notice") at least fifteen (15) days prior to the date of the Satisfaction Notice, but not more than thirty (30) days prior to the date of the Satisfaction Notice. The Pre-Satisfaction Notice shall state that Holdings II reasonably expects to deliver to TrizecHahn a Satisfaction Notice within such fifteen (15) day period (I.E., the period beginning sixteen (16) days after the date of the Pre-Satisfaction Notice and ending thirty (30) days after such date). In consideration of the provisions set forth below, TrizecHahn hereby agrees to either (i) commit to the obligations set forth in the preceding sentence or (ii) if TrizecHahn does not elect to commit to such obligations or if TrizecHahn fails to respond within five (5) business days of being furnished with the Satisfaction Notice (as provided in the Agreement, and modified by the preceding sentence of this Amendment), time being of the essence as to such response, then the provisions of Section 3.06 of the Agreement shall apply (I.E., the Company shall promptly reimburse TrizecHahn for all of its Predevelopment Costs, the Agreement shall automatically become null and void and the parties and their Affiliates shall have no further rights, duties or obligations to each other whatsoever, other than the reimbursement provisions provided in Section 3.06 of the Agreement). The "TrizecHahn Investment Conditions" are (a) the Company has obtained and is prepared to immediately close the construction loan identified in the Satisfaction Notice by Holdings II, with no conditions to draw against such loan other than TrizecHahn's commitment to contribute the TrizecHahn Investment; (b) all equity and debt financing necessary to construct the Aladdin Hotel and Casino, the Other Parking and the cost of the Parking Facility allocable to Aladdin Hotel and Casino, and to operate the same through the Opening have closed, no material default is currently pending, and construction is on schedule and within budget in all material respects; and (c) TrizecHahn has approved in its reasonable discretion, all material agreements, including the final forms of the Site Work Agreement, the Development Agreement between Clark County and Holdings (if such agreement is entered into), the Lease, the Subordinated Debt (described below), the Reciprocal Easement Agreement, the Parking Use Agreement and all loan documents. If TrizecHahn elects to commit to the obligations set forth in the first sentence of Paragraph 1 above, then notwithstanding anything in Article V to the contrary all, distributions of (i) Ordinary Cash Flow and/or (ii) Extraordinary Cash Flow shall be made first in the following of priority: (a) First, to TrizecHahn to the extent of TrizecHahn's accrued and unpaid Priority Preferred Return (defined below); (b) Second, to TrizecHahn to the extent of TrizecHahn's Priority Unrecovered Contribution Account (defined below); and (c) Thereafter, to the Members in accordance with Article V of the Agreement. The term "Priority Preferred Return" means, with respect to TrizecHahn only, an amount calculated like interest and accrued on the sum of the balance standing from time to time in TrizecHahn's Priority Unrecovered Contribution Account (defined below), if any, at a rate equal to twenty percent (20%) per annum, compounded monthly, and determined on a cumulative basis. For financial and income tax reporting purposes, neither accrual nor payment of the Priority Preferred Return shall be treated as an expense of the Company or as a guaranteed payment under Section 707(c) of the Code. The term "Priority Unrecovered Contribution Account" means with respect to TrizecHahn only, the difference between (x) the amount of capital contributions made by TrizecHahn to the Company (whether otherwise attributable to TrizecHahn's Unrecovered Contribution Account or Additional Unrecovered Contribution Account under the Agreement), and (y) Holdings II's Unrecovered Contribution Account in the amount of Ten Million Dollars ($10,000,000.00). For example, TrizecHahn's Priority Unrecovered Contribution Account would equal Twenty Million Dollars ($20,000,000.00) upon contribution in full of the TrizecHahn Investment. In addition, if and only if the Audrie/Harmon Hotel is not completed and open for business on the date which is nine (9) months following the date of the Opening, time being of the essence, then TrizecHahn's Priority Unrecovered Contribution Account shall be increased to equal the remaining unpaid balance of TrizecHahn's total capital contributions to the Company (and shall not be reduced by the Ten Million Dollars ($10,000,000.00) attributable to Holdings II's Unrecovered Contribution Account). For example, TrizecHahn's Priority Unrecovered Contribution Account would equal Thirty Million Dollars ($30,000,000.00) upon contribution in full of the TrizecHahn Investment (and assuming no prior distributions attributable to the Priority Unrecovered Contribution Account) if the Audrie/Harmon Hotel was not constructed and open for business on the date which is nine (9) months following the date of the Opening. TrizecHahn's Priority Unrecovered Contribution Account shall be decreased by the amount of Cash Flow distributed to TrizecHahn pursuant to sub-paragraph (b) above and attributable to TrizecHahn's Priority Unrecovered Contribution Account. Article IV of the Agreement shall be revised to treat the payment of TrizecHahn's Priority Preferred Return like a distribution of Preferred Return for purposes of allocating Net Income and Net Loss. To avoid duplication, amounts credited to TrizecHahn's Priority Unrecovered Contribution Account shall not also be credited to TrizecHahn's Unrecovered Contribution Account or Additional Unrecovered Contribution Account. If the Audrie/Harmon Hotel is not constructed and open for business on the date which is nine (9) months following the Opening, time being of the essence, then TrizecHahn's Unrecovered Contribution Account shall be debited, and TrizecHahn's Priority Unrecovered Contribution shall be credited, by the balance of TrizecHahn's Unrecovered Contribution Account as of such date (E.G., Ten Million Dollars ($10,000,000.00). 2. FEE PAYABLE TO HOLDINGS II. Upon the initial draw of the Company's construction loan ("Draw Date"), through the date of Opening, Holdings II shall be entitled to receive a development fee (the "Holdings II Development Fee") in an amount equal to One Hundred Thousand Dollars ($100,000.00) per month, payable on the first day of the month following the Draw Date. In no event shall the Holdings II Development Fee exceed One Million Eight Hundred Thousand Dollars ($1,800,000.00). Following the date which is five (5) years after the Opening Date, Holdings II shall be obligated to pay to TrizecHahn an amount equal to one-half (1/2) of the Holdings II Development Fee, payable on the first day of the month following the fifth (5th) anniversary of the Opening and on the first day of each following month in an equal monthly amount of Fifty Thousand Dollars ($50,000.00) per month, until such amount is paid in full, without interest. In addition to all other rights and/or remedies TrizecHahn may have at law and/or in equity to enforce such payment obligation, TrizecHahn shall be entitled to withhold distributions of Cash Flow otherwise payable to Holdings II in satisfaction of Holdings II's obligation to pay any accrued but unpaid monthly payments of Fifty Thousand Dollars ($50,000.00) per month over this period. 3. AGREEMENT REGARDING THE AUDRIE/HARMON HOTEL. As set forth in the Agreement, Gaming and PH have entered into a non-binding Memorandum of Understanding and Letter of Intent dated September 2, 1997 (the "MOU") to develop a music entertainment themed hotel casino on the Audrie/Harmon Hotel site. A copy of the MOU is attached hereto for reference. The MOU envisions that Aladdin Gaming and PH will enter into a formal agreement by October 15, 1997, to develop the Audrie/Harmon Hotel and will immediately move forward to obtain the financing required to develop and construct the Audrie/Harmon Hotel. TrizecHahn has reviewed the development concept and is supportive of the plans and intentions of Aladdin Gaming and PH with regard to the Audrie/Harmon Hotel. Notwithstanding the forgoing, however, TrizecHahn believes it is critical to ensure that a credible development plan for the Audrie/Harmon Hotel is firmly in place as a Condition Precedent to the construction of (or TrizecHahn's irrevocable commitment to fund and construct, subject only to the TrizecHahn Investment Conditions) the Center. Accordingly, Section 12.10 of the Agreement is hereby amended to add the following Conditions Precedent: "(i) Aladdin Gaming and PH have entered into a definitive joint venture agreement (the "Venture") to develop the Audrie/Harmon Hotel as set forth in the Memorandum of Understanding and Letter of Intent between Gaming and PH dated September 2, 1997 attached hereto as Exhibit J; (j) Gaming and PH have made a public announcement of their intention to develop the Audrie/Harmon Hotel; and (k) evidence reasonably satisfactory to TrizecHahn and Holdings II that (I) Aladdin Gaming or its Affiliates have received funds or irrevocable commitments from debt and equity sources (which has been fully negotiated, approved by the lenders and equity investors and ready for signature) in an amount sufficient to fund Gaming's share of the equity to be contributed to the Venture, (II) PH has irrevocably committed to contribute PH's share of the equity to the Venture (subject only to the closing of the construction financing set forth in clause III below), and (III) the Venture has a fully negotiated term sheet or expression of interest from one or more lenders for the construction of the Audrie/Harmon Hotel as set forth in the Memorandum of Understanding and Letter of Intent between Gaming and PH referenced above, and PH and Gaming have agreed in writing that the terms of the proposed construction financing are acceptable to each of them;" Notwithstanding Gaming's expectation that it will be able to successfully enter into the PH Agreement with PH, TrizecHahn and Holdings II agree that there can be no assurance that Gaming will be successful. However, Gaming and Holdings II shall continue to use commercially reasonable efforts to assure that the Audrie/Harmon Hotel is constructed and opened as soon as possible following the Opening. 4. CONVEYANCE OF PROPERTY AND TERMINATION OF LEASE. Aladdin Holdings agrees that it shall on or before the Opening, cause the Property to be subdivided into a separate parcel or parcels from the Master Site, in accordance with Nevada Revised Statutes ("NRS") 278.320 through NRS 278.469, inclusive, or into a separate condominium unit or units from the Master Site, in accordance with Chapter 116 of the NRS, whichever the parties hereto mutually determine to be more appropriate in the context of the entire site. Upon such subdivision or creation of a separate condominium unit, the Property shall be conveyed by Aladdin Holdings to the Company (without any additional credit to the Capital Account or Unrecovered Contribution Account of Holdings II), and the Lease shall be terminated. The Company shall pay a nominal amount of rent ($10.00 per year) pursuant to the Lease. Upon the later of (i) the Opening, or (ii) the transfer of the Property as a separate legal parcel or a separate condominium unit, in either case unencumbered by any monetary lien or encumbrance and subject only to title exceptions reasonably approved by the parties, the Company shall issue a subordinated debenture (the "Subordinated Debt"), payable to Holdings II out of available Cash Flow of the Company upon the terms and conditions described below. The Subordinated Debt shall be junior to all other debt or operating obligations of the Company. The Subordinated Debt shall be unsecured and shall have no right to declare any event of default or exercise any remedies during any period that any debt or operating obligations of the Company remain outstanding. In the event that during any period there are insufficient distributions of Cash Flow to return to TrizecHahn a twelve percent (12%) preferred return on the sum of TrizecHahn's (i) Priority Unrecovered Contribution Account, and (ii) Unrecovered Contribution Account ("TrizecHahn 12% Minimum Return"), then payments of the Subordinated Debt shall be made PARI PASSU with the TrizecHahn 12% Minimum Return. Subject to the foregoing, the Subordinated Debt shall be senior to distributions of Ordinary Cash Flow and Extraordinary Cash Flow to the Members pursuant to Article V of the Agreement. The amount of the Subordinated Debt shall be Sixteen Million Six Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($16,666,667.00). To the extent of available Cash Flow, the Subordinated Debt shall be payable in equal monthly installments aggregating Two Million Dollars ($2,000,000.00) per annum, payable to the extent of available Cash Flow within ten (10) business days of the first (1st) day of each month during the term of the Subordinated Debt. The Subordinated Debt shall be fully amortized over a term of sixty-nine (69) years. Any accrued but unpaid payments shall not accrue additional interest. 5. SOMMER TRUST FINANCIAL STATEMENTS. On or before October 31, 1997, Holdings II shall deliver certain financial information of the Sommer Trust to TrizecHahn sufficient to give comfort to TrizecHahn in its sole discretion on the ability of the Sommer Trust to perform its obligations under the Agreement. TrizecHahn agrees to keep the financial information confidential, except for any disclosure required to comply with court order or law. 6. FINANCING FEE. The Company shall pay to TrizecHahn a financing fee upon closing of the construction loan for the Bazaar Improvements in an amount equal to one percent (1%) of the total amount of the loan, and a fee in an amount equal to one quarter of one percent (.25%) to Westwood Capital LLC. Holdings II shall pay a fee in an amount equal to (or greater than) one quarter of one percent (.25%) to Westwood Capital LLC concurrent with payment by the Company. Holdings II represents that no fee will be due and owing to CS First Boston in connection with the loan. 7. SOMMER RETAIL SPACE. Aladdin Holdings or its Affiliates or principals shall have the right to lease, in connection with the initial lease-up of the Center, up to two thousand five hundred (2,500) rentable square feet of tenant space (or such lesser amount as Aladdin Holdings shall indicate in a notice to TrizecHahn no later than _____________, 1997), at a location in the Center reasonably mutually acceptable to both parties, for a term of ten (10) years, at a rental rate equal to fifty percent (50%) of the market rental being paid by tenants of comparable space for comparable terms in comparable locations in the Center, for a use which is consistent with the first-class quality of the Center and which does not conflict with the rights of any other tenants of the Center, and otherwise on terms and conditions reasonably mutually acceptable to both parties (based on the standard form of lease for the Center). TrizecHahn shall notify Aladdin Holdings of the proposed location, size and rental rate for such space no later than _________________, 1997. 8. CB COMMERCIAL. Holdings II shall be solely responsible to pay any alleged "finders fee" payable to CB Commercial in excess of Fifty Thousand Dollars ($50,000.00) (although the parties do not believe that such fee is properly payable). Except as expressly modified hereby, all of the terms and provisions of the Agreement shall remain in full force and effect, are incorporated herein by this reference (including, but not limited to, Article XI of the Agreement), and shall govern the conduct of the parties hereto; provided, however, to the extent of any inconsistency between the provisions of the Agreement and the provisions of this Amendment, the provisions of this Amendment shall control. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. "TrizecHahn" TH BAZAAR CENTERS INC., a Delaware corporation By: /s/ Wendy M. Godoy --------------------------------------- Wendy M. Godoy, Senior Vice President By: /s/ Wayne J. Finley --------------------------------------- Wayne J. Finley, Senior Vice President "Holdings II" ALADDIN BAZAAR HOLDINGS, LLC, a Nevada limited liability company By: ALADDIN MANAGEMENT CORPORATION, its Manager By: /s/ Ronald B. Dictrow ----------------------------------- Ronald B. Dictrow, Treasurer By: /s/ Jack Sommer ----------------------------------- Jack Sommer, Vice President EX-10.34 26 GAI CONTRIBUTION AND AMEND. AGMT DTD 2/26/98 GAI CONTRIBUTION AND AMENDMENT AGREEMENT This Contribution and Amendment Agreement (the "Agreement") dated as of February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"), Aladdin Gaming Holdings, LLC ("Gaming Holdings") and GAI, LLC (the "Consultant"). WHEREAS, the Company, Aladdin Holdings and the Consultant entered into a Consulting Agreement dated as of January 1, 1997 (and subsequently amended on January 30, 1998) (as amended, the "Consulting Agreement"); WHEREAS, the Company is a subsidiary of Gaming Holdings; and WHEREAS, the parties wish to enter into this Agreement to provide for the Consultant to contribute its equity interest in the Company to Gaming Holdings in return for an equity interest in Gaming Holdings and to amend the Consulting Agreement in connection therewith. NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows: 1. On the date hereof (a) the Consultant shall contribute its three percent Membership Interest in the Company to the capital of Gaming Holdings and (b) in consideration therefor Gaming Holdings shall issue to the Consultant 30,000 common shares in the capital of Gaming Holdings (representing three percent of the issued and outstanding common shares of Gaming Holdings on the date hereof) and shall establish a capital account in respect thereof in the amount of $6 million. 2. The parties agree that Gaming Holdings is hereby added as a party to the Consulting Agreement as amended hereby. 3. Pursuant to Section 15 of the Consulting Agreement, the Consulting Agreement is hereby amended as follows: (a) Sections 4(b) (ii), (iii) and (iv) of the Consulting Agreement are deleted in their entirety and replaced with the following: "(ii) ANTI-DILUTION PURCHASES. Upon Gaming Holdings' closing of a financing transaction or transactions involving the sale of membership interests, equity (or securities convertible into membership interests or equity) of Gaming Holdings (a "Financing Transac- tion"), and if Consultant is still providing services to the Company upon such closing date or dates, Consultant shall have the right to purchase that number of such instruments that would result in Consultant owning, in the aggregate (together with all membership interests or equity already held by Consultant at such time), three percent (subject to adjustment pursuant to Section 3.6 of the Operating Agreement of Gaming Holdings) of the fully-diluted membership interests or equity of Gaming Holdings, as measured on the date of such closing or closings; provided, however, that such right to purchase shall only be effective with respect to non-compensatory Financing Transactions (i.e. Consultant shall not have the right to make anti-dilutive purchases with respect to ordinary course of business compensatory sales of stock or membership interests to Company or Gaming Holdings' Employees). Any such right of Consultant to make an anti-dilutive purchase of stock hereunder shall be at the most favorable price and on the most favorable terms and conditions as are provided to any party in the Financing Transaction. For purposes of this Agreement, "fully diluted equity of Gaming Holdings" shall mean the aggregate amount of membership interests (or the aggregate number of shares of all outstanding common and preferred stock) plus the aggregate amount of membership interests (or the number of shares of common and preferred stock) that could be obtained through the exercise or conversion of rights, options, warrants and convertible securities (other than employee equity compensation). Notwithstanding the foregoing, Consultant shall not have the right to make anti-dilutive purchases (i) in any Financing Transaction in which Consultant's equity ownership interest in Gaming Holdings is diluted to the same extent as the indirect equity interest in Gaming Holdings held by The Trust Under Article Sixth u/w/o Sigmund Sommer or its affiliates (the "Trust"), or (ii) as a result of any sales or transfers arising as a result of the death of Mrs. Viola Sommer or for the purpose of satisfying attendant estate tax liabilities. (iii) PUT RIGHT. (A) CERTAIN TERMINATIONS DURING CONSULTING TERM. In the event that, during the Consulting Term, Richard J. Goeglein is terminated from his employment with the Company other than for "Cause" or voluntarily terminates for "Good Reason" (both as defined in Section 9 of the employment agreement (as amended) by and between Richard J. Goeglein and the Company (the "Employment Agreement")), 2 then Consultant shall have the right (but not the obligation) to sell any shares issued pursuant to that certain GAI Contribution and Amendment Agreement dated as of February 26, 1998 between the Company, Gaming Holdings and Consultant (the "GAI Contribution Agreement") or purchased hereunder back to Gaming Holdings on the date that is the one year anniversary of the date of such termination of employment or end of the Consulting Term (the "Anniversary Date") (so long as the IPO has not occurred by such date) at a price equal to the fair market value of such shares on the Anniversary Date, as determined by an independent appraisal firm mutually agreed to by and between Gaming Holdings and Consultant, with the costs of such appraisal being paid by the Company (the "Put Right"). The Put Right must be exercised in writing by Consultant by the Anniversary Date or it shall become void and without further effect. If the Put Right is exercised and Gaming Holdings does not satisfy its obligation to purchase the shares subject to the Put Right within seven days following receipt of Consultant's written notice of exercise thereof, the Consultant shall have the right to require the Company (rather than Gaming Holdings) to purchase such shares at fair market value. If the Company purchases such shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such shares from the Company for a purchase price of $1. (B) LAPSING OF CONSULTING TERM PRIOR TO IPO. In the event that the IPO has not occurred by the end of the Consulting Term (the "Consulting Term Lapse Date"), then Consultant shall have the right (but not the obligation) to sell any shares issued pursuant to the GAI Contribution Agreement or purchased hereunder back to Gaming Holdings at a price equal to the fair market value of such shares on the Consulting Term Lapse Date, as determined by an independent appraisal firm mutually agreed to by and between Gaming Holdings and Consultant, with the costs of such appraisal being paid by the Company (the "Consulting Term Lapse Put Right"). The Consulting Term Lapse Put Right must be exercised in writing by Consultant within thirty days following the Consulting Term Lapse Date or it shall become void and without further effect. If the Consulting Term Lapse Put Right is exercised, and Gaming Holdings does not satisfy its obligation to purchase shares subject to the Consulting Term 3 Lapse Put Right within seven days following receipt of Consultant's written notice of exercise thereof, the Consultant shall have the right to require the Company (rather than Gaming Holdings) to purchase such shares at fair market value. If the Company purchases such shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such shares from the Company for a purchase price of $1. (iv) LLC DISTRIBUTIONS. While Gaming Holdings remains a pass-through entity for federal income tax purposes, Gaming Holdings will periodically distribute cash, to the extent available, to Consultant in an amount equal to the increase in the cumulative tax liability of Consultant (or, if Consultant is a pass-through entity for federal income tax purposes, Consultant's interest holders) with respect to its interest in Gaming Holdings." (b) Section 5 of the Consulting Agreement is deleted in its entirety and replaced with the following; "5. PIGGYBACK REGISTRATION RIGHTS. (i) CERTAIN DEFINITIONS. As used in this Section 5, the following terms shall have the following respective meanings: "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "REGISTRABLE SECURITIES" means shares issued in respect of the Membership Interest. The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. 4 "REGISTRATION EXPENSES" shall mean all expenses incurred by Gaming Holdings in complying with this Section 5, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for Gaming Holdings, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of Gaming Holdings which shall be paid in any event by the Company or Gaming Holdings). "SELLING EXPENSES" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Consultant and all fees and disbursements of counsel for the Consultant. (ii) REGISTRATION. a. NOTICE OF REGISTRATION. If at any time Gaming Holdings shall determine to register any of its securities, either for its own account or the account of a security holder, other than (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Commission Rule 145 transaction, Gaming Holdings will: b. promptly give to the Consultant written notice thereof; and c. include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within 15 days after receipt of such written notice from Gaming Holdings, by the Consultant subject to the provisions of Section 5(iii). (iii) UNDERWRITING. If the registration of which Gaming Holdings gives notice is for a registered public offering involving an underwriting, Gaming Holdings shall so advise the Consultant as a part of the written notice given pursuant to this Section 5. In such event the right of the Consultant to registration pursuant to this Section 5 shall be conditioned upon the Consultant's participation in such underwriting and the inclusion of the Consultant's Registrable Securities in the underwriting to the extent provided herein. The Consultant shall (together with Gaming Holdings and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing 5 underwriter selected for such underwriting by Gaming Holdings. Notwithstanding any other provision of this Section 5, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the underwriter may limit the number of the Registrable Securities to be included in such registration and underwriting. In such event, Gaming Holdings shall so advise all holders distributing their securities through such underwriting, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all holders thereof, including the Consultant, in proportion, as nearly as practicable, to the respective amounts of equity interests in Gaming Holdings held by all such holders at the time filing the registration statement. If the Consultant disapproves of the terms of any such underwriting, the Consultant may elect to withdraw therefrom by written notice to Gaming Holdings and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, but shall not be transferred in a public distribution prior to ninety (90) days after the effective date of the registration statement relating thereto. (iv) EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 5 shall be borne by Gaming Holdings. Unless otherwise stated, all Selling Expenses relating to securities registered by the Consultant shall be borne by the Consultant. (v) REGISTRATION PROCEDURES. In the case of each registration, qualification or compliance effect by Gaming Holdings pursuant to this Section 5, Gaming Holdings will keep the Consultant advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense Gaming Holdings will furnish such number of prospectuses and other documents incident thereto as the Consultant from time to time may reasonably request. (vi) INDEMNIFICATION. a. Gaming Holdings will indemnify the Consultant, each of its officers and directors and the Consultant's legal counsel and independent accountants, and each person controlling the Consultant within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Section 5, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litiga- 6 tion, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by Gaming Holdings of any rule or regulation promulgated under the Securities Act applicable to Gaming Holdings and relating to action or inaction required of Gaming Holdings in connection with any such registration, qualification or compliance, and will reimburse the Consultant, each of its officers and directors and the Consultant's legal counsel and independent accountants, and each person controlling the Consultant, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that Gaming Holdings will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or alleged omission, made in reliance upon and in conformity with written information furnished to Gaming Holdings by an instrument duly executed by the Consultant or underwriter and stated to be specifically for use therein. b. Each party entitled to indemnification under this Section 5 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought. Gaming Holdings shall be entitled to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnified Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld). The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 5, unless the Indemnifying Party is materially prejudiced by the failure to give notice promptly. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 7 (vii) INFORMATION BY CONSULTANT. The Consultant shall furnish to Gaming Holdings such information regarding the Consultant and the distribution proposed by the Consultant as Gaming Holdings may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 5. (viii) RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Securities and Exchange Commission which may at any time permit the sale of the restricted securities to the public without registration, after such time as a public market exists for the Common Stock of Gaming Holdings, Gaming Holdings agrees to: a. Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration under the Securities Act filed by Gaming Holdings for an offering of its securities to the general public; b. Use its best efforts to then file with the Commission in a timely manner all reports and other documents required of Gaming Holdings under the Securities Act and the Securities Exchange Act of 1934, as amended (at any time after it has become subject to such reporting requirements); and c. So long as the Consultant owns any Registrable Securities, to furnish to the Consultant upon request a written statement by Gaming Holdings as to its compliance with the reporting requirements of said Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by Gaming Holdings for an offering of its securities to the general public), and of the Securities Act and of the Securities Exchange Act of 1934 (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of Gaming Holdings, and such other reports and documents of Gaming Holdings as the Consultant may reasonably request in availing itself of any rule or regulation of the Securities and Exchange Commission allowing the Consultant to sell any such securities without registration. (ix) TRANSFER AND EXPIRATION OF REGISTRATION RIGHTS. The rights to cause Gaming Holdings to register securities granted the Consultant under this Section 5 may not be assigned to a transferee or assignee in connection with the transfer or assignment of shares of the Restricted Securities. The registration rights granted to the Consultant under this Section 5 8 shall expire when the Consultant is able to sell all its Registrable Securities in any three month period." (c) Sections 9, 10, 11 and 15 of the Consulting Agreement are hereby amended so that Gaming Holdings has the same rights and obligations under such Sections as the Company. 4. GAMING LAW. Anything to the contrary herein or in the Consulting Agreement notwithstanding, the parties hereto agree and acknowledge that they are subject to and that they shall comply in all respects with the gaming laws of the State of Nevada, including the Nevada Gaming Control Act and (or any successor statute) the rules and regulations promulgated by the Nevada Gaming Commission and the State Gaming Control Board. To the extent anything in this Agreement or the Consulting Agreement is inconsistent with any gaming laws or regulations, the gaming laws and regulations shall control. 5. CONFIDENTIALITY. The Consultant (and all of its officers, directors and employees) acknowledges that the Company has a substantial, legitimate and continuing interest in the protection of its business relationships with others including without limitation current and prospective employees, consultants, advisors, customers, vendors, suppliers, partners or joint venturers, and financing sources, and in the protection of its Confidential Information, and has invested substantial sums, time and effort and will continue to invest substantial sums, time and effort to develop, maintain and protect such relationships and Information. Accordingly, the Consultant (and all of its officers, directors and employees) covenants and agrees that during the Consulting Term (as defined in the Consulting Agreement) and thereafter, the Consultant (and all of its officers, directors and employees) shall keep secret and retain in strictest confidence and shall not, without the prior written consent of the Company, furnish, make available or disclose to any third party or use for the benefit of itself or any third party any Confidential Information. Confidential Information is information related to or concerning the Company or Gaming Holdings and their businesses which is confidential, proprietary or not generally known to and cannot be readily ascertained through proper means by persons or entities (including the Company's present or future competitors), who can obtain any type of value from its disclosure or use. Confidential Information includes all secret, confidential or proprietary information, knowledge or data relating to the Company or Gaming Holdings, such as, without limitation, finances and financing methods, sources, proposals or plans; operational methods; marketing or development proposals, plans or strategies; pricing strategies; business or property acquisition or development proposals or plans; new personnel acquisition proposals or plans; customer lists and any descriptions or data concerning current or prospective customers; provided, however, while employed by the Company and in furtherance of the business and for the benefit of the Company, the Consultant may provide 9 Confidential Information as appropriate to attorneys, accountants, financial institutions and other persons or entities engaged in business with the Company or Gaming Holdings. 6. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of any successor of the Company or Gaming Holdings. Any such successor of the Company or Gaming Holdings shall be deemed substituted for the Company or Gaming Holdings under the terms of this Agreement for all purposes. As used herein, "successor" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company or Gaming Holdings. 7. ENTIRE AGREEMENT. This Agreement and the Consulting Agreement represent the entire agreement and understanding between the Company, Gaming Holdings, Aladdin Holdings, LLC and the Consultant concerning the matters herein. 8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may only be amended, cancelled or discharged in writing signed by Consultant, Gaming Holdings and the Company. 9. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Nevada. 10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have the meanings described thereto in the Consulting Agreement. 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all such counterparts shall together constitute but one and the same contract. 10 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ALADDIN GAMING, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN GAMING HOLDINGS, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary GAI, LLC By: /s/ Richard J. Goeglein ------------------------------- Name: Richard J. Goeglein Title: Principal 11 EX-10.35 27 GOEGLIN CONTRIBUTION AND AMEND AGREEMENT GOEGLEIN CONTRIBUTION AND AMENDMENT AGREEMENT This Contribution and Amendment Agreement (the "Agreement") dated as of February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"), Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Richard J. Goeglein (the "Executive"). WHEREAS, the Company, Aladdin Holdings and the Executive entered into an Employment and Consulting Agreement effective as of January 1, 1997 (and subsequently amended on January 30, 1998) (as amended, the "Employment and Consulting Agreement"); WHEREAS, the Company is a subsidiary of Gaming Holdings; and WHEREAS, the parties wish to enter into this Agreement to provide for the Executive to contribute his Restricted Membership Interest (as defined in the Employment and Consulting Agreement) in the Company to Gaming Holdings in return for restricted membership interest in Gaming Holdings on the terms and conditions herein and to amend the Employment and Consulting Agreement in connection therewith. NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows: 1. On the date hereof (a) the Executive shall contribute his two percent Restricted Membership Interest in the Company to the capital of Gaming Holdings and (b) in consideration therefor Gaming Holdings shall issue to the Executive a restricted membership interest in the capital of Gaming Holdings (the "Holdings Restricted Membership Interest") on the same terms and conditions as those which governed the Executive's Restricted Membership Interest in the Company (taking account of the amendments to the Employment and Consulting Agreement herein and the fact that the Holdings Restricted Membership Interest has been issued by Gaming Holdings), such Holdings Restricted Membership Interest representing upon the vesting thereof two percent of the issued and outstanding common shares of Gaming Holdings, subject to adjustment as provided in the Employment and Consulting Agreement as amended herein. At the time of the vesting of the Holdings Restricted Membership Interest Gaming Holdings shall establish a capital account in respect thereof in the amount of $4 million. 2. The parties agree that Gaming Holdings is hereby added as a party to the Employment and Consulting Agreement as amended hereby. 3. Pursuant to Section 29 of the Employment and Consulting Agreement, Section 4(c)(i) of the Employment and Consulting Agreement is hereby amended to change the reference to "Restricted Membership Interest" in the last sentence thereof to "Holdings Restricted Membership Interest (as defined in that certain Goeglein Contribution and Amendment Agreement dated as of February 26, 1998)." The Company and Gaming Holdings hereby agree that if the Company purchases the unvested portion of the Holdings Restricted Membership Interest pursuant to such amended Section 4(c)(i) of the Employment and Consulting Agreement, Gaming Holdings shall promptly thereafter purchase such Restricted Membership Interest from the Company for a purchase price of $1. 4. Pursuant to Section 29 of the Employment and Consulting Agreement, the Employment and Consulting Agreement is hereby amended as follows: (a) Sections 4(c)(ii), (iii) and (iv) and (d) of the Employment and Consulting Agreement are deleted in their entirety and replaced with the following: "(ii) ANTI-DILUTION PURCHASES. Upon Gaming Holdings' closing of a financing transaction or transactions involving the sale of membership interests, equity (or securities convertible into membership interests or equity) of Gaming Holdings (a "Financing Transaction"), and if Executive is employed by the Company upon such closing date or dates, Executive shall have the right to purchase that number of such instruments that would result in Executive owning, in the aggregate (together with all membership interests or equity or interests already held by Executive at such time which may vest into membership interests or equity) two percent (subject to adjustment pursuant to Section 3.6 of the Operating Agreement of Gaming Holdings) of the fully diluted membership interests or equity of Gaming Holdings, as measured on the date of such closing or closings; provided, however, that such right to purchase shall only be effective with respect to non-compensatory Financing Transactions (i.e., Executive shall not have the right to make anti-dilutive purchases with respect to ordinary course of business compensatory sales of stock or membership interests to Company or Gaming Holdings' employees). Any such right of Executive to make an anti-dilutive purchase of stock hereunder shall be at the most favorable price and on the most favorable terms and conditions as are provided to any party in the Financing Transaction. For purposes of this Agreement, "fully diluted equity of Gaming Holdings" shall mean the aggregate amount of membership interests (or the aggregate number of shares of 2 all outstanding common and preferred stock) plus the aggregate amount of membership interests (or the number of shares of common and preferred stock) that could be obtained through the exercise or conversion of rights, options, warrants and convertible securities (other than employee equity compensation). Notwithstanding the foregoing, Executive shall not have the right to make anti-dilutive purchases (i) in any Financing Transaction in which his equity ownership interest in Gaming Holdings is diluted to the same extent as the indirect equity interest in Gaming Holdings held by The Trust Under Article Sixth u/w/o Sigmund Sommer or its affiliates (the "Trust"), or (ii) as a result of any sales or transfers arising as a result of the death of Mrs. Viola Sommer or for the purpose of satisfying attendant estate tax liabilities. If, in the event of a public offering, underwriters take issue with Executive's rights under this paragraph, the underwriters, Gaming Holdings and Executive will address such issues on a mutually approved and reasonable basis, taking into account the interests of all involved. (iii) PUT RIGHT. (A) CERTAIN TERMINATIONS DURING EMPLOYMENT TERM. In the event that, during the Employment Term, Executive is terminated other than for "Cause" or voluntarily terminates for "Good Reason" (both as defined in Section 9 hereof), then Executive shall have the right (but not the obligation) to sell its Holdings Restricted Membership Interest and any other membership interest (or shares exchanged for such interests) purchased hereunder back to Gaming Holdings on the date that is the one year anniversary of the date of such termination of employment (the "Anniversary Date") (so long as the IPO has not occurred by such date) at a price equal to the fair market value of such membership interest or shares on the Anniversary Date, as determined by an independent appraisal firm mutually agreed to by and between Gaming Holdings and Executive, with the costs of such appraisal being paid by the Company (the "Employment Term Put Right"). The Employment Term Put Right must be exercised in writing by Executive by the Anniversary Date or it shall become void and without further effect. If the Employment Term Put Right is exercised, and Gaming Holdings does not satisfy its obligation to purchase the membership interest or shares subject to the Employment Term Put Right within seven days following receipt of Executive's written notice of exercise thereof, the Executive shall have the right to require the Company (rather than Gaming Holdings) to purchase such membership interest or shares at fair market value. 3 If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1. (B) LAPSING OF EMPLOYMENT TERM PRIOR TO IPO. In the event that the IPO has not occurred by the end of the Employment Term (the "Employment Term Lapse Date"), then Executive shall have the right (but not the obligation) to sell its Holdings Restricted Membership Interest and any other membership interest purchased hereunder (or shares exchanged for such interests) back to Gaming Holdings at a price equal to the fair market value of such membership interest or shares on the Employment Term Lapse Date, as determined by an independent appraisal firm mutually agreed to by and between Gaming Holdings and Executive, with the costs of such appraisal being paid by the Company (the "Employment Term Lapse Put Right"). The Employment Term Lapse Put Right must be exercised in writing by Executive within thirty days following the Employment Term Lapse Date or it shall become void and without further effect. If the Employment Term Lapse Put Right is exercised, and Gaming Holdings does not satisfy its obligation to purchase the membership interest or shares subject to the Employment Term Lapse Put Right within seven days following receipt of Executive's written notice of exercise thereof, the Executive shall have the right to require the Company (rather than Gaming Holdings) to purchase such membership interest or shares at fair market value. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1. (iv) LLC DISTRIBUTIONS. While Gaming Holdings remains a pass-through entity for federal income tax purposes, Gaming Holdings will periodically distribute cash, to the extent available, to Executive in an amount equal to the increase in his cumulative tax liability with respect to his interest in Gaming Holdings. (d) STOCK OPTION. On the date, if any, upon which Gaming Holdings (or an affiliate or successor entity of Gaming Holdings) effects an initial public offering for its securities (the "IPO"), Executive shall be granted a stock option covering such securities (the "Stock Option"). The number of shares subject to such option shall be equal to the number derived by dividing the 125% of the Base 4 Salary by the "Price to Public" share price in such offering. The Stock Option per share exercise price shall be equal to the "Price to Public" share price. The Stock Option, shall qualify, to the maximum extent permitted by Internal Revenue Code Section 422(d) or its successor provision, as an "incentive stock option." Subject to accelerated vesting as set forth elsewhere herein, the Stock Option shall vest as to one third of the shares subject to the Stock Option as of the date of grant, and as to an additional one third of such shares on each anniversary of the date of grant, so as to be 100% vested on the second anniversary of the date of grant, conditioned upon Executive's continued employment, consulting or director relationship with the Company as of each vesting date. Gaming Holdings agrees to register the Stock Option and the stock issuable thereunder on a Form-S-8 (or its successor form) with the Securities and Exchange Commission following the date of grant. In good faith and giving consideration to Executive's interests, Gaming Holdings, and Executive will agree upon the registration date(s)." (b) Section 9(iii) of the Employment and Consulting Agreement is hereby amended so that references to the "Restricted Membership Interest" or "any equity compensation granted to Executive by the Company" are, respectively, changed to the "Holdings Restricted Membership Interest" and "any equity compensation granted by Gaming Holdings." (c) Section 10 of the Employment and Consulting Agreement is deleted in its entirety and replaced with the following: "10. CHANGE OF CONTROL In the event of a "Change of Control" (as defined herein) of Gaming Holdings occurring while Executive is employed by the Company, Executive's Equity Compensation shall have its vesting accelerated in full so as to become 100% vested as of the date of the Change of Control. For this purpose, "Change of Control" of Gaming Holdings is defined as: (a) Any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (other than a group consisting of the members of the Board as of the Effective Date and their affiliated investment funds and the partners thereof) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of Gaming Holdings representing 50% or more of the total voting power represented by Gaming Holdings' then outstanding voting securities; provided, however, that a "Change of Control" will not be deemed to occur 5 under this paragraph with respect to (i) intra-family transfers among the Sommer family, (ii) sales or transfers arising as a result of the death of Mrs. Viola Sommer or for the purpose of satisfying attendant estate tax liabilities or (iii) adjustments in membership interests pursuant to Article III of the Operating Agreement of Gaming Holdings; or (b) The consummation of a merger or consolidation of Gaming Holdings with any other corporation other than a merger or consolidation which would result in the voting securities of Gaming Holdings outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of Gaming Holdings or such surviving entity outstanding immediately after such merger or consolidation; or (c) A change in the composition of the Board of Directors of Gaming Holdings occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of Gaming Holdings as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of Gaming Holdings with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to Gaming Holdings); or (d) The approval by the Board of a plan of complete liquidation of Gaming Holdings or of an agreement for the sale or disposition by Gaming Holdings of all or substantially all of Gaming Holdings' assets." (d) Sections 22, 24, 25 and 29 of the Employment and Consulting Agreement are hereby amended so that Gaming Holdings has the same rights and obligations under such Sections as the Company. 5. GAMING LAW. Anything to the contrary herein or in the Employment and Consulting Agreement notwithstanding, the parties hereto agree and acknowledge that they are subject to and that they shall comply in all respects with the gaming laws of the State of Nevada, including the Nevada Gaming Control Act and (or any successor statute) the rules and regulations promulgated by the Nevada 6 Gaming Commission and the State Gaming Control Board. To the extent anything in this Agreement or the Employment and Consulting Agreement is inconsistent with any gaming laws or regulations, the gaming laws and regulations shall control. 6. CONFIDENTIALITY. The Executive acknowledges that the Company has a substantial, legitimate and continuing interest in the protection of its business relationships with others including without limitation current and prospective employees, consultants, advisors, customers, vendors, suppliers, partners or joint venturers, and financing sources, and in the protection of its Confidential Information, and has invested substantial sums, time and effort and will continue to invest substantial sums, time and effort to develop, maintain and protect such relationships and Information. Accordingly, Executive covenants and agrees that during the Employment Term (as defined in the Employment and Consulting Agreement) and thereafter, the Executive shall keep secret and retain in strictest confidence and shall not, without the prior written consent of the Company, furnish, make available or disclose to any third party or use for the benefit of himself or any third party any Confidential Information. Confidential Information is information related to or concerning the Company or Gaming Holdings and their businesses which is confidential, proprietary or not generally known to and cannot be readily ascertained through proper means by persons or entities (including the Company's present or future competitors), who can obtain any type of value from its disclosure or use. Confidential Information includes all secret, confidential or proprietary information, knowledge or data relating to the Company or Gaming Holdings, such as, without limitation, finances and financing methods, sources, proposals or plans; operational methods; marketing or development proposals, plans or strategies; pricing strategies; business or property acquisition or development proposals or plans; new personnel acquisition proposals or plans; customer lists and any descriptions or data concerning current or prospective customers; provided, however, while employed by the Company and in furtherance of the business and for the benefit of the Company, Executive may provide Confidential Information as appropriate to attorneys, accountants, financial institutions and other persons or entities engaged in business with the Company or Gaming Holdings. 7. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of any successor of the Company or Gaming Holdings. Any such successor of the Company or Gaming Holdings shall be deemed substituted for the Company or Gaming Holdings under the terms of this Agreement for all purposes. As used herein, "successor" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company or Gaming Holdings. 7 8. ENTIRE AGREEMENT. This Agreement and the Employment and Consulting Agreement represent the entire agreement and understanding between the Company, Gaming Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein. 9. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may only be amended, cancelled or discharged in writing signed by the Executive, Gaming Holdings and the Company. 10. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Nevada. 11. CAPITALIZED TERMS. Capitalized terms not defined herein shall have the meanings described thereto in the Employment and Consulting Agreement. 12. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all such counterparts shall together constitute but one and the same contract. 8 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ALADDIN GAMING, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN GAMING HOLDINGS, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary /s/ Richard J. Goeglein ------------------------------- Name: RICHARD J. GOEGLEIN Title: Chief Executive Officer 9 EX-10.36 28 MCKENNON CONTRIBUTION AND AMEND AGREEMENT MCKENNON CONTRIBUTION AND AMENDMENT AGREEMENT This Contribution and Amendment Agreement (the "Agreement") dated as of February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"), Aladdin Gaming Holdings, LLC ("Gaming Holdings") and James H. McKennon (the "Executive"). WHEREAS, the Company, Aladdin Holdings and the Executive entered into an Employment Agreement effective as of April 15, 1997 (the "Employment Agreement"); WHEREAS, the Company is a subsidiary of Gaming Holdings; and WHEREAS, the parties wish to enter into this Agreement to provide for the Executive to contribute his Restricted Membership Interest (as defined in the Employment Agreement) in the Company to Gaming Holdings in return for a restricted membership interest in Gaming Holdings on the terms and conditions herein and to amend the Employment and Consulting Agreement in connection therewith. NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows: 1. On the date hereof (a) the Executive shall contribute his one percent Restricted Membership Interest in the Company to the capital of Gaming Holdings and (b) in consideration therefor Gaming Holdings shall issue to the Executive a restricted membership interest in the capital of Gaming Holdings (the "Holdings Restricted Membership Interest") on the same terms and conditions as those which governed the Executive's Restricted Membership Interest in the Company (taking account of the amendments to the Employment Agreement herein and the fact that the Holdings Restricted Membership Interest has been issued by Gaming Holdings), such Holdings Restricted Membership Interest representing upon the vesting thereof one percent of the issued and outstanding common shares of Gaming Holdings, subject to adjustment as provided in the Employment Agreement as amended herein. At the time of any vesting of any Holdings Restricted Membership Interest Gaming Holdings shall establish or increase the capital account in respect thereof in the amount of the proportion of the Holding Restricted Membership Interest that is vesting at such time applied against $2 million. 2. The parties agree that Gaming Holdings is hereby added as a party to the Employment Agreement as amended hereby. 3. Pursuant to Section 9(d) of the Employment Agreement, Sections 4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the reference to "Restricted Membership Interest" therein to "Holdings Restricted Membership Interest" (as defined in that certain McKennon Contribution and Amendment Agreement dated as of February 26, 1998). The Company and Gaming Holdings hereby agree that if the Company purchases the unvested portion of the Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3) of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase such Holdings Restricted Membership Interest from the Company for a purchase price of $1. 4. Pursuant to Section 9(d) of the Employment Agreement, the Employment Agreement is hereby amended as follows: (a) Section 4(f) (4) of the Employment Agreement is deleted in its entirety and replaced with the following: "(4) While Gaming Holdings remains a pass-through entity for federal income tax purposes, Gaming Holdings will periodically distribute cash, to the extent available, to Executive in an amount equal to the increase in his cumulative tax liability with respect to his interest in Gaming Holdings and Gaming Holdings may, at the discretion of the Gaming Holdings Board, periodically distribute additional cash, to the extent available, to Executive to satisfy any additional tax liability arising from his interest in Gaming Holdings in excess of distributions otherwise receivable." (b) Sections 4(g) and (h) of the Employment Agreement are deleted in their entirety and replaced with the following: "g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the obligation to sell his vested Holdings Restricted Membership Interest (or shares exchanged by such Interest) back to Gaming Holdings or to the Company only in the following circumstances: (1) Gaming Holdings' IPO has not occurred upon expiration of the original four-year term of this Agreement and Company does not continue to employ Executive for reason(s) not constituting Cause as defined in Section 5(d)(1-4) hereof or the Executive does not continue his employment at the request of the Company for reason(s) constituting Good Reason as defined in Section 5(d)(5). This Put 2 right must be exercised in writing by Executive within thirty (30) days of the expiration of the four-year term hereunder or it shall become void and without further effect. (2) Gaming Holdings' IPO has not occurred upon Executive becoming 100% vested in Holdings Restricted Membership Interest. This Put right must be exercised in writing by Executive within thirty days of Executive being 100% vested or it shall become void and without further effect. The Put purchase price is the fair market value of such Interest (or shares) on the Valuation Date. Under this Agreement, the Valuation Date is: (i) the expiration of the four-year term of this Agreement, in the event of a Put under Section 4(g)(i), or (ii) the date Executive becomes 100% vested, in the event of a Put under Section 4(g)(2). In either case of (i) or (ii) in the preceding sentence, the fair market value shall be determined by an independent appraisal firm mutually agreed to by Gaming Holdings and Executive, with the cost of such appraisal being paid by the Company. If Executive exercises the Put hereunder, and Gaming Holdings does not satisfy its obligation to purchase the membership interest or shares within seven days of Executive's written notice of exercise of the Put, Executive shall have the right to require the Company (rather than gaming Holdings) to purchase such membership interest or shares at fair market value. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1. h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's IPO, the Company terminates Executive for Cause as defined in Section 5(d) hereof (including Executive quitting without Good Reason under Section 5(d)(5)), then Gaming Holdings and the Company shall have the right but not the obligation to purchase any vested membership interest (or shares exchanged by such interest) within thirty days of the Termination Date at a price equal to two times the price Executive originally paid Gaming Holdings for such membership interest. The Call right must be exercised in writing by Gaming Holdings or the Company within thirty days of the Termination Date or it shall become void and without further effect. If Gaming Holdings or the Company exercises the Call hereunder, Executive must tender such membership interest or shares and otherwise complete the transaction hereunder within thirty days of Gaming Holdings' or the 3 Company's exercise of the Call. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1." (c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the Employment Agreement are hereby amended so that Gaming Holdings has the same rights and obligations under such Sections as the Company. 5. GAMING LAW. Anything to the contrary herein or in the Employment and Consulting Agreement notwithstanding, the parties hereto agree and acknowledge that they are subject to and that they shall comply in all respects with the gaming laws of the State of Nevada, including the Nevada Gaming Control Act and (or any successor statute) the rules and regulations promulgated by the Nevada Gaming Commission and the State Gaming Control Board. To the extent anything in this Agreement or the Employment Agreement is inconsistent with any gaming laws or regulations, the gaming laws and regulations shall control. 6. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of any successor of the Company or Gaming Holdings. Any such successor of the Company or Gaming Holdings shall be deemed substituted for the Company or Gaming Holdings under the terms of this Agreement for all purposes. As used herein, "successor" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company or Gaming Holdings and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC.. 7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement represent the entire agreement and understanding between the Company, Gaming Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC. 8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may only be amended, cancelled or discharged in writing signed by the Executive, Gaming Holdings and the Company. 9. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Nevada. 4 10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have the meanings described thereto in the Employment Agreement. 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all such counterparts shall together constitute but one and the same contract. 5 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ALADDIN GAMING, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN GAMING HOLDINGS, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary /s/ James H. Mckennon ------------------------------- Name: JAMES H. MCKENNON Title: Senior Vice President 6 EX-10.37 29 KLERK CONTRIBUTION AND AMENDMENT AGREEMENT KLERK CONTRIBUTION AND AMENDMENT AGREEMENT This Contribution and Amendment Agreement (the "Agreement") dated as of February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"), Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Cornelius T. Klerk (the "Executive"). WHEREAS, the Company, Aladdin Holdings and the Executive entered into an Employment Agreement effective as of July 1, 1997 (the "Employment Agreement"); WHEREAS, the Company is a subsidiary of Gaming Holdings; and WHEREAS, the parties wish to enter into this Agreement to provide for the Executive to contribute his Restricted Membership Interest (as defined in the Employment Agreement) in the Company to Gaming Holdings in return for a restricted membership interest in Gaming Holdings on the terms and conditions herein and to amend the Employment and Consulting Agreement in connection therewith. NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows: 1. On the date hereof (a) the Executive shall contribute his 0.75% Restricted Membership Interest in the Company to the capital of Gaming Holdings and (b) in consideration therefor Gaming Holdings shall issue to the Executive a restricted membership interest in the capital of Gaming Holdings (the "Holdings Restricted Membership Interest") on the same terms and conditions as those which governed the Executive's Restricted Membership Interest in the Company (taking account of the amendments to the Employment Agreement herein and the fact that the Holdings Restricted Membership Interest has been issued by Gaming Holdings), such Holdings Restricted Membership Interest representing upon the vesting thereof 0.75% of the issued and outstanding common shares of Gaming Holdings, subject to adjustment as provided in the Employment Agreement as amended herein. At the time of any vesting of any Holdings Restricted Membership Interest Gaming Holdings shall establish or increase the capital account in respect thereof in the amount of the proportion of the Holding Restricted Membership Interest that is vesting at such time applied against $1.5 million. 2. The parties agree that Gaming Holdings is hereby added as a party to the Employment Agreement as amended hereby. 3. Pursuant to Section 9(d) of the Employment Agreement, Sections 4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the reference to "Restricted Membership Interest" therein to "Holdings Restricted Membership Interest" (as defined in that certain Klerk Contribution and Amendment Agreement dated as of February 26, 1998). The Company and Gaming Holdings hereby agree that if the Company purchases the unvested portion of the Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3) of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase such Holdings Restricted Membership Interest from the Company for a purchase price of $1. 4. Pursuant to Section 9(d) of the Employment Agreement, the Employment Agreement is hereby amended as follows: (a) Section 4(f)(4) of the Employment Agreement is deleted in its entirety and replaced with the following: "(4) While Gaming Holdings remains a pass-through entity for federal income tax purposes, Gaming Holdings will periodically distribute cash, to the extent available, to Executive in an amount equal to the increase in his cumulative tax liability with respect to his interest in Gaming Holdings and Gaming Holdings may, at the discretion of the Gaming Holdings Board, periodically distribute additional cash, to the extent available, to Executive to satisfy any additional tax liability arising from his interest in Gaming Holdings in excess of distributions otherwise receivable." (b) Sections 4(g) and (h) of the Employment Agreement are deleted in their entirety and replaced with the following: "g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the obligation to sell his vested Holdings Restricted Membership Interest (or shares exchanged by such Interest) back to Gaming Holdings or to the Company only in the following circumstances: (1) Gaming Holdings' IPO has not occurred upon expiration of the original four-year term of this Agreement and Company does not continue to employ Executive for reason(s) not constituting Cause as defined in Section 5(d)(1-4) hereof or the Executive does not continue his employment at the request of the Company for reason(s) constituting Good Reason as defined in Section 5(d)(5). This Put 2 right must be exercised in writing by Executive within thirty (30) days of the expiration of the four-year term hereunder or it shall become void and without further effect. (2) Gaming Holdings' IPO has not occurred upon Executive becoming 100% vested in Holdings Restricted Membership Interest. This Put right must be exercised in writing by Executive within thirty days of Executive being 100% vested or it shall become void and without further effect. The Put purchase price is the fair market value of such Interest (or shares) on the Valuation Date. Under this Agreement, the Valuation Date is: (i) the expiration of the four-year term of this Agreement, in the event of a Put under Section 4(g)(i), or (ii) the date Executive becomes 100% vested, in the event of a Put under Section 4(g)(2). In either case of (i) or (ii) in the preceding sentence, the fair market value shall be determined by an independent appraisal firm mutually agreed to by Gaming Holdings and Executive, with the cost of such appraisal being paid by the Company. If Executive exercises the Put hereunder, and Gaming Holdings does not satisfy its obligation to purchase the membership interest or shares within seven days of Executive's written notice of exercise of the Put, Executive shall have the right to require the Company (rather than gaming Holdings) to purchase such membership interest or shares at fair market value. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1. h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's IPO, the Company terminates Executive for Cause as defined in Section 5(d) hereof (including Executive quitting without Good Reason under Section 5(d)(5)), then Gaming Holdings and the Company shall have the right but not the obligation to purchase any vested membership interest (or shares exchanged by such interest) within thirty days of the Termination Date at a price equal to two times the price Executive originally paid Gaming Holdings for such membership interest. The Call right must be exercised in writing by Gaming Holdings or the Company within thirty days of the Termination Date or it shall become void and without further effect. If Gaming Holdings or the Company exercises the Call hereunder, Executive must tender such membership interest or shares and otherwise complete the transaction hereunder within thirty days of Gaming Holdings' or the 3 Company's exercise of the Call. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1." (c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the Employment Agreement are hereby amended so that Gaming Holdings has the same rights and obligations under such Sections as the Company. 5. GAMING LAW. Anything to the contrary herein or in the Employment and Consulting Agreement notwithstanding, the parties hereto agree and acknowledge that they are subject to and that they shall comply in all respects with the gaming laws of the State of Nevada, including the Nevada Gaming Control Act and (or any successor statute) the rules and regulations promulgated by the Nevada Gaming Commission and the State Gaming Control Board. To the extent anything in this Agreement or the Employment Agreement is inconsistent with any gaming laws or regulations, the gaming laws and regulations shall control. 6. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of any successor of the Company or Gaming Holdings. Any such successor of the Company or Gaming Holdings shall be deemed substituted for the Company or Gaming Holdings under the terms of this Agreement for all purposes. As used herein, "successor" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company or Gaming Holdings and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC. 7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement represent the entire agreement and understanding between the Company, Gaming Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC. 8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may only be amended, cancelled or discharged in writing signed by the Executive, Gaming Holdings and the Company. 9. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Nevada. 4 10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have the meanings described thereto in the Employment Agreement. 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all such counterparts shall together constitute but one and the same contract. 5 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ALADDIN GAMING, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN GAMING HOLDINGS, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary /s/ Cornelius T. Klerk ------------------------------- CORNELIUS T. KLERK 6 EX-10.38 30 GALATI CONTRIBUTION AND AMEND AGREEMENT GALATI CONTRIBUTION AND AMENDMENT AGREEMENT This Contribution and Amendment Agreement (the "Agreement") dated as of February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"), Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Lee Galati (the "Executive"). WHEREAS, the Company, Aladdin Holdings and the Executive entered into an Employment Agreement effective as of July 1, 1997 (the "Employment Agreement"); WHEREAS, the Company is a subsidiary of Gaming Holdings; and WHEREAS, the parties wish to enter into this Agreement to provide for the Executive to contribute his Restricted Membership Interest (as defined in the Employment Agreement) in the Company to Gaming Holdings in return for a restricted membership interest in Gaming Holdings on the terms and conditions herein and to amend the Employment and Consulting Agreement in connection therewith. NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows: 1. On the date hereof (a) the Executive shall contribute his 0.25% Restricted Membership Interest in the Company to the capital of Gaming Holdings and (b) in consideration therefor Gaming Holdings shall issue to the Executive a restricted membership interest in the capital of Gaming Holdings (the "Holdings Restricted Membership Interest") on the same terms and conditions as those which governed the Executive's Restricted Membership Interest in the Company (taking account of the amendments to the Employment Agreement herein and the fact that the Holdings Restricted Membership Interest has been issued by Gaming Holdings), such Holdings Restricted Membership Interest representing upon the vesting thereof 0.25% of the issued and outstanding common shares of Gaming Holdings, subject to adjustment as provided in the Employment Agreement as amended herein. At the time of any vesting of any Holdings Restricted Membership Interest Gaming Holdings shall establish or increase the capital account in respect thereof in the amount of the proportion of the Holding Restricted Membership Interest that is vesting at such time applied against $0.5 million. 2. The parties agree that Gaming Holdings is hereby added as a party to the Employment Agreement as amended hereby. 3. Pursuant to Section 9(d) of the Employment Agreement, Sections 4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the reference to "Restricted Membership Interest" therein to "Holdings Restricted Membership Interest" (as defined in that certain Galati Contribution and Amendment Agreement dated as of February 26, 1998). The Company and Gaming Holdings hereby agree that if the Company purchases the unvested portion of the Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3) of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase such Holdings Restricted Membership Interest from the Company for a purchase price of $1. 4. Pursuant to Section 9(d) of the Employment Agreement, the Employment Agreement is hereby amended as follows: (a) Section 4(f)(4) of the Employment Agreement is deleted in its entirety and replaced with the following: "(4) While Gaming Holdings remains a pass-through entity for federal income tax purposes, Gaming Holdings will periodically distribute cash, to the extent available, to Executive in an amount equal to the increase in his cumulative tax liability with respect to his interest in Gaming Holdings and Gaming Holdings may, at the discretion of the Gaming Holdings Board, periodically distribute additional cash, to the extent available, to Executive to satisfy any additional tax liability arising from his interest in Gaming Holdings in excess of distributions otherwise receivable." (b) Sections 4(g) and (h) of the Employment Agreement are deleted in their entirety and replaced with the following: "g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the obligation to sell his vested Holdings Restricted Membership Interest (or shares exchanged by such Interest) back to Gaming Holdings or to the Company only in the following circumstances: (1) Gaming Holdings' IPO has not occurred upon expiration of the original four-year term of this Agreement and Company does not continue to employ Executive for reason(s) not constituting Cause as defined in Section 5(d)(1-4) hereof or the Executive does not continue his employment at the request of the Company for reason(s) constituting Good Reason as defined in Section 5(d)(5). This Put 2 right must be exercised in writing by Executive within thirty (30) days of the expiration of the four-year term hereunder or it shall become void and without further effect. (2) Gaming Holdings' IPO has not occurred upon Executive becoming 100% vested in Holdings Restricted Membership Interest. This Put right must be exercised in writing by Executive within thirty days of Executive being 100% vested or it shall become void and without further effect. The Put purchase price is the fair market value of such Interest (or shares) on the Valuation Date. Under this Agreement, the Valuation Date is: (i) the expiration of the four-year term of this Agreement, in the event of a Put under Section 4(g)(i), or (ii) the date Executive becomes 100% vested, in the event of a Put under Section 4(g)(2). In either case of (i) or (ii) in the preceding sentence, the fair market value shall be determined by an independent appraisal firm mutually agreed to by Gaming Holdings and Executive, with the cost of such appraisal being paid by the Company. If Executive exercises the Put hereunder, and Gaming Holdings does not satisfy its obligation to purchase the membership interest or shares within seven days of Executive's written notice of exercise of the Put, Executive shall have the right to require the Company (rather than gaming Holdings) to purchase such membership interest or shares at fair market value. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1. h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's IPO, the Company terminates Executive for Cause as defined in Section 5(d) hereof (including Executive quitting without Good Reason under Section 5(d)(5)), then Gaming Holdings and the Company shall have the right but not the obligation to purchase any vested membership interest (or shares exchanged by such interest) within thirty days of the Termination Date at a price equal to two times the price Executive originally paid Gaming Holdings for such membership interest. The Call right must be exercised in writing by Gaming Holdings or the Company within thirty days of the Termination Date or it shall become void and without further effect. If Gaming Holdings or the Company exercises the Call hereunder, Executive must tender such membership interest or shares and otherwise complete the transaction hereunder within thirty days of Gaming Holdings' or the 3 Company's exercise of the Call. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1." (c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the Employment Agreement are hereby amended so that Gaming Holdings has the same rights and obligations under such Sections as the Company. 5. GAMING LAW. Anything to the contrary herein or in the Employment and Consulting Agreement notwithstanding, the parties hereto agree and acknowledge that they are subject to and that they shall comply in all respects with the gaming laws of the State of Nevada, including the Nevada Gaming Control Act and (or any successor statute) the rules and regulations promulgated by the Nevada Gaming Commission and the State Gaming Control Board. To the extent anything in this Agreement or the Employment Agreement is inconsistent with any gaming laws or regulations, the gaming laws and regulations shall control. 6. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of any successor of the Company or Gaming Holdings. Any such successor of the Company or Gaming Holdings shall be deemed substituted for the Company or Gaming Holdings under the terms of this Agreement for all purposes. As used herein, "successor" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company or Gaming Holdings and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC. 7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement represent the entire agreement and understanding between the Company, Gaming Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC. 8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may only be amended, cancelled or discharged in writing signed by the Executive, Gaming Holdings and the Company. 9. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Nevada. 4 10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have the meanings described thereto in the Employment Agreement. 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all such counterparts shall together constitute but one and the same contract. 5 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ALADDIN GAMING, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN GAMING HOLDINGS, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary /s/ Lee Galati ------------------------------- Name: Lee Galati Title: Senior Vice President/Human Resources 6 EX-10.39 31 RUEDA CONTRIBUTION AND AMENDMENT AGREEMENT RUEDA CONTRIBUTION AND AMENDMENT AGREEMENT This Contribution and Amendment Agreement (the "Agreement") dated as of February 26, 1998 is made between and among Aladdin Gaming, LLC (the "Company"), Aladdin Gaming Holdings, LLC ("Gaming Holdings") and Jose A. Rueda (the "Executive"). WHEREAS, the Company, Aladdin Holdings and the Executive entered into an Employment Agreement effective as of July 1, 1997 (the "Employment Agreement"); WHEREAS, the Company is a subsidiary of Gaming Holdings; and WHEREAS, the parties wish to enter into this Agreement to provide for the Executive to contribute his Restricted Membership Interest (as defined in the Employment Agreement) in the Company to Gaming Holdings in return for a restricted membership interest in Gaming Holdings on the terms and conditions herein and to amend the Employment and Consulting Agreement in connection therewith. NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows: 1. On the date hereof (a) the Executive shall contribute his 0.75% Restricted Membership Interest in the Company to the capital of Gaming Holdings and (b) in consideration therefor Gaming Holdings shall issue to the Executive a restricted membership interest in the capital of Gaming Holdings (the "Holdings Restricted Membership Interest") on the same terms and conditions as those which governed the Executive's Restricted Membership Interest in the Company (taking account of the amendments to the Employment Agreement herein and the fact that the Holdings Restricted Membership Interest has been issued by Gaming Holdings), such Holdings Restricted Membership Interest representing upon the vesting thereof 0.75% of the issued and outstanding common shares of Gaming Holdings, subject to adjustment as provided in the Employment Agreement as amended herein. At the time of any vesting of any Holdings Restricted Membership Interest Gaming Holdings shall establish or increase the capital account in respect thereof in the amount of the proportion of the Holding Restricted Membership Interest that is vesting at such time applied against $1.5 million. 2. The parties agree that Gaming Holdings is hereby added as a party to the Employment Agreement as amended hereby. 3. Pursuant to Section 9(d) of the Employment Agreement, Sections 4(f)(1) and 4(f)(3) of the Employment Agreement are hereby amended to change the reference to "Restricted Membership Interest" therein to "Holdings Restricted Membership Interest" (as defined in that certain Rueda Contribution and Amendment Agreement dated as of February 26, 1998). The Company and Gaming Holdings hereby agree that if the Company purchases the unvested portion of the Holdings Restricted Membership Interest pursuant to such amended Section 4(f)(3) of the Employment Agreement, Gaming Holdings shall promptly thereafter purchase such Holdings Restricted Membership Interest from the Company for a purchase price of $1. 4. Pursuant to Section 9(d) of the Employment Agreement, the Employment Agreement is hereby amended as follows: (a) Section 4(f)(4) of the Employment Agreement is deleted in its entirety and replaced with the following: "(4) While Gaming Holdings remains a pass-through entity for federal income tax purposes, Gaming Holdings will periodically distribute cash, to the extent available, to Executive in an amount equal to the increase in his cumulative tax liability with respect to his interest in Gaming Holdings and Gaming Holdings may, at the discretion of the Gaming Holdings Board, periodically distribute additional cash, to the extent available, to Executive to satisfy any additional tax liability arising from his interest in Gaming Holdings in excess of distributions otherwise receivable." (b) Sections 4(g) and (h) of the Employment Agreement are deleted in their entirety and replaced with the following: "g. EXECUTIVE'S PUT RIGHT. Executive has the right but not the obligation to sell his vested Holdings Restricted Membership Interest (or shares exchanged by such Interest) back to Gaming Holdings or to the Company only in the following circumstances: (1) Gaming Holdings' IPO has not occurred upon expiration of the original four-year term of this Agreement and Company does not continue to employ Executive for reason(s) not constituting Cause as defined in Section 5(d)(1-4) hereof or the Executive does not continue his employment at the request of the Company for reason(s) constituting Good Reason as defined in Section 5(d)(5). This Put 2 right must be exercised in writing by Executive within thirty (30) days of the expiration of the four-year term hereunder or it shall become void and without further effect. (2) Gaming Holdings' IPO has not occurred upon Executive becoming 100% vested in Holdings Restricted Membership Interest. This Put right must be exercised in writing by Executive within thirty days of Executive being 100% vested or it shall become void and without further effect. The Put purchase price is the fair market value of such Interest (or shares) on the Valuation Date. Under this Agreement, the Valuation Date is: (i) the expiration of the four-year term of this Agreement, in the event of a Put under Section 4(g)(i), or (ii) the date Executive becomes 100% vested, in the event of a Put under Section 4(g)(2). In either case of (i) or (ii) in the preceding sentence, the fair market value shall be determined by an independent appraisal firm mutually agreed to by Gaming Holdings and Executive, with the cost of such appraisal being paid by the Company. If Executive exercises the Put hereunder, and Gaming Holdings does not satisfy its obligation to purchase the membership interest or shares within seven days of Executive's written notice of exercise of the Put, Executive shall have the right to require the Company (rather than gaming Holdings) to purchase such membership interest or shares at fair market value. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1. h. COMPANY'S CALL RIGHT. If, prior to the date of the Company's IPO, the Company terminates Executive for Cause as defined in Section 5(d) hereof (including Executive quitting without Good Reason under Section 5(d)(5)), then Gaming Holdings and the Company shall have the right but not the obligation to purchase any vested membership interest (or shares exchanged by such interest) within thirty days of the Termination Date at a price equal to two times the price Executive originally paid Gaming Holdings for such membership interest. The Call right must be exercised in writing by Gaming Holdings or the Company within thirty days of the Termination Date or it shall become void and without further effect. If Gaming Holdings or the Company exercises the Call hereunder, Executive must tender such membership interest or shares and otherwise complete the transaction hereunder within thirty days of Gaming Holdings' or the 3 Company's exercise of the Call. If the Company purchases such membership interest or shares, the Company and Gaming Holdings hereby agree that Gaming Holdings shall promptly thereafter purchase such membership interest or shares from the Company for a purchase price of $1." (c) Sections 6(a), 9(a), (b), (d), (h) and (k) of the Employment Agreement are hereby amended so that Gaming Holdings has the same rights and obligations under such Sections as the Company. 5. GAMING LAW. Anything to the contrary herein or in the Employment and Consulting Agreement notwithstanding, the parties hereto agree and acknowledge that they are subject to and that they shall comply in all respects with the gaming laws of the State of Nevada, including the Nevada Gaming Control Act and (or any successor statute) the rules and regulations promulgated by the Nevada Gaming Commission and the State Gaming Control Board. To the extent anything in this Agreement or the Employment Agreement is inconsistent with any gaming laws or regulations, the gaming laws and regulations shall control. 6. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of any successor of the Company or Gaming Holdings. Any such successor of the Company or Gaming Holdings shall be deemed substituted for the Company or Gaming Holdings under the terms of this Agreement for all purposes. As used herein, "successor" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company or Gaming Holdings and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC. 7. ENTIRE AGREEMENT. This Agreement and the Employment Agreement represent the entire agreement and understanding between the Company, Gaming Holdings, Aladdin Holdings, LLC and the Executive concerning the matters herein and supercede any prior understandings or agreements between the parties hereto and Aladdin Holdings, LLC. 8. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may only be amended, cancelled or discharged in writing signed by the Executive, Gaming Holdings and the Company. 9. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Nevada. 4 10. CAPITALIZED TERMS. Capitalized terms not defined herein shall have the meanings described thereto in the Employment Agreement. 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all such counterparts shall together constitute but one and the same contract. 5 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ALADDIN GAMING, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN GAMING HOLDINGS, LLC By: /s/ Ronald Dictrow ------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary /s/ Jose A. Rueda ------------------------------- Name: Jose A. Rueda Title: Senior Vice President/Electronic Gaming 6 EX-10.46 32 FF&E COMMITMENT LETTER January 23, 1998 CONFIDENTIAL Aladdin Gaming, LLC 3667 Las Vegas Blvd. South Las Vegas, NV 89109 Attn: Mr. Cornelius T. Klerk Chief Financial Officer Re: $80,000,000 Financing Facility from General Electric Capital Corporation ("GE Capital") to Aladdin Gaming, LLC (the "Obligor") Ladies and Gentlemen: Obligor has advised GE Capital that Obligor is seeking up to $80 million of financing (the "Financing") for the proposed purchase by Obligor of new furniture and equipment, and gaming equipment, for the Aladdin Hotel Casino (the "Transaction"). We anticipate that Obligor is a domestic operating company that will directly own and operate the assets used in its business. You have asked that the Financing include: $60 million to purchase new furniture and equipment (other than gaming equipment) for the Aladdin Hotel Casino (the "Synthetic Lease Facility") and a $20 million term loan to purchase gaming equipment for the Aladdin Hotel Casino (the "Term Loan Facility"; and together with the Synthetic Lease Facility being referred to, collectively, as the "Facilities"). Based on our understanding of the Transaction as described above and the information which you have provided to us, GE Capital is pleased to advise you (a) of its commitment to provide the Financing described in this letter (the "Commitment Letter") in the amount of $60 million, and (b) of the commitment of Credit Suisse First Boston Corporation ("First Boston") to provide the financing described in this letter in the amount of $20 million, subject to the following terms and conditions. GE Capital's affiliate, GECC Capital Markets Group, Inc. ("GECMG") will seek to arrange for a portion of the Financing to be syndicated to other financial institutions on the terms and conditions more fully described herein. Aladdin Gaming, LLC Page 2 CO-AGENTS: GE Capital and First Boston SYNDICATION AND DOCUMENTATION AGENT: GECMG SUMMARY OF PROPOSED TERMS FOR SYNTHETIC LEASE FACILITY TRANSACTION TYPE: The Synthetic Lease Facility is structured as a lease intended for security ("Lease"). The parties acknowledge that it is the intention of Obligor to be considered the owner of the Lease Property (as hereinafter defined) for tax purposes, and it is the desire of Obligor to structure the Synthetic Lease Facility as an operating lease for accounting purposes. LESSOR: GE Capital and other parties acceptable to GE Capital and to Obligor (which acceptance by Obligor shall not unreasonably be withheld, delayed or conditioned) LESSEE: Aladdin Gaming, LLC. AMOUNT: $60 million. BASIC LEASE TERM COMMENCEMENT DATE: Same as Construction Completion Date (as hereinafter defined). BASIC LEASE TERM: Three (3) years from Basic Lease Term Commencement Date. RENEWAL LEASE TERM: At Obligor's option, up to two (2) one-year renewal periods from the end of the Basic Lease Term. PAYMENTS/AMORTIZATION: Payments shall be made quarterly, in arrears, calculated such that there will be eighty percent (80%) amortization of principal at the end of the Basic Lease Term and the maximum two (2) Renewal Lease Terms. The remaining balloon payment will be twenty percent (20%) of the principal. LEASE RENTAL FACTOR: Calculated to be 5.6639% of the Lease Funding Amount (as hereinafter defined) per quarter. The quarterly rental installment shall consist of distinct principal and interest components. The Lease Rental Factor was calculated at an interest rate of 10.1875% which represents a spread of 425 basis points over the Base Index (as hereinafter defined) (5.9375%). Five (5) days prior Aladdin Gaming, LLC Page 3 to the Basic Lease Term Commencement Date, the Lease Rental Factor will be calculated on the basis of the floating rate Base Index plus the higher of (a) 425 basis points, or (b) the weighted average spread used to calculate the interest rate on Obligor's Senior Credit Facility (as hereinafter defined) plus 125 basis points; and such spread shall be fixed throughout the Basic Lease Term and any available Renewal Lease Terms. The Lease Rental Factor will be adjusted quarterly based on changes to the Base Index. BASE INDEX: The reserve-adjusted 90-day London Interbank Offering Rate. LEASE PROPERTY: GE Capital shall be secured by a first priority security interest in specified assets (but not the income generated therefrom), mutually agreed upon by Obligor and GE Capital, selected from a pool of new furniture and equipment (other than gaming equipment), substantially similar to the types of furniture and equipment described on Exhibit A attached hereto, with an estimated cost of $60 million, including freight, installation, sales tax and other costs not to exceed twelve percent (12%) of total cost. EQUIPMENT LOCATION: The Aladdin Hotel Casino located in Las Vegas, Nevada. LEASE FUNDING AMOUNT: 100% of Obligor's acquisition cost of the Lease Property, up to $60 million. INTERIM LEASE FUNDING AMOUNT: Up to $60 million, subject to no default then having occurred and be continuing under any of Obligor's financing, construction or other material agreements (subject to the rights with respect to assumption and/or cure of the lenders under Obligor's Senior Credit Facility, as set forth in an intercreditor agreement to be negotiated between such lenders and GE Capital (the "Intercreditor Agreement")), and satisfaction of all conditions precedent to funding as outlined herein and as defined in the definitive documents between the parties. Advances of the Interim Lease Funding Amount shall be made once per month during the Interim Funding Period. Any Interim Lease Funding Amount advanced under the Synthetic Lease Facility shall be made under an interim schedule, which shall be converted to a final schedule under the Lease on the Basic Lease Term Commencement Date. INTERIM LEASE REPAYMENT TERMS: Floating rate interest-only payments due monthly in arrears Aladdin Gaming, LLC Page 4 during the Interim Funding Period (as hereinafter defined) based on the Interim Lease Funding Amount. At Obligor's option, interest will be calculated at either (a) 30-Day LIBOR plus the higher of (1) 425 basis points, or (2) the weighted average spread used to calculate the interest rate on Obligor's Senior Credit Facility plus 125 basis points, or (b) the Prime Rate (as hereinafter defined) plus 275 basis points; and such spread shall be fixed throughout the Interim Funding Period, and 30-Day LIBOR or the Prime Rate will be adjusted monthly based on changes thereto. For purposes hereof, "30-Day LIBOR" shall mean the reserve-adjusted 30-day London Interbank Offering Rate on the date of determination. For purposes hereof, the "Prime Rate" shall mean the prime rate of interest published in THE WALL STREET JOURNAL on the date of determination. Obligor shall elect such option prior to the initial Interim Lease Funding Date and such election shall remain in effect during the Interim Funding Period. OPTIONS AT LEASE TERM EXPIRATION: Subject to the Fixed Purchase Price provisions set forth below, at the end of the Basic Lease Term or any Renewal Lease Term, Obligor may: (i) purchase all, but not less than all, of the Lease Property at the purchase price calculated as specified below (the "Fixed Purchase Price"), estimated to represent the Lease Property's then fair value, (ii) renew the Lease for all, but not less than all, of the Lease Property for up to two (2) additional one-year terms (with respect to the end of the Basic Lease Term) at the Lease Rental Factor set forth above, subject to the conditions set forth above in the Renewal Lease Term section, or (iii) return all but not less than all, of the Lease Property to GE Capital subject to GE Capital's return conditions and the payment to GE Capital of the Fixed Purchase Price as outlined below. FIXED PURCHASE PRICE: If Obligor elects to return the Lease Property at the expiration of the Basic Lease Term or any subsequent Renewal Lease Term, Obligor would pay to GE Capital a rent payment equal to the Fixed Purchase Price. Obligor and GE Capital would then arrange for the sale of the Lease Property. Upon the sale of all of the Lease Property, GE Capital would return to Obligor an amount equal to the Lessor's Residual Risk Amount (as hereinafter calculated) plus any net sale proceeds in excess of the GE Capital's Residual Risk Amount, less reasonable remarketing and carrying costs (which amount to be returned by GE Capital to Obligor may be subject to a security interest grated by Obligor to the Lenders under Obligor's Senior Credit Facility). Fixed Lessee's Lessor's Residual End of Year Purchase Price* Obligations* Risk Amount* ----------- --------------- ------------ ------------ ------------------------------------------------------------------- 3 56.8849 43.2267 13.6582 ------------------------------------------------------------------- 4 39.3693 33.0159 6.3534 ------------------------------------------------------------------- 5 20.0000 15.6029 4.3971 ------------------------------------------------------------------- Aladdin Gaming, LLC Page 5 (*expressed as a percentage of the Funding Amount) LESSOR'S RESIDUAL RISK AMOUNT: Lessor's Residual Risk Amount as outlined above, provided there is no default under the Lease (as defined in the definitive financing documents to be executed between the parties), is non-recourse to Obligor, i.e. GE Capital will look solely to the value of the Lease Property for repayment. CONTINGENT RENTAL: Upon termination of the Lease at the end of the Basic Lease Term or any Renewal Lease Term, should the Lease Property be returned to GE Capital by Obligor, GE Capital will calculate a Contingent Rental for the full lease term, on a quarterly basis, equal to the sum of (a) 85% of the per annum increase in the United States Consumer Price Index reported in each quarter as currently calculated, or a replacement index with a similar calculation acceptable to GE Capital, multiplied by the Lease Funding Amount, and (b) an amount to be determined based on the differential between (1) the average annual revenues generated at the Aladdin Hotel Casino for the period from November 1, 1992 through termination of current operations (estimated to be November 25, 1997), and (2) the average annual revenues generated at the Aladdin Hotel Casino for the period from the Construction Completion Date through and including the subsequent sixty (60) months. The total amount of Contingent Rental will be capped at a maximum percentage of the Lease Funding Amount as follows: Floating Rate Lease Termination Maximum at End of Year Contingent Rental* ----------------- ------------------ ------------------------------------------------------ 3 13.66% ------------------------------------------------------ 4 6.36% ------------------------------------------------------ 5 4.40% ------------------------------------------------------ (*expressed as a percentage of the Funding Amount) Upon completion of the sale of the Lease Property to a third party, Lessee shall pay to Lessor that portion (if any) of the Lessor's Residual Risk Amount not satisfied by application of the net sale proceeds; provided, however, that in no event shall the amount of Contingent Rent required to be paid by Obligor to GE Capital exceed the Floating Rate Maximum Contingent Rental specified above. Aladdin Gaming, LLC Page 6 SUMMARY OF PROPOSED TERMS FOR TERM LOAN FACILITY LENDER: GE Capital and other parties acceptable to GE Capital and to Obligor (which acceptance by Obligor shall not unreasonably be withheld, delayed or conditioned). BORROWER: Aladdin Gaming, LLC AMOUNT: $20 million TERM: Five (5) years. TERM LOAN COMMENCEMENT DATE: Same as Construction Completion Date. PAYMENTS/AMORTIZATION: Payments shall be made quarterly, in arrears, calculated such that principal will be amortized as follows: Quarter Percent Amortization ------- -------------------- 1-4 3.25 5-8 3.5 9-12 4.0 13-16 4.5 17-19 4.75 20 24.75 INTEREST RATE: The interest rate will be calculated five (5) days prior to the Term Loan Commencement Date on the basis of the floating rate Base Index plus the higher of (a) 425 basis points, or (b) the weighted average spread used to calculate the interest rate on Obligor's Senior Credit Facility on such date plus 125 basis points; and such spread shall be fixed throughout the Term. The Interest Rate will be adjusted quarterly, based on changes to the Base Index, if applicable. COLLATERAL: GE Capital shall be secured by a first priority security interest in specified new gaming equipment, mutually agreed upon by Obligor and GE Capital with an estimated cost of $20 million, including freight, installation, sales tax and other costs not to exceed twelve percent (12%) of total cost. The Lender shall not be considered the owner of Aladdin Gaming, LLC Page 7 the Collateral for Nevada regulatory purposes. COLLATERAL LOCATION: The Aladdin Hotel Casino located in Las Vegas, Nevada. TERM LOAN FUNDING AMOUNT: One hundred percent (100%) of Obligor's acquisition cost of the Collateral, up to $20 million. INTERIM TERM LOAN FUNDING AMOUNT: Up to $20 million, subject to no default then having occurred and be continuing under any of Obligor's financing, construction or other material agreements (subject to the rights with respect to assumption and/or cure of the lenders under Obligor's Senior Credit Facility, as set forth in the Intercreditor Agreement), and satisfaction of all conditions precedent to funding as outlined herein and as defined in the definitive documents between the parties. Advances of the Interim Term Loan Funding Amount shall be made once per month during the Interim Funding Period. Any Interim Term Loan Funding Amount advanced under the Term Loan Facility shall be evidenced by an interim promissory note, which shall be converted to a final promissory note on the Term Loan Commencement Date. INTERIM TERM LOAN REPAYMENT TERMS: Floating rate interest-only payments due monthly in arrears during the Interim Funding Period based on the Interim Term Loan Funding Amount. At Obligor's option, interest will be calculated at either (a) 30-Day LIBOR plus the higher of (1) 425 basis points, or (2) the weighted average spread used to calculate the interest rate on Obligor's Senior Credit Facility plus 125 basis points, or (b) the Prime Rate plus 275 basis points; and such spread shall be fixed throughout the Interim Funding Period, and 30-Day LIBOR or the Prime Rate will be adjusted monthly based on changes thereto. Obligor shall elect such option prior to the Interim Funding Date and such election shall remain in effect during the Interim Funding Period. SUMMARY OF GENERAL TERMS CONSTRUCTION Trust Under Article 6 u/w/o Sigmund Sommer (the "Trust"), COMPLETION GUARANTORS: London Clubs International PLC ("LCI"), and Aladdin Bazaar Holdings, LLC ("Bazaar Holdings"). Aladdin Gaming, LLC Page 8 CONSTRUCTION COMPLETION DATE: The date on which construction of the Aladdin Hotel Casino reasonably can be expected to be completed. INTERIM FUNDING DATE: Subject to the satisfaction of the conditions precedent and to there being no default, GE Capital will commence funding of deliveries of the Lease Property and/or the Collateral up to six (6) months prior to the Construction Completion Date upon delivery to GE Capital on a monthly basis of such substantiation with respect to the Lease Property and the Collateral, and of the delivery thereof to Obligor, as may be required by GE Capital. GE Capital's construction consultant will certify to GE Capital that the Construction Completion Date is reasonably anticipated to occur not more than six (6) months after the Initial Funding Date. INTERIM FUNDING PERIOD: The Interim Funding Date through the Construction Completion Date. VOLUNTARY TERMINATION: Obligor will not have the ability to terminate the Lease within the first twelve (12) months after the Basic Lease Term Commencement Date. Obligor will not have the ability to prepay the Term Loan within the first twelve (12) months after the Term Loan Commencement Date. Thereafter, voluntary early termination and/or prepayment will be subject to the following penalties: TERMINATION/PREPAYMENT DATE PENALTY* --------------------------- -------- > 12 months and < 24 months 2.0% - > 24 months and < 48 months 1.0% - > 48 months 0% - (*expressed as a percentage of the Funding Amount) DEFAULT RATE: From and after the occurrence of a default, the interest rate will be increased by 200 basis points per annum over the implicit interest rate until the default or defaults are cured. USE OF PREMISES: In the event of a default which leads to a liquidation of the Lease Property and/or the Collateral, subject to the provisions of the Intercreditor Agreement, Obligor would provide GE Capital with a time period of up to twelve (12) months in which to sell the Lease Property and/or the Collateral on site, without cost to GE Capital. FEES: As described in that certain fee letter of even date herewith. TRANSACTION EXPENSES: All reasonable and necessary documented transaction Aladdin Gaming, LLC Page 9 expenses including, but not necessarily limited to, expenses of counsel (including counsel for GE Capital), due diligence, lien searches, UCC filings, and field audit(s), etc., would be for the account of Obligor. SECURITY INTEREST: The security interest granted by Obligor will be a first priority security interest in the Lease Property and the Collateral (but not the income generated therefrom), and assignment of all improvements and/or additions to the Lease Property and the Collateral hereafter acquired. The Lease Property and the Collateral shall be free of all junior liens or encumbrances. Any and all existing and to be issued obligations of Obligor shall acknowledge the Facilities as senior indebtedness of Obligor. During the Interim Funding Period, Obligor shall assign to GE Capital its rights under the purchase contracts for the Lease Property. DOCUMENTATION: The Financing documentation will contain representations and warranties; conditions precedent; indemnities; events of default and remedies as required by GE Capital. Relevant documents shall include, but not be limited to, inter-creditor agreements and other material agreements, to be acceptable to GE Capital and shall contain cross-default and cross-acceleration provisions with all other indebtedness, and affirmative, negative and financial covenants similar to those contained in Obligor's Senior Credit Facility. Financial reporting requirements shall be included in such documentation, as required from time to time, as specified therein, including (without limitation) a compliance certificate with supporting covenant computation signed by an authorized representative of Obligor. It is understood and agreed that GE Capital's counsel will draft all documentation (other than the Intercreditor Agreement) to be used in the Transaction. SYNDICATION: GECMG will syndicate the Financing with the assistance of Obligor. Such assistance shall include, but not be limited to (i) prompt assistance in the preparation of an information memorandum to include any and all information pertinent to the syndication of the Financing ("Information Memorandum") and the verification of the completeness and accuracy of the information contained therein; (ii) preparation of offering materials and projections by Obligor and its advisors taking into account the proposed Transaction and Financing; (iii) providing GECMG with all information reasonably deemed necessary by GECMG to successfully complete the syndication; (iv) confirmation as to the accuracy and completeness of such offering materials, information and projections; (v) participation of the senior management of Obligor and its affiliates in Aladdin Gaming, LLC Page 10 meetings and conference calls with potential participants at such times and places as GECMG reasonably may request; and (vi) using best efforts to ensure that the syndication efforts benefit from existing lending relationships of Obligor and its affiliates. GE Capital shall not commence the syndication of the Facilities until the earlier of (a) the completion of the Syndication of Obligor's Senior Credit Facility (but not before the closing thereof), or (b) three (3) months from the date on which Obligor's Senior Credit Facility is closed. OTHER TERMS: The Financing of the Facilities will require, among other things, deliveries of, or compliance with covenants pertaining to, the following all in form and substance satisfactory to GE Capital: - If necessary, Obligor and GE Capital shall negotiate and put in place an Agency Agreement whereby Obligor may acquire Lease Property as agent for GE Capital ("Agency Agreement"). - Obligor shall bear all risk of loss and damage to the Lease Property and the Collateral. Obligor is responsible for keeping the Lease Property and the Collateral insured with commercially reasonable insurance protection for Obligor's industry, size and risk and GE Capital's collateral protection (terms, underwriter, scope, and coverage to be acceptable to GE Capital); GE Capital named as loss payee (property/casualty) and additional insured (liability); and non-renewal/cancellation/amendment endorsements to provide thirty (30) days' advance notice to GE Capital; plus breach of warranty and waiver of subrogation endorsements. Any co-insurance coverage would be reviewed by GE Capital for acceptability. - GE Capital shall require, on an itemized basis, fixed asset lists with complete descriptions of the Lease Property and the Collateral, including make (manufacturer), model numbers, serial numbers (if available), and original cost breakdown. GE Capital shall also be granted the right to review purchase orders and Aladdin Gaming, LLC Page 11 invoices for the Lease Property and the Collateral to verify payment. It is understood that such information shall, within five (5) days of any request by GE Capital, be provided by Obligor and/or its equipment vendor to GE Capital. - Obligor will have the right to remove predetermined Lease Property and Collateral and substitute with like equipment equal to or greater in value and utility upon such further terms and conditions as Obligor and GE Capital shall agree. - GE Capital shall require Obligor to indemnify it against any liability for environmental risks or hazards and any legal proceedings (etc.) as a result of an environmental related action or incident. - Obligor shall maintain the Lease Property and the Collateral in accordance with standards consistent with manufacturer's specifications and customary to industry practice. Maintenance programs may be reviewed by GE Capital. - The Facilities will be a net financing. Without limiting the generality of the foregoing, Obligor shall be responsible for all expenses, maintenance, insurance and taxes (other than taxes based solely upon the net income of GE Capital) relating to the purchase, lease, possession, use or rental of the Lease Property and the Collateral. - All obligations of Obligor under the Facilities will be cross-defaulted to each other and to all other material indebtedness of Obligor. In addition, all such obligations under the Facilities shall be cross-collateralized with each other. - Limitations on commercial transactions, management agreements, service agreements, and borrowing transactions between its officers, directors, employees and affiliates and intercompany loans among Aladdin Gaming, LLC Page 12 Obligor and its affiliates. - Limitations on, or prohibitions of, cash dividends, other distributions to equity holders, payments in respect of subordinated debt, payment of management fees to affiliates and redemption of membership interests, common stock and preferred stock of Obligor or Construction Completion Guarantors (other than dividends issued with respect to the preferred stock of Aladdin Gaming Holdings, LLC ("Holdings") and reasonable management fees). - Prohibitions of mergers, acquisitions, sale of Obligor, its stock membership interests or material portion of assets. - Prohibitions of a direct or indirect change in control of Obligor. - Financial covenants similar to those included in Obligor's Senior Credit Facility. - Governing law: New York CONDITIONS PRECEDENT Closing of the Financing will be conditioned upon receipt or satisfaction (all to GE Capital's TO CLOSING: satisfaction) of conditions precedent customary for these types of credit facilities and others to be reasonably specified by GE Capital, including (without limitation) the following: - Execution and delivery of all Transaction documents to GE Capital in a timely manner on or before March 31, 1998. The Transaction shall have been consummated on terms satisfactory to GE Capital. - Obligor shall have obtained financing of a senior credit facility in the amount of $410 million ("Senior Credit Facility"), on terms and conditions substantially the same as the terms and conditions contained in that certain commitment letter dated December 4, 1997, as Aladdin Gaming, LLC Page 13 amended to date, issued by The Bank of Nova Scotia and Merrill Lynch Capital Corporation to Obligor, Holdings, and LCI (the "Senior Credit Facility Commitment Letter"). - Obligor shall have received a cash equity contribution from Holdings of $110 million, accomplished by the sale of membership interests of Obligor, on terms and conditions substantially the same as the terms and conditions contained in the Holdings' offering memorandum (draft dated January 14, 1998) (the "Offering Memorandum"). - Contribution of an additional $50 million in cash equity to Obligor by LCI, on terms and conditions substantially the same as the terms and conditions contained in the Offering Memorandum. - Contribution of land (the "Site") as equity in the amount of $77 million, satisfactory in all respects to GE Capital, in the Aladdin Hotel Casino, on terms and conditions substantially the same as the terms and conditions contained in the Offering Memorandum. - Construction of the Aladdin Hotel Casino shall be substantially completed as defined by the parties and GE Capital's construction consultant shall provide to GE Capital a certificate confirming such substantial completion (at Obligor's expense). - Completion by GE Capital of all legal due diligence with results satisfactory to GE Capital. Without limiting the foregoing, such due diligence shall include: review by GE Capital of, and GE Capital's reasonable satisfaction with, (i) the final capital (debt and equity) and legal structure of the Aladdin Hotel Casino (the "Project"), (ii) the final sources and uses of funds to be used to consummate the Project, (iii) a market study, (iv) cash flow projections, (v) the Project budget, and (vi) other Aladdin Gaming, LLC Page 14 debt instruments and material contracts relating to the Project. - If and to the extent requested by GE Capital, environmental surveys or reviews in scope and form, by firms, and with results, acceptable to GE Capital. - An independent appraiser shall substantiate the Lease Property's remaining useful economic life and requisite values at selected points throughout the Basic Lease Term and Renewal Lease Terms, including GE Capital's residual value assumptions. The appraisal shall be commissioned by and acceptable to GE Capital. The cost of such appraisal shall be paid by Obligor. - A letter from a certified public accounting firm acceptable to GE Capital regarding Obligor's solvency at closing after taking into account the Transaction. - GE Capital shall have received Obligor's projected pro-forma income statements, balance sheets and cash flow statements for five (5) years. - The execution of a Keep-Well Agreement by Holdings, LCI and Bazaar Holdings in form and substance satisfactory to GE Capital (provided, however, that it is acknowledged that GE Capital is not a direct beneficiary thereof and has no rights with respect thereto, including no right to bring a cause of action with respect thereto). Aladdin Gaming, LLC Page 15 - The execution of a Guaranty of Performance and Completion by the Trust, LCI and Bazaar Holdings in favor of each of the Administrative Agent and the Lenders under Obligor's Senior Credit Facility, in form and substance satisfactory to GE Capital (provided, however, that it is acknowledged that GE Capital is not a direct beneficiary thereof and has no rights with respect thereto, including no right to bring a cause of action with respect thereto). - The execution of a Guaranty of Performance and Completion by the Trust, LCI and Bazaar Holdings in favor of the Noteholders with respect to Holdings' senior discount notes and the Contingent Guarantor (specified therein) in form and substance satisfactory to GE Capital (provided, however, that it is acknowledged that GE Capital is not a direct beneficiary thereof and has no rights with respect thereto, including no right to bring a cause of action with respect thereto). - Obligor shall have obtained all permits, licenses, and similar governmental authorizations then required to have been obtained in connection with the development and construction of the Project, and any other required permits, licenses or governmental authorizations which have not then been obtained are of a type that are routinely granted on application and no facts or circumstances exist which indicate that any such required permit, license or governmental authorization will not be timely obtainable by Obligor without material difficulty, expense or delay prior to the time that it is required to have been obtained; and the Project shall be in compliance with any and all applicable gaming and regulatory requirements. - At no time prior to a foreclosure of the Leased Property and/or the Collateral shall GE Capital or any other Lessor or Lender with respect to the Facilities be required to obtain any gaming or related licenses as a result of the Transaction (assuming no repossession of the Leased Property and/or the Collateral upon the occurrence of an event of default). GE Capital shall receive a favorable written opinion of counsel for Obligor, acceptable to GE Capital, regarding such licenses, in form and substance reasonably satisfactory to GE Capital, at Obligor's expense. - Other satisfactory closing certificates and opinions of counsel in form and substance reasonably satisfactory to GE Capital, at Obligor's expense. Aladdin Gaming, LLC Page 16 - GE Capital shall have received all fees and expenses required to be paid. - There shall exist no pending or threatened material litigation, proceedings or investigations which (x) contest the consummation of the Transaction or the Project, or (y) could reasonably be expected to have a material adverse effect on the Transaction, the Project or on the financial condition, operations, assets, business, properties or prospects of Obligor, Holdings, LCI or Bazaar Holdings. - All representations and warranties of Obligor in the Transaction documents shall be true, correct and complete in all material respects and Obligor shall deliver a certificate pursuant to which all such representations and warranties are reaffirmed in full and without material modification from such representations and warranties as originally made in the Transaction documents. - No default or event which, with the giving of notice or the lapse of time, or both, would constitute a default by Obligor under the Senior Credit Facility, under any other agreement relating to the Transaction or the Project, or with respect to the Financing, shall have occurred and be continuing (subject to the rights with respect to assumption and/or cure of the lenders under Obligor's Senior Credit Facility, as set forth in the Intercreditor Agreement). - A certified copy of the organizational documents and operating agreement of Obligor, together with a good standing certificate issued by the Secretary of State of Nevada with respect to Obligor. - Certified resolutions and incumbency with respect to Obligor. - All corporate proceedings required in connection with the Transaction on the part of Obligor shall be reasonably Aladdin Gaming, LLC Page 17 satisfactory in form and substance to GE Capital. - Evidence of insurance with respect to the coverages required by the Financing documents. - Execution, delivery and filing or recording, as appropriate (at Obligor's expense), of all Uniform Commercial Code financing statements and other security documents (including lien releases) as may be required by GE Capital to perfect a first priority security interest in the Leased Property and the Collateral. - GE Capital's construction consultant's certificate confirming that construction of the Project reasonably can be expected to be completed within six (6) months after the Interim Funding Date. - The lenders with respect to the Senior Credit Facility, GE Capital and any other Lessor or Lender with respect to the Facilities or the Project shall have entered into the Inter-creditor Agreement, the form and content of which shall be satisfactory to GE Capital in its sole discretion and to the Administrative Agent under the Senior Credit Facility in its sole discretion. The Intercreditor Agreement shall include, among other provisions, (1) that for a period of up to six (6) months after the date on which the lenders under Obligor's Senior Credit Facility (or their nominee) take possession or assume control of the Aladdin Hotel & Casino, GE Capital shall have the right to sell the Leased Property and/or Collateral, on site, without cost to GE Capital; and (2) during such six (6) month period, the lenders under Obligor's Senior Credit Facility may cause the Leased Property and/or the Collateral to be placed in safe, secure storage on site or shall cause the then prevailing payments required to be paid under the Lease and the Term Loan to be paid to GE Capital unless and until GE Capital causes the Leased Property and/or the Collateral to be removed from the Aladdin Hotel & Casino. - At all times, the funds then available to Obligor from all Aladdin Gaming, LLC Page 18 sources shall be sufficient to pay all remaining costs anticipated to be incurred in connection with the completion of the Project, including (without limitation) interest payments and fees due to GE Capital and other Lessors and Lenders with respect to the Facilities during the period through the Construction Completion Date. - The Financing shall not violate any law, governmental rule or regulation, including (without limitation) Regulation G, Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System. - There shall have been no material adverse change in the financial condition, operations, assets, business, properties or prospects of Holdings or LCI since the date of their most recent audited financial statements delivered to GE Capital (subject to the rights with respect to assumption and/or cure of the lenders under Obligor's Senior Credit Facility, as set forth in the Intercreditor Agreement). - The specified conditions must be satisfied with respect to the initial closing of the Financing and with respect to each funding of the Financing, including the provision of such bring-down certificates, opinions and confirmations as may be required by GE Capital. GE Capital's commitment hereunder is further subject to the execution and delivery of final legal, documentation reasonably acceptable to GE Capital and its counsel incorporating, without limitation, the terms set forth in this Commitment Letter, and completion of other customary conditions to GE Capital and its counsel's reasonable satisfaction. You agree that GECMG will act as the sole syndicate agent for the Transaction and that no additional agents, co-agents or arrangers will be appointed, or other titles conferred, without GECMG's consent. To ensure an orderly and effective syndication of the Financing, you agree that until the termination of the syndication, as determined by GECMG, you will not attempt to syndicate or issue, announce or authorize the announcement of the syndication of or issuance of, or engage in Aladdin Gaming, LLC Page 19 discussions concerning the syndication or issuance of, any debt facility or debt security (including any renewals thereof) (other than with respect to the Senior Credit Facility and the offering of Holdings' senior discount notes pursuant to the Offering Memorandum, which shall be closed not later than March 31, 1998), the financing of the Theater of the Performing Arts, the development on the Site of a retail project and another hotel project known as the Audrie/Harmon Project), without the prior written consent of GECMG. By signing this Commitment Letter, each party acknowledges that this Commitment Letter supersedes any and all discussions and understandings, written or oral, between or among GE Capital and any other person as to the subject matter hereof, including, without limitation, the proposal letter dated September 17, 1997 between GE Capital and Obligor (the "Proposal Letter"). No amendments, waivers or modifications of this Commitment Letter or any of its contents shall be effective unless expressly set forth in writing and executed by the parties hereto. This Commitment Letter is being provided to you on the condition that, except as required by law and except to the extent required in connection with the Offering Memorandum, neither it, the Proposal Letter, nor their contents will be disclosed publicly or privately except to those individuals who have a need to know of them as a result of their being specifically involved in the Transaction under consideration and then only on the condition that such matters may not, except as required by law, be further disclosed. No person to whom this Commitment Letter may be shown in violation of the above provisions is entitled to rely upon this Commitment Letter or any of its contents. Without limiting the generality of the foregoing, none of such persons shall, except as required by law, use the name of, or refer to, GE Capital, or any of its affiliates, in any correspondence, discussions, advertisement or disclosure made in connection with the Transaction without the prior written consent of GE Capital. Regardless of whether the Transaction or the Financing closes, Obligor agrees to pay upon demand to GE Capital all out-of-pocket expenses which may be incurred by GE Capital, First Boston or GECMG in connection with the Financing or the Transaction (including all reasonable legal, environmental, and other consultant costs and fees incurred in the preparation of this Commitment Letter, the Proposal Letter, and evaluation of any documenting of the Financing and the Transaction). Regardless of whether the Transaction or the Financing closes, Obligor shall indemnify and hold harmless each of GE Capital, First Boston, GECMG, their respective affiliates, and the directors, officers, employees, agents, attorneys and representatives of any of them (each, an "Indemnified Person"), from and against all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including, but not limited to, attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal), which may be instituted or asserted against or incurred by any such Indemnified Person in connection with, or arising out of, this Commitment Letter, the Proposal Letter, the Financing or the Transaction under consideration, the documentation related thereto, any other financing Aladdin Gaming, LLC Page 20 related thereto, any actions or failures to act in connection therewith, and any and all environmental liabilities and legal costs and expenses arising out of or incurred in connection with any disputes between or among any parties to any of the foregoing, and any investigation, litigation, or proceeding related to any such matters. Notwithstanding the preceding sentence, the indemnitors shall not be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results solely from that Indemnified Person's gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. Under no circumstances shall GE Capital, First Boston, GECMG, or any of their respective affiliates be liable to you or any other person for any punitive, exemplary, consequential or indirect damages which may be alleged to result from this Commitment Letter, the Proposal Letter, the Transaction, the Financing, the documentation related thereto or any other financing, regardless of whether the Transaction or the Financing closes. Each party hereby expressly waives any right to trial by jury of any claim, demand, action or cause of action arising under this Commitment Letter, the Proposal Letter, any transaction relating hereto or thereto, or any other instrument, document or agreement executed or delivered in connection herewith or therewith, whether sounding in contract, tort or otherwise. Each party hereto consents and agrees that the state or federal courts located in New York County, City of New York, New York, shall have exclusive jurisdiction to hear and determine any claims or disputes between or among any of the parties hereto pertaining to this Commitment Letter, the Proposal Letter, the Financing or the Transaction under consideration, any other financing related thereto, and any investigation, litigation, or proceeding related to or arising out of any such matters, PROVIDED, that the parties hereto acknowledge that any appeals from those courts may have to be heard by a court located outside of such jurisdiction. Each party hereto expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and hereby waives any objection which such party may have based upon lack of personal jurisdiction, improper venue or inconvenient forum. This Commitment Letter is governed by and shall be construed in accordance with the internal laws (as opposed to conflicts of law provisions) of the State of New York. GE Capital shall have access to all relevant facilities, personnel and accountants of Obligor and its affiliates, and copies of all documents of Obligor and its affiliates which GE Capital may request, including business plans, financial statements (actual and pro forma), books, records, and other documents. This Commitment Letter shall be of no force and effect unless and until (a) this Commitment Letter is executed and delivered to GE Capital on or before 5:00 p.m. Eastern Standard Time on January 30, 1998, at 777 Long Ridge Road, Building B - First Floor, Stamford, Connecticut 06927, and (b) such delivery is accompanied by payment of the initial portion of the Commitment Fee and any other fees or deposits due and payable to GE Capital as Aladdin Gaming, LLC Page 21 herein provided. Once effective, GE Capital's obligation to provide financing in accordance with the terms of this Commitment Letter shall cease if the Transaction does not close, or the funding of the Financing is not completed for any reason, on or before that date which is twenty-six (26) months after Obligor's Senior Credit Facility closes (if no FORCE MAJEURE has then occurred; provided that such date may be extended for up to twelve (12) months if a FORCE MAJEURE has then occurred) (unless extended beyond such date with the prior written consent of GE Capital and First Boston, at their sole discretion); and GE Capital, First Boston and their affiliates shall not have any liability to any person in connection with its refusal to fund the Financing or any portion thereof after such date. Aladdin Gaming, LLC Page 22 We look forward to continuing to work with you toward completing this transaction. Sincerely, GENERAL ELECTRIC CAPITAL CORPORATION CAPITAL FUNDING, INC. By: ------------------------------------ Daniel P. Gioia Senior Risk Analyst AGREED AND ACCEPTED this 23rd day of January, 1998 ALADDIN GAMING, LLC By: --------------------------- Its: ------------------------- EX-10.48 33 PURCHASE AGREEMENT DATED 2/18/98 $221,500,000 PRINCIPAL AMOUNT AT MATURITY ALADDIN GAMING HOLDINGS, LLC ALADDIN CAPITAL CORP. ALADDIN GAMING ENTERPRISES, INC. ALADDIN HOLDINGS, LLC THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER LONDON CLUBS INTERNATIONAL, PLC PURCHASE AGREEMENT February 18, 1998 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Credit Suisse First Boston Corporation as Representatives of the several Initial Purchasers c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: Aladdin Gaming Holdings, LLC, a Nevada limited-liability company ("Holdings"), Aladdin Capital Corp., a Nevada corporation and a wholly owned subsidiary of Holdings ("Capital" and, together with Holdings, the "Issuers"), Aladdin Gaming Enterprises, Inc., a Nevada corporation ("Enterprises" and, together with the Issuers, the "Aladdin Parties"), Aladdin Holdings, LLC, a Delaware limited liability company ("AHL"), the Trust under Article Sixth u/w/o Sigmund Sommer (the "Trust"), and London Clubs International, plc, a public limited company under the laws of England and Wales ("London Clubs" and, together with the Aladdin Parties, AHL and the Trust, collectively referred to herein as the "Venture Parties") confirm their agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Initial Purchasers named in Schedule A hereto (collectively, the "Initial Purchasers", which term shall also include any initial purchaser substituted as hereinafter provided in Section 13 hereof), for whom Merrill Lynch and Credit Suisse First Boston Corporation are acting as representatives (in such capacity, the "Representatives"), with respect to the issue and sale by the Aladdin Parties and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective number of units (the "Units") set forth in said Schedule A, consisting in the aggregate of $221,500,000 principal amount at maturity of the Issuers' Senior Discount Notes due 2010 (the "Series A Notes") and 2,215,000 Warrants (the "Warrants") to purchase 2,215,000 shares (the "Warrant Shares") of Enterprises' Class B non-voting common stock, no par value (the "Common Stock"). The Series A Notes are to be issued pursuant to an indenture dated as of February 26, 1998 (the "Indenture"), among the Issuers and State Street Bank and Trust Company, as trustee (the "Trustee"). The Series A Notes and the Series B Notes (as defined below) issuable in exchange therefor are collectively referred to herein as the "Notes." The Warrants are to be issued pursuant to a warrant agreement dated as of February 26, 1998 (the "Warrant Agreement"), between Enterprises, Holdings and State Street Bank and Trust Company, as warrant agent (the "Warrant Agent"). The Notes and the Warrants will not be separately transferable until the earliest of: (i) September 1, 1998; (ii) the date on which a registration statement with respect to the Series A Notes or a registration statement with respect to the Warrants and the Warrant Shares is filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "1933 Act"); (iii) the occurrence of a Change of Control (as defined in the Indenture) or a sale or recapitalization of Enterprises, Holdings or Aladdin Gaming, LLC, a Nevada limited-liability company (the "Company") occurs; (iv) 30 days after a Qualified Public Offering (as defined in the Indenture); (v) the occurrence of an Event of Default (as defined in the Indenture); or (vi) such earlier date as determined by Merrill Lynch in its sole discretion. The Units, the Notes, the Warrants and the Warrant Shares are collectively referred to herein as the "Securities." Securities issued in book-entry form will be issued to Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated as of the Closing Time (as defined in Section 4(b)) (the "DTC Agreement"), among the Aladdin Parties, the Trustee, the Warrant Agent and DTC. The Venture Parties understand that the Initial Purchasers propose to make an offering of the Units on the terms and in the manner set forth herein and agree that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Units to purchasers ("Subsequent Purchasers") at any time after the date of this Agreement. The Units are to be offered and sold through the Initial Purchasers without being registered under the 1933 Act, in reliance upon exemptions therefrom. Pursuant to the terms of the Securities, the Indenture and the Warrant Agreement, investors that acquire any of the Securities may only resell or otherwise transfer such Securities if such Securities are hereafter registered under the 1933 Act or if an exemption from the registration requirements of the 1933 Act is available (including the exemption afforded by Rule 144A ("Rule 144A") of the rules and regulations promulgated under the 1933 Act by the Commission). Holders (including subsequent transferees) of the Series A Notes will have the registration rights set forth in the Note Registration Rights Agreement (the "Note Registration Rights Agreement") to be dated as of the Closing Time among the Issuers and the Initial Purchasers and holders (including subsequent transferees) of the Warrants will have registration 2 rights set forth in the Warrant Registration Rights Agreement (the "Warrant Registration Rights Agreement") to be dated as of the Closing Time among Enterprises and the Initial Purchasers, for so long as such Notes, Warrants or any Warrant Shares constitute "Transfer Restricted Securities" (as defined in each such agreement, respectively). Pursuant to the Note Registration Rights Agreement, the Issuers will agree to file with Commission, under the circumstances set forth therein, (i) a registration statement under the 1933 Act (the "Exchange Offer Registration Statement") relating to the Issuers' Series B Senior Discount Notes due 2010 (the "Series B Notes"), to be offered in exchange for the Series A Notes (such offer to exchange being referred to as the "Exchange Offer") and (ii) a shelf registration statement pursuant to Rule 415 under the 1933 Act (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, the "Notes Registration Statements") relating to the resale by certain holders of the Series A Notes and to use their reasonable best efforts to cause such Notes Registration Statements to be declared and remain effective for the periods specified in the Note Registration Rights Agreement and to consummate the Exchange Offer. Pursuant to the Warrant Registration Rights Agreement, Enterprises will agree to use its reasonable best efforts to file with the Commission, under the circumstances set forth therein, a shelf registration statement pursuant to Rule 415 under the 1933 Act (the "Warrant Shelf Registration Statement") relating to the offer and sale of the Warrants and the Warrant Shares and the issuance of Warrant Shares upon the exercise of Warrants that were sold pursuant to the Warrant Shelf Registration Statement, and to use its reasonable best efforts to cause such Warrant Shelf Registration Statement to be declared effective. The following documents are hereinafter collectively referred to as "Operative Documents": (i) this Agreement, (ii) the Indenture, (iii) the Warrant Agreement, (iv) the Units, (v) the Notes, (vi) the Warrants, (vii) the Warrant Shares, (viii) the Note Registration Rights Agreement and (ix) the Warrant Registration Rights Agreement. The following documents are hereinafter collectively referred to as "Executed Transaction Documents": (i) the Company Operating Agreement (the "Company Operating Agreement") as amended as of the Closing Time, (ii) the London Clubs Purchase Agreement (the "London Clubs Purchase Agreement") dated September 24, 1997 (subsequently amended on October 16, 1997, November 18, 1997 and December 1, 1997 and as otherwise amended as of the Closing Time) among London Clubs, London Clubs Nevada, Inc. a Nevada corporation ("LCNI"), AHL, Sommer Enterprises, LLC, a Nevada limited-liability company ("Sommer Enterprises"), the Trust and the Company, (iii) the Development Agreement (the "Development Agreement") dated as of December 3, 1997 between the Company and Northwind Aladdin, LLC, a Nevada limited-liability company (the "Energy Provider") and (iv) the Design Build Contract (the "Design Build Contract") dated as of December 4, 1997 (as subsequently amended), between the Company and Fluor Daniel, Inc., a California corporation (the "Design/Builder"). The following documents are hereinafter collectively referred to as "Executory Transaction Documents": 3 (i) the Holdings Operating Agreement (the "Holdings Operating Agreement") to be executed as of the Closing Time among the Sommer Enterprises, Enterprises, GAI, LLC, a Nevada limited-liability company, and LCNI, (ii) the Equity Participation Agreement to be executed as of the Closing Time among the Trust, London Clubs, Holdings and the Warrant Agent, (iii) the Bank Credit Facility (the "Bank Credit Facility") to be executed as of the Closing Time among the Company, as borrower, various financial institutions, as lenders (the "Bank Lenders"), The Bank of Nova Scotia, as Administrative Agent (the "Administrative Agent"), Merrill Lynch Capital Corporation, as Syndication Agent, and Canadian Imperial Bank of Commerce, as Documentation Agent, (iv) the Noteholder Completion Guaranty (the "Noteholder Completion Guaranty") to be executed as of the Closing Time between London Clubs, the Trust and Aladdin Bazaar Holdings, LLC, a Nevada limited-liability company ("Bazaar Holdings") in favor of the Trustee, (v) the Completion Guaranty to be executed as of the Closing Time between London Clubs, the Trust and Bazaar Holdings in favor of the Administrative Agent and the Bank Lenders, (vi) the Disbursement Agreement (the "Disbursement Agreement") to be executed as of the Closing Time between Holdings, the Company, the Trustee, The Bank of Nova Scotia as Administrative Agent under the Bank Credit Facility, The Bank of Nova Scotia as Disbursement Agent on behalf of the Bank Lenders and the Trustee (the "Disbursement Agent") and an investment intermediary, (vii) the Keep-Well Agreement (the "Keep-Well Agreement") to be executed as of the Closing Time among AHL, Bazaar Holdings and London Clubs in favor of the Administrative Agent under the Bank Credit Facility, (viii) the Pledge Agreement to be executed as of the Closing Time, between Holdings and the Trustee relating to the Series A Preferred Membership Interests of the Company (the "Preferred Membership Interests Pledge Agreement"), (ix) the Note Construction Pledge Agreement to be executed as of the Closing Time, between the Company and the Trustee relating to the funds deposited in the Note Construction Disbursement Account (as defined in the Disbursement Agreement) pursuant to the Disbursement Agreement, (x) the Salle Privee Management Agreement to be executed as of the Closing Time, among the Company, London Clubs and LCNI, 4 (xi) the Construction, Operation and Reciprocal Easement Agreement to be executed as of the Closing Time between the Company, Bazaar, and Aladdin Music, LLC, a Nevada limited-liability company ("Aladdin Music"), (xii) the Site Work Development and Construction Agreement (the "Site Work Agreement") to be executed as of the Closing Time between the Company and Aladdin Bazaar, LLC, a Delaware limited-liability company ("Bazaar"), (xiii) the Fluor Guaranty (the "Fluor Guaranty") to be executed as of the Closing Time between the Company and the Fluor Corporation, a California corporation ("Fluor"), (xiv) the Lease to be executed as of the Closing Time, between the Company and the Energy Provider, and (xv) the Unicom Guaranty (the "Unicom Guaranty") executed as of the Closing Time between the Company and Unicom Corporation, an Illinois corporation ("Unicom"). The Aladdin Parties have prepared and delivered to each Initial Purchaser copies of a preliminary offering memorandum dated January 30, 1998 (the "Preliminary Offering Memorandum") and have prepared and will deliver to each Initial Purchaser, on the date hereof or the next succeeding day, copies of a final offering memorandum dated February 19, 1998 (the "Final Offering Memorandum"), each for use by such Initial Purchaser in connection with its solicitation of purchases of, or offering of, the Units. "Offering Memorandum" means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document), which has been prepared and delivered by the Aladdin Parties to the Initial Purchasers in connection with their solicitation of purchases of, or offering of, the Units. SECTION 1. Representations and Warranties of the Aladdin Parties. (a) Representations and Warranties by the Aladdin Parties. Each of the Aladdin Parties represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Time, and agrees with each Initial Purchaser as follows: (i) Similar Offerings. None of the Aladdin Parties has, directly or indirectly, solicited any offer to buy or offered to sell, and will not, directly or indirectly, solicit any offer to buy or offer to sell, any security which is or would be integrated with the sale of the Units, Notes or Warrants in a manner that would require the Units, Notes or Warrants to be registered under the 1933 Act. (ii) Offering Memorandum. The Offering Memorandum does not, and at the Closing Time will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to 5 statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Aladdin Parties in writing by any Initial Purchaser through the Representatives expressly for use in the Offering Memorandum. (iii) Independent Accountants. The accountants who certified the financial statements of the Aladdin Parties and the Company included in the Offering Memorandum are independent certified public accountants with respect to each of the Aladdin Parties and their subsidiaries and the Company within the meaning of Regulation S-X under the 1933 Act. (iv) Financial Statements. The financial statements of Holdings and its consolidated subsidiaries, Enterprises, Capital and the Company, together with the related schedules and notes included in the Offering Memorandum present fairly the financial position, results of operation and changes in financial position of each such entity at the dates indicated and for the respective periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The forward-looking statements contained in the Offering Memorandum are based upon good faith estimates and assumptions believed by the Aladdin Parties to have been reasonable when made. (v) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, (A) with respect to the Issuers, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Issuers and their subsidiaries considered as one enterprise and, with respect to Enterprises, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of Enterprises (with respect to either, a "Material Adverse Effect"), whether or not arising in the ordinary course of business and (B) there have been no transactions entered into by any of the Aladdin Parties or any of their subsidiaries, other than those in the ordinary course of business, which are material with respect to the Issuers and their subsidiaries considered as one enterprise or Enterprises. (vi) Good Standing of the Aladdin Parties. Each of the Aladdin Parties has been duly organized or incorporated, as applicable, and is validly existing as a limited-liability company or corporation, as applicable, in good standing under the laws of the State of Nevada and has all necessary power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement; and each of the Aladdin Parties is duly qualified as a foreign limited-liability company or corporation, as applicable, to transact business and is in good standing in each other jurisdiction in which such 6 qualification is required, whether by reason of the ownership or leasing of property or the conduct of business. (vii) Good Standing of Designated Subsidiaries. Each "significant subsidiary" of any of the Aladdin Parties (as such term is defined in Rule 1-02 of Regulation S-X) (each a "Designated Subsidiary" and, collectively, the "Designated Subsidiaries") has been duly organized or incorporated, as applicable, and is validly existing as a limited-liability company or corporation, as applicable, in good standing under the laws of the jurisdiction of its organization or incorporation, as applicable, has all necessary power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign limited-liability company or corporation, as applicable, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business; except as otherwise disclosed in the Offering Memorandum, all of the issued and outstanding membership interests or shares of capital stock, as applicable, of each Designated Subsidiary have been duly authorized and validly issued and are owned by the applicable Aladdin Party, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, except for any security interest, mortgage, pledge, lien, encumbrance, claim or equity granted or agreed to be granted pursuant to an Executed Transaction Document or Executory Transaction Document; none of the outstanding membership interests or shares of capital stock, as applicable, of the Designated Subsidiaries was issued in violation of any preemptive or similar rights arising by operation of law, or under the charter, by-laws or any other organizational document of such Designated Subsidiary or under any agreement to which any of the Aladdin Parties or any Designated Subsidiary is a party. (viii) Capitalization of Holdings. All outstanding membership interests of Holdings have been duly authorized and validly issued and are not subject to any preemptive and similar rights and are free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, except for any security interest, mortgage, pledge, lien, encumbrance, claim or equity granted or agreed to be granted pursuant to an Executed Transaction Document or Executory Transaction Document. The table relating to the capitalization of Holdings under the caption "Capitalization" in the Offering Memorandum, including the footnotes thereto, presents fairly, as of its date (i) the capitalization of Holdings, (ii) the expected capitalization of Holdings after giving effect to the consummation of the offering of the Units and the application by Holdings of the net proceeds received by it therefrom and (iii) the expected capitalization of Holdings on a consolidated basis after giving effect to the consummation of the Funding Transactions (as defined in the Offering Memorandum), the organization of Capital, the issuance of the Units and the application by Holdings of the net proceeds received by it therefrom. Capital, the Company and Aladdin Music Holdings, LLC, a Nevada 7 limited-liability company ("Aladdin Music Holdings") are the only subsidiaries of Holdings. (ix) Capitalization of Capital. All outstanding shares of capital stock of Capital have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights and are directly owned by Holdings free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. Capital has no subsidiaries. (x) Capitalization of Enterprises. All outstanding shares of capital stock of Enterprises have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights and are free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, except for any security interest, mortgage, pledge, lien, encumbrance, claim or equity granted or agreed to be granted pursuant to an Executed Transaction Document or Executory Transaction Document. The Warrants will entitle the holders thereof to acquire an aggregate of 2,215,000 shares of Common Stock. As of the Closing Time, there will be 8,000,000 shares of Common Stock authorized, of which 2,215,000 will be issued and outstanding. Enterprises has no subsidiaries. (xi) Subscription Rights. Except as described in the Offering Memorandum, none of the Aladdin Parties nor any of their subsidiaries has any outstanding options to purchase, or any preemptive rights or other rights to subscribe for or purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, any of its equity interests or any such options, rights, convertible securities or obligations. (xii) Ranking. When issued, the Notes will rank pari passu in right of payment with all senior Indebtedness (as defined in the Indenture) of the Issuers and will rank senior in right of payment to all subordinated Indebtedness of the Issuers. As of the Closing Time, and after giving effect to the Funding Transactions, the Notes will be the only outstanding Indebtedness of the Issuers. (xiii) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by each of the Aladdin Parties. (xiv) Authorization of the Units. The Units have been duly authorized by each of the Aladdin Parties. At the Closing Time, the Units will conform in all material respects to the description thereof contained in the Offering Memorandum. (xv) Authorization of the Series A Notes. The Series A Notes have been duly authorized and, at the Closing Time, will have been duly executed by each of the Issuers and, when authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will 8 constitute valid and binding obligations of each of the Issuers, enforceable against each of the Issuers in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. At the Closing Time, the Series A Notes will conform in all material respects to the description thereof contained in the Offering Memorandum. (xvi) Authorization of the Series B Notes. The Series B Notes have been duly authorized by each of the Issuers. When the Series B Notes are issued, executed and authenticated in the manner provided for by the terms of the Exchange Offer and the Indenture, the Series B Notes will constitute valid and binding obligations of each of the Issuers, enforceable against each of the Issuers in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. (xvii) Authorization of the Series A Preferred Membership Interests. The Company's Series A Preferred Membership Interests (the "Preferred Membership Interests") have been duly authorized by the Company and, when issued and delivered to Holdings in the manner set forth under the caption "Use of Proceeds" in the Offering Memorandum, will be validly issued and not subject to any preemptive or similar rights and, other than in connection with and subject to the Preferred Membership Interests Pledge Agreement, will be directly owned by Holdings free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. At the Closing Time, the Preferred Membership Interests will conform in all material respects to the description thereof contained in the Offering Memorandum. (xviii) Authorization of the Indenture. The Indenture has been duly authorized by each of the Issuers and, at the Closing Time, will have been duly executed and delivered by each of the Issuers and will constitute a valid and binding agreement of each of the Issuers, enforceable against each of the Issuers in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity 9 or at law). At the Closing Time, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act of 1939, as amended (the "1939 Act"), and the rules and regulations of the Commission applicable to an indenture which qualified thereunder. (xix) Authorization of the Note Registration Rights Agreement. The Note Registration Rights Agreement has been duly authorized by each of the Issuers and, at the Closing Time, will have been duly executed and delivered by each of the Issuers and will constitute a valid and binding agreement of each of the Issuers, enforceable against each of the Issuers in accordance with its terms except (i) as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and (ii) as limited by state or federal securities laws prohibiting or limiting the availability of, and public policy against, indemnification or contribution. At the Closing Time, the Note Registration Rights Agreement will conform in all material respects to the description thereof contained in the Offering Memorandum. (xx) Authorization of the Warrants. The Warrants have been duly authorized and at the Closing Time, will have been duly executed by Enterprises, and when issued in the manner provided for in the Warrant Agreement and delivered against payment of the purchase price therefor will constitute valid and binding obligations of Enterprises, enforceable against Enterprises in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits, of the Warrant Agreement. At the Closing Time, the Warrants will conform in all material respects to the description thereof contained in the Offering Memorandum. (xxi) Authorization of the Warrant Shares. The Warrants are exercisable into Warrant Shares in accordance with the terms of the Warrant Agreement. Enterprises has duly authorized and reserved for issuance the Warrant Shares and, when issued and paid for upon exercise of the Warrants in accordance with the terms thereof, the Warrant Shares will be validly issued, fully paid and nonassessable, free of any preemptive or similar rights. At the Closing Time, the Warrant Shares will conform in all material respects to the description thereof contained in the Offering Memorandum. 10 (xxii) Authorization of the Warrant Agreement. The Warrant Agreement has been duly authorized by Enterprises and, at the Closing Time, will have been duly executed and delivered by Enterprises and will constitute a valid and binding agreement of Enterprises, enforceable against Enterprises in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). (xxiii) Authorization of the Warrant Registration Rights Agreement. The Warrant Registration Rights Agreement has been duly authorized by Enterprises and, at the Closing Time, will have been duly executed and delivered by Enterprises and will constitute a valid and binding agreement of Enterprises, enforceable against Enterprises in accordance with its terms except (i) as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and (ii) as limited by state or federal securities laws prohibiting or limiting the availability of, and public policy against, indemnification or contribution. At the Closing Time, the Warrant Registration Rights Agreement will conform in all material respects to the description thereof contained in the Offering Memorandum. (xxiv) Authorization of the Executed Transaction Documents. Each of the Executed Transaction Documents to which an Aladdin Party is a party has been duly authorized, executed and delivered by each such Aladdin Party that is a party thereto and constitutes a valid and binding agreement of each such party, enforceable against each such party in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). At the Closing Time, each of the Executed Transaction Documents that is described in the Offering Memorandum will conform in all material respects to the description thereof contained in the Offering Memorandum. (xxv) Authorization of the Executory Transaction Documents. Each of the Executory Transaction Documents to which an Aladdin Party is a party has been duly authorized by each such Aladdin Party that is a party thereto and, at the Closing Time, will have been duly executed and delivered by each such party and will constitute a valid and binding agreement of each such party, enforceable 11 against each such party in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). At the Closing Time, each of the Executory Transaction Documents will conform in all material respects to the description thereof contained in the Offering Memorandum. (xxvi) Absence of Defaults and Conflicts. None of the Aladdin Parties or any of their subsidiaries is in violation of its charter, by-laws or any other organizational document or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which it may be bound, or to which any of its property or assets is subject (collectively, "Agreements and Instruments") except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement, the Units, the Series A Notes, the Series B Notes, the Indenture, the Note Registration Rights Agreements, the Warrant Agreement, the Warrants, the Warrant Registration Rights Agreements, the Executed Transaction Documents to the extent that any of the Aladdin Parties is a party, the Executory Transaction Documents to the extent that any of the Aladdin Parties will be a party and any other agreement or instrument entered into or issued or to be entered into or issued by any of the Aladdin Parties or any of their subsidiaries in connection with the transactions contemplated hereby or thereby or in the Offering Memorandum and the consummation of the transactions contemplated herein and in the Offering Memorandum (including the issuance and sale of the Units and the use of the proceeds from the sale of the Units as described in the Offering Memorandum under the caption "Use of Proceeds") and compliance by any of the Aladdin Parties with their obligations hereunder have been duly authorized by all necessary action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or a Repayment Event (as defined below) under, or, except with respect to the transactions contemplated by the Offering Memorandum, result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of any of the Aladdin Parties or any of their subsidiaries pursuant to, the Agreements and Instruments except for such conflicts, breaches or defaults or liens, charges or encumbrances that, singly or in the aggregate, would not result in a Material Adverse Effect, nor will such execution, delivery, performance or compliance result in any violation of the provisions of the charter, by-laws or any other organizational document of such Aladdin Party or any such subsidiary or, except as would not have a Material Adverse Effect, any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over it or any of 12 its assets or properties. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by any of the Aladdin Parties or any of their subsidiaries. (xxvii) Absence of Labor Dispute. No labor dispute with the employees of any of the Aladdin Parties or any of their subsidiaries exists or, to the knowledge of any of the Aladdin Parties, is imminent, and none of the Aladdin Parties is aware of any existing or imminent material labor disturbance by the employees of any of their or any of the Company's principal suppliers or contractors, which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xxviii) Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of any of the Aladdin Parties, threatened, against or affecting any of the Aladdin Parties or any subsidiary thereof which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets of any of the Aladdin Parties or any of their subsidiaries or the consummation of this Agreement or the performance by any of the Aladdin Parties of their obligations hereunder or under any of the other Operative Documents, the Executed Transaction Documents or the Executory Transaction Documents, except as disclosed in the Offering Memorandum. Except as disclosed in the Offering Memorandum, the aggregate of all pending legal or governmental proceedings to which any of the Aladdin Parties or any subsidiary thereof is a party or of which any of their respective property or assets is the subject, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xxix) Possession of Intellectual Property. The Company will at the Closing Time own or have contractual rights to acquire or be able to acquire on reasonable terms, adequate licenses, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") which will be employed by it in connection with the operation of its business in the manner described in the Offering Memorandum, and none of the Aladdin Parties or any of their subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company, and which infringement or conflict (if the subject of any unfavorable decision, 13 ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xxx) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by any of the Aladdin Parties of their obligations hereunder or in connection with issuance and sale of the Units hereunder or, except as contemplated by the Offering Memorandum, for the consummation of the transactions contemplated by this Agreement. (xxxi) Possession of Licenses and Permits. Each of the Aladdin Parties and their subsidiaries possesses such permits, licenses, franchises, certificates, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by, and has made all declarations and filings with the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to own, lease and operate its respective properties and to conduct the businesses now operated by them, except (i) where the failure thereof would not, singly or in the aggregate, have a Material Adverse Effect, (ii) for Governmental Licenses which the Aladdin Parties and their subsidiaries would not customarily possess at the date hereof but which customarily would be obtained in the ordinary course of development of the Aladdin (as defined in the Indenture) and (iii) for any Governmental Licenses to be issued by any Gaming Authority (as defined in the Indenture) which are necessary for any of the Aladdin Parties or any of their subsidiaries to own and operate the Aladdin, and no such Government License contains, or is expected by the Aladdin Parties to contain, a materially burdensome restriction; each of the Aladdin Parties and their subsidiaries is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and none of the Aladdin Parties or any of their subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. None of the Aladdin Parties nor any of their subsidiaries believes that any such Governmental Authorization necessary in the future to own or operate the Aladdin in the manner described in the Offering Memorandum will not be granted in due course following application or that any governmental agency is investigating any of the Aladdin Parties or any of their subsidiaries, other than ordinary course administrative reviews or any ordinary course review of the transactions contemplated hereby or by any such application. 14 (xxxii) Title to Property. Each of the Aladdin Parties and their subsidiaries have good and marketable title to all real and personal property and other assets reflected in the financial statements in the Offering Memorandum as owned by them, free and clear of all security interests, mortgages, pledges, liens, encumbrances, claims or equities of any kind except such as (a) are described in the Offering Memorandum or (b) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by any of the Aladdin Parties or any of their subsidiaries; and, except as would not, singly or in the aggregate, have a Material Adverse Effect, all of the leases and subleases material to the businesses of any of the Issuers and their subsidiaries considered as one enterprise, or Enterprises and their subsidiaries considered as one enterprise, and under which any of the Aladdin Parties or any of their subsidiaries holds properties described in the Offering Memorandum, are valid and binding and in full force and effect; and, except as would not, singly or in the aggregate, have a Material Adverse Effect, none of the Aladdin Parties or any of their subsidiaries has any notice of any default or material claim of any sort that has been asserted by anyone adverse to the rights of any of the Aladdin Parties or any of their subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of any of the Aladdin Parties or any of their subsidiaries to the continued possession of the leased or subleased premises under any such lease or sublease. (xxxiii) Personal and Real Property of the Company. At the Closing Time, the Company will have good and marketable title in fee simple to the Project Site (as defined in the Indenture) and good and marketable title to all personal property owned by the Company which is material to the business of the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity and defects, except (i) as contemplated by the Executed Transaction Documents or the Executory Transaction Documents and (ii) such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company in connection with its business as described in the Offering Memorandum; and there are no leases under which the Company holds real property. (xxxiv) Tax Returns. Each of the Aladdin Parties and their subsidiaries have filed all federal, state, local and foreign tax returns that are required to be filed or have duly requested extensions thereof and have paid all taxes required to be paid by any of them and any related assessments, fines or penalties, except for any such tax, assessment, fine or penalty that is being contested in good faith and by appropriate proceedings; and adequate charges, accruals and reserves have been provided for in the financial statements referred to in Section 1(a)(iv) above in respect of all federal, state, local and foreign taxes for all periods to which such financial statements relate as to which the tax liability of any of the Aladdin 15 Parties or any of their subsidiaries has not been finally determined or remains open to examination by applicable taxing authorities. (xxxv) Environmental Laws. Except as described in the Offering Memorandum and except such matters as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) none of the Aladdin Parties or any of their subsidiaries is in violation of any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) each of the Aladdin Parties and their subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or, to the knowledge of the Aladdin Parties, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against any of the Aladdin Parties or any of their subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting any of the Aladdin Parties or any of their subsidiaries relating to Hazardous Materials or Environmental Laws. (xxxvi) Investment Company Act. None of the Aladdin Parties are, and upon the issuance and sale of the Units as herein contemplated and the application of the net proceeds therefrom as described in the Offering Memorandum, will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"), required to register under the 1940 Act. (xxxvii) Rule 144A Eligibility. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), or quoted in a U.S. automated interdealer quotation system. (xxxviii) No General Solicitation. None of the Aladdin Parties or their subsidiaries or any person acting on their respective behalf (other than the Initial 16 Purchasers, their officers, employees and agents, as to whom the Aladdin Parties make no representation) has engaged or will engage, in connection with the offering of the Units, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the 1933 Act. (xxxix) No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 4 and the procedures set forth in Section 8 hereof, it is not necessary in connection with the offer, sale and delivery of the Units to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the 1939 Act. (xl) Accounting System. Each of the Aladdin Parties and their subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management's general or specific authorization and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xli) Insurance. As of the Closing Time, the Aladdin Parties and their subsidiaries are insured by and maintain insurance covering, or are the named beneficiaries of insurance maintained by third parties covering, their respective properties, with insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; and none of the Aladdin Parties nor their subsidiaries has any reason to believe that such insurance coverage can not be renewed as and when such coverage expires or that similar coverage could not be obtained from similar insurers at a cost that would not have a Material Adverse Effect. (xlii) No Agreement for Filing a Registration Statement. There are no persons with registration rights or other similar rights to have any securities registered pursuant to any registration statement or otherwise registered by any of the Aladdin Parties under the 1933 Act, except persons having such rights pursuant to the Notes Registration Statements, the Warrant Shelf Registration Statement and the Consulting Agreement dated as of July 1, 1997, between GAI, LLC and the Company. (xliii) Distribution of the Offering Memorandum. None of the Aladdin Parties or any of their subsidiaries has distributed and, prior to the later to occur of 17 (i) the Closing Time and (ii) completion of the distribution of the Units, will distribute any offering materials in connection with the offering and sale of the Units other than the Preliminary Offering Memorandum, the Final Offering Memorandum and any amendment and supplements thereto, if any, unless permitted by the 1933 Act and approved by the Representatives (which approval shall not be unreasonably withheld or delayed). (xliv) Tax Treatment. Holdings qualifies as a partnership and not an association or publicly traded partnership taxable as a corporation and the Company qualifies as a division of Holdings for federal income tax purposes. (xlv) Compliance with Federal Reserve System Regulations. None of the Aladdin Parties, any of their subsidiaries or any agent thereof acting on the behalf of any of them has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Units to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. (xlvi) Compliance with Rule 144A. Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, contains all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the 1933 Act. (xlvii) No Change in Rating. No "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the 1933 Act (i) has imposed (or has informed any of the Aladdin Parties that it is considering imposing) any condition (financial or otherwise) on any of the Aladdin Parties retaining any rating assigned to any of the Aladdin Parties or any securities of any of the Aladdin Parties or (ii) has indicated to any of the Aladdin Parties that it is considering (a) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or (b) any change in the outlook for any rating of any of the Aladdin Parties or any securities of any of the Aladdin Parties. (xlviii) ERISA. None of the Aladdin Parties or any of their subsidiaries has violated any provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. If any such plan is adopted, the execution and delivery of this Agreement and the sale of the Units will not involve any non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended. The representations made in the preceding sentence are made in reliance upon and subject to the accuracy of, and compliance with, the representations and covenants 18 made or deemed made by the Initial Purchasers as set forth in the Offering Memorandum under "Notice to Investors." (xlix) Operation of the Aladdin. The contemplated operation and use of the Aladdin, including the construction of the Aladdin, will be (giving effect to any waivers or variances which may be obtained) in compliance with all applicable municipal, county, state and federal laws, regulations, ordinances, standards, orders, and other regulations, except as would not, singly or in the aggregate, have a Material Adverse Effect. Under applicable zoning and use laws, ordinances, rules and regulations, the Aladdin may be used for the purposes contemplated in the Offering Memorandum. (l) Plans and Specifications. The Initial Purchasers have been furnished with a copy of the plans and specifications for the construction of the improvements of the Aladdin and other necessary expenditures. Such plans and specifications are satisfactory to the Aladdin Parties. The anticipated cost by the Aladdin Parties as of the Closing Time of such improvements (including interest, legal, architectural, engineering, planning, zoning and other similar costs) does not exceed the amounts for such costs set forth under the caption "Use of Proceeds" in the Offering Memorandum. In addition, each of the other amounts set forth in the section entitled "Sources and Uses of Funds" under the caption "Use of Proceeds" in the Offering Memorandum are based upon reasonable assumptions as to all matters material to the estimates set forth therein and are not expected by the Aladdin Parties to exceed the amounts set forth for such items. (li) Disbursement Budget and Construction Schedule. The Disbursement Budget (as defined in the Disbursement Agreement) and the Construction Schedule (as defined in the Disbursement Agreement), as of the Closing Time, (i) are, in the opinion of the Aladdin Parties after due investigation, based on reasonable assumptions as to all legal and factual matters material to the estimates set forth therein and relying to a large extent on professional advisors and (ii) call for the construction of the Minimum Aladdin Facilities (as defined in the Indenture) on or prior to the Operating Deadline (as defined in the Indenture). (b) Officer's Certificates. Any certificate signed by any officer of any of the Aladdin Parties or any of their subsidiaries delivered to the Representatives or to counsel for the Initial Purchasers shall be deemed a representation and warranty by such Aladdin Party to each Initial Purchaser as to the matters covered thereby. SECTION 2. Representations and Warranties of London Clubs. (a) Representations and Warranties by London Clubs. London Clubs represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Time, and agrees with each Initial Purchaser as follows: 19 (i) Good Standing of London Clubs and LCNI. Each of London Clubs and LCNI has been duly incorporated, is validly existing and is a corporation in good standing under the laws of its jurisdiction of incorporation and has all necessary corporate power and authority to carry on its business and to own, lease and operate its properties, and is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except, with respect to London Clubs, where the failure to be so qualified would not have a material adverse effect on its business, prospects, financial condition or results of operations. London Clubs owns all of the outstanding shares of capital stock of LCNI. (ii) Authorization of this Agreement. This Agreement has been duly authorized, executed and delivered by London Clubs. (iii) Absence of Defaults and Conflicts. Neither of London Clubs or LCNI is in violation of its charter, by-laws or any other organizational document or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which either of them is a party or by which or either of them may be bound, or to which any of the property or assets of either of them is subject (collectively, "LCI Agreements and Instruments") except for such defaults that would not result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of either of London Clubs or LCNI; and the execution, delivery and performance of this Agreement and compliance by either of London Clubs or LCNI with their obligations hereunder have been duly authorized by all necessary action, other than in connection with the U.S. Facilities Agreement banks with National Westminster PLC as arranger and U.S. 1997 Noteholders which shall be obtained prior to the Closing Time, and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by London Clubs or LCNI under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of either of them pursuant to, the LCI Agreements and Instruments except for such conflicts, breaches or defaults or liens, charges or encumbrances that, singly or in the aggregate, would not result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of either of London Clubs or LCNI, nor will such action result in any violation of the provisions of the charter, by-laws or any other organizational document of any of either London Clubs or LCNI or any applicable law, statute, rule, regulation, judgment, order, writ or 20 decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over either or them or any of their assets or properties. (iv) Absence of Further Requirements. Other than the approval of the shareholders of London Clubs and approvals necessary in connection with the U.S. Facilities Agreement banks with National Westminster PLC as arranger and U.S. 1997 Noteholders, each of which shall be obtained prior to the Closing Time, no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency or any other party is necessary or required for the performance by either of London Clubs or LCNI of their obligations hereunder. (v) Independent Accountants. The accountants who audited the financial statements of London Clubs included in the Offering Memorandum are independent certified public accountants with respect to London Clubs and their subsidiaries within the meaning of Regulation S-X under the 1933 Act. (b) Officer's Certificates. Any certificate signed by any officer of London Clubs or LCNI delivered to the Representatives or to counsel for the Initial Purchasers shall be deemed a representation and warranty by London Clubs or LCNI, as applicable, to each Initial Purchaser as to the matters covered thereby. SECTION 3.Representations and Warranties of the Trust and AHL. (a) Representations and Warranties by the Trust and AHL. Each of the Trust and AHL represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Time, and agrees with each Initial Purchaser as follows: (i) Good Standing of the Trust and AHL. Each of the Trust and AHL has been duly organized or incorporated, as applicable, is validly existing and is a trust or limited-liability company, as applicable, in good standing under the laws of its jurisdiction of organization or incorporation, as applicable, and has all necessary power and authority to carry on its business and to own, lease and operate its properties, and is duly qualified and is in good standing as a foreign trust or limited-liability company, as applicable, authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except, with respect to the Trust, where the failure to be so qualified would not have a material adverse effect on its business, prospects, financial condition or results of operations. The Trust owns 95% of the outstanding membership interests of AHL. (ii) Authorization of this Agreement. This Agreement has been duly authorized, executed and delivered by each of the Trust and AHL. (iii) Absence of Defaults and Conflicts. Neither of the Trust or AHL is in violation of its charter, by-laws or any other organizational document or in 21 default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which either of them is a party or by which or either of them may be bound, or to which any of the property or assets of either of them is subject (collectively, "Sommer Agreements and Instruments") except for such defaults that would not result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of either of the Trust or AHL; and the execution, delivery and performance of this Agreement and compliance by either of the Trust or AHL with their obligations hereunder have been duly authorized by all necessary action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Trust or AHL under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of either of them pursuant to, the Sommer Agreements and Instruments except for such conflicts, breaches or defaults or liens, charges or encumbrances that, singly or in the aggregate, would not result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of either of the Trust or AHL, nor will such action result in any violation of the provisions of the charter, by-laws or any other organizational document of any of either the Trust or AHL or , except to the extent that such action would not result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of either of the Trust or AHL, any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over either or them or any of their assets or properties. (iv) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by either the Trust or AHL of their obligations hereunder. (b) Officer's Certificates. Any certificate signed by any officer of the Trust or AHL delivered to the Representatives or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Trust or AHL, as applicable, to each Initial Purchaser as to the matters covered thereby. SECTION 4. Sale and Delivery to Initial Purchasers; Closing. (a) Units. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Aladdin Parties agree to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, 22 agrees to purchase from the Aladdin Parties, at the price set forth in Schedule B, the number of Units set forth in Schedule A opposite the name of such Initial Purchaser, plus any additional Units which such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 13 hereof. (b) Payment. Payment of the purchase price for, and delivery of certificates for, the Units shall be made at the office of Mayer Brown & Platt, 1675 Broadway, New York, New York, or at such other place as shall be agreed upon by the Representatives and the Aladdin Parties, at 9:00 A.M. (New York City time), on the fifth business day after the date hereof (unless postponed in accordance with the provisions of Section 13), or such other time not later than ten business days after such date as shall be agreed upon by the Representatives and the Aladdin Parties (such time and date of payment and delivery being herein called the "Closing Time"). Payment shall be made to the Aladdin Parties by wire transfer of immediately available funds to bank accounts designated by the Aladdin Parties, against delivery to the Representatives for the respective accounts of the Initial Purchasers of certificates for the Units to be purchased by them. It is understood that each Initial Purchaser has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Units which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Initial Purchasers, may (but shall not be obligated to) make payment of the purchase price for the Units to be purchased by any Initial Purchaser whose funds have not been received by the Closing Time, but such payment shall not relieve such Initial Purchaser from its obligations hereunder. The certificates representing the Units shall be registered in the name of Cede & Co. pursuant to the DTC Agreement and shall be made available for examination and packaging by the Initial Purchasers in the City of New York not later than 3:00 p.m. (New York City time) on the last business day prior to the Closing Time. (c) Qualified Institutional Buyer. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Aladdin Parties that it is a "qualified institutional buyer" within the meaning of Rule 144A under the 1933 Act (a "Qualified Institutional Buyer") and an "accredited investor" within the meaning of Rule 501(a) under the 1933 Act (an "Accredited Investor"). (d) Registration; Denominations. One or more Units in definitive global form, registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), having an aggregate amount corresponding to the aggregate amount of the Units sold to Subsequent Purchasers (collectively, the "Global Unit"), shall be delivered by the Aladdin Parties to the Representatives (or as the Representatives direct) in each case with any transfer taxes thereon duly paid by the Aladdin Parties, against payment by the Representatives of the purchase price therefor in accordance with this Section 4. The Global Unit shall be made available to the Representatives for inspection not later than 3:00 p.m. (New York City time) on the business day immediately preceding the Closing Time. 23 SECTION 5. Covenants of Each of the Aladdin Parties. Each of the Aladdin Parties covenants with each Initial Purchaser as follows: (a) Suspension of Qualification. The Aladdin Parties will, as promptly as possible after receipt of notice thereof, advise each Initial Purchaser of the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Units for offering or sale in any jurisdiction, or the initiation of any proceeding by any state securities commission or other federal or state regulatory agency for such purpose. The Aladdin Parties shall use their best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any of the Units under any state securities or Blue Sky laws, and if at any time any state securities commission or other federal or state regulatory authority shall issue an order suspending the qualification or exemption of any Units under any state securities or Blue Sky laws, the Aladdin Parties shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. (b) Offering Memorandum. The Aladdin Parties, as promptly as possible, will furnish to each Initial Purchaser, without charge, such number of copies of the Preliminary Offering Memorandum, the Final Offering Memorandum and any amendments and supplements thereto and documents incorporated by reference therein as such Initial Purchaser may reasonably request. (c) Notice and Effect of Material Events. The Aladdin Parties will as promptly as reasonably practicable notify each Initial Purchaser, and confirm such notice in writing, of (x) any filing made by any of the Aladdin Parties of information relating to the offering of the Units with any securities exchange or any other regulatory body in the United States or any other jurisdiction, and (y) prior to the completion of the placement of the Units by the Initial Purchasers as evidenced by a notice in writing from the Initial Purchasers to the Aladdin Parties, any material changes in or affecting the earnings, business affairs or business prospects of any of the Aladdin Parties and their subsidiaries, the Trust, AHL, London Clubs or LCNI which (i) make any statement of fact in the Offering Memorandum untrue or (ii) constitute an omission of material fact from the Offering Memorandum necessary so that the Offering Memorandum will omit to state a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. In such event or if during such time any event shall occur as a result of which it is necessary, in the reasonable opinion of any of the Aladdin Parties, their counsel, the Initial Purchasers or counsel for the Initial Purchasers, to amend or supplement the Final Offering Memorandum in order that the Final Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances then existing, the Aladdin Parties will forthwith amend or supplement the Final Offering Memorandum by preparing and furnishing to each Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Final Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchasers) so that, as so amended or supplemented, the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the 24 statements therein, in the light of the circumstances existing at the time it is delivered to a Subsequent Purchaser, not misleading. (d) Amendment to Offering Memorandum and Supplements. The Aladdin Parties will advise each Initial Purchaser promptly of any proposal to amend or supplement the Offering Memorandum and will not effect such amendment or supplement without the consent of the Initial Purchasers (which consent will not be unreasonably withheld or delayed). Neither the consent of the Initial Purchasers, nor the Initial Purchasers' delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 7 hereof. (e) Qualification of Units for Offer and Sale. The Aladdin Parties will use their best efforts, in cooperation with the Initial Purchasers, to qualify the Units for offering and sale under the applicable securities laws of such jurisdictions within the United States as the Representatives may reasonably designate and will maintain such qualifications in effect as long as required for the sale of the Units; provided, however, that the Aladdin Parties shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. (f) DTC. The Aladdin Parties will cooperate with the Representatives and use their best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of DTC. (g) Use of Proceeds. Each of the Aladdin Parties will use the net proceeds received by it from the sale of the Units, and Holdings will cause the Company to use the net proceeds from the sale of the Units contributed to it by Holdings, substantially in the manner specified in the Offering Memorandum under "Use of Proceeds" and to comply with the provisions of the Disbursement Agreement. (h) Restriction on Sale of Securities. During a period of 120 days from the date of the Offering Memorandum, the Aladdin Parties will not, without the prior written consent of Merrill Lynch, directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any debt securities of the Issuers, other than pursuant to this Agreement, or file a registration statement under the 1933 Act with respect to the foregoing, other than pursuant to the Note Registration Rights Agreement. (i) Comply with Agreements. To comply with all of their respective agreements set forth in each of the Note Registration Rights Agreement and the Warrant Registration Rights Agreement. (j) Furnish Reports. So long as any Securities are outstanding, to furnish to the Initial Purchasers as promptly as practicable after they are available copies of all reports or other communications furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Aladdin Parties are listed and such other 25 publicly available information concerning the Aladdin Parties and/or its subsidiaries as the Initial Purchaser may reasonably request. (k) Portal Registration. To use its best efforts to effect the inclusion of the Securities in PORTAL and to maintain the listing of each of the Securities on PORTAL for so long as any of such Securities are outstanding. (l) Exercise of Warrants. Enterprises will reserve and continue to reserve, so long as any Warrants are outstanding, a sufficient number of shares of Common Stock for issuance upon exercise of the Warrants. (m) Performance of Duties. To use its best efforts (i) to do and perform all things required or necessary to be done and performed under this Agreement by it prior to the Closing Time and (ii) to satisfy all conditions precedent to the delivery of the Units. SECTION 6. Payment of Expenses. (a) Expenses. The Aladdin Parties will pay, whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, all expenses incident to the performance of their obligations under this Agreement, including, without limitation, (i) the preparation, printing and any filing of the Offering Memorandum (including financial statements and any exhibits and any document incorporated therein by reference) and of each amendment or supplement thereto, (ii) the preparation, printing and delivery to the Initial Purchasers of this Agreement, the Indenture, the Warrant Agreement, the Note Registration Rights Agreement, the Warrant Registration Rights Agreement, the Executed Transaction Documents, the Executory Transaction Documents and such other documents as may be required in connection with the offering, purchase, sale and delivery of the Units, except for fees and expenses of the Initial Purchasers (including the fees and expenses of counsel to the Initial Purchasers) other than as set forth in clause (xii) below, (iii) the preparation, issuance and delivery of the certificates for the Units to the Initial Purchasers, including any charges of DTC in connection therewith; (iv) the fees and disbursements of any of the Venture Parties' counsel, accountants and other advisors, (v) the qualification of the Units under securities laws in accordance with the provisions of Section 5(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Initial Purchasers in connection therewith and in connection with the preparation of the Blue Sky Memoranda and any supplement thereto, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Notes, (vii) the fees and expenses of the Warrant Agent, including the fees and disbursements of counsel for the Warrant Agent in connection with the Warrant Agreement, the Warrants and the Warrant Shares, (viii) any fees payable to the review by the National Association of Securities Dealers, Inc. (the "NASD") in connection with the initial and continued designation of the Securities as PORTAL securities under the PORTAL Market Rules pursuant to NASD Rule 5322, (ix) all costs and expenses of the Exchange Offer and any Registration Statement, as set forth in and subject to the Note Registration Rights Agreement, (x) all cost and expenses of any Warrant Registration Statements as set forth in and subject to the Warrant Registration Rights Agreement, (xi) the fees and expenses of the 26 Disbursement Agent pursuant to the Disbursement Agreement and (xii) the expenses and disbursements of the Initial Purchasers (including reasonable fees, expenses and disbursements of counsel for the Initial Purchasers) up to a maximum of $500,000. (b) Termination of Agreement. If this Agreement is terminated by the Representatives in accordance with the provisions of Section 7 or Section 12(a)(i) hereof, the Aladdin Parties and the Trust, jointly and severally, shall reimburse the Initial Purchasers for all of their reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Initial Purchasers. SECTION 7. Conditions of Initial Purchasers' Obligations.The obligations of the several Initial Purchasers hereunder are subject to the accuracy of the representations and warranties of the Aladdin Parties contained in Section 1 hereof, the representations and warranties of London Clubs contained in Section 2 hereof and the representations and warranties of the Trust and AHL contained in Section 3 hereof or in certificates of any officer of any of the Venture Parties or any of their subsidiaries delivered pursuant to the provisions hereof, to the performance by each of the Venture Parties of their respective covenants and other obligations hereunder, and to the following further conditions: (a) Opinion of Counsel for the Venture Parties. (i) At the Closing Time, the Representatives shall have received the favorable opinion, dated as of the Closing Time, of Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, counsel for the Aladdin Parties, the Trust and AHL in form and substance satisfactory to counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers substantially to the effect set forth in Exhibit A hereto and to such further effect as counsel to the Initial Purchasers may reasonably request. (ii) At the Closing Time, the Representatives shall have received the favorable opinion, dated as of the Closing Time, of Schreck Morris, counsel for the Aladdin Parties in form and substance satisfactory to counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers substantially to the effect set forth in Exhibit B hereto and to such further effect as counsel to the Initial Purchasers may reasonably request. (iii) At the Closing Time, the Representatives shall have received the favorable opinion, dated as of the Closing Time, of Ohrenstein & Brown, counsel for London Clubs in form and substance satisfactory to counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers substantially to the effect set forth in Exhibit C hereto and to such further effect as counsel to the Initial Purchasers may reasonably request. 27 (b) Opinion of Counsel for Initial Purchasers. At the Closing Time, the Representatives shall have received the favorable opinion, dated as of the Closing Time, of Latham & Watkins, counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers with respect to the matters set forth in (i), (ii), (vi) through (x), inclusive, (xii) (solely as to the information in the Offering Memorandum under "Description of the Units", "Description of the Notes" and "Description of the Warrants") and the penultimate paragraph of Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York and the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Venture Parties and their subsidiaries and certificates of public officials. (c) Officers' Certificates. (i) (A) At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of either of the Issuers and their subsidiaries considered as one enterprise or Enterprises, whether or not arising in the ordinary course of business, (B) the Representatives shall have received a certificate of the President or a Vice President of each of the Aladdin Parties and of the chief financial or chief accounting officer of each of the Aladdin Parties, dated as of the Closing Time, to the effect that there has been no such material adverse change and (C) the Representatives shall have received a certificate of the President or a Vice President of each of the Venture Parties and of the chief financial or chief accounting officer of each of the Venture Parties, dated as of the Closing Time, that (1) to the extent applicable to such Venture Party, the representations and warranties in Section 1 hereof with respect to the Aladdin Parties, the representations and warranties in Section 2 hereof with respect to London Clubs and LCNI and the representations and warranties in Section 3 hereof with respect to the Trust and AHL are true and correct with the same force and effect as though expressly made at and as of the Closing Time and (2) the applicable Venture Party has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time. (ii) The Representatives shall have received a certificate of the President or a Vice President of London Clubs and of the chief financial or chief accounting officer of London Clubs, dated as of the Closing Time, to the effect that London Clubs has obtained all consents from creditors of London Clubs, necessary or required for the performance by London Clubs or any of its subsidiaries of their obligations hereunder, in connection with the offering, issuance or sale of the Units hereunder or the consummation of the transactions 28 contemplated by this Agreement or otherwise described in the Offering Memorandum. (iii) The Representatives shall have received a certificate of the chief financial or chief accounting officer of AHL, dated as of the Closing Time, setting forth (i) the nature of and the amount of pre-development costs which have been incurred prior to the Closing Time by AHL and which are to be reimbursed at the Closing Time as described in the Offering Memorandum and (ii) the nature of and the estimated amount of pre-development costs which AHL expects to incur on behalf of the Company after the Closing Time. (d) Accountants' Comfort Letters. (i) At the time of the execution of this Agreement, the Representatives shall have received from Arthur Andersen LLP with respect to the Aladdin Parties, a letter dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Initial Purchasers containing statements and information of the type ordinarily included in accountants' "comfort letters" to Initial Purchasers with respect to the financial statements and certain financial information of the Aladdin Parties contained in the Offering Memorandum and substantially the form of Example A of SAS 72. (ii) At the time of the execution of this Agreement, the Representatives shall have received from Price Waterhouse with respect to London Clubs, a letter dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Initial Purchasers containing statements and information of the type ordinarily included in accountants' "comfort letters" to Initial Purchasers with respect to the financial statements of London Clubs contained in the Offering Memorandum and substantially the form of Example A of SAS 72. (e) Bring-down Comfort Letters. (i) At the Closing Time, the Representatives shall have received from Arthur Andersen LLP with respect to the Aladdin Parties, a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d)(i) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (ii) At the Closing Time, the Representatives shall have received from Price Waterhouse with respect to London Clubs, a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d)(ii) of this Section, except that the specified 29 date referred to shall be a date not more than three business days prior to the Closing Time. (f) Maintenance of Rating. Since the date of this Agreement, there shall not have occurred a downgrading in the rating assigned any of the Aladdin Parties' securities by any nationally recognized securities rating agency, and no such securities rating agency shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of such securities. (g) PORTAL. At the Closing Time, the Units, the Notes, the Warrants and the Warrant Shares shall have been designated for trading on PORTAL. (h) Transaction Documents. (i) All the representations and warranties contained in each of the Executed Transaction Documents and Executory Transaction Documents shall be true and correct in all material respects at the Closing Time with the same force and effect as if made on and as of the Closing Time. (ii) All of the Executed Transaction Documents and Executory Transaction Documents shall have been executed and shall be in full force and effect and the Initial Purchasers shall have received fully executed copies thereof. The Venture Parties shall have received the requisite governmental and regulatory approval in connection with each of the Executed Transaction Documents and Executory Transaction Documents and transactions contemplated by the Offering Memorandum to be completed on or before the Closing Time. (iii) No party shall have failed materially at or prior to the Closing Time to perform or comply with any of the agreements contained in any of the Executed Transaction Documents or Executory Transaction Documents and required to be performed or complied with by such party at or prior to the Closing Time. (iv) All documents and agreement shall have been filed, and other actions shall have been taken, as may be required to perfect the security interests of the Trustee in the Series A Notes and the Note Construction Disbursement Account, and to accord the Trustee the priorities over other creditors of the Issuers as contemplated by the Offering Memorandum, the Pledge Agreement and the Note Construction Pledge Agreement. (v) No injunction, restraining order or order of any nature by a court, government body or agency shall have been issued as of the Closing Time that would prevent or interfere with the issuance and sale of the Units; and no stop order suspending the qualification or exemption from qualification of any of the Units in any jurisdiction shall have been issued and no action, claim, suit or proceeding (including without limitation an investigation or partial proceeding 30 such as a deposition) for that purpose shall have been commenced or be pending or contemplated as of the Closing Time. (i) Bank Credit Facility. At the Closing Time, (i) the Bank Credit Facility will conform in all material respects to the description thereof contained in the Offering Memorandum and (ii) the Term B Loan (as defined in the Offering Memorandum) and the Term C Loan (as defined in the Offering Memorandum) shall have been advanced to the Company. (j) Title Commitments. The Trustee shall have received irrevocable commitments for title insurance for the Project Site from Stewart Title Guaranty Company and Lawyers Title Insurance Company, in a form and substance reasonably satisfactory to the Representatives, subject only to Permitted Liens under the Indenture. (k) Additional Documents. (i) At the Closing Time, counsel for the Initial Purchasers shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Units as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Aladdin Parties in connection with the issuance and sale of the Units as herein contemplated shall be reasonably satisfactory in form and substance to the Representatives and counsel for the Initial Purchasers. (ii) At the Closing Time, the Initial Purchasers shall have received copies of all certificates, documents and opinions reasonably requested by the Initial Purchasers or counsel to the Initial Purchasers delivered by any of the Venture Parties or any of their counsels and such other certificates, documents and opinions reasonably obtainable by any of the Venture Parties in connection with any of the Funding Transactions or any other transactions contemplated in the Offering Memorandum, together with letters addressed to the Initial Purchasers stating that the Initial Purchasers may rely on such certificates as if they had been address to the Initial Purchasers. (l) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Representatives by notice to the Aladdin Parties at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 6 and except that Sections 1, 2, 3, 9, 10 and 13 shall survive any such termination and remain in full force and effect. 31 SECTION 8. Subsequent Offers and Resales of the Units. (a) Offer and Sale Procedures. Each of the Initial Purchasers and each of the Aladdin Parties hereby establish and agree to observe the following procedures in connection with the offer and sale of the Units: (i) Offers and Sales Only to Qualified Institutional Buyers. Offers and sales of the Units will be made only by the Initial Purchasers or Affiliates (as such term is defined in Rule 501(b) under the 1933 Act) thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made to persons whom the offeror or seller reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the 1933 Act). (ii) No General Solicitation. The Units will be offered by approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502(c) under the 1933 Act) will be used in the United States in connection with the offering of the Units. (iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank Subsequent Purchaser of a Unit acting as a fiduciary for one or more third parties, in connection with an offer and sale to such purchaser pursuant to this clause (a), each third party shall, in the reasonable judgment of the applicable Initial Purchaser, be a Qualified Institutional Buyer. (iv) Subsequent Purchaser Notification. Each Initial Purchaser will take reasonable steps to inform, and cause each of its U.S. Affiliates to take reasonable steps to inform, persons acquiring Units from such Initial Purchaser or affiliate, as the case may be, in the United States that the Units (A) have not been and will not be registered under the 1933 Act, (B) are being sold to them without registration under the 1933 Act in reliance on Rule 144A and (C) may not be offered, sold or otherwise transferred except (1) to the Aladdin Parties, (2) outside the United States in accordance with Rule 904 of Regulation S or (3) inside the United States in accordance with (x) Rule 144A to a person whom the seller reasonably believes is a Qualified Institutional Buyer that is purchasing such Units for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (y) the exemption from registration under the 1933 Act provided by Rule 144, if available. (v) Minimum Principal Amount. No sale of the Units to any one Subsequent Purchaser will be for consideration of less than U.S. $150,000. If the Subsequent Purchaser is a non-bank fiduciary acting on behalf of others, each 32 person for whom it is acting must purchase Units for consideration of at least U.S. $150,000. (vi) Restrictions on Transfer. The transfer restrictions and the other provisions set forth in Article 2 of the Indenture and Sections 2, 3, 4 and 5 of the Warrant Agreement, including any legends required thereby, shall apply to the Securities except as otherwise agreed by the Aladdin Parties and the Initial Purchasers. Following the sale and transfer of the Units by the Initial Purchasers to Subsequent Purchasers pursuant to the terms hereof, the Initial Purchasers shall not be liable or responsible to the Aladdin Parties for any losses, damages or liabilities suffered or incurred by the Aladdin Parties, including any losses, damages or liabilities under the 1933 Act, arising from or relating to any resale or transfer of any Security. (vii) Delivery of Offering Memorandum. Each Initial Purchaser will deliver to each purchaser of the Units from such Initial Purchaser, in connection with its original distribution of the Units, a copy of the Offering Memorandum, as amended and supplemented at the date of such delivery. (b) Covenants of the Aladdin Parties. Each of the Aladdin Parties covenants with each Initial Purchaser as follows: (i) Due Diligence. In connection with the original distribution of the Units, each of the Aladdin Parties agrees that, prior to any offer or resale of the Units by the Initial Purchasers, the Initial Purchasers and counsel for the Initial Purchasers shall have the right to make reasonable inquiries into the business of each of the Aladdin Parties and their subsidiaries. Each of the Aladdin Parties also agrees to provide answers to each prospective Subsequent Purchaser of Units who so reasonably requests concerning the Aladdin Parties and their subsidiaries (to the extent that such information is available or can be acquired and made available to prospective Subsequent Purchasers without unreasonable effort or expense and to the extent the provision thereof is not prohibited by applicable law and to the extent such disclosure, in the reasonable opinion of the Aladdin Parties, could not adversely effect the business, earnings, business prospects or condition (financial or otherwise) of the Aladdin Parties or their subsidiaries) and the terms and conditions of the offering of the Units, as provided in the Offering Memorandum. (ii) Integration. (a) The Aladdin Parties agree that they will not and will cause their Affiliates not to make any offer or sale of securities of the Aladdin Parties of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the 1933 Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Units by the Aladdin Parties to the Initial Purchasers, (ii) the resale of the Units by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the Units by such Subsequent Purchasers to others) the 33 exemption from the registration requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A or otherwise. (iii) Rule 144A Information. The Aladdin Parties agree that, in order to render the Securities eligible for resale pursuant to Rule 144A under the 1933 Act, while any of the Securities remain outstanding, it will make available, upon request, to any holder of any of the Securities or prospective purchasers of any of the information specified in Rule 144A(d)(4), unless the Aladdin Parties furnish information to the Commission pursuant to Section 13 or 15(d) of the 1934 Act (such information, whether made available to holders or prospective purchasers or furnished to the Commission, is herein referred to as "Additional Information"). (iv) Restriction on Repurchases. Until the expiration of two years after the original issuance of the Units, the Aladdin Parties will not, and will cause their Affiliates not to, purchase or agree to purchase or otherwise acquire any of the Securities which are "restricted securities" (as such term is defined under Rule 144(a)(3) under the 1933 Act), whether as beneficial owner or otherwise (except as agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker's transactions) unless, immediately upon any such purchase, the Aladdin Parties or any Affiliate shall submit such Securities to the Trustee or the Warrant Agent, as applicable, for cancellation. SECTION 9. Indemnification. (a) Indemnification of Initial Purchasers. The Aladdin Parties and the Trust agree, jointly and severally, to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 9(d) below) any such settlement is effected with the written consent of the Aladdin Parties and the Trust; and 34 (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Aladdin Parties by any Initial Purchaser through the Representatives expressly for use in the Offering Memorandum (or any amendment thereto). The foregoing indemnity with respect to any untrue statement contained in or any omission from the Preliminary Offering Memorandum shall not inure to the benefit of any Initial Purchaser (or any person controlling such Initial Purchaser) from whom the person asserting such loss, liability, claim, damage or expense purchased any of the Units that are the subject thereof if (i) the untrue statement or omission contained in the Preliminary Offering Memorandum (excluding documents incorporated by reference) was corrected; (ii) such person was not sent or given a copy of the Final Offering Memorandum (excluding documents incorporated by reference) which corrected the untrue statement or omission at or prior to the written confirmation of the sale of such Units to such person; and (iii) the Aladdin Parties and the Trust satisfied their obligation pursuant to Section 5(b) of this Agreement to provide a sufficient number of copies of the Final Offering Memorandum to the Initial Purchasers. (b) Indemnification of Aladdin Parties, Managers, Directors and Officers and the Trust. Each Initial Purchaser severally agrees to indemnify and hold harmless any of the Aladdin Parties and the Trust, their managers, directors, and officers and each person, if any, who controls the Aladdin Parties and the Trust within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum in reliance upon and in conformity with written information furnished to the Aladdin Parties by such Initial Purchaser through the Representatives expressly for use in the Offering Memorandum. (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 9(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 9(b) above, counsel to the indemnified parties shall be selected by the 35 Aladdin Parties and the Trust. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 9 or Section 10 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 9(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. Notwithstanding the immediately preceding sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, an indemnifying party shall not be liable for any settlement of the nature contemplated by Section 9(a)(ii) effected without its consent if such indemnifying party (i) reimburses such indemnified party in accordance with such request to the extent that it considers such request to be reasonable and (ii) provides written notice to the indemnified party substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement. SECTION 10. Contribution. If the indemnification provided for in Section 9 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Aladdin Parties on the one hand and the Initial Purchasers on the other hand from the offering of the Units pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Aladdin Parties and the Trust on the one hand and of the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in 36 such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Aladdin Parties on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Units pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Units pursuant to this Agreement (before deducting expenses) received by the Aladdin Parties and the total underwriting discount received by the Initial Purchasers, bear to the aggregate initial offering price of the Units. The relative fault of the Aladdin Parties and the Trust on the one hand and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Aladdin Parties or the Trust or by the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Aladdin Parties and the Trust and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 10. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 10 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Units underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 10, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser, and each director, trustee or manager of the Aladdin Parties, each officer of the Aladdin Parties, and each person, if any, who controls the Aladdin Parties or the Trust within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Aladdin Parties and the Trust, as applicable. The Initial Purchasers' respective obligations to contribute pursuant to this Section 37 10 are several in proportion to the principal amount of Units set forth opposite their respective names in Schedule A hereto and not joint. SECTION 11. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or certificates of officers of any of the Venture Parties and the Initial Purchasers submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser, Venture Party or controlling person, or by or on behalf of the Venture Parties or the Initial Purchasers, and shall survive delivery of the Units to the Initial Purchasers. SECTION 12. Termination of Agreement. (a) Termination; General. The Representatives may terminate this Agreement, by notice to the Venture Parties, at any time at or prior to the Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of any of Holdings and its subsidiaries considered as one enterprise or Enterprises, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable to market the Units or to enforce contracts for the sale of the Units, or (iii) if trading in any securities of any of the Venture Parties has been suspended or limited by the Commission or any stock exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the NASDAQ National Market System has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the NASD or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal or New York authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 6 hereof, and provided further that Sections 1, 2, 3, 9 and 10 shall survive such termination and remain in full force and effect. SECTION 13. Default by One or More of the Initial Purchasers. If one or more of the Initial Purchasers shall fail at the Closing Time to purchase the Units which it or they are obligated to purchase under this Agreement (the "Defaulted Units"), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Initial Purchasers, or any other Initial Purchasers, to purchase all, but not less than all, of the Defaulted Units in such amounts as may be agreed upon and upon the terms herein set 38 forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Units does not exceed 10% of the number of Units to be purchased hereunder, each of the non-defaulting Initial Purchasers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective obligations hereunder bear to the obligations of all non-defaulting Initial Purchasers, or (b) if the number of Defaulted Units exceeds 10% of the number of Units to be purchased hereunder, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser. No action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Representatives or the Aladdin Parties shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Offering Memorandum or in any other documents or arrangements. As used herein, the term "Initial Purchaser" includes any person substituted for an Initial Purchaser under this Section 13. SECTION 14. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to the Representatives c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated at North Tower, World Financial Center, New York, New York 10281-1201, attention of Edmond Moriarty; notices to the Issuers shall be directed to such party at P.O. Box 94827, Las Vegas, Nevada 89193, attention of Richard J. Goeglein; notices to Enterprises shall be directed to it at P.O. Box 94827, Las Vegas, Nevada 89193, attention of Richard J. Goeglein; notices to London Clubs shall be directed to it at 30 Old Burlington Street, London, WIX, 2LN England, attention of Barry Hardy; notices to LCNI shall be directed to it c/o Lionel, Sawyer & Collins, 300 South Fourth Street, Suite 1700, Las Vegas, Nevada 89101, attention of Greg Giordano; notices to the Trust shall be directed to it at 280 Park Avenue, New York, New York 10017, attention of Ronald Dictrow; and notices to AHL shall be directed to it at 280 Park Avenue, New York, New York 10017, attention of Ronald Dictrow. SECTION 15. Parties. This Agreement shall each inure to the benefit of and be binding upon the Initial Purchasers and the Venture Parties and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers and the Venture Parties and their respective successors and the controlling persons and officers, trustees, managers and directors referred to in Section 9 and 10 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and 39 exclusive benefit of the Initial Purchasers and the Venture Parties and their respective successors, and said controlling persons and officers, trustees, managers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Units from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. SECTION 16. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 17. Consent to Jurisdiction. Each of the Venture Parties and, with respect to clause (i) below, each of the Initial Purchasers hereby irrevocably and unconditionally: (a) submits itself and its property to any legal action or proceeding relating to this Agreement, or for recognition and enforcement of any judgment in respect of this Agreement, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York and appellate courts for such state and federal courts; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by registered or certified mail (or any substantially similar form of mail), postage prepaid, to LCNI at its address set forth in Section 14 above; and (d) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. SECTION 18. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 40 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Venture Parties a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Initial Purchasers and the Venture Parties in accordance with its terms. ALADDIN GAMING HOLDINGS, LLC By /s/ Ronald Dictrow -------------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN CAPITAL CORP. By /s/ Ronald Dictrow -------------------------------------- Name: Ronald Dictrow Title: Executive Vice President/Secretary ALADDIN GAMING ENTERPRISES, INC. By /s/ Ronald Dictrow -------------------------------------- Name: Ronald Dictrow Title: Secretary ALADDIN HOLDINGS, LLC By /s/ Ronald Dictrow -------------------------------------- Name: Ronald Dictrow Title: Vice President 41 THE TRUST UNDER ARTICLE SIXTH U/W/O SIGMUND SOMMER By /s/ Viola Sommer ---------------------------------------------- Name: Viola Sommer Title: Trustee LONDON CLUBS INTERNATIONAL, PLC By /s/ Barry Hardy ---------------------------------------------- Name: Barry Hardy Title: Financial Director CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED CREDIT SUISSE FIRST BOSTON CORPORATION By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By /s/ Gregory Margolies ---------------------------------------------- Authorized Signatory For themselves and as Representatives of the other Initial Purchasers named in Schedule A hereto. 42 SCHEDULE A
Name of Initial Purchaser Number of Units Merrill Lynch, Pierce, Fenner & Smith Incorporated........................... 128,470 Credit Suisse First Boston Corporation................ 64,235 CIBC Oppenheimer Corp................................. 14,398 Scotia Capital Markets (USA) Inc...................... 14,397 ------- Total..................................... 221,500
SCHEDULE B ALADDIN GAMING HOLDINGS, LLC ALADDIN CAPITAL CORP. ALADDIN GAMING ENTERPRISES, INC. 221,500 Units consisting of in the aggregate of $221,500,000 principal amount at maturity of Senior Discount Notes due 2010 of Aladdin Gaming Holdings, LLC and Aladdin Capital Corp. (the "Notes") and Warrants (the "Warrants") to purchase an aggregate of 2,215,000 shares of Common Stock of Aladdin Gaming Enterprises, Inc. 1. The initial public offering price of the Units shall be $519.40 per Unit, plus accrued interest on the Notes, if any, from the date of issuance. 2. The purchase price to be paid by the Initial Purchasers for the Units shall be $499.92 per Unit. Exhibit A Exhibit B FORM OF OPINION OF SPECIAL COUNSEL TO THE ALADDIN PARTIES TO BE DELIVERED PURSUANT TO SECTION 7(a)(ii) (i) Each of the Aladdin Parties has been duly organized or incorporated, as applicable, and is validly existing as a limited-liability company or corporation, as applicable, in good standing under the laws of the State of Nevada. (ii) Each of the Aladdin Parties has all necessary power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under the Purchase Agreement. (iii) Each of the Aladdin Parties is duly qualified as a foreign limited-liability company or corporation, as applicable, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business. (iv) Each Designated Subsidiary has been duly organized or incorporated, as applicable, and is validly existing as a limited-liability company or corporation, as applicable, in good standing under the laws of the jurisdiction of its organization or incorporation, as applicable, has all necessary power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign limited-liability company or corporation, as applicable, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business; except as otherwise disclosed in the Offering Memorandum, all of the issued and outstanding membership interests or shares of capital stock, as applicable, of each Designated Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and, to the best of our knowledge and information, is owned by the applicable Aladdin Party, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (v) All outstanding membership interests of Holdings have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive and similar rights and are free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity and is as set forth in the column entitled "At the Closing Time" under the table relating to the capitalization of Holdings under the caption "Capitalization" in the Offering Memorandum. Capital, the Company and Aladdin Music Holdings are the only subsidiaries of Holdings. (vi) All outstanding shares of capital stock of Capital have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights and are directly owned by Holdings free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. Capital has no subsidiaries. B-1 (vii) All outstanding shares of capital stock of Enterprises have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights and are free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity and is as set forth in the column entitled "At the Closing Time" under the table relating to the capitalization of Enterprises under the caption "Capitalization" in the Offering Memorandum. Enterprises has no subsidiaries. (viii) Each of the Trust and AHL is duly qualified as a foreign trust or limited-liability company, as applicable, to transact business and the Trust is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a material adverse effect on its business, prospects, financial condition or results of operations. (ix) The Preferred Membership Interests have been duly authorized by the Company, and are validly issued, fully-paid, non-assessable and not subject to any preemptive or similar rights and, other than in connection with the Preferred Membership Interests Pledge Agreement, are directly owned by Holdings free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (x) Each of the Aladdin Parties and their subsidiaries possesses such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; each of the Aladdin Parties and their subsidiaries is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and none of the Aladdin Parties or any of their subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xi) The issuance of the Warrant Shares has been duly authorized by all requisite corporate action of Enterprises; and upon issuance thereof and payment therefor in accordance with the terms of the Warrant Agreement, the Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive or similar rights. Enterprises has reserved the number of Warrant shares contemplated by the Warrant Agreement for issuance under the Warrants. (xii) None of the Aladdin Parties or any of their subsidiaries is in violation of its charter, by-laws or any other organizational document and, to the best of our knowledge, no default by any of the Aladdin Parties or any of their subsidiaries exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other B-2 agreement or instrument to which any of the Aladdin Parties or any of their subsidiaries is a party that is described or referred to in the Offering Memorandum. (xiii) Except as set forth in Section ___ of the Holdings Operating Agreement, none of the Aladdin Parties nor any of their subsidiaries has any outstanding options to purchase, or any preemptive rights or other rights to subscribe for or purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, equity interests or any such options, rights, convertible securities or obligations. (xiv) The statements under the caption "Risk Factors--Ability to Realize on Collateral; "Risk Factors--Certain Bankruptcy Considerations," "Risk Factors--Mechanic's Liens," "Risk Factors-Government Regulation" and "Regulation and Licensing"" in the Offering Memorandum, insofar as such statements constitute a summary of the legal matters, documents or proceedings referred to therein with respect to Nevada law, fairly present in all material respects such legal matters, documents and proceedings. (xv) After due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which any of the Aladdin Parties is or could be a party or to which any of their respective property is or could be subject, which might result, singly or in the aggregate, in a Material Adverse Effect. (xvi) None of the Aladdin Parties has violated any Environmental Laws or any provisions of ERISA, or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. (xvii) Other than as disclosed in the Offering Memorandum, there exists no fact or any event which has occurred or which is reasonably likely to result in material liability (including, without limitation, alleged or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damages, personal injuries or penalties) arising out of, based on or resulting from the presence or release into the environment of any hazardous material (including without limitation any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under or within the meaning of any Environmental Law) or any violation of any Environmental Law with respect to the Contributed Land. (xviii) Each of the Aladdin Parties and their subsidiaries possesses such Governmental Licenses issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; each of the Aladdin Parties and their subsidiaries is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and none of the Aladdin Parties or any of their subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, B-3 if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xix) The Company has good and marketable title in fee simple to the Project Site and good and marketable title to all personal property owned by the Company which is material to the business of the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity and defects, except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company in connection with its business as described in the Offering Memorandum; and any real property held under lease by the Company is held under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property by the Company in connection with its business as described in the Offering Memorandum, and the Company enjoys peaceful and undisturbed possession under all such leases. (xx) To the best knowledge of such counsel, there is no statute, rule, regulation or order that has been enacted, adopted or issued by any governmental agency which could have a Material Adverse Effect. (xxi) The contemplated operation and use of the Aladdin, including the construction of the Aladdin, will be (giving effect to any waivers or variances which may be obtained) in compliance with all applicable municipal, county, state and federal laws, regulations, ordinances, standards, orders, and other regulations, where the failure to comply therewith could have a Material Adverse Effect. Under applicable zoning and use laws, ordinances, rules and regulations, the Aladdin may be used for the purposes contemplated in the Offering Memorandum. (xxii) It is our opinion that a federal or state court sitting in Nevada will honor the parties' choice of the internal laws of the State of New York as the law applicable to the Executed Transaction Documents and the Executory Transaction Documents (to the extent set forth in such documents) and to the determination of whether the obligations created by the Executed Transaction Documents and Executory Transaction Documents are usurious. (xxiii) The Pledge Agreements are in a form that substantially meets the requirements of the Nevada Act and the Nevada Gaming Authorities. (xxiv) The (a) deposit of the proceeds from the sale of the Units into the Note Construction Disbursement Account, (b) execution of the Disbursement Agreement and the Note Construction Pledge Agreement and the Escrow Agreement by Holdings or the Company, as applicable, and (c) filing of the financing statements in the office of the Nevada Secretary of State, shall cause the Trustee, for the ratable benefit of the holders of the Notes, to have, as security for the payment of obligations under the Indenture and the Notes, a valid and perfected security interest or lien in the proceeds from the sale of the Units deposited into the Note Construction Disbursement Account, and the actions and filings described in clauses (a), (b) and (c) are hte only actions and filings necessary to publish notice of the validity of such security interests or liens and to perfect such security interest or liens as may be perfected by filing. From B-4 and after the date hereof (assuming the due filing of Holdings' financing statements and continuation statements required by Nevada law, without intervening liens or security interests), the liens or security interests created by the Disbursement Agreement and the Note Construction Pledge Agreement which are to be perfected by the filing of a UCC-1 financing statement will be duly perfected. (xxv) Assuming the Preferred Membership Interests Pledge Agreement create a valid security interest in the Pledged Interest (as defined in the Preferred Membership Interests Pledge Agreement) under New York law, after giving effect to the delivery to the Trustee for the benefit of the Noteholders in the State of Nevada of the certificates representing the Pledged Interests, in good faith and without notice of any adverse claim and in bearer form, or in registered form endorsed to the Trustee or in blank by an effective enforsement or registered in the name of the Trustee upon registration of transfer by the issuer, the Trustee for the benefit of the Noteholders will have a perfected security interest in such Pledged Interests. B-5 Exhibit C FORM OF OPINION OF COUNSEL TO LONDON CLUBS AND LCNI TO BE DELIVERED PURSUANT TO SECTION 7(a)(iii) (i) Each of London Clubs and LCNI has been duly incorporated, is validly existing and is a corporation in good standing under the laws of its jurisdiction of incorporation. (ii) Each of London Clubs and LCNI has all necessary corporate power and authority to carry on its business and to own, lease and operate its properties. London Clubs owns all of the outstanding shares of capital stock of LCNI. (iii) Each of London Clubs and LCNI is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except, with respect to London Clubs, where the failure to be so qualified would not have a material adverse effect on its business, prospects, financial condition or results of operations. (iv) The Purchase Agreement has been duly authorized, executed and delivered by London Clubs. (v) Neither London Clubs or LCNI is in violation of its charter, by-laws or any other organizational document and, to the best of our knowledge, no default by London Clubs or LCNI exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which London Clubs or LCNI is a party that is described or referred to in the Offering Memorandum. (vi) Other than the approval of the shareholders of London Clubs and approvals necessary in connection with the U.S. Facilities Agreement banks with National Westminster PLC as arranger and U.S. 1997 Noteholders, each of which shall be obtained prior to the Closing Time, no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency or any other party is necessary or required for the performance by either of London Clubs or LCNI of their obligations hereunder. EX-23.1 34 CONSENT OF ARTHUR ANDERSON LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the reference of our firm under the caption "Experts" in this Registration Statement (Form S-1) and related Prospectus of Aladdin Gaming Enterprises, Inc. for the registration of 2,215,000 warrants to purchase 2,215,000 of Class B non-voting Common Stock of Aladdin Gaming Enterprises, Inc. and to the incorporation by reference therein of our reports dated January 15, 1998, with respect to the consolidated financial statements of Aladdin Gaming Holdings, LLC and subsidiaries and the financial statements of Aladdin Gaming, LLC, Aladdin Gaming Enterprises, Inc. and Aladdin Capital Corp. ARTHUR ANDERSEN LLP Las Vegas, Nevada April 3, 1998 EX-23.2 35 CONSENT OF PRICE WATERHOUSE CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of Aladdin Gaming Enterprises, Inc. of our report dated 20 May 1997 relating to the financial statements of London Clubs International plc, which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PRICE WATERHOUSE ------------------------------------------------------------------------------ Price Waterhouse CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS London 8 April 1998 EX-23.5 36 AWARENESS LETTER FROM PRICE WATERHOUSE 8 April 1998 PRIVATE AND CONFIDENTIAL Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 USA Ladies and Gentlemen We are aware that Aladdin Gaming Enterprises, Inc. has included our report dated 5 December 1997 (issued pursuant to the provisions of United Kingdom Bulletin "Review of Interim Financial Information", issued by the United Kingdom Accounting Practices Board, which provisions are substantially consistent with the provisions of Statement on Auditing Standards No. 71) in the Prospectus constituting part of its Registration Statement on Form S-1 to be filed on or about 8 April 1998. We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly /s/ PRICE WATERHOUSE - ------------------------------------ Price Waterhouse -----END PRIVACY-ENHANCED MESSAGE-----