10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

Commission File Number 000-50689

BH/RE, L.L.C.

(Exact Name of Registrant as Specified in its Charter)

NEVADA	84-1622334
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
885 Third Avenue 34th Floor New York, New York	10022
(Address of Principal Executive Offices)	(Zip Code)

(212) 371-2211

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  o

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  Yes  o    No  x

The aggregate market value of voting stock held by nonaffiliates of the Registrant as of June 30, 2004 was $0. As of March 31, 2005, 50% of the Registrant’s voting membership interests were held by each of Robert Earl and Douglas P. Teitelbaum, and 40.75% of the Registrant’s equity membership interests were held by each of BH Casino and Hospitality LLC I and OCS Consultants, Inc., with the remaining 18.50% of equity membership interests held by BH Casino and Hospitality LLC II.

TABLE OF CONTENTS

PART I
ITEM 1.	BUSINESS	3
ITEM 2.	PROPERTIES	15
ITEM 3.	LEGAL PROCEEDINGS	15
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	15
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES	16
ITEM 6.	SELECTED FINANCIAL DATA	17
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	36
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	58
ITEM 9A.	CONTROLS AND PROCEDURES	58
ITEM 9B.	OTHER INFORMATION	59
PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	59
ITEM 11.	EXECUTIVE COMPENSATION	62
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	65
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	66
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	67
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	68
SIGNATURES		72

2

PART I

ITEM 1.BUSINESS

Unless the context indicates otherwise, all references to “BH/RE”, “we”, “us”, “our” and “ours” refer to BH/RE, L.L.C. and its consolidated subsidiaries.

Forward-looking Statements

When used in this report and elsewhere by management from time to time, the words “believes”, “anticipates” and “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our planned and possible expansion plans, legal proceedings and employee matters. Certain important factors, including but not limited to, competition from other gaming operations, factors affecting our ability to complete acquisitions and dispositions of gaming properties, leverage, construction risks, the inherent uncertainty and costs associated with litigation and governmental and regulatory investigations, and licensing and other regulatory risks, could cause our actual results to differ materially from those expressed in our forward-looking statements. Further information on potential factors which could affect our financial condition, results of operations and business including, without limitation, the expansion, development and acquisition projects, legal proceedings and employee matters are included in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.

Organization

BH/RE is a holding company that owns 85% of EquityCo, L.L.C. (“EquityCo”). The remaining 15% of EquityCo is owned by a subsidiary of Starwood Hotels and Resorts Worldwide, Inc. (“Starwood”). MezzCo, L.L.C. (“MezzCo”) is a wholly owned subsidiary of EquityCo, and OpBiz, L.L.C. (“OpBiz”) is a wholly owned subsidiary of MezzCo. As of February 28, 2005, 50% of BH/RE’s voting membership interests were held by each of Robert Earl and Douglas P. Teitelbaum, and BH/RE’s equity membership interests were held 40.75% by BH Casino and Hospitality LLC I (“BHCH I”), 18.50% by BH Casino and Hospitality LLC II (“BHCH II”) (collectively “BHCH”) and 40.75% by OCS Consultants, Inc. (“OCS”).

BH/RE and its subsidiaries were formed to acquire, operate and renovate the Aladdin Resort and Casino (the “Aladdin”) located in Las Vegas, Nevada. OpBiz, an indirect subsidiary of BH/RE, completed the acquisition of the Aladdin on September 1, 2004 and will begin a renovation project which, when complete, will transform the Aladdin into the Planet Hollywood Resort and Casino (the “PH Resort”). In connection with the renovation of the Aladdin, OpBiz has entered into an agreement with Planet Hollywood International, Inc. (“Planet Hollywood”) and certain of its subsidiaries to, among other things, license Planet Hollywood’s trademarks, memorabilia and other intellectual property. OpBiz has also entered into an agreement with Sheraton Operating Corporation (“Sheraton”), a subsidiary of Starwood, pursuant to which Sheraton provides hotel management, marketing and reservation services for the hotel that comprise a portion of the PH Resort.

BH/RE is a Nevada limited-liability company and was organized on March 31, 2003. BH/RE was formed by BHCH and OCS. BHCH is controlled by Douglas P. Teitelbaum, a managing principal of Bay Harbour Management, L.C. (“Bay Harbour Management”). BHCH was formed by Mr. Teitelbaum for the purpose of holding investments in BH/RE by funds managed by Bay Harbour Management. Bay Harbour Management is an investment management firm. OCS is wholly owned and controlled by Robert Earl and holds Mr. Earl’s investment in BH/RE. Mr. Earl is the founder, chairman and chief executive officer of Planet Hollywood and Mr. Teitelbaum is a director of Planet Hollywood. Together, Mr. Earl, a trust for the benefit of Mr. Earl’s children and affiliates of Bay Harbour Management, own substantially all of the

3

equity of Planet Hollywood. Mr. Earl disclaims beneficial ownership of any equity of Planet Hollywood owned by the trust.

Acquisition of the Aladdin

Aladdin Gaming, L.L.C. (“Aladdin Gaming”), which was a debtor-in-possession under Chapter 11 of the United States Bankruptcy Code, commenced its bankruptcy case in the United States Bankruptcy Court for the District of Nevada, Southern Division on September 28, 2001. On April 23, 2003, OpBiz and Aladdin Gaming entered into a purchase agreement pursuant to which OpBiz agreed to acquire the Aladdin. Under the terms of the purchase agreement and pursuant to an order of the Bankruptcy Court, Aladdin Gaming conducted an auction to sell the Aladdin. On June 20, 2003, the Bankruptcy Court declared OpBiz the winner of that auction and, on August 29, 2003, the Bankruptcy Court entered an order confirming Aladdin Gaming’s plan of reorganization and authorizing Aladdin Gaming to complete the sale of the Aladdin to OpBiz under the purchase agreement. On September 1, 2004, OpBiz acquired substantially all of the real and personal property owned or used by Aladdin Gaming to operate the Aladdin, and received $15 million of working capital from Aladdin Gaming, including $25.7 million of cash. The acquisition was accounted for as a purchase and, accordingly, the purchase price and working capital adjustments have been allocated to the underlying assets acquired and liabilities assumed. The working capital adjustment was determined based on the closing balance sheet on August 31, 2004. OpBiz paid the purchase price for the Aladdin by issuing new secured notes to Aladdin Gaming’s secured creditors and assumed various contracts and leases entered into by Aladdin Gaming in connection with its operation of the Aladdin and certain of Aladdin Gaming’s liabilities, including Aladdin Gaming’s energy service obligation to the third party owner of the central utility plant that supplies hot and cold water and emergency power to the Aladdin. At the time of purchase, the energy service obligation was $34.0 million. Upon the completion of the Aladdin acquisition, OpBiz issued $510 million of new secured notes to Aladdin Gaming’s secured creditors under an Amended and Restated Loan and Facilities Agreement (the “Credit Agreement”) with a group of lenders and The Bank of New York, Asset Solutions Division, as administrative and collateral agent. OpBiz also simultaneously made a $14 million cash payment to those secured creditors, which reduced the principal amount of the notes to $496 million and obtained a release of the lien on a four-acre parcel of undeveloped property that OpBiz also acquired from Aladdin Gaming (“Timeshare Land”). On December 10, 2004, we entered into a Timeshare Purchase Agreement with Westgate Resorts, LTD. (“Westgate”), whereby we have agreed to sell approximately four acres of the Timeshare Land to Westgate, which plans to develop, market, manage and sell timeshare units on the land. The Credit Agreement also required that OpBiz provide either cash or a letter of credit in the aggregate amount of $90 million to fund the costs of the planned renovations to the Aladdin. In August 2004, MezzCo issued $87 million of senior secured notes to a group of purchasers. The net proceeds of this financing were used to make the $14 million payment described above, to pay certain costs and expenses of BH/RE and its subsidiaries and affiliates related to the acquisition of the Aladdin, and to provide OpBiz with a portion of the funds necessary to meet its obligations regarding the planned renovations to the Aladdin.

The purchase agreement also provided that OpBiz assume substantially all of Aladdin Gaming’s pre-petition contracts and leases and any post-petition contracts or leases to which OpBiz does not object. In addition, the purchase agreement provided that OpBiz offer employment to all of Aladdin Gaming’s employees, other than executive management, on terms and conditions substantially similar to their previous employment terms and conditions.

Plan of Operations

We are currently conducting a renovation project which, when complete, will transform the Aladdin into the PH Resort. In connection with the proposed renovation of the Aladdin, we have entered into an agreement with Planet Hollywood and certain of its subsidiaries to, among other things, license Planet

4

Hollywood’s trademarks, memorabilia and other intellectual property. We have also entered into an agreement with Sheraton, a subsidiary of Starwood, pursuant to which Sheraton provides hotel management, marketing and reservation services for the hotel that comprise a portion of the pre-renovation PH Resort.

The Aladdin Resort and Casino

The Aladdin is located at 3667 South Las Vegas Boulevard in Clark County, Nevada, in the area commonly referred to as the Las Vegas Strip. The Aladdin is part of a resort, casino and entertainment complex (the “Complex”).

The Aladdin includes a 2,567-room hotel (the “Hotel”), which offers deluxe guestrooms, resort guestrooms, suites, luxury rooms and mega suites. In addition, the hotel has an outdoor pool area and an approximately 32,000-square foot spa that is leased to a third party. Aladdin’s 116,000-square foot casino (the “Casino”) offers approximately 1,860 slot machines, 60 table games, a poker room and a race-and sports-book facility on its main floor and includes a 15,000-square foot luxury gaming section on its mezzanine level with approximately 20 high denomination table games and 75 high denomination slot machines.

The Aladdin has seven restaurants, including a Chinese restaurant leased to P.F. Chang’s, a buffet, a sushi bar, a 24-hour casual dining facility, an Italian restaurant, a steak and seafood restaurant and a poolside snack bar, as well as a nightclub and several lounges. In addition, we operate a Starbucks Coffee franchise under an agreement with Starbucks Corporation. The Aladdin also has gift and merchandise shops operated by a third party. The Aladdin also has over 75,000 square feet of convention, trade show and meeting facilities, including a 37,000-square foot main ballroom, 10,000 square feet of pre-function space and 16,000 square feet of breakout space in 18 separate rooms.

The 7,500-seat Theater for the Performing Arts (the “TPA”) is part of the Complex described below, but is not directly connected to the Hotel and the Casino. Hotel and Casino customers and the general public can enter the TPA through the adjacent shopping mall, which is known as the Desert Passage and is described below, or through entrances leading directly into the TPA. The TPA is used for award shows, live music events and theatrical performances. The Aladdin also has unfinished space for an approximately 1,300-seat theater on a mezzanine level above the Casino (the “Showroom”). Effective December 16, 2004, OpBiz entered into a long-term lease agreement whereby SFX Entertainment, Inc. d/b/a Clear Channel Entertainment (“CCE”) will be renovating and leasing the TPA and Showroom and related areas located at the PH Resort. CCE will have the exclusive right to use, reconfigure, adapt, change and operate the leased premises.

In conjunction with the purchase of the Aladdin, we acquired a four-acre parcel of vacant land from Aladdin Gaming. This parcel is adjacent to the Desert Passage. For further discussion about our plans for this vacant land, see below under “Business Strategy—Develop Vacant Property.”

In addition to the Hotel, Casino and TPA, the Complex includes the Desert Passage, which is a themed entertainment shopping mall with approximately 435,000 square feet of retail space, and an approximately 4,800-space parking facility jointly used by the Aladdin and the Desert Passage.

The Desert Passage and the parking facility are owned by Boulevard Invest, LLC, (“Boulevard Invest”), an unaffiliated third party. The Desert Passage, which is directly connected to the Casino, contains an array of stores, boutiques, restaurants, cafes and other entertainment offerings. We are a party to reciprocal use easements and agreements governing the operation and maintenance of the Hotel, Casino, TPA, Desert Passage and parking facility. The theme and design of the Desert Passage are consistent with the current theme and design of the Aladdin, but are not currently consistent with our planned renovations to the Aladdin, as described below under “Business Strategy—Renovate the Aladdin.”

5

The reciprocal easement and use agreements that govern the joint operation of the Aladdin, the Desert Passage and the parking facility contain provisions that could have impacted our planned renovations. In particular, Boulevard Invest may have limited approval rights over a portion of our planned physical renovations. However, under an agreement between OpBiz and Aladdin Gaming, Boulevard Invest has already consented to the re-theming and re-naming of the Aladdin, and for the development of the vacant property adjacent to the Desert Passage, and has agreed to amend the reciprocal easement and use agreements accordingly.

The central utility plant, which provides hot and cold water and emergency power to the Complex, is owned by Northwind Aladdin (“Northwind”), an unaffiliated third party. We lease the land on which the central utility plant is located to Northwind for a nominal yearly rent.

Business Strategy

Our strategy is to improve profitability by:

·renovating the Aladdin;

·implementing a new marketing program to capitalize on the Planet Hollywood, Starwood and Sheraton brand names;

·upgrading and expanding gaming and non-gaming attractions; and

·entering into agreements with third parties, such as the recent Timeshare Land sale.

Renovate the Aladdin

We have created a preliminary design and construction plan with an estimated cost of $100 million to renovate the Aladdin into the PH Resort. In addition, we have entered into an agreement with a third party to fund, develop and operate the TPA and Showroom, and may enter into additional agreements with other third parties to develop and/or operate a television studio, additional restaurants, attractions, lounges and nightclubs at the PH Resort, thereby increasing the number of entertainment venues at the PH Resort without increasing renovation costs. We currently expect to complete the renovation of the Aladdin sometime during the fourth quarter of 2006.

The key elements of our plan to renovate the Aladdin are:

Redesign entrance and traffic flow.   We intend to construct a new main entrance to the PH Resort that will improve access to the Casino from Las Vegas Boulevard by creating a large main entrance and several well-identified secondary entrances. The main entrance will incorporate the Planet Hollywood globe trademark. We also plan to make other improvements to the entrance areas that we expect will improve pedestrian traffic into the Casino from Las Vegas Boulevard and to make improvements to the Casino that will direct those customers across the Casino floor to reach our restaurants, shops and entertainment attractions. In addition, we will add significant new signage to the PH Resort, including large lettering on top of the Hotel and a large marquee in front of the PH Resort. We anticipate that these improvements will result in more walk-in visitors to the Casino and our other planned attractions and amenities.

Renovate and expand Casino.   We intend to renovate the Casino and, subject to approval of applicable Nevada gaming authorities, expand the Casino into a portion of the Desert Passage to be leased by us. We have an agreement with Boulevard Invest containing the principal terms of a lease for space in the Desert Passage, but have not signed a definitive lease agreement. In addition, we intend to remove or modify existing structures on the Casino floor so that the Casino will appear larger and more inviting, to redesign the Casino floor to better use the available space for gaming and to add new gaming equipment.

6

Implement a New Marketing Program

We intend to focus our marketing efforts on attracting middle market gaming customers and establishing celebrity marketing agreements. We believe the general quality of the Hotel rooms is very competitive for the middle market segment. The new marketing program will feature:

·the entry of the Planet Hollywood brand name into the Las Vegas casino market; and

·Starwood’s reservation system and marketing and loyalty programs and the Sheraton brand name.

Planet Hollywood Brand Name.   We believe the Planet Hollywood brand name is well-known and internationally recognized. As a result, we expect that we will be able to spend more of our advertising budget on direct customer marketing rather than brand awareness. In addition, we expect that the PH Resort will host movie premieres, live television productions and similar entertainment industry events, with the goal of attracting Las Vegas tourists, including customers of other properties on the Las Vegas Strip, to the PH Resort.

Relationship with Starwood and Sheraton.   We believe our relationship with Starwood and Sheraton presents a number of advantages for the PH Resort. We expect that including the PH Resort in the Starwood reservation system and marketing and loyalty programs will result in higher average daily room rates at the Hotel. We also anticipate Starwood’s convention bookings database will generate more profitable convention and meeting business for the PH Resort, improving both mid-week occupancy levels and average daily room rates. The Starwood preferred guest program has approximately three million active members and approximately 14 million total members. We expect Starwood preferred guest program members to utilize the PH Resort as an award-redeeming destination.

Upgrade and Expand Gaming and Non-Gaming Attractions

Improve Mix and Layout of Casino Slot Machines.   We intend to improve our gaming operations by expanding the Casino, adding new ticket-in/ticket-out slot machines and by continuing to provide our customers with newer and more attractive slot machine options. We also intend to reduce the number of participatory slot machines as a percentage of our total slot machines. Participatory slot machines are slot machines that require the casino operator to pay a percentage of its winnings to the manufacturer.

Expand Race-and Sports-Book Facility and Poker Parlor and add Keno.   We intend to expand and remodel the Aladdin’s race-and sports-book facility and the poker parlor, as well as adding a Keno parlor to keep more of our Hotel guests in the Casino and to attract more non-Hotel customers to the Casino. We believe that a race-and sports-book facility is important because it serves as a gathering and relaxation point for groups of hotel and other customers. Virtually all of Aladdin’s major competitors have larger race-and sports-book facilities than the Aladdin. We intend for OpBiz to expand the race-and sports-book facility by utilizing existing unused space. We expect to remodel the race-and sports-book facility and incorporate sports memorabilia from Planet Hollywood’s extensive collection. In addition, because of the popularity of poker, we intend to expand and relocate the poker parlor adjacent to the expanded race-and sports-book facility. We plan to add Keno sometime during the second quarter of 2005. The lounge will be located near the race-and sports-book facility with additional Keno boards in the café and buffet.

Expand Amenities.   When we complete the planned renovations to the Aladdin, the PH Resort will offer a variety of non-gaming amenities that we believe will be unique among Las Vegas Strip properties. Our plans include entering into an agreement with a major electronics company to fund, develop and/or operate a television studio, renovating the pool area to include, among other things, a movie theater, hosting weekly “sneak peek” movie screenings, and constructing a Hollywood-themed memorabilia museum. Effective December 16, 2004, we entered into a long-term lease agreement whereby an entertainment company will be renovating and leasing the TPA and Showroom and related areas at the Aladdin. The entertainment company will have the exclusive right to use, reconfigure, adapt, change and

7

operate the leased premises. We believe that increasing the number, variety and desirability of non-gaming amenities at the PH Resort will attract more customers and, as a result, increase revenues and profits, including those from our gaming operations.

Upgrade and Expand Restaurant Choices.   Although the Aladdin has two upscale restaurants and a large buffet with a wide variety of food choices, none of the dining options at the Aladdin are affiliated with a well-known restaurant or chef from a major U.S. metropolitan area. We believe most Las Vegas Strip properties currently include these types of dining options and that having one or more of these dining options presents opportunities to attract customers to the Casino and to other non-gaming attractions and amenities at the PH Resort. We intend to enter into agreements with other restaurant operators and chefs at varying price points to offer customers of the PH Resort more dining options.

Develop Vacant Property

On December 10, 2004, OpBiz entered into a Timeshare Purchase Agreement with Westgate Resorts, LTD. (“Westgate”), a Florida limited partnership, whereby OpBiz has agreed to sell approximately 4 acres of land adjacent to the PH Resort to Westgate, who plans to develop, market, manage and sell timeshare units on the land. Under the Timeshare Purchase Agreement, OpBiz will receive fees each year based on sales of timeshare units until the timeshare units are one hundred percent sold out. We expect that development of the vacant property will also benefit us by providing additional revenues by increasing the number of potential customers for the PH Resort.

Markets

We believe that Las Vegas is one of the fastest growing leisure, hotel and 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 Las Vegas Convention and Visitors Authority, the number of visitors traveling to Las Vegas has continued to increase. The number of visitors increased from approximately 30.5 million in the year ended December 31, 1997 to approximately 37.4 million visitors in the year ended December 31, 2004, and is expected to reach 38.2 million visitors in 2005. There is no guarantee that Las Vegas will have this many visitors in 2005, or that the number of visitors will increase at all.

According to the American Gaming Association, Las Vegas has the highest casino gaming revenues in the United States. A number of major hotel casinos have opened in the past ten years on the Las Vegas Strip, including Bellagio, Mandalay Bay Resort & Casino, New York-New York Hotel and Casino, Paris Las Vegas and The Venetian Casino Resort. In addition, a number of existing properties on the Las Vegas Strip have expanded during this period, including MGM Grand Hotel and Casino, Luxor Hotel and Casino, Circus Circus Hotel, Casino and Theme Park, and Caesars Palace. Despite this significant increase in the supply of rooms in Las Vegas, hotel total occupancy rates exceeded on average 90.6% for the years 1990 to 1999, averaged 92.5% in 2000, 88.9% in 2001, 88.8% in 2002, 85.0% in 2003 and 88.6% in 2004. There is no guarantee that these occupancy rates will remain high or will not decrease in the future.

According to the Las Vegas Convention and Visitors Authority, gross gaming revenues for properties on the Las Vegas Strip have increased from approximately $3.8billion in the year ended December 31, 1997 to approximately $5.3billion in the year ended December 31, 2004. As a result of the increased popularity of gaming, Las Vegas has sought to increase its popularity as an overall vacation resort destination. There is no guarantee that Las Vegas will continue to grow in popularity, or will not go out of style. The number of hotel rooms in Las Vegas has increased from 105,347 at December 31, 1997 to 131,503 at December 31,2004.

The Las Vegas market continues to evolve from its historical gaming focus to broader entertainment and leisure offerings, such as retail, fine dining, sporting activities and major concerts. This diversification has contributed to the growth of the market and broadened the universe of individuals who would consider

8

Las Vegas as a vacation destination. The more diversified entertainment and leisure offerings present significant growth opportunities. In particular, the newer, large theme-destination resorts have been designed to capitalize on this development by providing better quality hotel rooms at higher rates and by providing expanded shopping, dining and entertainment opportunities to their patrons, in addition to gaming.

Competition

The hotel casino industry is highly competitive. The Aladdin competes, and the PH Resort will compete, on the basis of overall atmosphere, range of amenities, level of service, price, location, entertainment offered, theme and size. The Aladdin competes, and the PH Resort will compete, with other high-quality resorts and hotel casinos on the Las Vegas Strip and in downtown Las Vegas, as well as a large number of hotels and motels in and near Las Vegas.

Many competing properties, such as Bellagio, Caesars Palace, Luxor Hotel and Casino, Mandalay Bay Resort & Casino, the MGM Grand Hotel and Casino, The Mirage, Monte Carlo Hotel and Casino, New York-New York Hotel and Casino, Paris Las Vegas, Rio All-Suite Hotel & Casino, Treasure Island at The Mirage, The Venetian Casino Resort, the Hard Rock Hotel and Casino and, when completed, Wynn Las Vegas, have themes and attractions which draw a significant number of visitors and compete with the Aladdin for hotel and gaming customers and conventions and trade shows. Some of these properties are operated by companies that have more than one location and may have greater name recognition and financial and marketing resources than we have and will target the same demographic group as the Aladdin and the PH Resort. We will seek to differentiate the PH Resort from other major Las Vegas hotel casino resorts by concentrating on the design, atmosphere, personal service and amenities that we will provide and the added value of our arrangements with Planet Hollywood, Starwood and Sheraton.

A number of properties in the Las Vegas market are expanding their facilities. Mandalay Resort Group recently opened a new all-suites hotel tower with approximately 1,128 rooms at the Mandalay Bay Resort & Casino. The Venetian Casino Resort recently opened a new all-suites hotel tower with approximately 1,013-rooms. MGM Mirage has constructed a 928-room “spa tower” addition to Bellagio, as well as an expansion of Bellagio’s spa and salon, meeting space and retail space. The construction of Wynn Las Vegas on the 192-acre site of the former Desert Inn Resort & Casino on the Las Vegas Strip is scheduled to open in April 2005. Caesars Entertainment has begun construction of a 949-room hotel tower and additional convention and meeting facilities at Caesars Palace. Expected to be completed in 2005, the new hotel tower at Caesars Palace will include additional retail space and restaurant facilities.

Las Vegas casinos also compete with other hotel casino facilities elsewhere in Nevada and in Atlantic City, riverboat and Native American gaming facilities in other states, hotel casino facilities elsewhere in the world, Internet gaming and other forms of gaming. In addition, certain states recently have legalized, and others may legalize, casino gaming in specific areas. Passage of the Tribal Government Gaming and Economic Self-Sufficiency Act in 1988 has led to rapid increases in Native American gaming operations. In March 2000, California voters approved an amendment to the California Constitution allowing federally recognized Native American tribes to conduct and operate slot machines, lottery games and banked and percentage card games on Native American land in California. As a result, casino-style gaming on tribal lands is growing and could become a significant competitive force. The proliferation of Native American gaming in California and gaming activities in other areas could have a negative impact on our operations. In particular, the legalization of casino gaming in or near metropolitan areas, such as New York, Los Angeles, San Francisco and Boston, from which we intend to attract customers, could have a substantial negative effect on our business. In addition, new or renovated casinos in Asia could reduce the number of Asian customers who would otherwise visit Las Vegas.

9

We also compete with other forms of gaming on both a local and national level, including state lotteries, on-and off-track wagering and card parlors. The expansion of legalized gaming into new jurisdictions throughout the United States will also increase competition.

Intellectual Property

We have entered into agreements with Planet Hollywood and Sheraton which, among other things, grant us the right to use certain of their respective intellectual property in connection with the operation of the PH Resort. These licensing arrangements are described below under “Item 13. Certain Relationships and Related Transactions—Transactions with Planet Hollywood.”

We own several registered trademarks utilizing “Aladdin” for use in connection with casinos and casino entertainment services and hotel and restaurant services and will use the Aladdin trademarks until we commence operations as the PH Resort. We do not consider the Aladdin Gaming trademarks to be material to our business after completion of the renovation of the Aladdin into the PH Resort.

Regulation and Licensing

Nevada Gaming Regulations

Introduction

The ownership and operation of casino gaming facilities in Clark County, Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the “Nevada Act”); and (ii) various local ordinances and regulations. Our operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (“Nevada Commission”), the Nevada State Gaming Control Board (“Nevada Board”) and the Clark County Liquor and Gaming License Board (collectively, the “Nevada Gaming Authorities”).

Policy Concerns of Gaming Laws

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy. These public policy concerns include, among other things:

·preventing unsavory or unsuitable persons from being directly or indirectly involved with gaming at any time or in any capacity;

·establishing and maintaining responsible accounting practices and procedures;

·maintaining effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs, and safeguarding assets and revenues, providing reliable recordkeeping and requiring the filing of periodic reports with the Nevada Gaming Authorities;

·preventing cheating and fraudulent practices; and

·providing a source of state and local revenues through taxation and licensing fees.

Changes in these laws, regulations and procedures could have significant negative effects on our gaming operations and our financial condition and results of operations.

Owner and Operator Licensing Requirements

As the owner and operator of the Aladdin, we, as a registered corporation, are required to be licensed by the Nevada Gaming Authorities as a limited liability company licensee, referred to as a company licensee. This gaming license requires us to pay periodic fees and taxes and is not transferable. We are required periodically to submit detailed financial and operating reports to the Nevada Commission and the

10

Nevada Board and furnish any other information, which the Nevada Commission or the Nevada Board may require. No person may become a stockholder or holder of an interest of, or receive any percentage of profits from the Aladdin or PH Resort without first obtaining licenses and approvals from the Nevada Gaming Authorities. We have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses required in order to engage in gaming activities in Nevada.

Individual Licensing Requirements

The Nevada Gaming Authorities may investigate any individual who has a material relationship to or material involvement with OpBiz to determine whether the individual is suitable or should be licensed as a business associate of a gaming licensee. The officers, directors and certain key employees of OpBiz, MezzCo, EquityCo and BH/RE are required to file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position. Messrs. Teitelbaum and Earl, along with Michael V. Mecca, Chief Executive Officer of OpBiz and Theodore W. Darnall, Manager of EquityCo and OpBiz have been licensed by the Nevada Gaming Authorities. Applications for Michael Belletire and Jess M. Ravich, both Managers of OpBiz, are pending approval by the Nevada Gaming Authorities.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with OpBiz, OpBiz would have to terminate all relationships with that person. In addition, the Nevada Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.

We are required to submit detailed financial and operating reports to the Nevada Commission and provide any other information that the Nevada Commission may require. Substantially all of the material loans, leases, sales of securities and similar financing transactions of OpBiz, MezzCo, EquityCo and BH/RE must be reported to, or approved by, the Nevada Commission and/or the Nevada Board.

Consequences of Being Found Unsuitable

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or by the chairman of the Nevada Board, or who refuses or fails to pay the investigative costs incurred by the Nevada Gaming Authorities in connection with the investigation of its application, 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 person found unsuitable and who holds, directly or indirectly, any beneficial ownership of any voting security or debt security of a registered company beyond the period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We will be subject to disciplinary action if, after we receive notice that a person is unsuitable to hold an equity interest or to have any other relationship with, we:

·pay that person any dividend or interest upon any voting or debt securities;

·allow that person to exercise, directly or indirectly, any voting right held by that person relating to BH/RE, EquityCo, MezzCo or OpBiz;

11

·pay remuneration in any form to that person for services rendered or otherwise; or

·fail to pursue all lawful efforts to require the unsuitable person to relinquish such person’s voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value.

Consequences of Violating Gaming Laws

If the Nevada Commission decides that we have violated the Nevada Act or any of its regulations, it could limit, condition, suspend or revoke our registrations and gaming license. In addition, we and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act, or of the regulations of the Nevada Commission, at the discretion of the Nevada Commission. Further, the Nevada Commission could appoint a supervisor to operate the Aladdin (or the PH Resort) and, under specified circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any of our gaming licenses and the appointment of a supervisor could, and revocation of any gaming license would, have a significant negative effect on our gaming operations.

Requirements for Beneficial Securities Holders

Regardless of the number of shares held, any beneficial holder of BH/RE’s voting securities may be required to file an application, be investigated and have that person’s suitability as a beneficial holder of voting securities determined if the Nevada Commission has reason to believe that the ownership would otherwise be inconsistent with the policies of the State of Nevada. If the beneficial holder of the voting securities of BH/RE who must be found suitable is a corporation, partnership, limited partnership, limited liability company or trust, it must submit detailed business and financial information including a list of its beneficial owners. The applicant must pay all costs of the investigation incurred by the Nevada Gaming Authorities in conducting any investigation.

The Nevada Act requires any person who acquires more than 5% of the voting securities of a registered company to report the acquisition to the Nevada Commission. The Nevada Act requires beneficial owners of more than 10% of a registered company’s voting securities to apply to the Nevada Commission for a finding of suitability within 30 days after the chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of the registered company’s voting securities may apply to the Nevada Commission for a waiver of a finding of suitability if the institutional investor holds the voting securities for investment purposes only. In certain circumstances, an institutional investor that has obtained a waiver can hold up to 19% of a registered company’s voting securities for a limited period of time and maintain the waiver. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the registered company, a change in the 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 registered 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:

·voting on all matters voted on by stockholders or interest holders;

·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

12

·other activities that the Nevada Commission may determine to be consistent with such investment intent.

The articles of organization of BH/RE include provisions intended to help it implement the above restrictions.

Gaming Laws Relating to Securities Ownership

The Nevada Commission may, in its discretion, require the holder of any debt or similar securities of a registered company to file applications, be investigated and be found suitable to own the debt or other security of the registered company if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the Nevada Commission decides that a person is unsuitable to own the security, then under the Nevada Act, the registered company can be sanctioned, including the loss of its approvals if, without the prior approval of the Nevada Commission, it:

·pays to the unsuitable person any dividend, interest or any distribution whatsoever;

·recognizes any voting right by the unsuitable person in connection with the securities;

·pays the unsuitable person remuneration in any form; or

·makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.

BH/RE is required to maintain a current ownership ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make the disclosure may be grounds for finding the record holder unsuitable. We will be required to render maximum assistance in determining the identity of the beneficial owner of any of BH/RE’s voting securities. The Nevada Commission has the power to require the certificates representing equity interests of any registered company to bear a legend indicating that the securities are subject to the Nevada Act. We do not know whether this requirement will be imposed on us. However, the certificates representing BH/RE’s membership interests note that the membership interests are subject to a right of redemption and other restrictions set forth in BH/RE’s articles of organization and bylaws and that the membership interests are, or may become, subject to restrictions imposed by applicable gaming laws.

Approval of Public Offerings

Neither BH/RE nor any of its affiliates may make a public offering of its debt or equity securities without the prior approval of the Nevada Commission if the proceeds from the offering are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for those purposes or for similar transactions, unless, upon a written request for a ruling, the chairman of the Nevada Board has ruled that it is not necessary to submit an application for approval. Any approval that we might receive in the future relating to future offerings will not constitute a finding, recommendation or approval by any of the Nevada Gaming Authorities as to the accuracy or adequacy of the offering memorandum or the investment merits of the securities. Any representation to the contrary is unlawful.

Approval of Changes in Control

As a registered company, BH/RE must obtain prior approval of the Nevada Commission with respect to a change in control through:

·merger;

13

·consolidation;

·stock or asset acquisitions;

·management or consulting agreements; or

·any act or conduct by a person by which the person obtains control of us.

Entities seeking to acquire control of a registered company must satisfy the Nevada Board and Nevada Commission with respect to a variety of stringent standards before assuming control of the 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.

Approval of Defensive Tactics

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licenses or affecting registered companies that are affiliated with the operations permitted by Nevada gaming licenses may be harmful to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to reduce the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to:

·assure the financial stability of corporate gaming operators and their affiliates;

·preserve the beneficial aspects of conducting business in the corporate form; and

·promote a neutral environment for the orderly governance of corporate affairs.

We may be required to obtain approval from the Nevada Commission before we can make exceptional repurchases of voting securities above their current market price 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 a registered company’s board of directors in response to a tender offer made directly to its stockholders for the purpose of acquiring control.

Consequences of Violating Gaming Laws

If the Nevada Commission decides that we have violated the Nevada Act or any of its regulations, it could limit, condition, suspend or revoke our registrations and gaming license. In addition, we and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act, or of the regulations of the Nevada Commission, at the discretion of the Nevada Commission. Further, the Nevada Commission could appoint a supervisor to operate the Aladdin (or the PH Resort) and, under specified circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any of our gaming licenses and the appointment of a supervisor could, and revocation of any gaming license would, have a significant negative effect on our gaming operations.

Fees and Taxes

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the licensed operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon:

·a percentage of the gross revenues received;

·the number of gaming devices operated; or

14

·the number of table games operated.

A live entertainment tax is also paid by casino operators where entertainment is furnished in connection with an admission charge or the selling or serving of food or refreshments or the selling of merchandise.

License for Conduct of Gaming and Sale of Alcoholic Beverages

The conduct of gaming activities and the service and sale of alcoholic beverages at the Aladdin and the PH Resort are subject to licensing, control and regulation by the Clark County Liquor and Gaming License Board. In addition to approving OpBiz, the Clark County Liquor and Gaming License Board has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license. All licenses are revocable and are not transferable. The county agency has full power to limit, condition, suspend or revoke any license. Any disciplinary action could, and revocation would, have a substantial negative impact upon our operations.

Employees

BH/RE does not have, and does not expect to have, any employees. Under the terms of the purchase agreement, OpBiz was obligated to make offers of employment to all non-management employees of Aladdin Gaming upon completion of the Aladdin acquisition and has hired all employees who accepted the offers of employment. OpBiz currently has approximately 3,100 employees. Aladdin Gaming had entered into a collective bargaining agreement that covers less than 20 employees who work on the Aladdin loading docks. OpBiz has assumed this agreement in connection with the Aladdin acquisition. No other employees of the Aladdin are presently represented by labor unions, but negotiations with the Culinary Workers’ Union Local 226, Las Vegas are currently taking place.

ITEM 2.PROPERTIES

Substantially all of our assets have been pledged as collateral for our Credit Facility. The outstanding balance under the Credit Facility was approximately $496.2 million at December 31, 2004. See ITEM 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness”.

The Complex occupies a 35-acre site located on the northeast corner of Las Vegas Boulevard (“The Strip”) and Harmon Avenue in Las Vegas, Nevada. We own approximately 21.8 acres, which consists of the Aladdin, the TPA, the Showroom, Hotel, Casino, various restaurants and bars and the central utility plant. Approximately 0.62 acres are leased to the owner and operator of the central utility plant.

ITEM 3.LEGAL PROCEEDINGS

As of December 31, 2004, neither BH/RE nor any of its subsidiaries is a party to any material litigation.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of 2004.

15

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established public trading market for BH/RE’s membership interests and we do not presently expect that a trading market in BH/RE’s membership interests will develop. There are no outstanding options or warrants to purchase, or securities convertible into, any of BH/RE’s membership interests. BH/RE’s membership interests are not eligible for sale pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). BH/RE has not agreed with any security holder to register for sale under the Securities Act any of its membership interests. BH/RE does not currently propose to publicly offer any of its membership interests.

As of December 31, 2004, there were two holders of record of BH/RE’s voting membership interests and two holders of record of BH/RE’s equity membership interests.

BH/RE does not pay, and does not anticipate paying, any distributions to the holders of its membership interests, other than distributions in respect of income taxes payable by such members resulting from their ownership of membership interests.

There were no sales or repurchases of securities of BH/RE during the year ended December 31, 2004.

Use of Proceeds

On August 31, 2004, OpBiz issued $510 million of new secured notes to Aladdin Gaming’s secured creditors under the Credit Agreement in order to complete the purchase of the Aladdin. OpBiz also simultaneously made a $14 million cash payment to those secured creditors, which reduced the principal amount of the notes to $496 million, and obtained a release of the lien on a four-acre parcel of undeveloped property that OpBiz also acquired from Aladdin Gaming. The Credit Agreement also required that OpBiz provide either cash or a letter of credit in the aggregate amount of $90 million to fund the costs of the planned renovations to the Aladdin. MezzCo issued $87 million of senior secured notes to a group of purchasers. The net proceeds of this financing were used to make the $14 million payment described above, to pay certain costs and expenses of BH/RE and its subsidiaries and affiliates related to the acquisition of the Aladdin, and to provide OpBiz with a portion of the funds necessary to meet its obligations regarding the planned renovations to the Aladdin.

16

ITEM 6.SELECTED FINANCIAL DATA

The selected financial data presented below are qualified in their entirety by, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements, the notes thereto and other financial and statistical information included elsewhere in this Annual Report on Form 10-K.

							For the years ended December 31,
				Predecessor Information
	2004(a)			2004(b)			2003			2002			2001			2000(c)
	(In thousands)
Operating Results:
Net revenues	$	96,141		$	190,889		$	266,540		$	236,384		$	260,387		$	122,749
Operating costs and expenses, excluding the following items	85,465			146,791			255,111			263,052			294,455			133,445
Pre-opening expenses(d)	1,684			—			—			—			—			28,916
Impairment of long-lived assets(e)	—			1,732			29,478			—			—			—
Write-off of project development costs(f)	—			—			—			—			—			2,644
Operating income (loss)	8,992			42,366			(18,049		)	(26,668		)	(34,068		)	(42,256		)
Other expense	15,648			2,541			9,953			11,883			74,383			22,819
Income (loss) before cumulative effect of change in accounting principal and reorganization items	(6,656		)	39,825			(28,002		)	(38,551		)	(108,451		)	(65,075		)
Cumulative effect of change in accounting principal	—			—			—			—			(10,709		)	—
Reorganization items	—			(6,647		)	(12,103		)	(10,604		)	(25,756		)	—
Net income (loss)	$	(6,656	)	$	33,178		$	(40,105	)	$	(49,155	)	$	(144,916	)	$	(65,075	)
Balance Sheet Data:
Total assets	$	663,383		$	548,634		$	564,198		$	621,057		$	677,287		$	741,453
Long-term debt	586,082			33,958			34,690			35,664			1,750			505,280
Member’s equity (deficit)	13,613			(20,194		)	(53,372		)	(13,267		)	35,888			157,821

(a)Includes the operations of BH/RE and its subsidiaries for the twelve months ended December 31, 2004.

(b)Includes the operations of the Aladdin by Aladdin Gaming for the eight months ended August 31, 2004.

(c)The Aladdin commenced operations on August 18, 2000.

(d)Pre-opening expenses for the year ended December 31, 2004 were approximately $1.7 million, which included costs incurred prior to the acquisition of the Aladdin by BH/RE on September 1, 2004. Pre-opening expenses for the year ended December 31, 2000 were approximately $28.9 million, which included costs incurred prior to the opening of the Aladdin on August 18, 2000.

(e)On August 31, 2004, Aladdin Gaming recorded an impairment loss of approximately $1.7 million based on the purchase price of assets sold to OpBiz on September 1, 2004. On August 29, 2003, the Bankruptcy Court confirmed Aladdin Gaming’s plan of reorganization and approved the Purchase Agreement with OpBiz. As a result, Aladdin Gaming classified substantially all of its assets as “assets held for sale” and performed an impairment review in accordance with SFAS 144. An impairment loss of approximately $29.5 million was recognized based on a discounted cash flow analysis and allocated to the individual assets based on their relative fair values for the year ended December 31, 2003.

(f)During the year ended December 31, 2000, Aladdin gaming recorded a write-off of project development costs of approximately $2.6 million, which related to a music project that they elected not to pursue. As a result, all of the development costs Aladdin Gaming incurred were written-off, as they were deemed to have no value.

17

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview of Management’s Discussion and Analysis of Financial Condition and Results of Operations

Set forth below is a discussion of the financial condition and results of operations of BH/RE and our subsidiaries for the periods covered in the report. The discussion of operations herein focuses on events and the revenues and expenses during the year ended December 31, 2004 as compared to the year ended December 31, 2003, and the year ended December 31, 2003 as compared to the year ended December 31, 2002, as if there was no change in ownership of the Aladdin.

The following discussion and analysis should be read in conjunction with “Selected Financial Data” and the financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Significant Accounting Policies and Estimates

Our consolidated financial statements are prepared in conformity with U.S generally accepted accounting principles. Certain policies, including the determination of bad debt reserves, the estimated useful lives assigned to assets, asset impairment, insurance reserves and the calculation of liabilities, require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on historical experience, terms of existing contracts, observance of trends in the gaming industry and information available from other outside sources. There can be no assurance that actual results will not differ from our estimates. To provide an understanding of the methodology we apply, our significant accounting policies and basis of presentation are discussed below, as well as where appropriate in the notes to the consolidated financial statements

Property and Equipment

Property and equipment are stated at cost. Gains or losses on dispositions of property and equipment are included in the determination of income. Property and equipment are generally depreciated over the following estimated useful lives on a straight-line basis:

Buildings	39.5 years
Building improvements	15 to 40 years
Furniture, fixtures and equipment	3 to 7 years

Property and equipment and other long-lived assets are evaluated for impairment in accordance with the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” For assets to be disposed of, the asset to be sold is recognized at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

Fixed assets are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the estimated future cash flows of the asset, on an undiscounted basis, are compared to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model.

18

The property and equipment and other long-lived assets that we obtained in the acquisition of the Aladdin were appraised by an independent third party. Property and equipment and the related accumulated depreciation amounts recorded in the consolidated balance sheets as of December 31, 2004 are based on the independent third party appraisal.

Derivative Instruments and Hedging Activities

BH/RE has issued warrants in an effort to provide further consideration to the purchasers of membership interests in EquityCo and MezzCo. BH/RE accounts for the senior note warrants in EquityCo as embedded derivative instruments in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Hedging Activities—an Amendment of FASB Statement No. 133”. The warrants issued in conjunction with the Mezzanine Financing contain a net cash settlement, and therefore are accounted for in accordance with Emerging Issues Task Force (“EITF”) 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”. Both SFAS No. 133 and EITF 00-19 require that the warrants be recognized as liabilities, with changes in fair value affecting net income. See “Note 7. Long-Term Debt—Mezzanine Financing”.

Promotional Allowances

Casino revenues are recognized as the net win from gaming activities, which is the difference between gaming wins and losses. All other revenues are recognized as the service is provided. Revenues include the retail value of food, beverage, rooms, entertainment, and merchandise provided on a complimentary basis to customers. Such complimentary amounts are then deducted from revenues as promotional allowances on our consolidated statements of operations. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses.

Hotel and Food and Beverage Revenues

Hotel revenue recognition criteria are generally met at the time of occupancy. Food and beverage revenue recognition criteria are generally met at the time of service. Deposits for future hotel occupancy or food and beverage services are recorded as deferred income until revenue recognition criteria are met. Cancellation fees for hotel and food and beverage services are recognized upon cancellation by the customer as defined by a written contract entered into with the customer.

Slot Club Program

Slot club members earn points based on gaming activity, which can be redeemed for cash. A liability is recorded for the estimated cost of the outstanding points accrued under the slot club program.

Income Taxes

The consolidated financial statements include the operations of BH/RE and its controlled subsidiaries: EquityCo, MezzCo, and OpBiz. BH/RE and EquityCo are limited liability companies and are taxed as partnerships for federal income tax purposes. MezzCo has elected to be taxed as a corporation for federal income tax purposes. OpBiz, a wholly-owned subsidiary of MezzCo, will be treated as a division of MezzCo for federal income tax purposes, and accordingly, will also be subject to federal income taxes.

MezzCo and OpBiz account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

19

Preopening Costs

We account for costs incurred during the preopening and start-up phases of operations in accordance with Statement of Position 98-5, “Reporting on the Costs of Start-up Activities”. Preopening and start-up costs include, but are not limited to, salary related expenses for new employees, travel and entertainment expenses. Preopening costs are expensed as incurred.

Results of Operations

The following table highlights the results of operations of the Aladdin. The amounts for the year ended December 31, 2004 include the eight months of operation by Aladdin Gaming and the four months of operation by OpBiz.

	Year Ended December 31,
	2004		Percent Change		2003			Percent Change		2002
	(In thousands)
Net revenues	$	287,030	7.7	%	$	266,540		12.8	%	$	236,384
Operating expenses:
Casino	64,552		3.1	%	62,626			4.7	%	59,824
Hotel	33,902		17.3	%	28,913			9.7	%	26,354
Food and beverage	48,343		9.8	%	44,032			14.0	%	38,613
Other	12,550		(12.5	)%	14,344			3.8	%	13,821
Selling, general and administrative	65,095		5.5	%	61,701			3.7	%	59,511
Depreciation and amortization	7,814		(82.0	)%	43,495			(33.0	)%	64,929
Pre-opening expenses	1,684		31.3	%	1,283			100	%	—
Impairment of long-lived assets	1,732		(94.1	)%	29,478			100.0	%	—
Operating income (loss)	$	51,358	365.7	%	$	(19,332	)	27.5	%	$	(26,668	)

Net revenues and overall operating results for the year ended December 31, 2004 improved over that of the year ended December 31, 2003 due to more effective operating efficiencies as a result of the purchase of the Aladdin by OpBiz, as well as an improvement in general economic conditions throughout 2004. The increase in operating income (loss) was primarily due to depreciation not being recorded during the first eight months of 2004 while Aladdin Gaming was undergoing bankruptcy proceedings.

Net revenues and overall operating results for the year ended December 31, 2003 improved over that of the year ended December 31, 2002 due to the expansion and more effective use of the Casino marketing database and promotional activities and higher pedestrian traffic resulting from the closure of the monorail station connecting the MGM Grand Hotel and Casino and Bally’s Casino and Hotel. The monorail station closed temporarily in January 2003 and diverted additional pedestrian traffic through the Aladdin’s south entrance.

20

The following table highlights the various sources of our revenues and expenses as compared to the prior years. The amounts for the year ended December 31, 2004 include both the eight months of operation by Aladdin Gaming and the four months of operation by OpBiz.

	Year Ended December 31,
	2004				Percent Change			2003			Percent Change			2002
	(In thousands)
Casino revenues		$	118,842			7.4	%	$	110,642			14.1	%	$	96,969
Casino expenses		64,552				3.1	%	62,626				4.7	%	59,824
Margin		45.7		%				43.4		%				38.3		%
Hotel revenues		$	106,112			10.7	%	$	95,836			12.5	%	$	85,151
Hotel expenses		33,902				17.3	%	28,913				9.7	%	26,354
Margin		68.1		%				69.8		%				69.1		%
Food and beverage revenues		$	72,473			6.4	%	$	68,084			13.2	%	$	60,144
Food and beverage expenses		48,343				9.8	%	44,032				14.0	%	38,613
Margin		33.3		%				35.3		%				35.8		%
Other revenues		$	16,775			(8.7	)%	$	18,378			3.8	%	$	17,710
Other expenses		12,550				(12.5	)%	14,344				3.8	%	13,821
Selling, general and administrative expenses		$	65,095			5.5	%	$	61,701			3.7	%	$	59,511
Percent of net revenues		22.7		%				23.1		%				25.2		%

Casino

Casino revenue is derived primarily from patrons wagering on slot machines, table games and other gaming activities. Table games generally include Blackjack or Twenty One, Craps, Baccarat and Roulette. Other gaming activities include the Race and Sports Books and Poker. Casino revenue is defined as the win from gaming activities, computed as the difference between gaming wins and losses.

Casino revenues vary from time to time due to general economic conditions, competition, popularity of entertainment offerings, table game hold, slot machine hold and occupancy percentages in the hotel. Casino revenues also vary depending upon the amount of gaming activity, as well as variations in the odds for different games of chance. Casino revenue is recognized at the end of each gaming day.

Casino revenues increased 7.4% to $118.8 million for the year ended December 31, 2004 as compared to $110.6 million for the year ended December 31, 2003. The increase in casino revenues is primarily due to the addition of new and more popular gaming devices and the conversion of a significant amount of our gaming devices to “ticket-in, ticket-out” technology. Table games revenues also increased by $1.1 million over the same twelve-month periods.

Casino revenues increased 14.1% to $110.6 million for the year ended December 31, 2003 as compared to $97.0 million for the year ended December 31, 2002. In 2003, management continued to focus on maximizing the profitability of slot machines by implementing ticket-in/ticket-out technology and installing more popular slot machines. Slot machine revenues also benefited from the expansion of the Casino marketing database, which resulted in more revenues from special events and promotions. Table games revenues also increased by $1.3 million due to an increase in the hold to 17.2% in 2003 from 16.6% in 2002.

Casino expenses increased 3.1% to $64.6 million for the year ended December 31, 2004 as compared to $62.6 million for the year ended December 31, 2003. Casino margins increased 2.3 percentage points over the same periods. The increase in casino expenses was mainly the result of increased employee benefit expenses, as well as an increase in the base gaming tax rate in August 2003.

21

Casino expenses increased 4.7% to $62.6 million for the year ended December 31, 2003 as compared to $59.8 million for the year ended December 31, 2002. Casino margins increased 5.1 percentage points over the same periods.

Hotel

Hotel revenue is derived from rooms and suites rented to guests. “Average daily rate” is an industry specific term used to define the average amount of revenue per occupied room per day. “Occupancy percentage” defines the total percentage of rooms occupied and is computed by dividing the number of rooms occupied by the total number of rooms available. Hotel revenue is recognized at the time the room is provided to the guest.

Hotel revenues increased 10.7% to $106.1 million for the year ended December 31, 2004 as compared to $95.8 million for the year ended December 31, 2003. The hotel occupancy percentage for the year ended December 31, 2004 was 97% as compared to 98% for the year ended December 31, 2003. Average daily room rates increased to $117 for the year ended December 31, 2004 as compared to $105 for the year ended December 31, 2003, resulting in the increase in hotel revenues. The increase in hotel revenues and average daily room rates is primarily due to an improvement in general economic conditions throughout 2004 and a higher demand for rooms in Las Vegas in general. Although demand was slightly improved over previous years, the presence of additional luxury inventory in Las Vegas affected the growth of average daily room rates and occupancy levels.

Hotel revenues increased 12.5% to $95.8 million for the year ended December 31, 2003 as compared to $85.2 million for the year ended December 31, 2002. The hotel occupancy percentage for the year ended December 31, 2003 was 98% as compared to 91% for the year ended December 31, 2002. Average daily room rates increased to $105 for the year ended December 31, 2003 as compared to $91 for the year ended December 31, 2002, resulting in the increase in hotel revenues. The increase in hotel occupancy was due primarily to increased marketing and higher demand for Las Vegas hotel rooms generally. As a result, Aladdin Gaming’s management was able to implement moderate price increases.

Hotel expenses increased 17.3% to $33.9 million for the year ended December 31, 2004 as compared to $28.9 million for the year ended December 31, 2003. Hotel margins decreased 1.7 percentage points over the same periods, respectively. The decrease in hotel margins was primarily due to increased employee benefit expenses and the addition of management fees paid to Starwood under the management contract.

Hotel expenses increased 9.7% to $28.9 million for the year ended December 31, 2003 as compared to $26.4 million for the year ended December 31, 2002. Hotel margins increased 0.7 percentage points over the same periods, respectively.

Food and Beverage

Food and beverage revenues are derived from food and beverage sales in the restaurants, bars, room service, banquets and entertainment outlets. Food and beverage revenue is recognized at the time the food and/or beverage are provided to the guest.

Food and beverage revenues increased 6.4% to $72.5 million for the year ended December 31, 2004 as compared to $68.1 million for the year ended December 31, 2003. The average guest check increased to $24.66 for the year ended December 31, 2004 as compared to $22.61 for the year ended December 31, 2003. The increase in the average guest check was primarily due to selected price increases, particularly in the buffet.

22

Food and beverage revenues increased 13.2% to $68.1 million for the year ended December 31, 2003 as compared to $60.1 million for the year ended December 31, 2002. The average guest check decreased to $22.61 for the year ended December 31, 2003 as compared to $23.32 for the year ended December 31, 2002. The increase in food and beverage revenues was primarily due to price and volume increases at the buffet in 2003, which were driven by increased marketing and promotional efforts, and revenues from the Center Stage lounge, which opened in late 2002.

Food and beverage expenses increased 9.8% to $48.3 million for the year ended December 31, 2004 as compared to $44.0 million for the year ended December 31, 2003. Food and beverage margins decreased 2.0 percentage points over the same periods. The increase in food and beverage expenses was due to increased employee benefit expenses, as well as increases in selected food cost items.

Food and beverage expenses increased 14.0% to $44.0 million for the year ended December 31, 2003 as compared to $38.6 million for the year ended December 31, 2002. Food and beverage margins decreased 0.5 percentage points over the same periods.

Other

Other revenue includes entertainment sales, retail sales, telephone and other miscellaneous income and is recognized at the time the goods or services are provided to the guest.

Other revenues decreased 8.7% to $16.8 million for the year ended December 31, 2004 as compared to $18.4 million for the year ended December 31, 2003. The decrease in other revenues is primarily due to a decrease in entertainment revenue, which was the result of fewer performances in the TPA during 2004.

Other revenues increased 3.8% to $18.4 million for the year ended December 31, 2003 as compared to $17.7 million for the year ended December 31, 2002.

Other expenses decreased 12.5% to $12.6 million for the year ended December 31, 2004 as compared to $14.3 million for the year ended December 31, 2003. Other expenses increased 3.8% to $14.3 million for the year ended December 31, 2003 as compared to $13.8 million for the year ended December 31, 2002.

Selling, General and Administrative (“SG&A”)

SG&A expenses increased 5.5% to $65.1 million for the year ended December 31, 2004 as compared to $61.7 million for the year ended December 31, 2003. SG&A expenses as a percentage of net revenues decreased 0.4 percentage points over the same periods. The increase in SG&A expenses was primarily due to an increase in payroll and related expenses, as well as management and centralized services fees incurred under the Starwood Management Agreement beginning in September 2004. A large portion of these costs are fixed and, as a result, as revenues increased the percentage of SG&A expenses to net revenues decreased.

SG&A expenses increased 3.7% to $61.7 million for the year ended December 31, 2003 as compared to $59.5 million for the year ended December 31, 2002. SG&A expenses as a percentage of net revenues decreased 2.1 percentage points over the same periods.

Depreciation and Amortization

Depreciation and amortization expense decreased 82.0% to $7.8 million for the year ended December 31, 2004 as compared to $43.5 million for the year ended December 31, 2003. Aladdin Gaming was not recording depreciation expense during 2004, as the assets were classified as “held for sale”. As a result, the depreciation expense for the year ended December 31, 2004 was significantly less than in the prior year.

23

Depreciation and amortization expense decreased 33.0% to $43.5 million for the year ended December 31, 2003 as compared to $64.9 million for the year ended December 31, 2002, as a result of the cessation of depreciation resulting from the classification of assets held for sale on August 29, 2003.

Interest Expense, Net

Interest expense, net increased 91.6% to $19.1 million for the year ended December 31, 2004 as compared to $10.0 million for the year ended December 31, 2003. The increase in interest expense, net is directly related to the addition of the Credit Agreement we entered into upon the completion of the acquisition of the Aladdin on September 1, 2004.

Interest expense, net decreased 16.2% to $10.0 million for the year ended December 31, 2003 as compared to $11.9 million for the year ended December 31, 2002. In 2003, Aladdin Gaming made adequate protection payments of $16.2 million to various creditors pursuant to orders of the Bankruptcy Court. Most of these payments were made in respect of Aladdin Gaming’s pre- petition obligations to its secured creditors under both its bank credit facility and its gaming equipment term loan, and under capital leases for certain non-gaming furniture, fixtures and equipment (“FF&E”). The payments in 2003 were allocated between interest and principal on the gaming equipment term loan and the capital leases for non-gaming FF&E on a pro-rata basis. Contractual interest related to pre-petition bank credit facility obligations totaled $92.7 million in 2003.

Liquidity and Capital Resources

The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, expansion projects and our subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, financial market risks, the ability to maintain existing management, integration of acquisitions, competition within the gaming industry, the cyclical nature of the hotel business and gaming business, economic conditions, regulatory matters and litigation and other risks described in our filings with the Securities and Exchange Commission. All forward-looking statements are based on our current expectations and projections about future events.

During the year ended December 31, 2004, the Aladdin generated cash flows from operating activities of approximately $63.4 million. We also had restricted cash and cash equivalents of approximately $96.2 million, which is designated to be used for costs associated with the renovation of the Aladdin to the PH Resort.

Our primary cash requirements for 2005 are expected to include (i) up to approximately $100 million in capital expenditures related to the renovation project, (ii) approximately $9.0 million for maintenance capital expenditures and (iii) up to approximately $27.1 million in interest payments on our debt.

We believe that cash generated from operations, the capital invested in OpBiz at the closing and the working capital, including the cash, we acquired from Aladdin Gaming under the purchase agreement will be adequate to meet the anticipated working capital, capital expenditure, renovation and debt service obligations of OpBiz for the first 12 months after the Aladdin acquisition. We may have other liquidity needs, such as tax distributions to the members of EquityCo and BH/RE. The Credit Agreement provides that OpBiz will be permitted to make tax distributions.

There can be no assurance that we have accurately estimated our liquidity needs, or that we will not experience unforeseen events that may materially increase our need for liquidity to fund our operations or capital expenditure programs or decrease the amount of cash generated from our operations. We expect to experience a reduction in cash generated by our operations during our planned renovations to the Aladdin and have negotiated the terms of the Credit Agreement to address those anticipated reductions. For

24

example, the covenant in the Credit Agreement requiring OpBiz to achieve specified levels of earnings before interest, taxes, depreciation and amortization (“EBITDA”), during the first two years of the Credit Agreement is significantly below the Aladdin’s current EBITDA levels. Also, the interest rate during the first three years of the Credit Agreement is lower than the interest rate in the last three years.

Off Balance Sheet Arrangements

As of December 31, 2004, we do not have any off balance sheet arrangements. We have not entered into any transactions with special purposes entities, nor have we engaged in any derivative transactions.

Commitments and Contractual Obligations

The following table summarizes our scheduled commitments and contractual obligations as of December 31, 2004:

	2005		2006		2007		2008		2009		Thereafter
	(In thousands)
Long-term debt(a)	$	3,768	$	11,421	$	19,092	$	24,285	$	451,716	$	290,081
Sheraton hotel management contract(b)	6,930		6,834		8,103		8,340		8,674		182,478
Planet Hollywood licensing agreement(c)	—		—		3,636		3,742		3,892		81,881
Energy service consumption charges	1,140		1,140		1,140		1,140		1,140		11,400
Operating leases(d)	2,093		1,650		1,650		1,650		—		—
Employment agreements	1,894		1,728		1,598		331		—		—
Common Parking Area Use agreement(e)	5,120		5,120		5,120		5,120		5,120		731,555
Total	$	20,945	$	27,893	$	40,339	$	44,608	$	470,542	$	1,297,395

(a)See Note 7 to the Consolidated Financial Statements in this Annual Report on Form 10-K.

(b)We pay management fees to Sheraton under the hotel management contract. These management fees are generally based on various percentages of our non-gaming revenues. See above under “Item 1. Business—Material Agreements—Sheraton Hotel Management Contract.” We will also pay Sheraton a centralized service fee, a portion of which is fixed and which is shown in the table above, and other de minimis charges which are included in the table above. Amounts are based on internal projections made by management.

(c)Fees under the Planet Hollywood licensing agreement generally commence when we begin operating as the PH Resort and are based on a percentage of our non-gaming revenues. See “Item 1. Business—Material Agreements—Planet Hollywood Licensing Agreement.” Amounts are based on internal projections made by management.

(d)Consists of leases for certain office and casino equipment.

(e)Includes amounts paid for parking charges, as well as common area maintenance charges, which are estimates made by management based on current year expenses. The base fee is subject to a maximum 5% increase every five years.

Description of Certain Indebtedness

Credit Agreement

The Aladdin acquisition and the planned renovations were funded by the issuance of $510 million of secured notes to Aladdin Gaming’s secured creditors pursuant to a Credit Agreement. Our obligations

25

under the Credit Agreement are secured by liens on all of our assets, including a mortgage on our real property, the Hotel, the Casino and the TPA, and security interests in our accounts receivable, inventory, equipment and intangible assets, excluding the Timeshare Land. The Credit Agreement is guaranteed by MezzCo and MezzCo secured its guarantee by pledging its membership interests in OpBiz to the lenders. The Credit Agreement matures on August 31, 2010.

The loans under the Credit Agreement are evidenced by $500 million of Term Loan A notes and $10 million of Term Loan B notes. We simultaneously made a $14 million cash payment to the holders of the Term Loan A notes to reduce the principal amount of the Term Loan A notes to $486 million and obtained a release of their lien on the Timeshare Land.

Scheduled principal payments on the Term Loan A notes are as follows:

·$1.25 million on the first day of each fiscal quarter during the period beginning on August 31, 2006 and ending on August 31, 2007;

·$3.75 million on the first day of each fiscal quarter during the period beginning on August 31, 2007 and ending on August 31, 2008;

·$5.0 million on the first day of each fiscal quarter during the period beginning on August 31, 2008 and ending on August 31, 2009;

·$6.25 million on the first day of each fiscal quarter during the period beginning on August 31, 2009 and ending on August 31, 2010;

·the then unpaid balance amount of Term Loan A notes on August 31, 2010.

We pay interest on the outstanding Term Loan A notes quarterly, in cash, at the London Inter-Bank Offered Rate, or LIBOR, plus an applicable margin that increases over time. Until August 31, 2007, our interest payment will not exceed our quarterly EBITDA, reduced by certain permitted deductions (as defined in the Credit Agreement), divided by a factor of 1.20. After August 31, 2007, our interest payment will not exceed our quarterly EBITDA, reduced by certain permitted reductions (as defined in the Credit Agreement). Interest on the Term Loan B notes will accrue at a rate of LIBOR plus 4% and will be added quarterly to the outstanding principal amount of the Term Loan B notes and will be paid when we pay off the Term Loan B notes. We are also required to pay an annual administrative fee and certain other fees and expenses of the lender under the Credit Agreement.

We are required to prepay amounts outstanding under the Credit Agreement:

·with excess cash flow (as defined in the Credit Agreement) after certain permitted cash reserves are accumulated;

·in scheduled quarterly amounts beginning after August, 31, 2006;

·with certain amounts received in connection with the development of the Timeshare Land adjacent to the Desert Passage (as defined in the underlying agreement);

·with an amount equal to the difference between what should have been spent on renovation capital expenditures and what was actually spent thereon if (i) an aggregate amount of $72.0 million is not spent on renovation capital expenditures by August 31, 2006, or (ii) an aggregate amount of $81.0 million is not spent on renovation capital expenditures by February 28, 2007 or (iii) an aggregate amount of $90.0 million is not spent on renovation capital expenditures by August 31, 2007; and

·with the proceeds of certain asset sales.

In particular, after we accumulate certain permitted cash reserves, we are required to pay 100% of our excess cash flow (as defined in the Credit Agreement) from operations to the lenders under the Credit Agreement. That percentage decreases to 75%, then 50%, if we meet certain targeted ratios of total debt to EBITDA, or leverage ratios, for any two consecutive fiscal quarters.

26

The Credit Agreement includes covenants that, among other things, restrict our ability to sell assets, make distributions to our owners, other than distributions for taxes, incur or prepay additional indebtedness, enter into transactions with affiliates, incur liens, make investments, make capital expenditures,develop the Timeshare Land adjacent to the Desert Passage and enter into material contracts. In addition, we are required to maintain certain levels of EBITDA that increase over time and, beginning August 31, 2007, maintain certain ratios of EBITDA to interest expense that increase over time and maintain certain leverage ratios that decrease over time.

The Credit Agreement contains customary events of default, including a change of control of OpBiz, the occurrence of a default under the terms of any indebtedness of MezzCo, a default by us under the hotel management contract or termination of Sheraton as the manager of the Hotel (unless we replace Sheraton with another approved manager within 30 days of such termination), a default or termination of the Planet Hollywood license agreement and certain defaults under the agreements with Boulevard Invest or Northwind.

The Credit Agreement includes warrants entitling the lenders to 2.5% of the fully diluted membership interests in EquityCo at a price equal to the price paid by the principals of EquityCo. BH/RE has issued warrants to purchase 2.94% of its ownership interest in EquityCo to the lenders under the Credit Agreement. The warrants can only be exercised upon the occurrence of a liquidity event or distribution (such as through the sale of the hotel/casino); a public sale of equity securities of EquityCo, MezzCo, or OpBiz; or payment in full of the obligations under the Credit Agreement. The warrants can either be settled in cash or in other membership interests upon exercise.

As of December 31, 2004, the estimated fair value of the warrants was approximately $0.1 million.

Mezzanine Financing

In August 2004, MezzCo entered into a mezzanine financing transaction (“Mezzanine Financing”) with a group of purchasers. Pursuant to the Mezzanine Financing, MezzCo issued $87 million of 16% Senior Secured Subordinated Notes and warrants to purchase 17,500 of its units representing membership interests, equal to 17.5% of the fully diluted equity of MezzCo. The gross offering proceeds of the Mezzanine Financing were deposited into an escrow account and, in conjunction with the closing of the Aladdin acquisition, were used to (i) pay approximately $16.1 million of fees and expenses related to the acquisition of the Aladdin, (ii) fund the $14 million lien release payment required under the Credit Agreement, and (iii) fund a portion of the planned renovations to the Aladdin. The notes mature in August 2011 and accrue interest at 16% per annum. Interest on the notes is payable in kind or, at the option of MezzCo, in cash. The warrants are exercisable at any time, subject to the approval of the Nevada gaming authorities, at a purchase price of $0.01 per unit. Subject to the approval of the Nevada gaming authorities, the warrants may be exercised to purchase either voting or non-voting membership interests of MezzCo or a combination thereof. Currently all of MezzCo’s voting membership interests are represented by units owned by EquityCo. In addition to customary anti-dilution protections, the number of units representing MezzCo membership interests issuable upon exercise of the warrants may be increased from time to time upon the occurrence of certain events as described in the warrants. The maximum aggregate increase is 28%, following which the warrants would represent rights to purchase 45.5% of the units representing membership interests of MezzCo, on a fully-diluted basis. Holders of the warrants and any securities issued upon exercise of the warrants may require MezzCo to redeem such securities commencing in August 2011 at a redemption price based upon a formula set forth in the warrants. The holders of warrants, and securities issued upon exercise thereof, have the right, starting in August 2008, to assume control of MezzCo and OpBiz and conduct a sale of the equity of, or all or substantially all of the assets of, either MezzCo or OpBiz. These rights are subject to (i) repayment in full of all indebtedness that is senior to the notes (including all indebtedness of OpBiz under the Credit Agreement), (ii) certain covenants related to OpBiz’s ability to achieve targeted levels of EBITDA and (iii) the prior approval of the Nevada gaming authorities. These rights expire upon completion of a public offering by MezzCo or OpBiz. In

27

connection with the Mezzanine Financing, our obligation to make expenditures on renovations to the Aladdin was increased from $90 million, as required under the Credit Agreement, to $100 million.

As of December 31, 2004, the MezzCo financing is recorded net of the unamortized balance of the put warrants of approximately $4.3 million. The estimated fair value of the warrants was approximately $4.1 million as of December 31, 2004, and the additional interest expense associated with the change in market value of the warrants was approximately $113,000 for the year then ended.

Energy Services Agreement

Northwind, a third party, owns and operates a central utility plant on land leased from us. The plant supplies hot and cold water and emergency power to the Aladdin under a contract between Aladdin Gaming and Northwind. We have assumed the energy service agreement, which expires in 2018. Under the agreement, we are required to pay Northwind a monthly consumption charge, a monthly operational charge, a monthly debt service payment and a monthly return on equity payment. Payments under the Northwind agreement total approximately $500,000 per month.

Risk Factors

Our plans and business are subject to the following risks:

Risks Related to the Aladdin Renovation

Our renovation budget is only an estimate and actual costs may exceed the budget.

The final plans and specifications for the renovation of the Aladdin have not been finalized. We currently estimate that renovation costs will be about $100 million. While we believe that the budget is reasonable, the costs are an estimate and actual costs may be higher than expected. Construction projects like the proposed renovations to the Aladdin entail significant risks, including:

·unanticipated cost increases;

·unforeseen engineering, environmental and/or geographical problems;

·shortages of materials or skilled labor;

·work stoppages; and

·weather interference.

Construction, equipment or staffing problems or difficulties in obtaining any of the requisite licenses, permits and authorizations from regulatory authorities could increase the total cost of the renovations, delay or prevent the renovations or otherwise affect the design and features of the PH Resort. We cannot assure you that the actual renovation costs will not exceed the budgeted amounts. Failure to complete the renovations within our budget may negatively affect our financial condition and results of operations.

We may not be able to fund cost overruns.

We do not have commitments for funding in excess of $100 million and we cannot assure you that such funding, if necessary, will be available on acceptable terms and conditions. In addition, substantially all of our internally generated funds, other than cash reserves permitted under the Credit Agreement, will be used to pay interest and principal under the Credit Agreement. The terms of the Credit Agreement do not allow us to use our cash reserves to fund the planned renovations. If we experience cost overruns or other events or circumstances that would cause us to require funding in excess of the existing capital commitments, we might not be able to complete the renovations or execute the business plans for the PH Resort.

28

Renovations to the Aladdin may disrupt our operations.

We intend to operate the Hotel and Casino under the Aladdin name during renovations. We intend to conduct the renovations in phases and otherwise attempt to reduce disruption to our business to the extent practicable. However, we cannot assure you that the renovation process will not result in a decrease in Hotel occupancy or use of the Casino, either of which would have a negative impact on our results of operations.

The Planet Hollywood brand has not historically been associated with hotels or casinos.

Planet Hollywood is a franchisor of themed restaurants and related retail shops. In the past, the Planet Hollywood brand has not been associated with hotels or casinos. We cannot assure you that customers will be attracted to a Planet Hollywood-themed resort such as the PH Resort. In addition, Planet Hollywood filed for Chapter 11 bankruptcy protection in October 1999 and emerged in May 2000. Planet Hollywood subsequently filed for Chapter 11 bankruptcy protection in October 2001 and emerged in March 2003. We do not know what effect, if any, Planet Hollywood’s bankruptcy proceedings might have on the general perception of the Planet Hollywood brand or the PH Resort.

OpBiz may need limited approvals from Boulevard Invest to carry out certain of the planned renovations.

Boulevard Invest has agreed to allow OpBiz to change the name of the Aladdin to the PH Resort, to re-theme the Aladdin from its current Arabian-based theme to a Planet Hollywood theme and to develop the vacant property adjacent to the Desert Passage. Boulevard Invest has also agreed to amend the reciprocal use agreements governing the operation and maintenance of the Hotel, Casino, TPA, Showroom, Desert Passage and parking facility accordingly. However, Boulevard Invest may have limited approval rights to portions of the renovation plans that involve changes to the physical structure of the Desert Passage, changes to the physical structure of the Hotel, Casino or TPA that could affect the Desert Passage and other changes that could adversely affect the Desert Passage. We cannot assure you that Boulevard Invest will approve of such portions of our final plans and specifications, if any. Failure of Boulevard Invest to give any required approvals might cause us to delay or modify our planned renovations.

Risks Related to Our Substantial Indebtedness

Our substantial indebtedness could adversely affect our financial results.

We have $510 million of indebtedness under the Credit Agreement ($496 million after making the $14 million cash payment to Aladdin Gaming’s secured creditors), approximately $33.6 million of indebtedness under the Energy Service Agreement and approximately $91.7 million of indebtedness incurred by MezzCo. The indebtedness under the Credit Agreement is secured by a first lien on all of the assets of OpBiz and a pledge of MezzCo’s equity interest in OpBiz.

The Credit Agreement provides that substantially all of our excess cash flow (as defined in the Credit Agreement) will be used to pay down indebtedness of OpBiz after OpBiz establishes a $30 million cash reserve from operating cash flow. Therefore, we will have limited cash flow available to fund working capital, capital expenditures permitted under the Credit Agreement and other general corporate activities and to make distributions to our owners, other than limited distributions to pay interest and principal on indebtedness of MezzCo, and distributions to pay income taxes. Our substantial indebtedness could also have the following additional consequences:

·limit our ability to obtain additional financing in the future;

·increase our vulnerability to general adverse economic and industry conditions;

29

·limit flexibility in planning for, or reacting to, changes in our business and industry; and

·place us at a disadvantage compared to less leveraged competitors.

The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations or prospects.

Our future cash flows may not be sufficient to meet our debt obligations.

Our ability to make payments on our indebtedness depends on our ability to generate sufficient cash flow in the future. Our ability to generate cash flow will depend upon many factors, some of which are beyond our control, including:

·demand for our services;

·economic conditions generally, as well as in Nevada and within the casino industry;

·competition in the hotel and casino industries;

·legislative and regulatory factors affecting our operations and business; and

·our ability to hire and retain employees at a reasonable cost.

We cannot assure you that we will generate cash flow from operations in an amount sufficient to make payments on our indebtedness or to fund other liquidity needs. Our inability to generate sufficient cash flow would have a material adverse effect on our financial condition and results of operations. In addition, if we are not able to generate sufficient cash flow to service our indebtedness, we may need to refinance or restructure our indebtedness, sell assets, reduce or delay capital investment, or seek to raise additional capital. If we cannot implement one or more of these alternatives, we may not be able to meet our payment obligations under our indebtedness.

The Credit Agreement imposes restrictions on our operations.

The Credit Agreement imposes operating and financial restrictions on us. These restrictions include, among other things, limitations on our ability to:

·incur additional debt or refinance existing debt;

·create liens or other encumbrances;

·make distributions with respect to our, or our subsidiaries’, equity (other than distributions for tax obligations) or make other restricted payments;

·make investments, capital expenditures, loans or other guarantees;

·sell or otherwise dispose of our assets; and

·merge or consolidate with another entity.

The Credit Agreement contains certain financial covenants, including minimum levels of EBITDA, a minimum ratio of EBITDA to cash interest expense and a maximum ratio of indebtedness to EBITDA.

Our failure to comply with the covenants contained in the Credit Agreement, including as a result of events beyond our control, could result in an event of default.

If there were an event of default under one of our debt instruments, the holders of the indebtedness under the Credit Agreement could cause all amounts outstanding with respect to that debt to be due and payable immediately. In addition, any event of default or declaration of acceleration under one debt

30

instrument could result in an event of default under one or more of our other debt instruments. It is likely that, if the defaulted debt is accelerated, our assets and cash flow will not be sufficient to fully repay borrowings under our outstanding debt instruments and we cannot assure you that we would be able to refinance or restructure the payments on those debt securities. Further, if we are unable to repay, refinance or restructure our indebtedness under the Credit Agreement, the lenders under the Credit Agreement could proceed against the collateral securing that indebtedness.

Risks Related to Our Business

We have no operating history.

We were formed to acquire, operate and renovate the Aladdin. While the Aladdin has a history of operations, we do not. Consequently, we cannot assure you that our planned renovations to the Aladdin and transformation of the Aladdin into the PH Resort will attract the number and type of Hotel and Casino customers and other visitors we desire or whether we will be able to achieve our objective to improve the profitability of the Aladdin.

We will be subject to the significant business, economic, regulatory and competitive uncertainties and contingencies frequently encountered by new businesses in competitive environments, many of which are beyond our control. Because we have no operating history, it may be more difficult for us to prepare for and respond to these types of risks, and the other risks described in this Form 10-K, as compared to a company with an established business. If we are not able to manage these risks successfully, our results of operations could be negatively affected.

We are dependent upon Planet Hollywood’s entertainment industry relationships and the efforts and skills of the senior management of OpBiz.

Our ability to maintain our competitive position will be dependent to a large degree on our ability to leverage Planet Hollywood’s celebrity and entertainment industry relationships and to hire and retain experienced senior management, including marketing and operating personnel. Whether the PH Resort becomes a venue for entertainment industry events will be highly dependent on Planet Hollywood’s entertainment industry relationships and the efforts and skill of our marketing personnel in brand management and their ability to attract celebrities and entertainment industry personalities to the PH Resort. If we are unable to leverage Planet Hollywood’s relationships within the entertainment industry or to hire and retain experienced senior management, our business may be significantly impaired.

We may not be able to retain qualified senior management.

We will need to retain qualified senior management personnel for the Casino and for certain key financial positions such as chief financial officer. We believe that the pool of experienced gaming and other personnel is limited and competition to recruit and retain gaming and other personnel is intense. We cannot assure you that we will be able to retain a sufficient number of qualified senior managers for our planned operations.

Our managers, officers and key employees may not obtain applicable gaming licenses.

Our managers, officers and certain key employees are required to file applications with the Nevada Gaming Authorities and may be required to be approved by the Nevada Gaming Authorities. If the Nevada Gaming Authorities were to find an officer, manager or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. Furthermore, the Nevada Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Either result could adversely affect our gaming operations.

31

We will face intense competition from other hotel casino resorts in Las Vegas.

There is intense competition in the gaming industry. Competition in the Las Vegas area has increased over the last several years as the result of significant increases in hotel rooms, casino size and convention, trade show and meeting facilities. Moreover, this growth is presently continuing and is expected to continue.

Resorts located on or near the Las Vegas Strip compete with other Las Vegas Strip hotels and with other hotel casinos in Las Vegas on the basis of overall atmosphere, range of amenities, level of service, price, location, entertainment offered, theme and size. We compete with a large number of other hotels and motels located in and near Las Vegas, as well as other resort destinations. Many of our competitors have established gaming operations and may have greater financial and other resources than we do.

We cannot assure you that the Las Vegas market will continue to grow or that hotel casino resorts will continue to be popular. A decline or leveling off of the growth or popularity of hotel casino resorts or the appeal of the features offered by the Aladdin, and to be offered by the PH Resort, could impair our financial condition and results of operations. Further, the design and amenities of the PH Resort may not appeal to customers. Customer preferences and trends can change, often without warning, and we may not be able to predict or respond to changes in customer preferences in time to adapt the attractions and amenities offered at the PH Resort to address these new trends.

We face competition from gaming operations outside Las Vegas.

We compete with other hotel casino facilities elsewhere in Nevada and in Atlantic City, riverboat gaming facilities in other states, hotel casino facilities elsewhere in the world, Internet gaming, state lotteries and other forms of gaming. Certain states recently have legalized, and others may legalize, casino gaming in specific areas, and casino-style gaming on Native American tribal lands is growing and could become a significant competitive force. In particular, the expansion of Native American gaming in California could have a negative impact on our results of operations.

Expansion of gaming activities in other areas could significantly harm our business. In particular, the legalization of casino gaming in or near areas from which we intend to attract customers could have a substantial negative effect on our business. In addition, new or renovated casinos in Asia could reduce the number of Asian customers who would otherwise visit Las Vegas.

We are entirely dependent upon OpBiz for all of our cash flow.

We do not currently expect to have material assets or operations other than our investment in OpBiz. OpBiz conducts substantially all of our operations and owns substantially all of our assets. Consequently, our cash flow depends on the cash flow of OpBiz and the payment of funds to us by OpBiz in the form of loans, distributions or otherwise, which payments are either restricted or prohibited without the consent of OpBiz’s lenders. Given that our operations only focus on one property in Las Vegas, we are subject to greater degrees of risk than a gaming company with multiple operating properties. Material risks include:

·a decrease in gaming and non-gaming activities at the PH Resort;

·a decline in the number of visitors to Las Vegas;

·local economic and competitive conditions;

·an increase in the cost of electrical power as a result of, among other things, power shortages in California or other western states with which Nevada shares a single regional power grid;

·changes in local and state governmental laws and regulations, including gaming laws and regulations; and

·natural and other disasters.

32

Any of the factors outlined above could negatively affect our ability to generate sufficient cash flow to make payments on our indebtedness and to make distributions to our owners.

The gaming industry is highly regulated and we are required to adhere to various regulations and maintain our licenses to continue operations.

The operation of the PH Resort is contingent upon the receipt and maintenance of various regulatory licenses, permits, approvals, registrations, findings of suitability, orders and authorizations. The laws, regulations and ordinances requiring these licenses, permits and other approvals generally relate to the responsibility, financial stability and character of the owners and managers of gaming operations, as well as persons financially interested or involved in gaming operations. The scope of the approvals required to acquire and operate a facility is extensive. Failure to obtain or maintain the necessary approvals could prevent or delay all or part of the renovations to the Aladdin or otherwise affect the design and features of the PH Resort.

Nevada regulatory authorities have broad powers to request detailed financial and other information, to limit, condition, suspend or revoke a registration, gaming license or related approval and to approve changes in the operations of the Aladdin or the PH Resort. Substantial fines or forfeiture of assets for violations of gaming laws or regulations may be levied. The suspension or revocation of any license which may be granted to us or the levy of substantial fines or forfeiture of assets could significantly harm our business, financial condition and results of operations. Furthermore, compliance costs associated with gaming laws, regulations and licenses are significant. Any change in the laws, regulations or licenses applicable to our business or a violation of any current or future laws or regulations applicable to our business or gaming license could require us to make substantial expenditures or could otherwise negatively affect our gaming operations.

Our employees could join unions.

In December 2004, a majority of the employees of the Aladdin who could be represented by the culinary union, requested union representation. Negotiations between management of OpBiz and the culinary union commenced on March 1, 2005. Continued unionization efforts, pressure to unionize or other forms of collective bargaining could increase our labor costs.

Because we own real property, we are subject to environmental regulation.

We may incur costs and expend funds to comply with environmental requirements, such as those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. Under these and other environmental requirements, OpBiz, as the owner of the property on which the PH Resort will be situated, may be required to investigate and clean up hazardous or toxic substances or chemical releases at that property. As an owner or operator, OpBiz could also be held responsible to a governmental entity or third parties for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination.

These laws typically impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. The liability under those laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of those substances may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use the property.

33

Energy price increases could adversely affect our costs of operations and our revenues.

We use significant amounts of electricity, natural gas and other forms of energy. While Las Vegas Strip properties have not recently experienced significant energy shortages, substantial increases in the cost of electricity in the western United States would negatively affect our operating results. The extent of the impact is subject to the magnitude and duration of any energy price increase, but this impact could be material. In addition, higher energy and gasoline prices may result in reduced visits to Las Vegas.

Acts of terrorism, as well as other factors affecting discretionary consumer spending, have impacted our industry and may harm our operating results and our ability to insure against certain risks.

The terrorist attacks of September 11, 2001 had an immediate negative impact on travel and leisure expenditures, including lodging, gaming and tourism, and ongoing terrorist and war activities have occasionally had a negative effect on our industry. As a destination whose primary customers arrive by air, Las Vegas is vulnerable to consumer concerns about travel in general, and particularly flying. We cannot predict the extent to which ongoing terrorist and war activities may affect us. These events, the potential for future terrorist attacks, the national and international responses to terrorist attacks and other acts of war or hostility have created many economic and political uncertainties which could adversely affect our business and results of operations. Future acts of terror in the United States or an outbreak of hostilities involving the United States may reduce a willingness on the part of the general public to travel with the result that our operations will suffer.

In addition to fears of war and future acts of terrorism, other factors affecting discretionary consumer spending, including general economic conditions, disposable consumer income, fears of recession and consumer confidence in the economy, may negatively impact our business. Adverse changes in factors affecting discretionary spending could reduce customer demand for the gaming, dining and entertainment activities we will offer, thus imposing practical limits on pricing and harming our operations.

Partly as a consequence of the events of September 11, 2001 and the threat of similar events in the future, premiums for a variety of insurance products have increased sharply, and some types of insurance coverage are no longer available. Although we will endeavor to obtain and maintain insurance covering extraordinary events that could affect our operations, conditions in the marketplace have made it prohibitive for us to maintain insurance against losses and interruptions caused by terrorist acts and acts of war. If any such event were to affect the Aladdin, or following our planned renovations, the PH Resort, we would likely suffer a substantial loss.

A downturn in general economic conditions may adversely affect our results of operations.

Our business operations will be affected by international, national and local economic conditions. A recession or downturn in the general economy, or in a region constituting a significant source of our customers, could result in fewer customers visiting the Aladdin or, following our planned renovations, the PH Resort, which would adversely affect our revenues.

ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

When used in this report and elsewhere by management from time to time, the words “believes”, “anticipates” and “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansion, legal proceedings and employee matters. Certain important factors, including but not limited to, competition from other gaming operations, factors affecting our ability to complete acquisitions and dispositions of gaming properties, leverage, construction risks, the inherent uncertainty and costs associated with litigation and governmental and regulatory investigations, and licensing and other regulatory risks, could cause our actual results to differ materially from those expressed in our

34

forward-looking statements. Further information on potential factors which could affect our financial condition, results of operations and business including, without limitation, the expansion, development and acquisition projects, legal proceedings and employee matters are included in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt. We pay interest on the outstanding Term Loan A notes quarterly, in cash, at the London Inter-Bank Offered Rate, or LIBOR, plus an applicable margin that increases over time. Interest on the Term Loan B notes will accrue at a rate of LIBOR plus 4% and will be added quarterly to the outstanding principal amount of the Term Loan B notes and will be paid when we pay off the Term Loan B notes. An increase of one percentage point in the average interest rate applicable to the variable rate debt outstanding at December 31, 2004 would increase the annual interest cost by approximately $3.8 million.

The following table provides information about our long-term debt at December 31, 2004 (see also “Description of Certain Indebtedness” above):

	Maturity Date	Face Amount	Carrying Value	Estimated Fair Value
	(In thousands)
Term Loan A notes	August 2010	$ 500,000	$ 486,000	$ 481,140
Term Loan B notes	August 2010	10,000	10,202	10,202
Mezzanine Financing	August 2011	87,000	91,734	91,734
Energy Services Agreement	March 2018	33,862	33,570	33,570
Total long-term debt		$ 630,862	$ 621,506	$ 616,646

The following table provides information about the scheduled maturities of our financial instruments that are sensitive to changes in interest rates:

	2005		2006		2007		2008		2009		Thereafter		Total
	(In thousands, except interest)
Long-Term Debt:
Fixed-rate	$ 1,268		$   1,421		$   1,592		$   1,785		$     2,001		$ 290,081		$ 298,148
Average interest rate	11.44	%	11.46	%	11.47	%	11.48	%	11.49	%	15.61	%	15.48	%
Variable-rate	$ 2,500		$ 10,000		$ 17,500		$ 22,500		$ 449,715		$          —		$ 502,215
Average interest rate	6.43	%	7.04	%	7.22	%	7.60	%	7.94	%	—		7.93	%

We currently do not utilize any hedging instruments, interest rate swaps or other forms of derivatives to manage interest rate risk.

35

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		37
Report of Independent Registered Public Accounting Firm		38
Consolidated Balance Sheets		39
Consolidated Statements of Operations		40
Consolidated Statements of Members’ Equity (Deficit)		41
Consolidated Statements of Cash Flows		42
Notes to Consolidated Financial Statements		43

36

Report of Independent Registered Public Accounting Firm

To the Board of Managers of BH/RE, LLC

We have audited the accompanying consolidated balance sheets of BH/RE, LLC and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, members’ equity, and cash flows for the year ended December 31, 2004 and for the period from March 31, 2003 (date of formation) through December 31, 2003. Our audit also included the financial statement schedule in the Index of Item 15 (a)(2). These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BH/RE, LLC and subsidiaries as of December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for the year ended December 31, 2004 and for the period from March 31, 2003 (date of formation) through December 31, 2003, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

	/s/ ERNST & YOUNG  Llp
Las Vegas, Nevada
March 28, 2005

37

Report of Independent Registered Public Accounting Firm

To Reorganized Aladdin Gaming, LLC

We have audited the accompanying consolidated statements of operations and cash flows of Aladdin Gaming, LLC (a Nevada limited liability company) and subsidiaries (the “Predecessor”) for the eight months ended August 31, 2004 and the years ended December 31, 2003 and 2002. These financial statements are the responsibility of the Predecessor’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Aladdin Gaming, LLC and subsidiaries for the eight months ended August 31, 2004 and the years ended December 31, 2003 and 2002, in conformity with U.S. genrally accepted accounting principles.

	/s/ ERNST & YOUNG LLP
Las Vegas, Nevada
January  31, 2005

38

BH/RE, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)

	December 31,				December 31,
	2004				2003
ASSETS
Current assets:
Cash and cash equivalents		$	37,016			$	—
Receivables, net		12,626				—
Inventories		2,489				—
Prepaid expenses		5,253				—
Deposits and other current assets		3,258
Total current assets		60,642				—
Property and equipment, net		494,781				—
Restricted cash and cash equivalents		96,199				10,061
Deferred acquisition costs		—				3,225
Other assets, net		11,761				—
Total assets		$	663,383			$	13,286
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	1,268			$	—
Accounts payable		2,095				—
Accrued payroll and related		10,652				—
Accrued interest payable		6,498				—
Accrued taxes		2,500				—
Accrued expenses		8,123				—
Deposits		4,040				—
Other current liabilities		4,386				—
Due to affiliates		1,887				13,008
Total current liabilities		41,449				13,008
Long-term debt, less current portion		584,814				—
Other long-term liabilities		4,375				—
Total liabilities		630,638				13,008
Commitments and contingencies
Minority interests		19,132				1,509
Members’ equity:
Member’s equity		21,500				—
Accumulated deficit		(7,887		)		(1,231		)
Total members’ equity		13,613				(1,231		)
Total liabilities and members’ equity		$	663,383			$	13,286

The accompanying notes are an integral part of these consolidated financial statements.

39

BH/RE, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands)

					For the period from March 31, 2003 (Date of Formation)				Predecessor Information
	Year Ended December 31, 2004				through December 31, 2003				Eight Months Ended August 31, 2004				Year Ended December 31, 2003				Year Ended December 31 2002
Operating revenues:
Casino		$	41,068			$	—			$	77,774			$	110,642			$	96,969
Hotel		34,407				—				71,705				95,836				85,151
Food and beverage		23,242				—				49,231				68,084				60,144
Other		5,813				—				10,962				18,378				17,710
Gross revenues		104,530				—				209,672				292,940				259,974
Promotional allowances		(8,389		)		—				(18,783		)		(26,400		)		(23,590		)
Net revenues		96,141				—				190,889				266,540				236,384
Operating costs and expenses:
Casino		17,295				—				47,257				62,626				59,824
Hotel		12,892				—				21,010				28,913				26,354
Food and beverage		19,880				—				28,463				44,032				38,613
Other		3,422				—				9,128				14,344				13,821
Selling, general and administrative		24,162				—				40,933				61,701				59,511
Depreciation and amortization		7,814				—				—				43,495				64,929
Preopening expenses		1,684				1,283				—				—				—
Impairment of long-lived assets		—				—				1,732				29,478				—
		87,149				1,283				148,523				284,589				263,052
Operating income (loss)		8,992				(1,283		)		42,366				(18,049		)		(26,668		)
Other income (expense):
Interest income (expense), net		(16,525		)		61				(2,541		)		(9,953		)		(11,883		)
Minority interest income (expense)		877				(9		)		—				—				—
Reorganization costs		—				—				(6,647		)		(12,103		)		(10,604		)
		(15,648		)		52				(9,188		)		(22,056		)		(22,487		)
Pre-tax income (loss)		(6,656		)		(1,231		)		33,178				(40,105		)		(49,155		)
Provision (benefit) for income taxes		—				—				—				—				—
Net income (loss)		$	(6,656	)		$	(1,231	)		$	33,178			$	(40,105	)		$	(49,155	)

The accompanying notes are an integral part of these consolidated financial statements.

40

BH/RE, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY (DEFICIT)
For the period from March 31, 2003 (Date of Formation)
through December 31, 2004
(amounts in thousands)

								Total
	Equity			Accumulated				Member’s
	Contributions			Deficit				Equity
Balances, March 31, 2003		$	—		$	—		$	—
Net loss		—			(1,231		)	(1,231		)
Balances, December 31, 2003		—			(1,231		)	(1,231		)
Member contributions		21,500			—			21,500
Net loss		—			(6,656		)	(6,656		)
Balances, December 31, 2004		$	21,500		$	(7,887	)	$	13,613

The accompanying notes are an integral part of these consolidated financial statements.

41

BH/RE, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)

					For the Period from March 31, 2003 (Date of Formation)				Predecessor Information
	Year Ended December 31,				through December 31,				Eight Months Ended August 31,				Year Ended December 31,				Year Ended December 31,
	2004				2003				2004				2003				2002
Cash flows from operating activities:
Net income (loss)		$	(6,656	)		$	(1,231	)		$	33,178			$	(40,105	)		$	(49,155	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		7,814				—				—				43,496				63,779
Amortization of debt discount and issuance costs		503				—				—				—				1,150
Minority interest		17,623				1,509				—				—				—
Impairment of long-lived assets		—				—				1,732				29,478				—
Loss on sale of assets		—				—				—				—				89
Reorganization items:
Professional fees		—				—				2,433				10,576				9,205
Management retention expense		—				—				2,139				1,925				1,602
Loss on extinguishment of pre-petition debt		—				—				—				(20		)		(2		)
Interest earned on accumulated cash during Chapter 11 proceedings		—				—				(111		)		(876		)		(211		)
Changes in assets and liabilities:
Receivables, net		(12,626		)		—				2,216				1,449				4,581
Inventories and prepaid expenses		(7,742		)		—				2,686				603				(2,404		)
Other assets		(6,928		)		—				951				(434		)		79
Accounts payable		2,095				—				(3,729		)		(6,312		)		586
Accrued expenses and other current liabilities		38,086				—				(5,830		)		(281		)		(4,605		)
Net cash provided by operating activities before cash payments for reorganization items		32,169				278				35,665				39,499				24,694
Cash payments for reorganization items:
Professional fees paid		—				—				(4,572		)		(11,464		)		(9,327		)
Loss on extinguishment of pre-petition debt		—				—				—				20				2
Interest earned on accumulated cash during Chapter 11 proceedings		—				—				111				875				211
Cash payments for reorganization items		—				—				(4,461		)		(10,569		)		(9,114		)
Net cash provided by operating activities		32,169				278				31,204				28,930				15,580
Cash flows from investing activities:
Acquisition of Aladdin Resort and Casino, net of cash acquired		(466,409		)		—				—				—				—
Construction contracts payable		—				—				—				(48		)		—
Capital expenditures		(1,787		)		—				(988		)		(3,061		)		(3,855		)
Proceeds from sale of land, property and equipment		—				—				—				—				50
Restricted cash and cash equivalents		(86,138		)		(10,061		)		76				1,187				(2,718		)
Other, net		—				—				—				—				—
Net cash used in investing activities		(554,334		)		(10,061		)		(912		)		(1,922		)		(6,523		)
Cash flows from financing activities:
Member contributions		21,500				—				—				—				—
Borrowings under bank facilities, net		566,512				—				—				—				—
Payments under bank facility		(14,000		)		—				(732		)		(11,199		)		(4,536		)
Payments under CUP financing		(388		)		—				—				—				—
Issuance of warrants		4,375				—				—				—				—
Debt issuance costs		(9,035		)		—				—				—				—
Advances from affiliates		(13,008		)		13,008				—				—				—
Deferred acquisition costs		3,225				(3,225		)		—				—				—
Adequate protection payments—secured lenders		—				—				(33,450		)		—				—
Adequate protection payments—GECC		—				—				(5,000		)		—				—
Other, net		—				—				—				—				—
Net cash provided by (used in) financing activities		559,181				9,783				(39,182		)		(11,199		)		(4,536		)
Cash and cash equivalents:						—
Increase (decrease) in cash and cash equivalents		37,016				—				(8,890		)		15,809				4,521
Balance, beginning of period		—				—				38,240				22,431				17,910
Balance, end of period		$	37,016			$	—			$	29,350			$	38,240			$	22,431
Supplemental cash flow disclosures:
Cash paid for interest		$	2,914			$	—			$	2,573			$	9,007			$	11,787
Assumption of Central Utility Plant Obligation		$	33,958			$	—			$	—			$	—			$	—
Non-cash preferred dividends		$	—			$	—			$	—			$	7,392			$	27,377

On September 1, 2004, BH/RE acquired substantially all of the real and personal property of the Aladdin. In conjunction with the purchase, the assets and liabilities acquired were as follows:

Fair value of assets acquired	$	545,114
Cash paid and debt assumed	518,354
Liabilities assumed	$	26,760

The accompanying notes are an integral part of these consolidated financial statements.

42

BH/RE, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND BASIS OF PRESENTATION

Organization

BH/RE, L.L.C. (“BH/RE”) is a holding company that owns 85% of EquityCo, L.L.C. (“EquityCo”). The remaining 15% of EquityCo is owned by a subsidiary of Starwood Hotels and Resorts Worldwide, Inc. (“Starwood”). MezzCo, L.L.C. (“MezzCo”) is a wholly owned subsidiary of EquityCo, and OpBiz, L.L.C. (“OpBiz”) is a wholly owned subsidiary of MezzCo. As of December 31, 2004, 50% of BH/RE’s voting membership interests were held by each of Robert Earl and Douglas P. Teitelbaum, and BH/RE’s equity membership interests were held 40.75% by BH Casino and Hospitality LLC I (“BHCH I”), 18.50% by BH Casino and Hospitality LLC II (“BHCH II”) (collectively “BHCH”) and 40.75% by OCS Consultants, Inc. (“OCS”).

BH/RE and its subsidiaries were formed to acquire, operate and renovate the Aladdin Resort and Casino (the “Aladdin”) located in Las Vegas, Nevada. OpBiz, an indirect subsidiary of BH/RE, completed the acquisition of the Aladdin on September 1, 2004 and will begin a renovation project which, when complete, will transform the Aladdin into the Planet Hollywood Resort and Casino (the “PH Resort”). In connection with the renovation of the Aladdin, OpBiz has entered into an agreement with Planet Hollywood International, Inc. (“Planet Hollywood”) and certain of its subsidiaries to, among other things, license Planet Hollywood’s trademarks, memorabilia and other intellectual property. OpBiz has also entered into an agreement with Sheraton Operating Corporation (“Sheraton”), a subsidiary of Starwood, pursuant to which Sheraton provides hotel management, marketing and reservation services for the hotel that comprise a portion of the PH Resort.

BH/RE is a Nevada limited-liability company and was organized on March 31, 2003. BH/RE was formed by BHCH and OCS. BHCH is controlled by Douglas P. Teitelbaum, a managing principal of Bay Harbour Management, L.C. (“Bay Harbour Management”). BHCH was formed by Mr. Teitelbaum for the purpose of holding investments in BH/RE by funds managed by Bay Harbour Management. Bay Harbour Management is an investment management firm. OCS is wholly owned and controlled by Robert Earl and holds Mr. Earl’s investment in BH/RE. Mr. Earl is the founder, chairman and chief executive officer of Planet Hollywood and Mr. Teitelbaum is a director of Planet Hollywood. Together, Mr. Earl, a trust for the benefit of Mr. Earl’s children and affiliates of Bay Harbour Management, own substantially all of the equity of Planet Hollywood. Mr. Earl disclaims beneficial ownership of any equity of Planet Hollywood owned by the trust.

Acquisition of the Aladdin

Aladdin Gaming, L.L.C. (“Aladdin Gaming”), which was a debtor-in-possession under Chapter 11 of the United States Bankruptcy Code, commenced its bankruptcy case in the United States Bankruptcy Court for the District of Nevada, Southern Division on September 28, 2001. On April 23, 2003, OpBiz and Aladdin Gaming entered into a purchase agreement pursuant to which OpBiz agreed to acquire the Aladdin. Under the terms of the purchase agreement and pursuant to an order of the Bankruptcy Court, Aladdin Gaming conducted an auction to sell the Aladdin. On June 20, 2003, the Bankruptcy Court declared OpBiz the winner of that auction and, on August 29, 2003, the Bankruptcy Court entered an order confirming Aladdin Gaming’s plan of reorganization and authorizing Aladdin Gaming to complete the sale of the Aladdin to OpBiz under the purchase agreement. On September 1, 2004, OpBiz acquired substantially all of the real and personal property owned or used by Aladdin Gaming to operate the Aladdin, and received $15 million of working capital from Aladdin Gaming, including $25.7 million of cash. The acquisition was accounted for as a purchase and, accordingly, the purchase price and working

43

capital adjustments have been allocated to the underlying assets acquired and liabilities assumed. The working capital adjustment was determined based on the closing balance sheet on August 31, 2004. OpBiz paid the purchase price for the Aladdin by issuing new secured notes to Aladdin Gaming’s secured creditors and assumed various contracts and leases entered into by Aladdin Gaming in connection with its operation of the Aladdin and certain of Aladdin Gaming’s liabilities, including Aladdin Gaming’s energy service obligation to the third party owner of the central utility plant that supplies hot and cold water and emergency power to the Aladdin. At the time of purchase, the energy service obligation was $34.0 million. Upon the completion of the Aladdin acquisition, OpBiz issued $510 million of new secured notes to Aladdin Gaming’s secured creditors under an Amended and Restated Loan and Facilities Agreement (the “Credit Agreement”) with a group of lenders and The Bank of New York, Asset Solutions Division, as administrative and collateral agent. OpBiz also simultaneously made a $14 million cash payment to those secured creditors, which reduced the principal amount of the notes to $496 million and obtained a release of the lien on a four-acre parcel of undeveloped property that OpBiz also acquired from Aladdin Gaming (“Timeshare Land”). On December 10, 2004, OpBiz entered into a Timeshare Purchase Agreement with Westgate Resorts, LTD. (“Westgate”), whereby OpBiz has agreed to sell approximately four acres of the Timeshare Land to Westgate, who plans to develop, market, manage and sell timeshare units on the land. The Credit Agreement also requires that OpBiz provide either cash or a letter of credit in the aggregate amount of $90 million to fund the costs of the planned renovations to the Aladdin. In August 2004, MezzCo issued $87 million of senior secured notes to a group of purchasers. The net proceeds of this financing were used to make the $14 million payment described above, to pay certain costs and expenses of BH/RE and its subsidiaries and affiliates related to the acquisition of the Aladdin, and to provide OpBiz with a portion of the funds necessary to meet its obligations regarding the planned renovations to the Aladdin.

The purchase agreement also provided that OpBiz assume substantially all of Aladdin Gaming’s pre-petition contracts and leases and any post-petition contracts or leases to which OpBiz does not object. In addition, the purchase agreement provided that OpBiz offer employment to all of Aladdin Gaming’s employees, other than executive management, on terms and conditions substantially similar to their previous employment terms and conditions.

The following is a summary of the total consideration in the Aladdin acquisition (amounts in thousands):

Issuance of long-term debt, net of discount	$	477,000
Assumption of energy service obligation	33,958
Transaction costs	7,396
Total purchase consideration	$	518,354

In order to assist us in assigning values of assets acquired and liabilities assumed in the transaction, we obtained a third party valuation of significant identifiable intangible assets acquired, as well as other assets acquired and liabilities assumed.

The following is a summary of the estimated fair values of the assets acquired and liabilities assumed as of September 1, 2004 (amounts in thousands):

Current assets	$	41,015
Property and equipment	499,686
Intangible assets	3,670
Other assets	743
Total assets acquired	545,114
Current liabilities	26,760
Purchase price	$	518,354

44

The total intangible assets of $3.7 million will be amortized over their respective remaining useful lives and include a customer list valued at $2.7 million with a useful life at September 1, 2004 of approximately 4 years and a trade name valued at approximately $1.0 million with a useful life at September 1, 2004 of 1.5 years.

The following unaudited pro forma financial information for BH/RE has been prepared assuming the acquisition had occurred on the first day of the year ended December 31, 2004 and 2003 (amounts in thousands):

	2004		2003
Net revenues	$	287,030	$	266,540
Operating income (loss)	51,358		(19,332		)
Net income (loss)	26,522		(41,336		)

These pro forma results have been prepared for comparative purposes only and include certain adjustments such as additional amortization expense as a result of identifiable intangible assets arising from the acquisition and from increased interest expense on acquisition debt. The pro forma results are not necessarily indicative either of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the years ended December 31, 2004 and 2003, or of future results.

Plan of Operations

OpBiz is currently conducting a renovation project which, when complete, will transform the Aladdin into the PH Resort. In connection with the proposed renovation of the Aladdin, OpBiz has entered into an agreement with Planet Hollywood and certain of its subsidiaries to, among other things, license Planet Hollywood’s trademarks, memorabilia and other intellectual property. OpBiz has also entered into an agreement with Sheraton, a subsidiary of Starwood, pursuant to which Sheraton provides hotel management, marketing and reservation services for the hotel that comprise a portion of the pre-renovation PH Resort.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies and Estimates

The consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. Certain policies, including the determination of bad debt reserves, the estimated useful lives assigned to assets, asset impairment, insurance reserves and the calculation of liabilities, require that management apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Management’s judgments are based on historical experience, terms of existing contracts, observance of trends in the gaming industry and information available from other outside sources. There can be no assurance that actual results will not differ from our estimates. To provide an understanding of the methodology management applies, BH/RE’s significant accounting policies and basis of presentation are discussed below.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, as well as short-term investments with original maturities not in excess of 90 days.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents consist of approximately $96.2 million at December 31, 2004, the majority of which will be applied toward the remaining cash commitments for the planned renovations to the Aladdin. Restricted cash and cash equivalents totaled approximately $10.1 million at December 31, 2003.

45

Accounts Receivable

Accounts receivable, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. An estimated allowance for doubtful accounts is maintained to reduce the receivables to their carrying amount, which approximates fair value. BH/RE estimates the allowance for doubtful accounts by applying standard reserve percentages to aged account balances under a specific dollar amount and specifically analyzes the collectibility of each account with a balance over the specified dollar amount, based on the age of the account, the customer’s financial condition, collection history and any other known information.

Inventories

Inventories consist of food and beverage, retail merchandise and operating supplies, and are stated at the lower of cost or market. Cost is determined by the first-in, first-out and specific identification methods.

Property and Equipment

Property and equipment are stated at cost. Gains or losses on dispositions of property and equipment are included in the determination of income. Property and equipment are generally depreciated over the following estimated useful lives on a straight-line basis:

Buildings	39.5 years
Building improvements	15 to 40 years
Furniture, fixtures and equipment	3 to 7 years

Property and equipment and other long-lived assets are evaluated for impairment in accordance with the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” For assets to be disposed of, the asset to be sold is recognized at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

Fixed assets are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the estimated future cash flows of the asset, on an undiscounted basis, are compared to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model.

The property and equipment and other long-lived assets that BH/RE obtained in the acquisition of the Aladdin were appraised by an independent third party. Property and equipment and the related accumulated depreciation amounts, as well as certain intangible assets recorded in the Company’s consolidated balance sheets as of December 31, 2004 are based on the independent third party appraisal.

Debt Issuance Costs

Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the expected terms of the related debt agreements using the straight-line method, which approximates the amount derived from the effective interest method and are included in other assets on BH/RE’s consolidated balance sheets. Debt issuance costs, net totaled approximately $8.5 million as of December 31, 2004. No debt issuance costs were incurred as of December 31, 2003.

46

Intangible Assets

In connection with the purchase of the Aladdin and as a result of an independent appraisal of the assets purchased, BH/RE recorded intangible assets, which consist of a customer list and trade name on its consolidated balance sheets at December 31, 2004. The customer list was valued at approximately $2.7 million at the time of purchase and at December 31, 2004, had a net book value of approximately $2.5 million. The trade name was valued at approximately $1.0 million at the time of purchase and at December 31, 2004, had a net book value of approximately $0.8 million. The customer list and trade name will be amortized using the straight-line method over a useful life of 4 years and 1.5 years, respectively. The amortization expense related to the customer list and trade name for the year ended December 31, 2004, was approximately $0.2 million for each of the intangible assets.

Derivative Instruments and Hedging Activities

BH/RE has issued warrants in an effort to provide further consideration to the purchasers of membership interests in EquityCo and MezzCo. BH/RE accounts for the senior note warrants in EquityCo as embedded derivative instruments in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Hedging Activities—an Amendment of FASB Statement No 133”. The warrants issued in conjunction with the Mezzanine Financing contain a net cash settlement, and therefore are accounted for in accordance with Emerging Issues Task Force (“EITF”) 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”. Both SFAS No. 133 and EITF 00-19 require that the warrants be recognized as liabilities, with changes in fair value affecting net income. See “Note 7. Long-Term Debt—Mezzanine Financing”.

Promotional Allowances

Casino revenues are recognized as the net win from gaming activities, which is the difference between gaming wins and losses. Hotel revenue recognition criteria are generally met at the time of occupancy. Food and beverage revenue recognition criteria are generally met at the time of service. Deposits for future hotel occupancy or food and beverage services are recorded as deferred income until revenue recognition criteria are met. Cancellation fees for hotel and food and beverage services are recognized upon cancellation by the customer as defined by a written contract entered into with the customer. All other revenues are recognized as the service is provided. Revenues include the retail value of food, beverage, rooms, entertainment, and merchandise provided on a complimentary basis to customers. Such complimentary amounts are then deducted from revenues as promotional allowances on BH/RE’s consolidated statements of operations. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses and consist of the following (amounts in thousands):

				For the period
				from March 31,
				2003
				(Date of			Predecessor Information
	Year			Formation)			Eight months
	ended December 31,			through December 31,			ended August 31,			Year ended December 31,
	2004			2003			2004			2003		2002
Rooms		$	902		$	—		$	2,208	$	3,476	$	3,056
Food and beverage		4,571			—			10,251		10,051		9,044
Other		512			—			579		1,806		1,539
Total cost of promotional allowances		$	5,985		—			$	13,038	$	15,333	$	13,639

Slot Club Program

The Aladdin’s slot club members earn points based on gaming activity, which can be redeemed for cash or complimentary goods and services. A liability is recorded for the estimated cost of the outstanding

47

points accrued under the slot club program. The accrued slot club point liability was approximately $1.9 million and $0 as of December 31, 2004 and 2003, respectively.

Advertising Costs

Advertising costs are expensed as incurred and included in selling, general and administrative costs and expenses. Advertising costs totaled approximately $1.2 million and $0 for the year ended December 31, 2004 and the period from March 31, 2003 (Date of Formation) through December 31, 2003, respectively. Advertising costs for Aladdin Gaming totaled approximately $4.2 million, $8.1 million and $8.6 million for the eight months ended August 31, 2004 and the years ended December 31, 2003 and 2002, respectively.

Income Taxes

The consolidated financial statements include the operations of BH/RE and its majority-owned subsidiaries: EquityCo, MezzCo, and OpBiz. BH/RE and EquityCo are limited liability companies and are taxed as partnerships for federal income tax purposes. However, MezzCo has elected to be taxed as a corporation for federal income tax purposes. OpBiz, a wholly-owned subsidiary of MezzCo, will be treated as a division of MezzCo for federal income tax purposes, and accordingly, will also be subject to federal income taxes.

MezzCo and OpBiz account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

Preopening Costs

BH/RE accounts for costs incurred during the preopening and start-up phases of operations in accordance with Statement of Position 98-5, “Reporting on the Costs of Start-up Activities”. Preopening and start-up costs include, but are not limited to, salary related expenses for new employees, travel and entertainment expenses. Preopening costs are expensed as incurred.

Membership Interests

As of December 31, 2004, BH/RE’s membership interests had not been unitized and BH/RE’s members do not presently intend to unitize these membership interests. Accordingly, management of BH/RE has excluded earnings per share data required pursuant to SFAS No. 128 “Earnings Per Share” because management believes that such disclosures would not be meaningful to the financial statement presentation.

Recently Issued Accounting Standards

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” The objective of FIN 46 is to improve financial reporting by companies involved with variable interest entities. FIN 46 changes certain consolidation requirements by requiring a variable interest entity to be consolidated by a company that is subject to a majority of the risk of loss from the variable interest entity’s activities or receives a majority of the entity’s residual returns or both. BH/RE has adopted FIN 46 and has determined that all variable interest entities that it has an interest in at December 31, 2004 do not require consolidation under the provisions of FIN 46, as BH/RE is not subject to a majority of the risk of loss or entitled to receive a majority of the variable interest entity’s residual returns.

48

In December 2004, the FASB issued SFAS No. 123,“Accounting for Stock-Based Compensation (revised December 2004),” to eliminate the alternative use of the intrinsic value method of accounting for transactions in which an entity obtains employee services in share-based payment transactions under APB Opinion No. 25 that was provided in SFAS No. 123 as originally issued. The revision is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The adoption of the revision is not expected to have a material impact on the consolidated financial statements of BH/RE.

3.   RECEIVABLES

Accounts receivable consist of the following at December 31, 2004 (in thousands):

Casino	$	5,712
Hotel	7,735
Other	1,433
	14,880
Allowance for doubtful accounts	(2,254		)
Receivables, net	$	12,626

There were no accounts receivable at December 31, 2003.

4.   PROPERTY AND EQUIPMENT

The assets that BH/RE obtained in the acquisition of the Aladdin were appraised by an independent third party. Property and equipment and the related accumulated depreciation amounts consist of the following at December 31, 2004 (in thousands):

Land	$	97,979
Buildings and improvements	367,234
Furniture, fixtures and equipment	35,172
Construction in progress	1,787
	502,172
Accumulated depreciation	(7,391		)
Property and equipment, net	$	494,781

There were no property and equipment balances at December 31, 2003 for BH/RE. Depreciation expense was approximately $7.4 million for the year ended December 31, 2004. BH/RE recorded no depreciation expense for the period from March 31, 2003 (Date of Formation) through December 31, 2003. Depreciation expense for Aladdin Gaming totaled approximately $0, $43.3 million and $62.7 million for the eight months ended August 31, 2004 and the years ended December 31, 2003 and 2002, respectively. Any amortization of assets under capital leases is included within the reported depreciation expense.

49

5.ACCRUED EXPENSES

Accrued expenses consist of the following at December, 31, 2004 (in thousands):

Accrued slot club points	$	1,900
Accrued Central Utility Plant charges	1,287
Accrued acquisition costs	796
Accrued legal fees	701
Accrued slot participation fees	643
Accrued utilities	540
Other accrued expenses	2,256
Accrued expenses	$	8,123

There were no accrued expenses at December 31, 2003 for BH/RE.

6.OTHER CURRENT LIABILITIES

Other current liabilities consist of the following at December, 31, 2004 (in thousands):

Outstanding chips and tokens	$	1,852
Advance commissions	1,245
Advance ticket sales	421
Future sports bets	417
Other current liabilities	451
Other current liabilities	$	4,386

There were no other current liabilities at December 31, 2003 for BH/RE.

7.LONG-TERM DEBT

Long-term debt consists of the following at December 31, 2004 (in thousands):

Term Loan A—$500 million senior notes	$	486,000
Term Loan B—$10 million senior notes	10,202
Mezzanine senior secured subordinated notes	91,734
Northwind Aladdin obligation under capital lease	33,570
Total long-term debt	621,506
Term A debt discount, net	(31,162		)
MezzCo warrants, net	(4,262		)
Current portion of long-term debt	(1,268		)
Total long-term debt, net	$	584,814

There were no long-term debt balances at December 31, 2003 for BH/RE.

Credit Agreement

The Aladdin acquisition and the planned renovations were funded by the issuance of $510 million of secured notes to Aladdin Gaming’s secured creditors pursuant to a Credit Agreement. OpBiz’s obligations under the Credit Agreement are secured by liens on all of its assets, including a mortgage on its real property, the Hotel, the Casino and the Theater for the Performing Arts (“TPA”), and security interests in its accounts receivable, inventory, equipment and intangible assets, excluding the Timeshare Land. The Credit Agreement will be guaranteed by MezzCo and MezzCo will secure its guarantee by pledging its membership interests in OpBiz to the lenders. The Credit Agreement matures on August 31, 2010.

50

The loans under the Credit Agreement are evidenced by $500 million of Term Loan A notes and $10 million of Term Loan B notes. BH/RE simultaneously made a $14 million cash payment to the holders of the Term Loan A notes to reduce the principal amount of the Term Loan A notes to $486 million and obtained a release of the lien on the Timeshare Land.

Scheduled principal payments on the Term Loan A notes are as follows:

·$1.25 million on the first day of each fiscal quarter during the period beginning on August 31, 2006 and ending on August 31, 2007;

·$3.75 million on the first day of each fiscal quarter during the period beginning on August 31, 2007 and ending on August 31, 2008;

·$5.0 million on the first day of each fiscal quarter during the period beginning on August 31, 2008 and ending on August 31, 2009;

·$6.25 million on the first day of each fiscal quarter during the period beginning on August 31, 2009 and ending on August 31, 2010;

·the then unpaid balance amount of Term Loan A notes on August 31, 2010.

OpBiz pays interest on the outstanding Term Loan A notes quarterly, in cash, at the London Inter-Bank Offered Rate, or LIBOR, plus an applicable margin that increases over time. Until August 31, 2007, OpBiz’s interest payment will not exceed its quarterly EBITDA, reduced by certain permitted reductions (as defined in the Credit Agreement) , divided by a factor of 1.20. After August 31, 2007, OpBiz’s interest payment will not exceed its quarterly EBITDA, reduced by certain permitted reductions (as defined in the Credit Agreement). Interest on the Term Loan B notes will accrue at a rate of LIBOR plus 4% and will be added quarterly to the outstanding principal amount of the Term Loan B notes and will be paid when OpBiz pays off the Term Loan B notes. OpBiz is also required to pay an annual administrative fee and certain other fees and expenses of the lender under the Credit Agreement.

OpBiz is required to prepay amounts outstanding under the Credit Agreement:

·with excess cash flow (as defined in the Credit Agreement) after certain permitted cash reserves are accumulated;

·in scheduled quarterly amounts beginning after August, 31, 2006;

·with certain amounts received in connection with the development of the Timeshare Land adjacent to the Desert Passage (as defined in the underlying agreement);

·with an amount equal to the difference between what should have been spent on renovation capital expenditures and what was actually spent thereon if (i) an aggregate amount of $72.0 million is not spent on renovation capital expenditures by August 31, 2006, or (ii) an aggregate amount of $81.0 million is not spent on renovation capital expenditures by February 28, 2007 or (iii) an aggregate amount of $90.0 million is not spent on renovation capital expenditures by August 31, 2007; and

·with the proceeds of certain asset sales.

In particular, after OpBiz accumulates certain permitted cash reserves, OpBiz is required to pay 100% of its excess cash flow (as defined in the Credit Agreement) from operations to the lenders under the Credit Agreement. That percentage decreases to 75%, then 50%, if OpBiz meets certain targeted ratios of total debt to EBITDA, or leverage ratios, for any two consecutive fiscal quarters.

The Credit Agreement includes covenants that, among other things, restrict OpBiz’s ability to sell assets, make distributions to its owners, other than distributions for taxes, incur or prepay additional indebtedness, enter into transactions with affiliates, incur liens, make investments, make capital expenditures,develop the Timeshare Land adjacent to the Desert Passage and enter into material contracts. In addition, OpBiz is required to maintain certain levels of EBITDA that increase over time

51

and, beginning August 31, 2007, maintain certain ratios of EBITDA to interest expense that increase over time and maintain certain leverage ratios that decrease over time.

The Credit Agreement contains customary events of default, including a change of control of OpBiz, the occurrence of a default under the terms of any indebtedness of MezzCo, a default by us under the hotel management contract or termination of Sheraton as the manager of the Hotel (unless we replace Sheraton with another approved manager within 30 days of such termination), a default or termination of the Planet Hollywood license agreement and certain defaults under the agreements with Boulevard Invest or Northwind Aladdin.

The Credit Agreement includes warrants entitling the lenders to 2.5% of the fully diluted membership interests in EquityCo at a price equal to the price paid by the principals of EquityCo. BH/RE has issued warrants to purchase 2.94% of its ownership interest in EquityCo to the lenders under the Credit Agreement. The warrants can only be exercised upon the occurrence of a liquidity event or distribution (such as through the sale of the hotel/casino); a public sale of equity securities of EquityCo, MezzCo, or OpBiz; or payment in full of the obligations under the Credit Agreement. The warrants can either be settled in cash or in other membership interests upon exercise.

As of December 31, 2004, the estimated fair value of the warrants was approximately $0.1 million.

Mezzanine Financing

In August 2004, MezzCo entered into a mezzanine financing transaction (“Mezzanine Financing”) with a group of purchasers. Pursuant to the Mezzanine Financing, MezzCo issued $87 million of 16% Senior Secured Subordinated Notes and warrants to purchase 17,500 of its units representing membership interests, equal to 17.5% of the fully diluted equity of MezzCo. The gross offering proceeds of the Mezzanine Financing were deposited into an escrow account and, in conjunction with the closing of the Aladdin acquisition, were used to (i) pay approximately $16.1 million of fees and expenses related to the acquisition of the Aladdin, (ii) fund the $14 million lien release payment required under the Credit Agreement, and (iii) fund a portion of the planned renovations to the Aladdin. The notes mature in August 2011 and accrue interest at 16% per annum. Interest on the notes is payable in kind or, at the option of MezzCo, in cash. The warrants are exercisable at any time, subject to the approval of the Nevada gaming authorities, at a purchase price of $0.01 per unit. Subject to the approval of the Nevada gaming authorities, the warrants may be exercised to purchase either voting or non-voting membership interests of MezzCo or a combination thereof. Currently all of MezzCo’s voting membership interests are represented by units owned by EquityCo. In addition to customary anti-dilution protections, the number of units representing MezzCo membership interests issuable upon exercise of the warrants may be increased from time to time upon the occurrence of certain events as described in the warrants. The maximum aggregate increase is 28%, following which the warrants would represent rights to purchase 45.5% of the units representing membership interests of MezzCo, on a fully-diluted basis. Holders of the warrants and any securities issued upon exercise of the warrants may require MezzCo to redeem such securities commencing in August 2011 at a redemption price based upon a formula set forth in the warrants. The holders of warrants, and securities issued upon exercise thereof, have the right, starting in August 2008, to assume control of MezzCo and OpBiz and conduct a sale of the equity of, or all or substantially all of the assets of, either MezzCo or OpBiz. These rights are subject to (i) repayment in full of all indebtedness that is senior to the notes (including all indebtedness of OpBiz under the Credit Agreement), (ii) certain covenants related to OpBiz’s ability to achieve targeted levels of EBITDA and (iii) the prior approval of the Nevada gaming authorities. These rights expire upon completion of a public offering by MezzCo or OpBiz. In connection with the Mezzanine Financing, OpBiz’s obligation to make expenditures on renovations to the Aladdin was increased from $90 million, as required under the Credit Agreement, to $100 million.

As of December 31, 2004, the MezzCo financing is recorded net of the unamortized balance of the put warrants of approximately $4.3 million. The estimated fair value of the warrants was approximately

52

$4.1 million as of December 31, 2004, and the additional interest expense associated with the change in market value of the warrants was approximately $113,000 for the year then ended.

Energy Services Agreement

Northwind Aladdin (“Northwind”), a third party, owns and operates a central utility plant on land leased from OpBiz. The plant supplies hot and cold water and emergency power to the Aladdin under a contract between Aladdin Gaming and Northwind. OpBiz has assumed the energy service agreement, which expires in 2018. Under the agreement, OpBiz is required to pay Northwind a monthly consumption charge, a monthly operational charge, a monthly debt service payment and a monthly return on equity payment. Payments under the Northwind agreement total approximately $500,000 per month.

Scheduled Maturities of Long-Term Debt

Scheduled maturities of BH/RE’s long-term debt are as follows (in thousands):

Years ending December 31,
2005	$	3,768
2006	11,421
2007	19,092
2008	24,285
2009	451,716
Thereafter	290,081
	800,363
Term A debt discount, net	(31,162		)
Put warrants, net	(4,262		)
Total	$	764,939

Fair Value of Long-Term Debt

The estimated fair value of BH/RE’s long-term debt at December 31, 2004 was approximately $616.7 million, compared to the carrying value of approximately $621.5 million, based on the quoted market price of the Term Loan A notes.

8.MEMBERSHIP INTERESTS

The non-voting interests in BH/RE are owned 40.75% by BHCH I, 18.50% by BHCH II and 40.75% by OCS and the voting interests are owned 50% by Douglas P. Teitelbaum and 50% by Robert Earl. BHCH is controlled by Mr. Teitelbaum, managing principal of Bay Harbour Management, an investment management firm. BHCH was formed by Mr. Teitelbaum for the purpose of holding investments in BH/RE by funds managed by Bay Harbour Management. OCS is wholly-owned and controlled by Mr. Earl and holds Mr. Earl’s investment in BH/RE. Mr. Earl is the founder, chairman and chief executive officer of Planet Hollywood and Mr. Teitelbaum is a director of Planet Hollywood. Together, Mr. Earl, a trust for the benefit of Mr. Earl’s children and affiliates of Bay Harbour Management, own substantially all of the equity of Planet Hollywood.

BH/RE owns 85% of the membership interests in EquityCo and Starwood owns 15%. OpBiz is a wholly owned subsidiary of EquityCo. BH/RE and Starwood made total equity contributions of $20 million each in EquityCo to fund the costs of the planned renovations to the Aladdin. Starwood’s equity interest in EquityCo is reflected as minority interest in the accompanying consolidated financial statements. BH/RE recorded minority interest income related to the Starwood interests of approximately $0.9 million for the year ended December 31, 2004.

53

BH/RE has the option to purchase all of Starwood’s membership interests in EquityCo if OpBiz is entitled to terminate the hotel management contract between OpBiz and Sheraton (see Note 9) as a result of a breach by Sheraton. Starwood can require EquityCo to purchase all of its membership interests in EquityCo if the hotel management contract is terminated for any reason other than in accordance with its terms or as the result of a breach by Sheraton. In addition, BH/RE and Starwood entered into a registration rights agreement with respect to their membership interests in EquityCo.

9.RELATED PARTY TRANSACTIONS

Due to Affiliates

Since its formation, certain members or affiliates of BH/RE have paid expenses totaling approximately $20.0 million related to the Aladdin acquisition and funded deposits under the purchase agreement on behalf of BH/RE and its subsidiaries. On September 1, 2004, $4.25 million of advances from each of BHCH and OCS, which were used to fund the deposit required under the purchase agreement, were contributed to BH/RE as capital. Additionally, on September 1, 2004, the advances made by BHCH and Planet Hollywood to pay transaction fees and deposits were repaid.

Planet Hollywood Licensing Agreement

OpBiz, Planet Hollywood and certain of Planet Hollywood’s subsidiaries have entered into a licensing agreement pursuant to which OpBiz received a non-exclusive, irrevocable license to use various “Planet Hollywood” trademarks and service marks. Under the licensing agreement, OpBiz also has the right, but not the obligation, to open a Planet Hollywood restaurant and one or more Planet Hollywood retail shops under a separate restaurant agreement with Planet Hollywood. OpBiz will pay Planet Hollywood a quarterly licensing fee of 1.75% of OpBiz’s non-casino revenues. If OpBiz opens an attraction with paid admission using the Planet Hollywood marks or memorabilia prior to beginning operations as the PH Resort, it will pay Planet Hollywood a quarterly licensing fee of 1.75% of the revenues of the attraction until OpBiz begins operating as the PH Resort. The initial term of the licensing agreement will expire in 2028. OpBiz can renew the licensing agreement for three successive 10-year terms. As of December 31, 2004, no licensing fees have been paid to Planet Hollywood for the use of its trademarks and service marks.

In addition to being a manager of BH/RE, Mr. Earl is the chief executive officer and chairman of the board of directors of Planet Hollywood. Similarly, Mr. Teitelbaum is a manager of BH/RE and a director of Planet Hollywood. Together, Mr. Earl, a trust for the benefit of Mr. Earl’s children and affiliates of Bay Harbour Management, own substantially all of the equity of Planet Hollywood. Mr. Earl disclaims beneficial ownership of any equity of Planet Hollywood owned by the trust.

Sheraton Hotel Management Contract

OpBiz and Sheraton have entered into a management contract pursuant to which Sheraton provides hotel management services to OpBiz, assists OpBiz in the management, operation and promotion of the Hotel and permits OpBiz to use the Sheraton brand and trademarks in the promotion of the Hotel. OpBiz pays Sheraton a monthly fee of 4% of gross hotel revenue and certain food and beverage outlet revenues and 2% of rental income from third-party leases in the hotel. The management contract has a 20-year term commencing on the completion of the Aladdin acquisition and is subject to certain termination provisions by either OpBiz or Sheraton. Sheraton is a wholly owned subsidiary of Starwood, which has a 15% equity interest in EquityCo and has the right to appoint two members to the EquityCo board of managers. Management fees paid to Starwood totaled approximately $0.8 million for the year ended December 31, 2004. No such fees were incurred prior to 2004.

54

10.INCOME TAXES

The consolidated financial statements include the operations of BH/RE and its majority-owned subsidiaries: EquityCo, MezzCo, and OpBiz. BH/RE and EquityCo are limited liability companies taxed as partnerships for federal income tax purposes. MezzCo has elected to be taxed as a corporation for federal income tax purposes. OpBiz, a wholly-owned subsidiary of MezzCo, will be treated as a division of MezzCo for federal income tax purposes, and accordingly, will also be subject to federal income taxes.

MezzCo and OpBiz account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss (“NOL”) carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

The income tax benefit from continuing operations consists of the following for the year ended December 31, 2004 (amounts in thousands):

Current	$	—
Deferred	—
Total income tax benefit	$	—

The income tax benefit differs from that computed at the federal statutory corporate tax rate for the year ended December 31, 2004 as follows (amounts in thousands):

	Amount			Percent
Pre-tax income at U.S. statutory rate	$	(2,329	)		35.0	%
Tax attributable to pass-through entities	282				(4.2	)
Permanent differences	57				(0.9	)
Tax credits, net of current addback	(106		)		1.6
Valuation allowance	2,096				(31.5	)
Effective tax rate	$	—			—	%

The tax effects of significant temporary differences representing net deferred tax assets and liabilities are as follows at December 31, 2004 (amounts in thousands):

Deferred tax assets:
Accruals	$	1,392
Depreciation	729
Reserves for doubtful accounts	789
Amortization	126
FICA tip credit	146
Other	152
Valuation allowance	(2,096		)
Total deferred tax assets	$	1,238
Deferred tax liabilities:
Prepaid expenses	$	1,238
Total deferred tax liabilities	$	1,238
Net deferred tax assets and liabilities	$	—

55

At December 31, 2004, OpBiz has a general business credit carryforward of approximately $146,000 that expires in 2024. MezzCo and OpBiz recorded a valuation allowance at December 31, 2004 relating to recorded tax benefits because all benefits are more likely than not to be unrealized.

11.COMMITMENTS AND CONTINGENCIES

Litigation

BH/RE is not currently a party to any material legal proceedings.

Operating Leases

OpBiz leases certain real property, furniture and equipment. The leases are accounted for as operating leases in accordance with SFAS No. 13, “Accounting for Leases.”

At December 31, 2004, aggregate minimum rental commitments under noncancelable operating leases with initial or remaining terms of one year or more consisted of the following (in thousands):

Years ending December 31,
2005	$	2,093
2006	1,650
2007	1,650
2008	1,650
2009	—
Thereafter	—
Total	$	7,043

Rental expense amounted to approximately $0.4 million for the year ended December 31, 2004, and $0 for the period from March 31, 2003 (Date of Formation) through December 31, 2003. Rental expense for Aladdin Gaming totaled approximately $0.9 million for the eight months ended December 31, 2004, and $1.3 million for the years ended December 31, 2003 and 2002.

Timeshare Purchase Agreement

On December 10, 2004, OpBiz entered into a Timeshare Purchase Agreement with Westgate Resorts, LTD. (“Westgate”), a Florida limited partnership, whereby OpBiz has agreed to sell approximately 4 acres of land adjacent to the Aladdin to Westgate, who plans to develop, market, manage and sell timeshare units on the land. Under the Timeshare Purchase Agreement, OpBiz will receive fees each year based on sales of timeshare units until the timeshare units are one hundred percent sold out.

Theater Lease

On December 16, 2004, OpBiz entered into a long-term lease agreement whereby SFX Entertainment, Inc. d/b/a Clear Channel Entertainment (“CCE”) will be renovating and leasing certain theaters and related areas located at the Aladdin. CCE will have the exclusive right to use, reconfigure, adapt, change and operate the leased premises.

12.EMPLOYEE BENEFIT PLANS

401K Plan

OpBiz has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its employees, which it assumed from Aladdin Gaming on September 1, 2004. The plan allows employees to defer, within prescribed limits, up to 15% of their income on a pre-tax basis through contributions to the

56

plan. OpBiz currently matches, within prescribed limits, 50% of all employees’ contributions up to 6% of their individual earnings on an annual basis. The amount of the company match paid to the eligible plan participants was approximately $1.1 million for the years ended December 31, 2004, 2003 and 2002.

Health Insurance Plan and Self-Funded Employee Health Care Insurance Program

OpBiz maintains a qualified employee health insurance plan covering all employees who work in a full-time capacity. The plan, which is self-funded by OpBiz with respect to claims below a certain maximum amount, requires contributions from eligible employees and their dependents.

OpBiz’s employee health care benefits program is self-funded up to a maximum amount per claim. Claims in excess of this maximum amount are fully insured through a stop-loss insurance policy. Accruals are based on claims filed and estimates of claims incurred but not reported.

At December 31, 2004 and 2003, OpBiz’s estimated liabilities for all unpaid and incurred but not reported claims totaled approximately $2.7 million and $0, respectively.

13.SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	Net revenues		Operating income (loss)				Pre-tax income (loss)				Net income (loss)
	(In thousands)
Year ended December 31, 2004:
First Quarter(a)	$	73,357		$	18,615			$	16,119			$	16,119
Second Quarter(a)	71,262			17,304				13,757				13,757
Third Quarter(a)	69,229			8,167				1,406				1,406
Fourth Quarter(b)	72,932			7,121				(4,993		)		(4,993		)
Year ended December 31, 2003:
First Quarter(c)	$	67,293		$	5,021			$	1,198			$	1,198
Second Quarter(a)	65,930			(7,280		)		(12,705		)		(12,705		)
Third Quarter(a)	64,630			(5,715		)		(9,804		)		(9,804		)
Fourth Quarter(a)	68,687			(11,357		)		(20,024		)		(20,024		)

(a)Includes the combined operating results of BH/RE, LLC and its subsidiaries and Aladdin Gaming, LLC.

(b)Includes the operating results of BH/RE, LLC and its subsidiaries.

(c)Includes the operating results of Aladdin Gaming, LLC.

57

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disagreements with accountants on accounting or financial disclosures during the last three fiscal years. We did not change our accountants during the year ended December 31, 2004. BH/RE is utilizing the services of the same accountants that were employed by Aladdin Gaming.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls

Prior to August 31, 2004, we were a development stage company and as such, our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, were developing a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) and performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures implemented at such time. Since the closing of the acquisition of the Aladdin, a system of disclosure controls and procedures has been put in place that our management, including our Chief Executive Officer and Chief Financial Officer, believe include disclosure controls and procedures that are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is accumulated and communicated to our managers, as appropriate to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls

Our managers do not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of a control system is also based upon certain assumptions about the likelihood of future events, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Conclusions

Based on this evaluation, we concluded that, subject to the limitations noted above, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

58

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during our last fiscal quarter, i.e., the quarter ended December 31, 2004, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B.OTHER INFORMATION

None.

PART III

ITEM 10.DIRECTORS AND EXECUTUIVE OFFICERS OF THE REGISTRANT

The members of the board of managers and executive officers of BH/RE and its subsidiaries are as follows:

Name	Age	Position
Robert Earl	53	Manager of BH/RE and EquityCo, Co-Chairman of OpBiz
Douglas P. Teitelbaum	39	Manager of BH/RE and EquityCo , Co-Chairman of OpBiz
Michael V. Mecca	56	President and Chief Executive Officer of OpBiz
Donna Lehmann	35	Chief Financial Officer of OpBiz and Treasurer of BH/RE
Mark S. Helm	34	Senior Vice President, General Counsel and Secretary of OpBiz
Michael A. Belletire	58	Manager of OpBiz
Jess M.Ravich	47	Manager of OpBiz
Theodore W. Darnall	47	Manager of EquityCo and OpBiz
Thomas M. Smith	52	Manager of OpBiz

Robert Earl.   Mr. Earl has been a manager of BH/RE since its formation in March 2003. Mr. Earl has over 31 years experience in the restaurant industry. Mr. Earl is the founder of Planet Hollywood and has been the chief executive officer and a member of the board of directors of Planet Hollywood and its predecessors since 1991. In November 1998, Mr. Earl was elected chairman of the board of directors of Planet Hollywood. Planet Hollywood filed voluntary petitions for relief under the Bankruptcy Code in October 1999 and October 2001.

Douglas P. Teitelbaum.   Mr. Teitelbaum has been a manager of BH/RE since its formation in March 2003. Mr. Teitelbaum is the co-owner and a managing principal of Bay Harbour Management, an SEC-registered investment management firm focusing on investments in distressed securities, as well as acquiring and restructuring distressed companies. Mr. Teitelbaum joined Bay Harbour Management in 1996 as a principal and co-portfolio manager. Prior to joining Bay Harbour Management, Mr. Teitelbaum was a managing director at Bear, Stearns & Co. Inc. in the high yield and distressed securities department. Mr. Teitelbaum currently serves on the board of directors of Planet Hollywood, Telcove and the American Jewish Congress.

Michael V. Mecca.   Mr. Mecca has been the president and chief executive officer of OpBiz since May 2003. Mr. Mecca has over 30 years of experience in the hotel and gaming industries, including 13 years in various management positions with the predecessor to Caesars Entertainment, Inc. From April 2001 to April 2003, he was the vice president and general manager of Green Valley Ranch Resort Casino in Henderson, Nevada. From February 1999 to April 2001, Mr. Mecca served as the chief operating officer of Greektown Casino in Detroit, Michigan. From December 1997 to January 1999, Mr. Mecca held the positions of chief operating officer of Ramparts International and vice president and general manager of Mandalay Bay Resort & Casino in Las Vegas, Nevada. From March 1994 to December 1997, Mr. Mecca managed the development of the Crown Casino in Melbourne, Australia, one of the largest casinos in the world.

59

Donna Lehmann.   Ms. Lehmann has been the chief financial officer of OpBiz and treasurer of BH/RE since the purchase of the Aladdin on September 1, 2004. She was the vice president of finance for Aladdin Gaming, LLC from July 2001 until August 31, 2004. Prior to joining the Aladdin, Ms. Lehmann was Controller for Ethel M. Chocolates (a subsidiary of M&M Mars, Inc.) from June 2000 until July 2001. She was a senior auditor with Arthur Andersen LLP from January 1998 to June 2000 and is a Certified Public Accountant in Nevada.

Mark S. Helm.   Mr. Helm has been the senior vice president, general counsel and secretary of OpBiz since November 2004. Prior to joining OpBiz, Mr. Helm was in-house counsel for Planet Hollywood and its subsidiaries from 1995 until October of 2004 and served as vice president, general counsel and secretary of Planet Hollywood from January 2000 until October of 2004. Mr. Helm is a member of the Florida Bar and maintains an In-House Counsel designation with the Nevada Bar.

Michael A. Belletire.   Mr. Belletire has served as manager of OpBiz since October 2004. Mr. Belletire owns and operates his own management services firm, BMA Consulting, where he served as gaming regulatory and financial advisor to the secured Senior Lender Group to Aladdin Gaming until September 2004. From 1995 through 1999, he was the chief executive/staff director of the Illinois Gaming Board. Prior to 1995, Mr. Belletire served in several executive management positions with the State of Illinois.

Jess M. Ravich.   Mr. Ravich has served as a manager of EquityCo and OpBiz since October 2004. Mr. Ravich is the chairman and chief executive officer of Libra Securities, LLC (“Libra”), a Los Angeles based investment banking firm that focuses on capital raising and financial advisory services for middle market corporate clients and the sales and trading of debt and equity securities for institutional investors. Prior to founding Libra in 1991, Mr. Ravich was an executive vice president at Jefferies & Co., Inc. and a senior vice president at Drexel Burnham Lambert. He also serves on the board of directors of Cherokee Inc. and Continental AFA Dispensing Company. Mr. Ravich is on the undergraduate executive board of the Wharton School and the board of trustees of the Archer School for Girls.

Theodore W. Darnall.   Mr. Darnall has served as manager of EquityCo and OpBiz since October 2004. Mr. Darnall has 29 years of experience in the hotel industry, including serving as president, Starwood Real Estate for Starwood Hotels & Resorts Worldwide since his appointment to that position in August 2002. Mr. Darnall has also served as president, North America Division and executive vice president, Operations, North America since joining Starwood Lodging Corp. in 1996 as Chief Operating Officer. Prior to joining Starwood, Mr. Darnall was with Interstate Hotels Corporation for more than 14 years.

Thomas M. Smith.   Mr. Smith was appointed to the board of managers of OpBiz in March 2005. Mr. Smith has more than ten years of senior level management experience in hotel operations. He is a senior vice president of Starwood Hotels and Resorts Worldwide (HOT) Real Estate Group. Prior to joining Starwood in 1998, Mr. Smith was a managing director with CIGNA Corporation’s Real Estate Investment Division, where he was responsible for hotel real estate investments for eleven years.

As OpBiz is our operating subsidiary, the information provided below discusses the board of managers of OpBiz (the “Board”).

Meetings of the Board of Managers

The Board met one time between September 1, 2004 and December 31, 2004. The Board has a standing Audit Committee, Compensation Committee, Compliance/Credit Committee, Executive Committee and a Renovation Committee. During 2004, none of the members of the Board attended less than 75% of the meetings that the Board held, or the total number of meetings held by all committees of the Board on which various members served. The current members of each of the Board’s committees are listed below.

60

The Audit Committee

The Board has a separately designated standing Audit Committee that was established in accordance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934. The current members of the Audit Committee are Jess M. Ravich, Michael A. Belletire and Michael V. Mecca. Mr. Ravich serves as Chairman of the Audit Committee.

The Audit Committee meets periodically with BH/RE’s independent auditors, management, internal auditors and legal counsel to discuss accounting principles, financial and accounting controls, the scope of the annual audit, internal controls, regulatory compliance and other matters. The Audit Committee also advises the Board on matters related to accounting and auditing and selects the independent auditors. The independent auditors and internal auditors have complete access to the Audit Committee without management present to discuss results of their audit and their opinions on adequacy of internal controls, quality of financial reporting and other accounting and auditing matters. The Audit Committee is currently in the process of drafting a written charter, which will outline its responsibilities.

The Board has determined that all Audit Committee members are financially literate and has also determined that Michael A. Belletire qualifies as an audit committee financial expert.

The Compensation Committee

The current members of the Compensation Committee are Douglas P. Teitelbaum, Robert Earl and Theodore W. Darnall. Each member of the Compensation Committee is an independent non-employee director. Mr. Teitelbaum serves as Chairman of the Compensation Committee.

The Compensation Committee reviews and takes action regarding terms of compensation, employment contracts and pension matters that concern officers and key employees. The responsibilities of the Compensation Committee are outlined in a written charter, which is filed as an exhibit to this Annual Report on Form 10-K.

The Compliance/Credit Committee

The current members of the Compliance/Credit Committee are Douglas P. Teitelbaum and Robert Earl. The Compliance/Credit Committee has the responsibility and authority to set policies for the establishment of the Gaming Compliance Program and the Credit Extension Program. The Gaming Compliance Program establishes policies and procedures to ensure that OpBiz remains in compliance with any and all gaming regulations. The Credit Extension Program establishes policies and procedures for extending credit to OpBiz’s gaming customers.

The Executive Committee

The current members of the Executive Committee are Douglas P. Teitelbaum and Robert Earl. The Executive Committee has the full power and authority to act for the Board between meetings in all matters on which the Board is authorized to act and where specific actions shall not have previously been taken by the Board unless (i) the Board has taken action restricting the authority of the Executive Committee to act; (ii) the action is the final approval of BH/RE’s annual budget or (iii) such action would require the consent of Starwood Nevada Holdings, LLC (as defined in the Second Amended and Restated Operating Agreement of EquityCo, LLC).

The Renovation Committee

The current members of the Renovation Committee are Douglas P. Teitelbaum and Robert Earl. The Renovation Committee has the authority to develop and implement the renovation capital expenditure budget for presentation and approval by the Board of Directors and, upon such approval, shall be further

61

authorized to enter into and monitor any and all contracts, agreements or arrangements and payments made in connection with the renovation of the Aladdin.

Code of Ethics

The Board is finalizing and will be adopting a code of ethics that will apply to all managers, officers (including the chief executive office and chief financial officer) and employees of BH/RE.

ITEM 11.EXECUTIVE COMPENSATION

BH/RE currently pays no compensation to any of its managers who are directly or indirectly affiliated with BH/RE or Starwood. As BH/RE has no executive officers, the compensation of certain executive officers of OpBiz, our operating subsidiary, is set forth below.

Summary Compensation Table

The following table sets forth the compensation paid to the chief executive officer of OpBiz and other highly compensated executive officers during the fiscal years ended December 31, 2004 and 2003 to the extent that such persons were employed by OpBiz during such years.

SUMMARY COMPENSATION TABLE

	Annual Compensation								Securities
Name and						Other Annual			Underlying			All Other
Principal Position	Year	Salary		Bonus		Compensation			Options			Compensation
Michael V. Mecca	2004	$	468,407	$	250,000		$	54,443		$	—		$	—
President and Chief Executive	2003	277,444		250,000			—			—			—
Officer of OpBiz(1)(2)
Donna Lehmann	2004	$	81,572	$	75,000		$	—		$	—		$	—
Chief Financial Officer of OpBiz(3)
Bruce B. Himelfarb	2004	$	81,599	$	35,000		$	—		$	—		$	—
Senior Vice President of Casino Marketing(4)

(1)Other annual compensation for Mr. Mecca consisted of an automobile allowance.

(2)Mr. Mecca began employment with OpBiz in May 2003. Mr. Mecca’s employment agreement grants him an option to purchase up to 3% of the equity of MezzCo, vesting one-third annually beginning in April 2004. The exercise price for Mr. Mecca’s options is based on a current subscription valuation. Mr. Mecca has not exercised any options as of December 31, 2004.

(3)Ms. Lehmann began employment with OpBiz in September 2004. Ms. Lehmann’s employment agreement grants her with an option to purchase 0.3% of the equity of MezzCo, vesting one-third annually beginning September 1, 2005. Ms. Lehmann’s options carry a strike price based on a $100 million equity value.

62

(4)Mr. Himelfarb began employment with OpBiz in September 2004. Mr. Himelfarb’s employment agreement grants him an option to purchase up to 0.25% of the equity of MezzCo, vesting one-third annually beginning August 23, 2005. Mr. Himelfarb’s options carry a strike price based on a $100 million equity value.

Compensation of Board

Members of the Board who are not directly or indirectly affiliated with BH/RE or Starwood receive annual compensation of $75,000, which is paid in quarterly installments. All managers are reimbursed for expenses connected with attendance at meetings of the Board.

Option/SAR Grants

BH/RE has not issued options or appreciation rights to any of its managers or executive officers. There were no options or SAR grants during the fiscal year ended December 31, 2004. Notwithstanding the foregoing, certain of our subsidiaries have issued options to our managers and executive officers.

Aggregated Option/SAR Exercises in 2004 and Option/SAR Values at December 31, 2004

The following table sets forth certain information regarding options to acquire equity interests in Mazz Co held by the president and chief executive officer of OpBiz at December 31, 2004.

AGGREGATED OPTION/SAR EXERCISES IN 2004
AND OPTION/SAR VALUES AT DECEMBER 31, 2004

Name	Number of Securities Underlying Options/SARs Exercised		Value Realized			Number of Securities Underlying Unexercised Options/SARs at December 31, 2004 Exercisable/ Unexercisable			Value of Unexercised In-The-Money Options/SARs at December 31, 2004 Exercisable/ Unexercisable
Michael V. Mecca		—		$	—		—	/(1)		$	—/$—

Michael V. Mecca Employment Agreement

Mr. Mecca serves as OpBiz’s president and chief executive officer under an employment agreement that expires in May 2008. The employment agreement automatically renews for successive five-year terms unless either party elects not to renew at least 90 days prior to the end of a term. OpBiz pays Mr. Mecca a base salary of $450,000 per year, subject to annual upward adjustments beginning in April 2005. OpBiz pays Mr. Mecca a performance bonus determined by OpBiz’s board of managers based on OpBiz’s financial performance and certain other factors. If OpBiz terminates the employment agreement other than for cause, Mr. Mecca will be entitled to receive 12 months of his then-base salary. In addition, if the employment agreement is terminated for any reason other than by OpBiz for cause, Mr. Mecca will be entitled to receive all accrued but unpaid bonuses through the date of termination. The agreement provides Mr. Mecca with an option to purchase up to 3% of the equity of MezzCo at the exercise price described above, vesting one-third annually. Mr. Mecca has granted OpBiz a right of first refusal with respect to any proposed sales of his equity interests in MezzCo.

Donna Lehmann Employment Agreement

Ms. Lehmann serves as the chief financial officer of OpBiz and treasurer of BH/RE under an employment agreement that expires on September 1, 2005. If Ms. Lehmann remains employed by OpBiz after her employment agreements expires, any such employment will be on an at-will basis unless she and OpBiz agree in writing to extend the terms of her agreement. OpBiz pays Ms. Lehmann a base salary of

63

$250,000 per year, subject to annual upward adjustments at a minimum of 5% per annum, beginning September 1, 2005. Ms. Lehmann was paid a one-time transition bonus of $75,000 in 2004 for her transition from vice president of finance for Aladdin Gaming to her current position with OpBiz. She will receive an annual discretionary bonus of up to 50% of her annual compensation determined by OpBiz’s board of managers based on OpBiz’s financial performance and certain other factors. The agreement provides Ms. Lehmann with an option to purchase up to 0.3% of the equity of MezzCo at an exercise price based on a $100 million equity value, vesting one-third annually beginning on September 1, 2005.

Bruce B. Himelfarb Employment Agreement

Mr. Himelfarb serves as the senior vice president of casino marketing for OpBiz under an employment agreement that expires on August 23, 2007. If Mr. Himalfarb remains employed by OpBiz after his employment agreement expires, any such employment will be on an at-will basis unless he and OpBiz agree in writing to extend the terms of his agreement. OpBiz will pay Mr. Himelfarb a base salary of $250,000 during the first year, $275,000 during the second year and $300,000 during the third year of his agreement. He will receive an annual discretionary bonus of up to 50% of his annual compensation determined by OpBiz’s board of managers based on OpBiz’s financial performance and certain other factors; however, his bonus for the period ending December 31, 2004 cannot be les than $35,000 and his bonus for the 2005 and 2006 calendar years cannot be less than $100,000. The agreement provides Mr. Himelfarb with an option to purchase up to 0.25% of the equity of MezzCo at an exercise price based on a $100 million equity value, vesting one-third annually beginning on August 23, 2005.

Mark S. Helm Employment Agreement

Mr. Helm serves as senior vice president, general counsel and secretary of OpBiz under an employment agreement that expires on November 2, 2007. If Mr. Helm remains employed by OpBiz after his employment agreements expires, any such employment will be on an at-will basis unless he and OpBiz agree in writing to extend the terms of his agreement. OpBiz pays Mr. Helm a base salary of $215,000 per year, subject to annual upward adjustments. He will receive an annual discretionary bonus of up to 50% of his annual compensation determined by OpBiz’s board of managers based on OpBiz’s financial performance and certain other factors. The agreement provides Mr. Helm with an option to purchase up to 0.2% of the equity of MezzCo at an exercise price based on a $100 million equity value, vesting one-third annually beginning on November 2, 2005.

The Compensation Committee

The current members of the Compensation Committee are Douglas P. Teitelbaum, Robert Earl and Theodore W. Darnall. Each member of the Compensation Committee is an independent non-employee director. Mr. Teitelbaum serves as Chairman of the Compensation Committee.

The Compensation Committee reviews and takes action regarding terms of compensation, employment contracts and pension matters that concern officers and key employees. The responsibilities of the Compensation Committee are outlined in a written charter, which is filed as an exhibit to this Annual Report on Form 10-K.

64

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth the beneficial ownership of BH/RE’s voting and equity membership interests and OpBiz’s membership interests as of March 1, 2005 by:

·each member of the board of managers of BH/RE;

·the chief executive officer; and

·BH/RE’s board of managers and executive officers as a group.

In addition, the table below sets forth, as of March 1, 2005, the beneficial ownership of each person known by BH/RE to be the beneficial owner of more than five percent of its voting membership interests, which is the only class of voting securities of BH/RE.

Unless otherwise indicated, each person listed in the table below has sole voting and investment power over the percentage of voting and equity membership interests listed opposite such person’s name.

	BH/RE						OpBiz
Name	Percent of Voting Membership Interests			Percent of Equity Membership Interests			Percent of Economic Membership Interests(4)
Douglas P. Teitelbaum(1),(2)		50.00	%		—			—
Robert Earl(2),(3)		50.00	%		—			—
Starwood Nevada Holdings		—			—			15.0	%
BH Casino and Hospitality LLC I		—			40.75	%		34.64	%
BH Casino and Hospitality LLC II		—			18.50	%		15.72	%
OCS Consultants, Inc		—			40.75	%		34.64	%
All members of the BH/RE board of managers and BH/RE executive officers as a group (2 persons)		100.00	%		100.00	%		100.00	%

(1)The address for Mr. Teitelbaum is 885 Third Avenue, 34th Floor, New York, New York 10022. Mr. Teitelbaum beneficially owns all of the equity membership interests beneficially owned by BH Casino and Hospitality I and II because Mr. Teitelbaum is the sole manager of BH Casino and Hospitality I and II. Mr. Teitelbaum disclaims beneficial ownership of such equity membership interests, except to the extent of his pecuniary interest therein.

(2)All of the outstanding membership interests of OpBiz are held by MezzCo and, in turn, all of the outstanding membership interests of MezzCo are held by EquityCo. EquityCo is owned 85% by BH/RE and 15% by Starwood. Because OpBiz and MezzCo are both single member limited liability companies and their respective operating agreements provide that the sole member of each entity has full, exclusive and complete discretion in the management and control of the entity, the board of managers of EquityCo directly or indirectly controls the management and affairs of MezzCo and OpBiz. Under its operating agreement, EquityCo is managed by a three-member board of managers, which includes two BH/RE appointees, Mr. Teitelbaum and Mr. Earl, and one Starwood appointee, Mr. Darnall. Because all actions of the EquityCo board of managers must be approved by majority vote, except certain actions which require unanimous approval, BH/RE can direct the voting and disposition of the membership interests of MezzCo owned by EquityCo and, in turn, the membership interests of OpBiz owned by MezzCo. Mr. Teitelbaum and Mr. Earl, individually and through their respective affiliates, own 100% of BH/RE. All actions of BH/RE require the approval of both Mr. Teitelbaum and Mr. Earl. Consequently, Mr. Teitelbaum and Mr. Earl share voting and investment power over the membership interests of MezzCo owned by EquityCo and, in turn, the membership interests of OpBiz owned by MezzCo, and therefore are deemed to beneficially own such

65

membership interests. Mr. Teitelbaum and Mr. Earl both disclaim beneficial ownership of the membership interests of EquityCo owned by Starwood.

(3)The address for Mr. Earl is 7598 West Sand Lake Road, Orlando, Florida 32819. Mr. Earl beneficially owns all of the equity membership interests beneficially owned by OCS because OCS is wholly owned and controlled by Mr. Earl.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Due to Affiliates

Since its formation, certain members or affiliates of BH/RE have paid expenses totaling approximately $20.0 million related to the Aladdin acquisition and funded deposits under the purchase agreement on behalf of BH/RE and its subsidiaries. On September 1, 2004, $4.25 million of advances from each of BHCH and OCS, which were used to fund the deposit required under the purchase agreement, were contributed to BH/RE as capital. Additionally, on September 1, 2004, the advances made by BHCH and Planet Hollywood to pay transaction fees and deposits were repaid.

Transactions with Planet Hollywood

OpBiz, Planet Hollywood and certain of Planet Hollywood’s subsidiaries have entered into a licensing agreement pursuant to which OpBiz received a non-exclusive, irrevocable license to use various “Planet Hollywood” trademarks and service marks. Under the licensing agreement, OpBiz also has the right, but not the obligation, to open a Planet Hollywood restaurant and one or more Planet Hollywood retail shops under a separate restaurant agreement with Planet Hollywood. OpBiz will pay Planet Hollywood a quarterly licensing fee of 1.75% of OpBiz’s non-casino revenues. If OpBiz opens an attraction with paid admission using the Planet Hollywood marks or memorabilia prior to beginning operations as the PH Resort, it will pay Planet Hollywood a quarterly licensing fee of 1.75% of the revenues of the attraction until OpBiz begins operating as the PH Resort. The initial term of the licensing agreement will expire in 2028. OpBiz can renew the licensing agreement for three successive 10-year terms.

In addition to being a manager of BH/RE, Mr. Earl is the chief executive officer and chairman of the board of directors of Planet Hollywood. Similarly, Mr. Teitelbaum is a manager of BH/RE and a director of Planet Hollywood. Together, Mr. Earl, a trust for the benefit of Mr. Earl’s children and affiliates of Bay Harbour Management, own substantially all of the equity of Planet Hollywood. Mr. Earl disclaims beneficial ownership of any equity of Planet Hollywood owned by the trust.

Transaction with Starwood

OpBiz and Sheraton have entered into a management contract pursuant to which Sheraton provides hotel management services to OpBiz, assists OpBiz in the management, operation and promotion of the Hotel and permits OpBiz to use the Sheraton brand and trademarks in the promotion of the Hotel. OpBiz pays Sheraton a monthly fee of 4% of gross hotel revenue and certain food and beverage outlet revenues and 2% of rental income from third-party leases in the hotel. The management contract has a 20-year term commencing on the completion of the Aladdin acquisition and is subject to certain termination provisions by either OpBiz or Sheraton. Sheraton is a wholly owned subsidiary of Starwood, which has a 15% equity interest in EquityCo and has the right to appoint two members to the EquityCo board of managers.

66

ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth fees paid to Ernst & Young LLP, our principal independent auditors, during 2004 for audit and non-audit services:

Audit Fees	$156,800
Audit-Related Fees	257,700
Tax Fees	—
All Other Fees	—
Total	$	414,500

Ernst & Young LLP did not provide any services related to financial information systems and design and implementation during the year ended December 31, 2004, “Audit Fees” include fees incurred for the 2004 annual audit and the reviews of the 2004 Forms 10-Q. “Audit-Related Fees” include fees paid for costs related to the acquisition of the Aladdin and review of gaming regulations and controls.

The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax and other services performed by the independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. The Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. If the pre-approval authority is delegated to one or more members of the Audit Committee, such pre-approval must be presented to the Audit Committee at its next scheduled meeting for ratification.

67

PART IV

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	(1)   Financial statements (including related notes to Consolidated Financial Statements) filed as Item 8 in Part II of this report are listed below:
	Report of Independent Registered Public Accounting Firm
	Report of Independent Registered Public Accounting Firm
	Consolidated Balance Sheets as of December 31, 2004 and 2003
	Years ended December 31, 2004, 2003, and 2002—
	Consolidated Statements of Operations
	Consolidated Statements of Members’ Equity (Deficit)
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements
(a)	(2)

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

				Additions				Deductions
Description	Balance at  beginning of period			Charge to  costs and expense				Accounts written off (recovered)			Balance at end of period
Allowance for doubtful accounts:
Year ended December 31,:
2003		$	—		$	—			$	—		$	—
2004		$	—		$	(3,575	)		$	1,321		$	(2,254	)

We have omitted schedules other than the ones listed above because they are not required or not applicable or the required information is shown in the consolidated financial statements or the notes to the consolidated financial statements.

(a) (3)   Exhibits

Exhibit Number	Description
2.1	Purchase and Sale Agreement dated April 23, 2003, by and between OpBiz, L.L.C. and Aladdin Gaming, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
2.2	First Amendment to Purchase and Sale Agreement dated August 31, 2004, by and between OpBiz, L.L.C. and Aladdin Gaming, LLC (Incorporated herein by reference to the Company’s Form 8-K filed on August 31, 2004)
3.1	Articles of Organization of BH/RE, L.L.C., as amended (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
3.2	Amended and Restated Operating Agreement of BH/RE, L.L.C. dated March 26, 2004 (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
3.3	Amendment to Amended and Restated Operating Agreement of BH/RE, L.L.C. dated August 9, 2004 (Incorporated by reference to the Company’s Form 10 filed on April 16, 2004)
3.4	Amended and Restated Operating Agreement of EquityCo, L.L.C. dated April 23, 2003 (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)

68

3.5	Second Amended and Restated Operating Agreement of EquityCo, L.L.C. dated August, 31, 2004 (Incorporated herein by reference to the Company’s Form 8-K filed on August 31, 2004)
4.1	Form of Amended and Restated Loan and Facilities Agreement by and among OpBiz, L.L.C., the lenders party thereto and BNY Asset Solutions LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
4.2	Amended and Restated Loan Facilities Agreement dated August 31, 2004, by and among OpBiz, L.L.C., the lenders party thereto and The Bank of New York, Asset Solutions Division (Incorporated herein by reference to the Company’s Form 8-K filed on August 31, 2004)
4.3	Form of Senior Secured Promissory Note (Incorporated by reference to the Company’s Form 10 filed on April 16, 2004)
4.4	Form of Warrant to Purchase Membership Interests of MezzCo, L.L.C. (Incorporated by reference to the Company’s Form 10 filed on April 16, 2004)
10.1	Planet Hollywood Hotel & Casino Licensing Agreement dated May 3, 2003, by and among Planet Hollywood International, Inc., Planet Hollywood (Region IV), Inc., Planet Hollywood Memorabilia, Inc. and OpBiz, L.L.C. (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.2	Amended and Restated Planet Hollywood Hotel & Casino Licensing Agreement dated August 9, 2004, by and among Planet Hollywood International, Inc., Planet Hollywood (Region IV), Inc., Planet Hollywood Memorabilia, Inc. and OpBiz, L.L.C. (Incorporated herein by reference to the Company’s Form 8-K filed on August 31, 2004)
10.3	Management Contract dated April 23, 2003, by and between Sheraton Operating Corporation and OpBiz, L.L.C. (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.4	Agreement by and between Starwood Nevada Holding LLC, Sheraton Operating Corporation, BH/RE, L.L.C., EquityCo, L.L.C. and OpBiz, L.L.C. dated August 9, 2004 (Incorporated by reference to the Company’s Form 10 filed on April 16, 2004)
10.5	Securities Purchase Agreement among MezzCo, L.L.C. and the Purchasers named therein, dated August 9, 2004 (Incorporated by reference to the Company’s Form 10 filed on April 16, 2004)
10.6	Investor Rights Agreement by and among MezzCo, L.L.C., The Mezzanine Investors named therein and the other signatories thereto, dated August 9, 2004 (Incorporated by reference to the Company’s Form 10 filed on April 16, 2004)
10.7	Order Granting Motion to Approve Settlement Agreement with Aladdin Bazaar, LLC, filed August 6, 2003 (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.8	Construction, Operation and Reciprocal Easement Agreement, dated February 26, 1998, by and among Aladdin Gaming, LLC, Aladdin Bazaar, LLC and Aladdin Music Holdings, LLC; (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.9	Amendment and Ratification of Construction, Operation and Reciprocal Easement Agreement, dated November 20, 2000, by and between Aladdin Gaming, LLC and Aladdin Bazaar, LLC; (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.10	Second Amendment of Construction, Operation and Reciprocal Easement Agreement, effective March 31, 2003, by and between Aladdin Gaming, LLC and Aladdin Bazaar, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)

69

10.11	Memorandum of Amendment and Ratification of REA, dated November 20, 2000, by and between Aladdin Gaming, LLC and Aladdin Bazaar, LLC; (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.12	Findings of Fact and Conclusions of Law Re: Aladdin Bazaar, LLC’s Motion for Payment of Administrative Expense, or in the Alternative, for an Order Setting a Deadline for Debtor to Assume or Reject Common Area Parking Agreement, filed October 8, 2002 (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.13	Common Parking Area Use Agreement, dated February 26, 1998, by and between Aladdin Gaming, LLC and Aladdin Bazaar, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.14	Traffic Control Improvements Cost Participation Agreement Commercial Development, dated June 7, 2000, by and between Aladdin Gaming, LLC and Clark County, Nevada (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.15	Order Granting Motion to (i) Approve Settlement Agreement and Releases Respecting Central Utility Plant Litigation and (ii) Assume Certain Agreements Respecting the Central Utility Plant, filed December 10, 2002 (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.16	Energy Service Agreement, dated September 24, 1998, between Aladdin Gaming, LLC and Northwind Aladdin, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.17	Amendment and Agreement, dated September 25, 1998, between Northwind Aladdin, LLC and Aladdin Gaming, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.18	Second Amendment and Agreement, dated May 28, 1999, between Northwind Aladdin, LLC and Aladdin Gaming, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.19	Third Amendment and Agreement, dated May 28, 1999, between Northwind Aladdin, LLC and Aladdin Gaming, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.20	Energy Services Coordination Agreement, dated May 28, 1999, by and among Aladdin Gaming, LLC and Aladdin Bazaar, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.21	Timeshare Purchase Agreement, dated December 10, 2004, between Westgate Resorts, Ltd. and OpBiz, L.L.C.
10.22	Subordination, Non-Disturbance and Attornment Agreement and Consent, dated as of June 7, 1999, by and among The Bank of Nova Scotia, Northwind Aladdin, LLC, Aladdin Gaming, LLC, State Street Bank and Trust Company, Aladdin Music, LLC and Aladdin Music Holdings, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.23	Lease, dated December 3, 1997, by and between Aladdin Gaming, LLC and Northwind Aladdin, LLC (Incorporated by reference to the Company’s Form 10/A filed on June 15, 2004)
10.24	Employment Agreement dated April 11, 2003, by and among OpBiz, L.L.C., Michael Mecca, Robert Earl and Doug Teitelbaum (Incorporated by reference to the Company’s Form 10 filed on April 16, 2004)
10.25	Letter Agreement dated July 13, 2004, by and among MezzCo. L.L.C., OpBiz, L.L.C. and Michael V. Mecca (Incorporated by reference to the Company’s Form 10-Q filed on August 16, 2004)

70

10.26	Employment Agreement dated September 1, 2004, by and between OpBiz, L.L.C. and Donna Lehmann
10.27	Employment Agreement dated November 2, 2004, by and between OpBiz, L.L.C. and Mark S. Helm
10.28	Employment Agreement dated August 9, 2004, by and between OpBiz, L.L.C. and Bruce Himelfarb
21.1	List of Subsidiaries of BH/RE, L.L.C.
31.1	Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Donna Lehmann
31.2	Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Robert Earl
31.3	Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Douglas P. Teitelbaum
32.1	Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Donna Lehmann
32.2	Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Robert Earl
32.3	Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Douglas P. Teitelbaum
99.1	OpBiz, L.L.C. Compensation Committee Charter

(b)   Reports of Form 8-K

On March 11, 2005, the Company filed a Current Report on Form 8-K dated March 8, 2005, reporting items listed under Item 5.02.

71

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BH/RE, L.L.C.
April 14, 2005	By:	/s/ DONNA LEHMANN
	Donna Lehmann
	Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Signature		Title		Date
/s/ ROBERT EARL		Manager of BH/RE and EquityCo		April 14, 2005
Robert Earl		and Co-Chairman of OpBiz
/s/ DOUGLAS P. TEITELBAUM		Manager of BH/RE and EquityCo		April 14, 2005
Douglas P. Teitelbaum		and Co-Chairman of OpBiz
/s/ MICHAEL V. MECCA		President and Chief Executive Officer of OpBiz		April 14, 2005
Michael V. Mecca		(Principal Executive Officer)
/s/ DONNA LEHMANN		Chief Financial Officer of OpBiz and Treasurer		April 14, 2005
Donna Lehmann		of BH/RE (Principal Financial and Accounting Officer)
/s/ MICHAEL A. BELLETIRE		Manager of OpBiz		April 14, 2005
Michael A. Belletire
/s/ JESS M. RAVICH		Manager of OpBiz		April 14, 2005
Jess M. Ravich

72

EX-10.21

Exhibit 10.21

TIMESHARE PURCHASE AGREEMENT

This TIMESHARE PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of the 10th day of December, 2004 (the “Effective Date”), by and between OPBIZ, L.L.C., a Nevada limited liability company (the “Seller”), and WESTGATE RESORTS, LTD., a Florida limited partnership (the “Developer”).

RECITALS:

A.The Seller has entered into a Purchase and Sale Agreement (the “PSA”) with Aladdin Gaming, L.L.C. pertaining to the acquisition by the Seller of the hotel and casino Complex commonly known currently as the Aladdin Resort & Casino in Las Vegas, Nevada (the “Complex”).  The parcel of land described on Exhibit A attached hereto (or to be attached hereto, in accordance with the Documentation Schedule defined below) (the “Timeshare Property”) is included in the Complex.

B.The Developer develops, markets, manages and sells Timeshare Units and other real estate related products and wishes to purchase the Timeshare Property, and the Seller wishes to sell the Timeshare Property, and the parties wish to enter into certain other agreements and undertakings identified herein, all subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by reference as if fully restated, and the mutual representations, warranties, certifications, promises, undertakings and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.Definitions.   In addition to terms defined elsewhere herein, the following terms have the meanings indicated:

(a)100 Percent Sell-Out means that all Timeshare Intervals in the Timeshare Project, including all phases contemplated as part of the Timeshare Project, havebeen sold and conveyed to bona fide third-party consumer purchasers and that no such purchaser is in breach, violation or default under any of the Timeshare Documents or under any documents or agreements pertinent to the purchase and/or financing of the purchase of any Timeshare Interval in the Project.  100 Percent Sell-Out shall be determined on a “net” basis in accordance with the Timeshare Interval Measurement Principles.

(b)ADR:  Average Daily Rate, as the case may be, actually charged for the applicable property or portion thereof, determined in accordance with hotel industry standards as applied at the Hotel/Casino Property.

(c)Aggregate Maximum Marketing Fee Amount:  See Section 3(f).

(d)Business Day:  A day other than a day which is a Saturday or Sunday or a day on which banks are closed in Las Vegas, Nevada, or Orlando, Florida.

(e)CERCLA:  The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. (“CERCLA”), and the regulations adopted pursuant to CERCLA.

(f)City Block Covenants:  Documents and agreements binding upon the properties in the city block (the “City Block”) in which the Complex is located – including the Northwind Property, the Mall Property and the Complex (which includes the Hotel/Casino Property and the Timeshare Property (collectively, the “City Block Properties”) – and the owners of said properties.  See Section 19.

(g)Closing:   Consummation of the transfer of the Timeshare Property to the Developer, as provided in Section 25 and other applicable sections of this Agreement, and subject to the conditions and contingencies in said Section and other applicable provisions of this Agreement.

(h)Closing Date:  The date on which Closing occurs.  The parties agree that the Closing shall occur not later than December 31, 2004, in any event.  See, e.g., Section 25.

(i)Complex:  The hotel and casino complex commonly known currently as the Aladdin Resort & Casino in Las Vegas, Nevada, including but not limited to the Hotel/Casino Property and the Timeshare Property, and all amenities and other common support facilities and other facilities now or hereafter owned or controlled by Seller and serving the Complex which constitute amenities for the Complex, of which some or all shall be available to occupants of the Timeshare Property, as and to the extent provided herein.

(j)Complex Standards:  The Timeshare Project will be constructed and furnished in accordance with the standards agreed upon by Seller and Developer as to brand adherence, quality of furnishings, amenities and other attributes, all as more particularly set forth in the final Development and Construction Plan for the Timeshare Project, as amended and supplemented from time to time by mutual agreement.

(k)Critical Jurisdictions:  See Section 11.

(l)Deed Delivery:  See Section 25(f).

(m)Design/Approval Process:  See Section 5.

(n)Developer:  WESTGATE RESORTS, LTD., a Florida limited partnership.  Westgate Resorts, Ltd. may form a single-purpose entity wholly owned by Westgate Resorts, Ltd. for the purpose of acting as Developer hereunder, in which event said wholly-owned single-purpose entity shall be the Developer hereunder; notwithstanding the foregoing, in the event Westgate Resorts, Ltd. forms a wholly-owned single-purpose entity for such purpose, Westgate Resorts, Ltd. shall remain liable to Seller hereunder.

(o)Disposal:  Refer to definition of Hazardous Substances.

(p)Documentation Schedule:  The schedule hereby agreed upon for negotiation and attachment to this Agreement of exhibits, schedules and other items, as set forth in Section 37.

2

(q)Effective Date:  Regardless of the date of execution and/or delivery of this Agreement by any or all parties, the date identified as the Effective Date on page 1 of this Agreement.

(r)Environmental Assessment:  Any Phase One, Phase Two or other environmental assessment of the Timeshare Property pursuant to the provisions of Section 9 and/or any other applicable provisions of this Agreement, any and all of which shall be Developer’s its sole cost and expense.

(s)Environmental Matters:  Any matter arising under and in violation of any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any state or federal environmental agency relating to (i) the protection, preservation or restoration of the environment (including, without limitation, air, water, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (ii) the usage, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, Release or Disposal of any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by type or by quantity, including any material containing any such substance as a component.

(t)Environmental Objections:  Environmental Matters which may materially and adversely impair Developer’s intended purpose for the Timeshare Property, as determined by Developer in its reasonable discretion, and to which Developer validly objects pursuant to the terms of this Agreement.

(u)Existing Permitting and Zoning Approvals:  All zoning, PUD or subdivision approvals, ordinances, or resolutions of any governmental authority, body, agency or entity relating to the Timeshare Property, and all site plans, development orders, approvals, consents, permits, certificates and other governmental licenses, which burden, benefit or otherwise affect the ownership or development of the Timeshare Property or relate to the payment of any reservation fee, deposit or impact fee benefiting or burdening the Timeshare Property.

(v)Filing Date:  See Section 11.

(w)Fully Sold or Fully Sold Project or Fully Sold-Out or Fully Sold-Out Project means one year following achievement by the Developer of Net Interval Sales constituting 95 percent of all Timeshare Intervals in the Timeshare Project, or such earlier date, after achievement by the Developer of Net Interval Sales constituting 95 percent of all Timeshare Intervals in the Timeshare Project, that Developer no longer sells exclusively Timeshare Intervals in the Timeshare Project.  Fully Sold Project (and related terms) shall be determined on a “net” basis in accordance with the Timeshare Interval Measurement Principles.

(x)GAAP:  United States generally accepted accounting principles, provided, however, that, for the purpose of the definitions of “Net Interval Sales”, “Interval Sale” and as such terms are defined herein, and subject to the Timeshare Interval Measurement Principles and the provisions of such definitions, references to GAAP shall be applicable only for the purpose of determining whether and when a sale has occurred and for such

3

other purposes as shall not be in conflict with said definitions or with the Timeshare Interval Measurement Principles.

(y)Hazardous Materials:  “Solid Waste” (as that term is defined under RCRA), “Hazardous Waste” (as that term is defined under RCRA), “Hazardous Substances” (as that term is defined under CERCLA), and other pollutants, including, without limitation, any solid, liquid, gaseous or thermal irritant or contaminant, such as smoke, vapor, soot, fumes, acids, alkalis, petroleum products or chemicals.

(z)Hazardous Substances:  The definitions thereof set forth in CERCLA and RCRA, and all other federal, state, county, local and other laws, ordinances, codes, statutes, rules, regulations, decrees and orders relating to or imposing liability or standards of conduct regarding environmental or hygienic matters.

(aa)Hazardous Waste:  Refer to definition of Hazardous Materials and Hazardous Substances.

(bb)Hotel/Casino Property:  All portions of the Complex other than the Timeshare Property, including but not limited to that portion of the Complex upon which the current Aladdin Hotel and Casino and the Theatre for the Performing Arts are and are to be located, and also including any adjacent land or buildings that may be acquired in the future by Seller or any affiliate and designated by Seller as Hotel/Casino Property under this Agreement, and all of which are (or are to be) owned by the Seller.

(cc)Interval Sales (sometimes also referred to as Vacation Ownership Sales) shall mean, for any period of time, the sales price for each Timeshare Interval in the Timeshare Project (or, if and to the extent applicable, in other timeshare projects) sold to bona fide third party consumer purchasers, as such sales price is set forth in the purchase agreement for each such sale, multiplied by the number of such sales occurring in the applicable period of time; less (i) all consumer discounts (excluding, however, credits given to purchasers of Timeshare Intervals at the Timeshare Project to the extent said credits pertain to contractual or other undertakings in connection with properties or products other than the Timeshare Project); and (ii) the cost of all “first day benefits” included in such purchase agreement which may include, but not be limited to, unreimbursed closing costs solely attributable to the purchaser of a Timeshare Unit whether included as part of the purchase price or separately itemized; and (iii) credits given to purchasers of Timeshare Intervals at the Timeshare Project as a result of “trade-ins” or “upgrades”, each such credit not to exceed the Net Interval Sale price previously recognized by Developer with respect to the Timeshare Interval being “traded in”.

Interval Sales (and Net Interval Sales; see below) shall be determined on a “net” basis in accordance with the Timeshare Interval Measurement Principles and, only for the purpose of determining whether and when a sale has occurred and for such other purposes as shall not be in conflict with the Timeshare Interval Measurement Principles, GAAP.  Interval Sales (and Net Interval Sales; see below) shall not include (A) revenues received by Developer or any affiliate of Developer relating to or arising from any management fees due to Developer in connection with the Timeshare Project, or (B) revenues received by Developer or any affiliate of Developer relating to any timeshare, vacation ownership, fractional, club, exchange network, credit life insurance or similar resort products offered for sale by Developer or any affiliate of Developer other

4

than Interval Sales (aka Vacation Ownership Sales) (which arise from the Timeshare Project), or (C) other amounts collected by Developer at the time of the closing or thereafter of the Timeshare Unit such as assessments and service fees in accordance with customary schedules for such assessments and fees at Developer’s timeshare projects generally, and third party exchange membership fees or third party exchange transaction fees; or (D) interest and finance charges paid by purchasers of Timeshare Intervals in connection with financing their purchases thereof.

Interval Sales shall be based upon 52 weeks (or applicable fraction) multiplied by 1,000 Timeshare Units or such larger number of Timeshare Units as are actually built, in accordance with the Unit Count Example, adjusted for partial weeks and for other than annual (i.e., biannual) use.

(dd)         Leases:  The Marketing & Solicitation Leases, the Resort and Amenities Access Easement/Agreement, the Sales Center Lease (see Section 14), and the Maintenance Agreement.

(ee)Letter of Credit:  See Section 3(d).

(ff)Maintenance Agreement:  See Section 17.

(gg)Mall Property:   A portion of the City Block owned by Boulevard Investments and used in whole or in part as a shopping mall.  Also known as Desert Passage Shopping Center (aka/fka Aladdin Bazaar).

(hh)Marketing and Leasing Agreement:  See Section 12.

(ii)Marketing Commencement Date:  See Section 12.

(jj)Marketing & Solicitation Leases:  See Section 13.

(kk)Marketing Fee:  See Section 4.

(ll)Marketing Fee Period:  See Section 4.

(mm)Marketing Plan:  Developer’s plan for marketing the Timeshare Project to prospective purchasers.

(nn)Mezzanine Lender Agreements:   Securities Purchase Agreement among the Seller and the Mezzanine Lenders, together with all documents and agreements related thereto, all of which affect the Seller and the Complex including the Timeshare Property.

(oo)Mezzanine Lenders:   Post Advisory Group, LLC, as Agent and Collateral Agent for, and together with, the lenders who are parties to the Mezzanine Lender Agreements.

(pp)Minimum Project Density:  The requirement that the Timeshare Project must consist of no fewer than one thousand (1,000) Timeshare Units, and no fewer than two thousand (2,000) keys, in one-, two-, three- and/or four-bedroom “lockout” units, located in not more than four (4) buildings, each containing at least fifteen (15) stories and no fewer than five hundred (500) keys, in one-, two-, three- and/or four-bedroom “lockout” units.

5

(qq)Net Interval Sales shall mean, for any period of time, the aggregate amount of Interval Sales (aka Vacation Ownership Sales) during said period, determined on a “net” basis in accordance with the Timeshare Interval Measurement Principles and, only for the purpose of determining whether and when a sale has occurred and for such other purposes as shall not be in conflict with the Timeshare Interval Measurement Principles, GAAP.  Net Interval Sales shall not include (A) revenues received by Developer or any affiliate of Developer relating to or arising from any management fees due to Developer in connection with the Timeshare Project, or (B) revenues received by Developer or any affiliate of Developer relating to any timeshare, vacation ownership, fractional, club, exchange network, credit life insurance or similar resort products offered for sale by Developer or any affiliate of Developer other than Interval Sales (which arise from the Timeshare Project), or (C) other amounts collected by Developer at the time of the closing or thereafter of the Timeshare Unit such as assessments and service fees in accordance with customary schedules for such assessments and fees at Developer’s timeshare projects generally, and third party exchange membership fees or third party exchange transaction fees; or (D) interest and finance charges paid by purchasers of Timeshare Intervals in connection with financing their purchases thereof.

(rr)Northwind Property:   A portion of the City Block owned by Northwind Aladdin LLC (a Nevada limited liability company) and used in whole or in part as an electric generating facility.

(ss)Operating Budget:  See Section 17.

(tt)Operating Costs:  The direct out-of-pocket expenses of operating the Timeshare Project (which include all Timeshare Units both dedicated to the timeshare plan and any Timeshare Units operated as hotel units), including but not limited to maintenance expenses, reserves required to be funded pursuant to the Timeshare Documents, real estate taxes, fees payable to Westgate for management of the Timeshare Project; fees payable to Starwood for management and maintenance of the Timeshare Project; the PHII License Fee; the Westgate License Fee; the amenities fee payable pursuant to the Resort and Amenities Access Easement/Agreement; the actual cost of operation and maintenance of parking facilities serving the Timeshare Project constructed by Developer to the extent necessitated by Seller’s inability, pursuant to the City Block Covenants (see Section 6(d)), to provide and make available to Developer the entire number of parking spaces required by the Parking Requirement; the Parking Fee; and all other applicable fees and expenses mutually agreed by Seller and Developer.  See Section 17 and Section 18 for provisions pertinent to payment of Operating Costs and other related items, including, to the extent applicable, construction loan interest and construction cost amortization.

(uu)Parent Guaranty:  See Section 9(n).

(vv)Parking Fee:  See Section 6(d).

(ww)Parking Requirement:  The entire number of parking spaces required by Developer pursuant to applicable legal requirements to develop the Timeshare Project.  See Section 6(d).

(xx)Permitted Environmental Matters:  Facts and circumstances pertaining to environmental issues affecting the Timeshare Property, other than Environmental Objections.

6

(yy)Permitted Survey Matters:  Matters of survey to the Timeshare Property, other than Survey Objections.

(zz)Permitted Title Matters:  Matters of title to the Timeshare Property, other than Title Objections.

(aaa)Permitted Zoning and Land Use Matters:  Facts and circumstances pertaining to zoning and land use issues affecting the Timeshare Property, other than Zoning and Land Use Objections.

(bbb)PHII Licensing and Memorabilia Agreement:  See Section 10.

(ccc)PH Sales Commencement Date:  See Section 11.

(ddd)Plans and Specifications and Development Schedule:  The Developer’s plans and specifications for the development and construction of the Timeshare Project, including but not limited to the Developer’s schedule and timeline therefor, all subject to approval by the Seller in accordance with this Agreement.

(eee)PSA:  See Recital A.

(fff)Purchase Price:  The monetary consideration to be paid by Developer to Seller for the Timeshare Property pursuant to the terms of this Agreement, as provided in Section 3 and other applicable provisions of this Agreement.

(ggg)RCRA:  The Resource Conservation and Recovery Act, as amended, 42 U.S.C.§ 6901 et seq. (“RCRA”), and the regulations adopted pursuant to RCRA.

(hhh)REA Approval Deadline:  See Section 6(a).

(iii)Release (when used in connection with Hazardous Substances and/or Environmental Matters):  Refer to definition of Hazardous Substances.

(jjj)Rental Income:  See Section 18.

(kkk)Resort and Amenities Access Easement/Agreement:  See Section 13.

(lll)Sales Center Lease:  See Section 14.

(mmm)Seller:  OPBIZ, L.L.C., a Nevada limited liability company, and, as applicable affiliate(s) thereof, including but not limited to its parent, MezzCo LLC, a Nevada limited liability company.

(nnn)Seller’s Environmental Assessment:  That certain Environmental Assessment dated February 24, 1998 prepared by Ninyo & Moore.

(ooo)Seller’s Survey:  That certain ALTA Survey dated March 24, 2003 by Horigan Survey for the Complex.

(ppp)Seller’s Title Report:   That certain Preliminary Title Report dated March 14, 2003 prepared by United Title of Nevada.

7

(qqq)Senior Lender Agreements:   Amended and Restated Loan and Facilities Agreement among the Seller and the Senior Lenders, together with all documents and agreements related thereto, all of which affect the Seller and the Complex including the Timeshare Property.

(rrr)Senior Lenders:   BNY Asset Solutions, as Agent and Collateral Agent for, and together with, the lenders who are parties to the Senior Lender Agreements.

(sss)Shore Up:   The difference between (1) all maintenance fees, calculated on a non-discounted basis, on all completed Timeshare Units and Timeshare Intervals, as provided in the mutually agreed Operating Budget, and (2) the amount of maintenance fees actually collected.  See Section 18.

(ttt)Solid Waste:  Refer to the definition of Hazardous Materials.

(uuu)Survey:  Any delineation or other measurement of the Timeshare Property obtained or requested by Developer at its sole cost and expense pursuant to the provisions of Section 8(a).

(vvv)Survey Objections:  Any matters of survey arising in the Survey which may materially and adversely affect Developer’s intended purpose for the Timeshare Property, as determined by Developer in its reasonable discretion, and to which Developer objects pursuant to the provisions of this Agreement.

(www)Threatened Release:  Refer to definition of Hazardous Substances.

(xxx)Timeshare Advances:  See Section 3.

(yyy)Timeshare Development Agreements:  All documents and agreements executed or to be executed by Seller and/or Developer, in connection with this Agreement and the development of the Timeshare Project on the Timeshare Property, and all documents and agreements which otherwise pertain thereto, including but not limited to this Agreement, the Timeshare Documents, the Marketing and Leasing Agreement, the Letter of Credit, the Parent Guaranty, the completion bond(s) described in Section 9(n), the Marketing & Solicitation Leases, the Resort and Amenities Access Easement/ Agreement, the Sales Center Lease, and the Maintenance Agreement, all of which are to be acceptable to the parties and such third parties (e.g., Senior Lenders and Developer’s construction and receivables lenders) whose approval may be called for under this Agreement.

(zzz)Timeshare Documents:  Documents creating the timeshare plan and form of timeshare ownership for the Timeshare Project pursuant to Nevada law, including but not limited to Nevada Revised Statutes Ch. 119A and Nevada Administrative Code Ch. 119A.

(aaaa)Timeshare Interval means and includes a right to use a Timeshare Unit, in whatever format may at any time apply, including but not limited to vacation ownership, fractional ownership, rights to use, vacation clubs, non-equity clubs and similar or related products, and whether or not established via deed, and whether or not measured on the basis of “points” or any other basis, and whether or not on a partial-week or full-week basis or on an annual or other than annual (e.g., biannual) use basis.

8

(bbbb)Timeshare Interval Measurement Principles.  The parties wish to provide for maximum flexibility to the Developer in determining, from time to time, the best and most efficient method for marketing and selling Timeshare Intervals in the Timeshare Project.  The parties also wish to describe, with as much clarity as possible, the net effect hereunder of cancellations, rescissions and other terminations of consumer contracts to purchase Timeshare Intervals in the Timeshare Project.  To that end, any reference herein to Timeshare Intervals, 100 Percent Sell-Out, Fully Sold Project, Interval Sales, Net Interval Sales and similar or related terms and concepts shall be interpreted in the context of the following principles.

(1)Fully Sold Project (and related terms) and 100 Percent Sell-Out and related and/or similarly described terms shall not be achieved unless at least the Minimum Project Density has been achieved, in accordance with the Unit Count Example.

(2)Timeshare Intervals shall be determined on the basis of 52 weeks worth of Timeshare Intervals per Timeshare Unit per year.  Nevertheless, Developer may sell Timeshare Intervals in increments of less than one week and more than one week and/or on the basis of less than the entirety of a Timeshare Unit and/or may sell Timeshare Intervals for other than annual use (i.e., biannual use or other similarly split use).  Any determination of Interval Sales, Net Interval Sales, Fully Sold Project, 100 Percent Sell-Out and similar or related terms and concepts shall be adjusted to reflect the foregoing.

(3)Determinations of Interval Sales, Net Interval Sales, Fully Sold Project, 100 Percent Sell-Out and similar or related terms and concepts shall be made on a “net” basis, in accordance with the Timeshare Measurement Principles and, only for the purpose of determining whether and when a sale has occurred and for such other purposes as shall not be in conflict with the Timeshare Interval Measurement Principles, GAAP; and any applicable benchmark or level of performance shall not have occurred if any Timeshare Interval necessary for occurrence of such benchmark or level of performance has been returned or recovered for any reason (e.g., cancellation of sale by consumer, foreclosure on Timeshare Interval by Developer or Developer’s factor) and remains unsold and part of the Timeshare Project inventory for resale to a bona fide third-party consumer purchaser.

(4)Within the Timeshare Interval Measurement Principles, references to Timeshare Units (or, if applicable, “keys”) shall be deemed to refer to Timeshare Units (or “keys”) actually constructed, but the foregoing shall not affect the requirements herein pertaining to Minimum Project Density.

(cccc)Timeshare Project:  A single-phase or multi-phased (as provided herein) timeshare development on the Timeshare Property, in accordance with this Agreement (see, e.g., Section 9) and the final Complex Standards, complying with the Minimum Project Density, and with amenities for all Timeshare Units, to be developed and constructed by the Developer pursuant to this Agreement and subjected to a timeshare plan or regime pursuant to the Timeshare Documents.  The Timeshare Project may also include other facilities customarily contained in a timeshare development, but, with the exception of check-in facilities and swimming pool, which Developer may in its discretion construct at its cost as part of the Timeshare Project for use by occupants of the Timeshare Project,

9

such other facilities at the Timeshare Project shall not include any amenities offered by Seller at the Hotel/Casino Property, including but not limited to gaming, conventions, hotel use (including facilities developed for hotel use as well as hotel use of Timeshare Units as provided herein), food and beverage, retail, entertainment (live or otherwise) and other recreational facilities.

Whether or not the entire number of expected Timeshare Units is ultimately constructed, each dwelling accommodation constructed at the Timeshare Property shall be deemed for all purposes hereunder to be a Timeshare Unit and part of the Timeshare Project.

The Timeshare Project does not include any right of the Developer to any use of or payment associated with any activity at or about or associated with the Complex other than development and marketing of Timeshare Intervals, such as, but not limited to, gaming, conventions, hotel use (including facilities developed for hotel use as well as hotel use of Timeshare Units as provided herein), food and beverage, retail and entertainment.

(dddd)Timeshare Property:  The portion of the Complex to be transferred to the Developer in accordance with and subject to the provisions of this Agreement, and upon which Developer shall construct at least one thousand (1,000) Timeshare Units, and no fewer than two thousand (2,000) keys, in one-, two-, three- and/or four-bedroom “lockout” units, and such improvements thereon actually constructed thereon from time to time, together with all other rights, privileges and easements appurtenant to such Timeshare Property, whether or not recorded.

(eeee)Timeshare Sales Premiums:  See Section 15.

(ffff)Timeshare Unit:  Each dwelling unit developed at the Timeshare Property, which is divided into separate timeshare use periods.  Any dwelling unit at the Timeshare Property in which a door or doors connecting two or more separate rooms capable of being locked to create two or more private dwellings (i.e., each one-, two-, three- and/or four-bedroom “lockout” unit) shall constitute only one Timeshare Unit, subject, nevertheless, to the Unit Count Example and other applicable provisions of this Agreement.  Developer may designate one or more portions of any such “lockout” unit as separate Timeshare Units (so that such “lockout” unit is thereby considered two or more Timeshare Units) for the purpose of measuring Interval Sales and Net Interval Sales and for the purpose of calculating Marketing Fees and other related purposes under this Agreement, but not for the purpose of measuring compliance with the Minimum Project Density requirement or for other construction or related purposes under this Agreement.

(gggg)Timeshare Unit Vacancy:  A Timeshare Unit, or, in the case of a lock-out unit, a separately keyed portion of a Timeshare Unit, which is completed and available for occupancy, but which is not actually occupied or reserved or sold for actual occupancy as to the week or night or other period of time in question.  Timeshare Unit Vacancies may include, among other things, Timeshare Units returned or recovered for any reason (e.g., cancellation of sale by consumer, foreclosure on Timeshare Interval by Developer or Developer’s factor) and remain unsold and part of the Timeshare Project inventory for resale to a bona fide third-party consumer.  See also Section 18.

10

(hhhh)Title Commitment:  Any title insurance commitment or title report or other title information regarding the Timeshare Property obtained or requested by Developer from the Title Company at Developer’s sole cost and expense pursuant to the provisions of Section 8(a).

(iiii)Title Company: First American Title Insurance Company, or such other nationally recognized title insurance company designated by Developer and approved by Seller, such approval not to be unreasonably withheld.

(jjjj)Title Objections:  Any matters of title arising in the Title Commitment which may materially and adversely affect Developer’s intended purpose for the Timeshare Property, as determined by Developer in its reasonable discretion, and to which Developer objects pursuant to the provisions of this Agreement.

(kkkk)Unit Count Example:   The following example illustrates the parties’ understanding of the number of Timeshare Units and number of separately keyed dwelling spaces (also referred to as separate “keys”) to be built by the Developer in the Timeshare Project in accordance with this Agreement, and how the Developer’s construction of “lockout” units (see above definition of Timeshare Units) affects the unit count and key count for purpose of measuring the Developer’s liabilities and obligations hereunder:

(1)If the Developer builds, in accordance with this Agreement, a total of 1,000 Timeshare Units, each of which is a two-bedroom “lockout” unit, for a total of 2,000 keys, then the Developer shall have complied with its obligations concerning Minimum Project Density.

(2)If the Developer builds, in accordance with this Agreement, at least 1,000 Timeshare Units, but does not include a sufficient number of two-, three- and/or four-bedroom “lockout” units in order to achieve a total of at least 2,000 keys, then the Developer shall not have complied with its obligations concerning Minimum Project Density.

(3)If the Developer builds, in accordance with this Agreement, in the first phase as and to the extent provided for herein, at least 500 Timeshare Units and includes in such phase a sufficient number of two-, three- and/or four-bedroom “lockout” units in order to achieve a total of at least 1,000 keys, then the Developer shall have completed its construction obligations concerning the first phase of the Timeshare Project.

(4)If the Developer builds, in accordance with this Agreement, in the first phase as and to the extent provided for herein, at least 500 Timeshare Units, but does not include in such phase a sufficient number of two-, three- and/or four-bedroom “lockout” units in order to achieve a total of at least 1,000 keys, then the Developer shall not have completed its construction obligations concerning the first phase of the Timeshare Project.

The foregoing is by way of example only and is only for the purpose of demonstrating the manner in which Timeshare Units are to be counted in connection with measuring Developer’s compliance with its construction obligations.  Notwithstanding this Unit Count Example, the Timeshare Project is subject to the reversion or perpetual easement

11

described in Section 9(g) and other specifically applicable provisions hereof, but only to the extent therein stated.

(llll)Vacation Ownership Sales:  Refer to definition of Interval Sales.

(mmmm)Westgate License Fee:   Defined in Section 10(g).

(nnnn)Zoning and Land Use Assessment:  Any review or investigation of the Existing Permitting and Zoning Approvals or other similar data for the Timeshare Property obtained or requested by Developer at its sole cost and expense pursuant to the provisions of Section 8.

(oooo)Zoning and Land Use Objections:  Any matters relating to zoning and land use classifications arising from the Zoning and Land Use Assessment which may materially and adversely impair Developer’s intended purpose for the Timeshare Property, as determined by Developer in its reasonable discretion, and to which Developer objects pursuant to the terms of this Agreement.  The fact or circumstance that the Timeshare Property, prior to action by Developer and/or Seller and/or others in connection with the Design/Approval Process, is not and/or may not be zoned and/or otherwise approved by applicable governmental zoning and permitting authorities to allow Developer’s intended purpose for the Timeshare Property, shall not constitute a Zoning and Land Use Objection.  The preceding sentence shall not prevent Developer or Seller from relying upon any rezoning or other land use approval undertaken as part of the Design/Approval Process (see Section 5) as a condition precedent to Developer’s or Seller’s obligations pertinent to Closing or Deed Delivery.

2.Purchase and Sale.   Subject to the terms and conditions set forth in this Agreement, Seller agrees to sell the Timeshare Property to Developer and Developer agrees to purchase the Timeshare Property from Seller for the Purchase Price.

3.Purchase Price; Advances.

(a)The Purchase Price shall be paid by timely payment of the Marketing Fee provided for in the Marketing and Leasing Agreement and as provided in Section 4 below.  Notwithstanding the preceding sentence, the parties agree that the Purchase Price, for the purpose of calculating any transfer tax or recordation tax or similar payment, and for related purposes such as allocations among land, improvements, fixtures and personalty, and for any reporting purposes, is $35,000,000, subject to confirmation by a definitive appraisal expected by the Closing Date, which amount is consistent with the allocation assigned to the Timeshare Property pursuant to the PSA.

(b)Notwithstanding Section 4 below or the provisions of the Marketing and Leasing Agreement, Developer agrees to pay Seller the following annual advances (“Timeshare Advances”) against the Marketing Fee to be earned by Seller.

(i)$3,500,000 for Year 1 (see Section 4(d) for designation of applicable years); and

(ii)$4,500,000 for Year 2; and

(iii)$6,000,000 for Year 3 and for each year thereafter until 100 Percent Sell-Out.

12

Timeshare Advances, in accordance with the above allocation, shall be paid on a monthly basis, in arrears, as provided in Section 4 below for payment of Marketing Fees, with the first Marketing Fee Period (defined below) commencing on the PH Sales Commencement Date and expiring on the last day of the month in which the PH Sales Commencement Date occurs.  At the end of each quarter (i.e., as of each March 31, June 30, September 30 and December 31), the Timeshare Advance for such quarter will be added to all the previous Timeshare Advances and compared to the Marketing Fees earned and paid from inception.  As of the end of each quarter,

(1)if Seller is due Marketing Fees in excess of Timeshare Advances received to date, Developer shall pay said shortfall within thirty (30) days of the end of each quarter, and

(2)if Seller has received Timeshare Advances in excess of Marketing Fees earned to date, then no Marketing Fees shall be due thereafter, until the aggregate amount of all Marketing Fees earned exceed aggregate amount of all Timeshare Advances paid, in which case Developer shall again be obligated to pay, as provided above, both the scheduled Timeshare Advances provided for in Section 3(b) plus the excess of Marketing Fees earned over said scheduled Timeshare Advances; provided, however, in any event, Developer shall be obligated to pay the scheduled Timeshare Advances provided for in Section 3(b) even if such payments of scheduled Timeshare Advances in the aggregate exceed Marketing Fees earned to date.

In the event of an act occasioned exclusively by forces of nature, terrorism or war within the continental United States outside the reasonable control of Developer and which materially impacts the Project, the parties shall negotiate in good faith whether and to what extent there shall be adjustments of the Timeshare Advances.

(c)All payments in under or in connection with this Agreement, whether of the Purchase Price or otherwise, shall be in current funds or by wire transfer to or at the direction of Seller, which may include, in accordance with Seller’s lending covenants, the direction of such amounts to separate parent, subsidiary or affiliated entities including, with out limitation, causing such payments to be made to accounts controlled by or under common control with the Seller’s lenders.

(d)In order to secure Developer’s duty to pay Timeshare Advances and Marketing Fees and other amounts payable under or in connection with this Agreement, Developer shall

(1)at Deed Delivery, deliver to Seller a letter of credit (the “Letter of Credit”), in form and substance as set forth in Exhibit C attached hereto (or to be attached hereto, in accordance with the Documentation Schedule) and incorporated herein by reference, issued by a commercial bank the commercial paper of which is rated “A” or higher by Standard & Poor’s Corporation.  The Letter of Credit shall be issued in a face amount of $6,000,000, with an initial term of one (1) year, and shall be renewed annually with a face amount of $6,000,000 until the date which is six (6) years following the Closing Date; failure of Developer to provide for a renewal or acceptable substitute Letter of Credit at least thirty (30) days prior to its then-stated expiration shall entitle the Seller to draw upon said Letter of Credit in full ten (10) days prior to its then-stated expiration; and

(2)at Closing, establish an escrow account, at a federally insured bank or savings institution with assets of at least $100 million, from which escrow account withdrawals are permitted to be made only by or with the express prior written approval of the Seller in each

13

instance, into which Developer shall deposit such amounts as are required herein and in the Escrow Agreement.  The amounts required to be deposited in said escrow account are equal to and not exceeding 10 percent of the gross purchase price of each Timeshare Interval sold by Developer in accordance with the Marketing and Leasing Agreement (including, where applicable, timeshare intervals in timeshare projects other than the Timeshare Project to the extent marketed by Developer at the Complex).  The form and substance of the Escrow Agreement for said escrow account is set forth in Exhibit O which is (or shall be, in accordance with the Documentation Schedule) attached hereto and incorporated herein by reference.

(e)The marketing and use leases and easements described in Section 13 are included as part of the Timeshare Property for purpose of determining the Purchase Price.

(f)The Developer shall not be required to pay Marketing Fees or Timeshare Advances after the Seller has received, in the aggregate, payments of Marketing Fees totaling, in the aggregate, the Aggregate Maximum Marketing Fee Amount.  For the purpose hereof, the “Aggregate Maximum Marketing Fee Amount” is the product of the following:

(52) x TCI x TCIP x 10%

where “TCI” means the total number of Timeshare Intervals (determined in accordance with the Timeshare Interval Measurement Principles) corresponding to the total number of Timeshare Units actually constructed in the Timeshare Project, but not less than 1,000 Timeshare Units containing in the aggregate not less than 2,000 “keys”; and “TCIP” means the actual purchase price charged to and paid by or on behalf of purchasers of Timeshare Intervals of all TCIs.

(g)If, after completion of construction of the last Phase of the Timeshare Project constructed by Developer, Developer’s remaining inventory of unsold Timeshare Intervals as of the first day of any year is materially less than an amount which, if 100 Percent Sell-Out were to occur in such year, would generate aggregate Marketing Fees for such year in an amount materially less than the aggregate monthly Timeshare Advances prescribed to be paid for such year in accordance with Subsection (b) above, then the parties the parties shall negotiate in good faith the extent to which there shall be adjustments of the Timeshare Advances for such year to reflect said remaining inventory.

4.Marketing Fee.

(a)For so long as the Marketing and Leasing Agreement (see Section 12) remains in effect, and continuing thereafter until 100 Percent Sell-Out, Developer shall pay a marketing fee (the “Marketing Fee”) in an amount equal to nine percent (9%) of the Net Interval Sales made by Developer of Timeshare Intervals in the Timeshare Project (including, where applicable, timeshare intervals in timeshare projects other than the Timeshare Project to the extent marketed at the Complex, as and to the extent permitted pursuant to this Agreement), in accordance with the Timeshare Interval Measurement Principles.  The Marketing Fee shall be paid in arrears by Developer to Seller on a monthly basis (the “Marketing Fee Period”) not later than the 20th day following the last day of the most recently expired Marketing Fee Period, by wire transfer of immediately available funds to one or more bank accounts as designated by Seller, and in connection with such payment, Developer shall provide to Seller a reasonably detailed itemized statement of the cumulative Net Interval Sales made by Developer for such Marketing Fee Period.  Said itemized statement shall be in the format set forth in Exhibit L attached hereto (or to be attached hereto, in accordance with the Documentation Schedule) and

14

incorporated herein by reference, with such adjustments, additions and refinements as may be mutually agreed to by the Seller and Developer from time to time.

(b)Seller shall be responsible for obtaining all licenses and/or permits as may be required under applicable law to receive the Marketing Fee.  Notwithstanding the foregoing, no payment of Timeshare Advances and/or Marketing Fees shall be withheld or delayed or denied in the event any required license or permit is not obtained, but, rather, any such payment shall be deposited in escrow with the Title Company and disbursed by the Title Company to the Seller as soon as any such required license or permit has been obtained.  If any such escrow remains in place for more than sixty (60) days, Seller and Developer shall in good faith negotiate an alternative payment arrangement giving Seller the same net economic result as payment of Timeshare Advances and Marketing Fees as provided for herein.

(c)It is acknowledged and agreed that the Marketing Fee shall also cover the consideration for all permitted kiosks, leases and marketing efforts in the Complex.  See Sections 12, 13, 14, 15 and 16below.

(d)Notwithstanding anything contained herein to the contrary, it is the intention of the parties that the Marketing Fee shall be calculated and paid based upon Net Interval Sales, which shall be reconciled and determined on quarterly and annual bases until the Marketing Fee has been paid in full, with the first year commencing as of the day Developer commences sales of Timeshare Intervals (i.e., on the PH Sales Commencement Date) and ending on the last day of the twelfth month thereafter.  Each successive year shall commence on the first succeeding day and end on the last day of the twelfth month thereafter.  For payments due to the Seller for periods prior to the commencement of the first year (i.e., prior to the PH Sales Commencement Date), see Section 12(c) and other applicable provisions of this Agreement.

(e)The aggregate Marketing Fee to be paid by Developer shall be determined on a “net” basis in accordance with the Timeshare Interval Measurement Principles.

(f)Simultaneously with delivery to Developer’s lenders for the Timeshare Project and other providers of funds for the Timeshare Project, but no less often than quarterly, with annual summarization, Developer shall deliver to Seller, for reliance by Seller, financial and other reports identical to the reports prepared for said lenders and other providers of funds, covering the just-ended quarter and the year-to-date period, for Developer and, where applicable, any and all entities with which Developer may be consolidated for reporting and/or audit and/or tax purposes; provided, however, Developer shall not be required to disclose to Seller specific information pertinent to that business of the Developer which is not related directly to the Timeshare Project.  If necessary, said deliveries to Seller shall include supplemental information to demonstrate and verify calculation and payment of Marketing Fees and Timeshare Advances and determination of Net Interval Sales for the period(s) in question.  Seller in its reasonable discretion may require any one or more of said reports and/or other books and records of Seller to be audited, for Seller’s benefit, by independent third-party certified public accountants acceptable to Seller.  Any such audit shall be at Seller’s expense unless the audit identifies a Marketing Fee discrepancy equal to or greater than 2 percent of any Marketing Fees payable for any covered period, in which event the audit in question shall be at Developer’s expense.  Any such reports and any such audits shall be subject to reasonable confidentiality requirements for the protection of Developer.

(g)Notwithstanding anything to the contrary contained in this Section 4, Marketing Fees payable to Seller shall be reduced by the amount of Shore Up or Operating Expenses

15

actually paid by Developer, together with interest thereon at the rate of six percent (6%) per annum, but the Timeshare Advance payments described in Section 3 above shall not, in any event, be reduced below the minimums described in said Section.  The amount of any such reduction not effected due to the minimum Timeshare Advance requirement of Section 3 shall be available to be effected in any subsequent year, if and to the extent Marketing Fees in such year exceed the applicable minimum.

(h)Of the nine percent (9%) Marketing Fee payable to Seller, Seller upon actual receipt shall direct that (1) fifty percent (50%) shall be deposited into a securities account in the name of MezzCo LLC with Wells Fargo Bank NA established under the Collateral Account Agreement as provided in the Mezzanine Lender Agreements, and (2) fifty percent (50%) shall be deposited into an account securing the Senior Lenders as provided in the Senior Lender Agreements.

5.Pre-Closing.

(a)Design/Approval Process.  Notwithstanding anything contained herein to the contrary, it is acknowledged that prior to commencing construction and as part of its efforts to obtain financing, Developer and Seller must among other things complete and execute this Agreement and all the related agreements described herein.  In addition, Developer must complete the design and planning of the Timeshare Project and obtain all required governmental approvals (herein referred to as the “Design/Approval Process”).  The parties acknowledge that the Developer shall incur substantial expense in connection with the Design/Approval Process and since Seller and Developer cannot close hereunder unless closing first occurs under the PSA, the Developer does not wish to incur expenses in connection with the Design/Approval Process until such time.  Accordingly, Seller and Developer agree that the Design/Approval Process will not, except as provided below, commence until the closing under the PSA and the Effective Date of this Agreement.

(b)Reserved.

(c)Seller’s Approval.  All aspects of the Design/Approval Process, including but not limited to the subject matter of this Section 5, are subject to prior approval of the Seller, as provided in Section 9 below, such approval not to be unreasonably withheld.

(d)Pre-Closing Deliveries by Seller.  Seller shall deliver to Developer, as soon as practical following the execution of this Agreement, subject to the terms and conditions of the PSA, and subject to any applicable confidentiality and similar agreements binding on Seller and/or the Timeshare Property and/or the Complex, and to the extent within Seller’s custody and control, all records and documents (or copies of such records and documents) concerning the Timeshare Property, to the extent in the possession or control of Seller and to the extent disclosure is not unauthorized, including but not limited to the following:

(i)Existing Permitting and Zoning Approvals and project commitments that were required by governmental authorities in connection with such Existing Permitting and Zoning Approvals; and

(ii)All surveys in Seller’s possession and control showing the boundaries of the Timeshare Property and any other matters relating to the Timeshare Property; and

16

(iii)All drawings, surveys, specifications, engineering reports, and all reports, documents, analyses, memoranda, letters, summaries and work papers relating to Environmental Matters concerning the Timeshare Property and physical condition of the land and any improvements now existing on the Timeshare Property, including any Environmental Assessments in Seller’s possession and control relating to the Timeshare Property to the extent in Seller’s possession and control; and

(iv)Any and all documents in Seller’s possession and control relating to the current status of the title to the Timeshare Property, including any applicable Title Commitments and any known easements affecting the Timeshare Property and copies of all documents to which a title insurer might take exception, whether or not of record; and

(v)Any reports in Seller’s possession and control providing the results of pre-construction soil tests performed on the Timeshare Property; and

(vi)All notices of assessment or reassessment in Seller’s possession and control concerning real estate taxes for the Timeshare Property; and

(vii)All leases, licenses, service agreements or other agreements in Seller’s possession and control affecting the Timeshare Property; and

(viii)The City Block Covenants; and

(ix)All Senior Lender Agreements; such Senior Lender Agreements shall be treated as documents which affect title for the purpose of the review and evaluation provisions of Section 7; and

(x)All documents related to the Northwind Property; and

(xi)Any Environmental Assessment; and any updates arising from Seller’s closing on the PSA; and

(xii)Any existing Starwood Management Agreement applicable to the Complex; Developer hereby Developer covenants that as long as this Agreement remains in effect (and following its termination for any cause whatsoever), Developer (and Developer’s affiliates) will hold in strict confidence all data and information obtained by Developer concerning the Starwood Management Agreement and/or Starwood and/or affiliates, in connection with this Agreement or otherwise; provided, however, Developer may disclose such information to Developer’s attorneys, outside consultants, lenders and bonding companies to the extent necessary to Developer’s compliance with its obligations hereunder, so long as any such recipients agree not to further disclose any such information; such Starwood Management Agreement shall be treated as a document which affects title for the purpose of the review and evaluation provisions of Section 7; and

(xiii)All existing plans and specifications for the Complex; and

(xiv)Any updated/revised title and/or survey materials arising from Seller’s closing on the PSA; and

17

(xv)Any of Seller’s occupancy projections pertaining to the Hotel/Casino Property and the Timeshare Project to the extent relevant to Developer’s financial and sales projections for the Timeshare Project; and

(xvi)Any other documents reasonably requested by Developer relating to the development, sale, rental or management of the Timeshare Project.

Seller shall supplement each such delivery of records and documents during the term of this Agreement within a reasonable period following Developer’s request therefor in the event that additional items arise or become available to Seller, or in the event that any of the foregoing is amended or modified.

(e)Pre-Closing Deliveries by Developer.  Developer shall deliver to Seller, as soon as practical, but in any event prior to Closing hereunder, to the extent within Developer’s custody and control, all records and documents (or copies of such records and documents) concerning the Timeshare Property, including but not limited to the following:

(i)The results of Developer’s analysis and investigation of the Timeshare Property and the feasibility of the Timeshare Project, including but not limited to drawings, surveys, specifications, engineering reports, and all reports, documents, analyses, memoranda, letters, summaries and work papers relating to Environmental Matters concerning the Timeshare Property and physical condition of the land and any improvements now existing on the Timeshare Property; and

(ii)The Plans and Specifications and Development Schedule; and

(iii)Preliminary confirmation, in form and substance reasonably acceptable to Seller, that Developer, by the time of Deed Delivery under Section 25(f) below, will have obtained and/or will have available sufficient funds (e.g., debt and equity) to complete the development and construction of the Timeshare Project (or, if applicable, the first phase thereof) and to timely pay the Marketing Fees and other amounts payable to Seller under or pursuant to the provisions of this Agreement and the Marketing and Leasing Agreement; and

(iv)The form of Letter of Credit; and

(v)All financial and sales projections pertaining to the Timeshare Project; Developer’s projections pursuant to this clause shall be without warranty or representation and are merely estimates; and

(vi)The Developer’s preferred form of Non-Disturbance and Attornment Agreement described in Section 19; and

(vii)Any other documents reasonably requested by Seller relating to the development, sale, rental or management of the Timeshare Project

Developer shall supplement each such delivery of records and documents during the term of this Agreement within a reasonable period following Seller’s request therefor in the event that additional items arise or become available to Developer, or in the event that any of the foregoing is amended or modified.

18

(f)Evaluation by Developer; Access.

(i)Following execution of this Agreement and prior to Closing hereunder, Developer shall have the right to evaluate the Timeshare Property, subject to the PSA (including but not limited to the provisions of the PSA which govern Seller’s access to the Complex and any portion thereof).  At a minimum Developer shall obtain a Title Commitment (see Section 6 below) and a Survey (same) and also shall conduct an Environmental Assessment and a Zoning and Land Use Assessment.  Developer in its discretion may also evaluate, among other things,

(i)suitability of physical characteristics of the Timeshare Property; and

(ii)results of Environmental Assessments of the Timeshare Property; and

(iii)Title Commitments for the Timeshare Property, and all title defects cited therein; and

(iv)each Survey of the Timeshare Property; and

(v)the zoning and land use classification of the Timeshare Property; and

(vi)title and other information regarding the Complex; and

(vii)Prospects for approval of the Timeshare Documents from the State of Nevada; and

(viii)Plans and Specifications and Development Schedule; and

(ix)The impact of any other matters as disclosed by the documents and materials required to be delivered by Seller pursuant to Subsection (d) above.

(ii)Seller grants to the Developer and its employees, representatives, agents and consultants having building or construction related duties (and such other persons as Developer shall identify to Seller in a notice) permission, with prior notice and subject to reasonable Seller requirements, to access and enter on the Timeshare Property prior to Closing hereunder for the purposes of physically inspecting the Timeshare Property and performing such tests, surveys and investigations as Developer deems necessary or appropriate, including, but not limited to, investigating the surface and sub-surface soil and water conditions and conducting tests, core borings, and environmental assessments and other site activities.  Developer shall fill any and all wells, borings or other excavations made by the Developer or any of its employees, representatives, agents or consultants and shall return the Timeshare Property to Seller in substantially the same condition as existed prior to the Developer’s entry on the Timeshare Property.  Developer shall pay for any and all tests and investigations which Developer and its employees, representatives, agents and consultants conduct on the Timeshare Property and indemnify and hold Seller and the Senior Lenders harmless from any claims for liability or property damage arising from such inspections and any claim for compensation by any contractor or subcontractor who conducts work or alleges to have made improvements upon the Timeshare Property at the Developer’s request.  Developer’s agreement to hold Seller harmless shall include the cost of bonding off any applicable lien or claim.  Developer shall advise Seller of the names of the representatives, agents, and consultants employed by Developer to perform such tests, surveys and inspections.

19

(g)Any and all deliveries by Seller and cooperation by Seller as provided in this Agreement are and shall be without representation or warranty of any kind by Seller or any of its officers, agents, employees and contractors, except as may be provided in Section 20 hereof.

6.City Block Covenants & Senior Lender Agreements;
Senior Lender Approvals; Access to Timeshare Property.

(a)(1)Notwithstanding anything to the contrary herein or in any other document or agreement, this Agreement, the Seller’s obligations to the Developer and the Developer’s rights under this Agreement and/or under any other related document or agreement are subject to and limited by the City Block Covenants.  The City Block Covenants include but are not limited to a Reciprocal Easement Agreement (as modified and/or affected by letter agreement dated June 20, 2003), a Common Area Access Agreement and a Shared Parking Agreement (aka Parking Use Agreement), all of which define, govern and limit access to the City Block Properties and provide for payment by the owners of the City Block Properties of common area maintenance (“CAM”) and similar payments.  The City Block Covenants also include agreements, binding on the City Block Properties and the owners thereof, pertaining to use of and payment for utilities generated by the utility plant on the Northwind Property, including payments designated to repay debt incurred to acquire and build said utility plant.

(2)It shall be a condition to Deed Delivery, as provided in Section 25(a)(viii), that the owner of the Mall Property, aka Desert Passage Shopping Center (aka/fka Aladdin Bazaar) (Boulevard Investments), shall have given, in form and substance satisfactory to Developer in its reasonable discretion, by the REA Approval Deadline, as same may be extended, all necessary approvals required of said owner pursuant to the Reciprocal Easement Agreement, as modified and/or affected by letter agreement dated June 20, 2003, for the Timeshare Project, except as provided in Paragraph (3) below.  For the purpose hereof, the “REA Approval Deadline” shall be the date which is the later to occur of (i) April 1, 2005, or (ii) the date which is ninety (90) days following the Closing Date; and Seller may extend the REA Approval Deadline for successive periods of thirty (30) days, in which event each such extension shall cause all corresponding deadlines applicable to Seller or Developer to be extended for identical periods of time.

(3)Notwithstanding Paragraph (2) above or any other provision of this Agreement or of any other document or agreement, it shall not be a condition to Deed Delivery that Seller provide access through the Mall Property as described in Subsection (c) below or that the owner of the Mall Property give any other approval related to said access, and any failure of Developer to obtain said access or any other approval related to said access shall not excuse any performance required of Developer hereunder.

(4)If the owner of the Mall Property requires, as a condition to one or more of the approvals described in Paragraph (2), modifications to the scope or scale of the Timeshare Project as described herein, then Seller shall reimburse Developer for the Developer’s actual costs in revising the Plans to accommodate such required modifications.

(5)If the owner of the Mall Property disapproves Developer as the timeshare developer described in the letter agreement dated June 20, 2003 (see Paragraph (2) above); or if the owner of the Mall Property disapproves construction of at least 800 Timeshare Units containing at least 1,600 “keys” in the Timeshare Project as provided for in this Agreement; or if the owner of the Mall Property requires changes in Developer’s plans and schedule for the Timeshare Project and/or fails to give any required approval that, in either case, materially and

20

adversely affect(s) Developer’s ability to finance the construction of the Timeshare Project, Developer’s ability to obtain Clark County permits required for construction of the Timeshare Project, Developer’s cost to construct the Timeshare Project, Developer’s scheduling and/or phasing plans for the construction of the Timeshare Project; or if the owner of the Mall Property proximately causes Clark County to disapprove construction of at least 800 Timeshare Units containing at least 1,600 “keys” in the Timeshare Project as provided for in this Agreement – provided, in each case, that Developer in good faith diligently pursues and exhausts all commercially reasonable efforts to obtain the necessary approvals from the owner of the Mall Property and/or to develop commercially reasonable alternative(s) – then a condition to Deed Delivery shall not have been satisfied, in which event Developer shall not be liable for liquidated damages under Section 26(c) for any breach, violation, default or failure hereunder which arises proximately from Seller’s said inability.

(6)If the Timeshare Project contains fewer than 1,000 Timeshare Units consisting of at least 2,000 “keys” but does contain at least 800 Timeshare Units containing at least 1,600 “keys” as a consequence of Paragraph (5) above, then the provisions of this Agreement pertaining to Minimum Project Density and pertaining to the second and any subsequent phase of the Timeshare Project shall be adjusted to reflect the actual number of Timeshare Units and “keys” in the Timeshare Project.

(b)Notwithstanding anything to the contrary herein or in any other document or agreement, the parties understand and acknowledge that Seller is or may be required to obtain consents and approvals from the Senior Lenders prior to and in connection with, among other things, entering into this Agreement and/or granting any consent or approval to Developer in connection with this Agreement or the Timeshare Project and/or approving any Timeshare Development Agreement and/or any exhibit or schedule to this Agreement.  Developer agrees to cooperate with Seller’s reasonable requests and requirements arising from Senior Lender considerations.

(c)Seller shall make commercially reasonable efforts to provide for vehicular and/or pedestrian access to the Timeshare Property via the Mall Property, aka Desert Passage Shopping Center (aka/fka Aladdin Bazaar) (Boulevard Investments), and/or via other routes, whether or not now existing.  The configuration of such access, and the Seller’s and Developer’s respective responsibilities with respect thereto (including but not limited to rights of access and payment of costs) shall be mutually agreed during the Design/Approval Process (or later if applicable).  Developer acknowledges that Seller’s initial actions to comply with its obligations in this Subsection (c) shall be solely pursuant to the City Block Covenants.  In the event Seller is unable to so comply solely pursuant to the City Block Covenants, then Seller shall take commercially reasonable steps to so comply pursuant to other mutually agreed means, with costs of compliance to be allocated as mutually agreed between Seller and Developer.

(d)(1)Seller shall provide and make available to the Developer those parking spaces to which Seller is entitled pursuant to the City Block Covenants, including the Shared Parking Agreement (aka Parking Use Agreement), after subtracting therefrom those parking spaces required by Seller for its operations at the Hotel/Casino Property.  Seller shall pass through to Developer, without fee or markup, and Developer shall pay, all costs and fees payable from time to time for or in connection with the parking spaces so provided and made available to the Developer as aforesaid (the “Parking Fee”).  Seller shall provide written confirmation, in form and substance reasonably satisfactory to Developer, of the number of parking spaces so provided pursuant to the City Block Covenants.

21

(2)If Seller, after exhausting all commercially reasonable efforts, is unable, pursuant to the City Block Covenants as aforesaid, to provide and make available to Developer the entire number of parking spaces required by Developer pursuant to applicable legal requirements to develop the Timeshare Project (the “Parking Requirement”), but if Seller is able to so provide and make available to Developer at least 600 parking spaces, then, to the extent of the shortfall, Developer shall construct parking facilities serving the Timeshare Project on the Timeshare Property at Developer’s cost, in which event Developer shall be entitled to

(A)reimbursement of allocable construction loan interest, as provided in Section 18(b), for parking facilities so constructed to meet said shortfall, but said reimbursement shall be available only to the extent the Parking Requirement does not exceed 800 parking spaces; and

(B)a monthly cost recovery payment for parking facilities so constructed to meet said shortfall, provided that said cost recovery component (which cost recovery component shall be treated as part of the Parking Fee for the purpose of the definition of Operating Costs) shall be available only to the extent the Parking Requirement does not exceed 800 parking spaces; and provided further that the sum of said cost recovery component, plus the reimbursement provided for in clause (A) above, shall not exceed, in any event, the monthly Parking Fee described in Paragraph (d)(1) above;

provided, however, that the aforesaid 800 parking space limitation shall be increased to the extent (but only to the extent) that construction of the convention center space, provided for in Section 9(h) of this Agreement, causes the Parking Requirement to increase.

(3)If Seller, after exhausting all commercially reasonable efforts, is unable, pursuant to the City Block Covenants as aforesaid, to provide and make available to Developer at least 600 parking spaces, as set forth in Paragraph (2) above, then

(A)a condition to Deed Delivery shall not have been satisfied, in which event Developer shall not be liable for liquidated damages under Section 26(c) for any breach, violation, default or failure hereunder which arises proximately from Seller’s said inability; provided, however, that said inability shall not be grounds for Developer to terminate its obligations under this Agreement; and

(B)Seller shall reimburse Developer for the Developer’s actual costs in revising the Plans to provide parking for the Timeshare Project to the extent of the shortfall; and

(C)all corresponding deadlines applicable to Seller or Developer shall be extended for such reasonable period of time as is necessary to accomplish said revision of the Plans.

(4)Notwithstanding anything to the contrary herein, Developer in its sole discretion may elect not to utilize the parking spaces provided and made available by Seller as provided above, in which event Developer shall construct parking facilities serving the Timeshare Project on the Timeshare Property at Developer’s sole cost, but Developer shall nevertheless accept and, as provided herein, pay (or cause to be paid) the Parking Fee for those parking spaces provided and made available by Seller as provided in Paragraph (1) above.

(e)(1)Seller shall provide to Developer, by the REA Approval Deadline, as same may be extended, confirmation, in form and substance satisfactory to the Developer in its

22

reasonable discretion, that, subject to payment of applicable fees, costs and expenses, utilities generated by the utility plant on the Northwind Property will be available to the Timeshare Project.

(2)If Seller, after exhausting all commercially reasonable efforts, is unable to provide the utilities confirmation as aforesaid by the REA Approval Deadline, as same may be extended, then, if alternative means of providing utilities to the Timeshare Project are available on commercially reasonable terms:

(A)Seller shall reimburse Developer for the Developer’s actual costs in revising the Plans to provide alternatively for utilities serving the Timeshare Project; and

(B)all corresponding deadlines applicable to Seller or Developer shall be extended for such reasonable period of time as is necessary to accomplish said revision of the Plans.

7.Title and Survey Matters.

(a)As an accommodation, at Developer’s expense, Seller will make available to Developer, without representation or warranty, copies of any Title Commitment and related materials in Seller’s possession or control pertaining to the Timeshare Property.  Within thirty (30) days after the date of delivery of said items (but not, in any event, later than December 31, 2004), Developer shall obtain, at Developer’s sole cost and expense, a Title Commitment for the Timeshare Property and such other title information for the Complex and the Hotel/Casino Property as deemed reasonable by Developer.

(b)Developer shall pay the cost of all title insurance charges, premiums and endorsements, including all search, continuation and later-date fees and any and all title related closing fees, attorney fees and expenses, and including the premium for title insurance benefiting Seller in its capacity as holder of the reversionary interest pursuant to Section 9(g) if such title insurance is available, provided Seller shall not be responsible to pay any additional title insurance premium due to the nature of the Seller’s interest being other than that of a mortgagee.

(c)If the Title Commitment reveals any Title Objections, Developer shall notify Seller within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004).  Prior to Deed Delivery, Seller shall correct any Title Objection which can be corrected solely by payment of money, such that the Timeshare Property shall be free of monetary liens (other than inchoate liens) as of the date of Deed Delivery (see also Section 25(e) which pertains to adjustment and proration of certain items at Deed Delivery).  Subject to the PSA, Seller may, but shall have no obligation to, correct any other Title Objections, and in such event Seller shall pay all fees and expenses incurred in correcting any Title Objections, but Seller shall not be obligated to bring suit to do so.  If Seller fails to correct any Title Objection, or if Seller notifies Developer that Seller declines to correct any Title Objection, Developer shall either

(i)terminate this Agreement by giving notice to Seller, upon which the parties shall have no further rights or obligations hereunder other than as provided in Section 33; or

(ii)proceed to Closing, and deduct the cost to correct (to be agreed upon by Seller and Developer) or (if no cost is incurred to correct the Title Objection) the resulting diminution in value (to be agreed upon by Seller and Developer), if any, from the Purchase Price by

23

deducting equal amounts from the first four annual Timeshare Advance amounts (i.e., the monthly Timeshare Advance shall be reduced by 1/48 of the aggregate amount of said deduction), in which case said Title Objections shall constitute Permitted Title Matters.

If Developer fails to elect either option (i) or option (ii) above in writing within ten (10) days of written notice from Seller, then the right to elect shall belong to Seller, not Developer.

(d)If Developer does not notify Seller of any potential Title Objections within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004), then all matters of title shall constitute Permitted Title Matters.

(e)As an accommodation, at Developer’s expense, Seller will make available to Developer, without representation or warranty, copies of any survey and related materials in Seller’s possession or control pertaining to the Timeshare Property.  Within thirty (30) days after the date of delivery of said items (but not, in any event, later than December 31, 2004), Developer shall have a Survey of the Timeshare Property prepared by a Nevada licensed surveyor.  Developer’s Survey shall be certified to the Title Company, the Seller, the Developer and the Developer’s lender, if applicable, and shall be in such form as the Developer and/or the Title Company may reasonably require or approve.  The Survey shall show all encroachments of any improvements onto adjoining properties, easements, set-back lines or rights-of-way, and all encroachments of adjacent improvements onto the Properties.  Developer shall pay the cost of the Survey and all updates thereto required by Developer or the Title Company.

(f)If the Survey reveals any Survey Objections, Developer shall notify Seller within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004).  Subject to the PSA, Seller may, but shall have no obligation to, correct said Survey Objections, and in such event Seller shall pay all fees and expenses incurred in correcting any Survey Objections, but Seller shall not be obligated to bring suit to do so.  If Seller fails to correct any Survey Objection, or if Seller notifies Developer that Seller declines to correct any Survey Objection, Developer shall either

(i)terminate this Agreement by giving notice to Seller, upon which the parties shall have no further rights or obligations hereunder other than as provided in Section 33; or

 (ii)proceed to Closing, and deduct the cost to correct (to be agreed upon by Seller and Developer) or (if no cost is incurred to correct the Survey Objection) the resulting diminution in value (to be agreed upon by Seller and Developer), if any, from the Purchase Price by deducting equal amounts from the first four annual Timeshare Advance amounts (i.e., the monthly Timeshare Advance shall be reduced by 1/48 of the aggregate amount of said deduction), in which case said Survey Objections shall constitute Permitted Survey Matters.

If Developer fails to elect either option (i) or option (ii) above in writing within ten (10) days of written notice from Seller, then the right to elect shall belong to Seller, not Developer.

(g)If Developer does not notify Seller of any potential Survey Objections within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004), then all matters of survey shall constitute Permitted Survey Matters.

24

(h)As the Timeshare Project is being completed (or, if applicable, as each phase is being completed), Developer shall obtain an updated “as built” Survey for the Timeshare Project or applicable phase in order to enable the Title Company to insure the title to the Timeshare Property (or applicable phase) without exceptions for matters of survey and in order to provide final drawings for the timeshare regime.

8.Environmental and Zoning Matters.

(a)As an accommodation, at Developer’s expense, Seller will make available to Developer, without representation or warranty, copies of any environmental assessment and related materials in Seller’s possession or control pertaining to the Timeshare Property.  Within thirty (30) days after the date of delivery of said items (but not, in any event, later than December 31, 2004), Developer shall obtain and review an Environmental Assessment of the Timeshare Property.  Such assessment shall be performed by a duly licensed and reputable environmental engineering company selected by Developer and shall expressly provide that it may be relied upon by Seller.  If Developer discovers any matters that constitute Environmental Objections, Developer shall notify Seller within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004).  Subject to the PSA, Seller may, but shall have no obligation to, correct said Environmental Objections, and in such event Seller shall pay all fees and expenses incurred in correcting any Environmental Objections, but Seller shall not be obligated to bring suit to do so.  If Seller fails to correct any Environmental Objection, or if Seller notifies Developer that Seller declines to correct any Environmental Objection, Developer shall either

(i)terminate this Agreement by giving notice to Seller, upon which the parties shall have no further rights or obligations hereunder other than as provided in Section 33; or

 (ii)proceed to Closing, and deduct the cost to correct (to be agreed upon by Seller and Developer) or (if no cost is incurred to correct the Environmental Objection) the resulting diminution in value (to be agreed upon by Seller and Developer), if any, from the Purchase Price by deducting equal amounts from the first four annual Timeshare Advance amounts (i.e., the monthly Timeshare Advance shall be reduced by 1/48 of the aggregate amount of said deduction), in which case said Environmental Objections shall constitute Permitted Environmental Matters.

If Developer fails to elect either option (i) or option (ii) above in writing within ten (10) days of written notice from Seller, then the right to elect shall belong to Seller, not Developer.

(b)If Developer does not notify Seller of any potential Environmental Objections within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004), then all Environmental Matters shall constitute Permitted Environmental Matters.

(c)During the thirty (30) days following the Effective Date (but not, in any event, later than December 31, 2004), Developer may investigate the Existing Permitting and Zoning Approvals and may verify that all applicable zoning and land use regulations permit the use of the Timeshare Property for Developer’s Timeshare Project (with variances and exceptions, if applicable).  If Developer discovers any matters that constitute Zoning and Land Use Objections, Developer shall notify Seller within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004).  Subject to the PSA, Seller may, but shall have no obligation to, correct said Zoning and Land Use Objections,

25

and in such event Seller shall pay all fees and expenses incurred in correcting any Zoning and Land Use Objections, but Seller shall not be obligated to bring suit to do so.  If Seller fails to correct any Zoning and Land Use Objection, or if Seller notifies Developer that Seller declines to correct any Zoning and Land Use Objection, Developer shall either

(i)terminate this Agreement by giving notice to Seller, upon which the parties shall have no further rights or obligations hereunder other than as provided in Section 33; or

(ii)proceed to Closing, and deduct the cost to correct (to be agreed upon by Seller and Developer) or (if no cost is incurred to correct the Zoning and Land Use Objection) the resulting diminution in value (to be agreed upon by Seller and Developer), if any, from the Purchase Price by deducting equal amounts from the first four annual Timeshare Advance amounts (i.e., the monthly Timeshare Advance shall be reduced by 1/48 of the aggregate amount of said deduction), in which case said Zoning and Land Use Objections shall constitute Permitted Zoning and Land Use Matters.

If Developer fails to elect either option (i) or option (ii) above in writing within ten (10) days of written notice from Seller, then the right to elect shall belong to Seller, not Developer.

(d)If Developer does not notify Seller of any potential Zoning and Land Use Objections within five (5) days following the end of the aforesaid thirty (30) day period (but not, in any event, later than December 31, 2004), then all matters of zoning and land use shall constitute Permitted Zoning and Land Use Matters.  The preceding sentence applies only to the Timeshare Property as of the Effective Date, and shall not affect the related provisions hereof concerning the Design/Approval Process, as described in Section 5, and the Developer’s conditions to closing and/or Deed Delivery, as provided in Section 25.

9.Development of the Timeshare Project.

(a)Commencement & Completion.

(1)Developer shall commence the Design/Approval Process described in Section 5(a) immediately upon execution and delivery of this Agreement, subject to Section 5(b).  Immediately following delivery of the deed as provided in Section 25, Developer shall commence construction of the Timeshare Project as provided in this Agreement and the final Complex Standards.

(2)(A)Developer shall use commercially reasonable efforts to complete construction of the Timeshare Project (or, if applicable, the first phase thereof) no later than November 1, 2006, and shall, in any event (subject to extension or revision as provided below in this Paragraph (2)(A)), complete construction of the Timeshare Project (or, if applicable, the first phase thereof) no later than December 31, 2007.  The foregoing construction completion dates shall be subject to extension or revision by mutual written agreement of Seller and Developer (both acting in a commercially reasonable manner) as part of the Design/Approval Process and as a result of contract terms between Developer and its general contractor.

(B)If the Timeshare Project is built in phases as provided in Subsection (f) below, the Developer shall commence construction of the second and any subsequent phases as and when (and no later than) provided in said Subsection (f), and shall complete construction of the final phase of the Timeshare Project no later than the date required in or pursuant to said Subsection (f) for completion of the Timeshare Project.

26

(3)To induce Seller to accept evidence of delivery to the State of Nevada of the completion bond(s) and to accept the Parent Guaranty, both of which are described in Section 9(n) below, Developer agrees to commence all portions of Phase 1 of the Timeshare Project (including both towers, each containing at least 250 units and at least 500 keys) at the same time, to diligently pursue development and construction of all such portions with equal diligence and in good faith, and to complete construction of all such portions at the same time.

(4)Assurance of completion acceptable to the Seller, in the form of evidence of delivery to the State of Nevada of the completion bond(s) and/or in the form of the Parent Guaranty, both of which are described in Section 9(n) below, shall be required for each phase of the Timeshare Project following the first phase.  If the third and fourth buildings of the Timeshare Project are commenced simultaneously, or are under construction at the same time, both the completion bond(s) and the Parent Guaranty, as aforesaid, shall be required.  Only a completion bond(s) as aforesaid shall be required during any time that only one of such buildings is under construction.

(b)Quality.  The theming, design, trade dress and operation of the Timeshare Project will be subject to Seller’s approval, will be of a first class nature, will be in keeping with the Complex Standards, and will be of a quality and specification equal to or better than a “five stars” standard as established by Interval International.

(c)The Timeshare Project.  The Timeshare Project shall be a timeshare project, constructed in accordance with this Agreement and the final Complex Standards, consisting of no fewer than one thousand (1,000) Timeshare Units, and no fewer than two thousand (2,000) keys, in one-, two-, three- and/or four-bedroom “lockout” units, located in not more than four (4) buildings, each containing at least fifteen (15) stories and no fewer than five hundred (500) keys, in one-, two-, three- and/or four-bedroom “lockout” units, and with amenities for all of the aforesaid.  The Timeshare Project may also include other facilities customarily contained in a timeshare development, but, with the exception of check-in facilities and swimming pool, which Developer may in its discretion construct at its cost as part of the Timeshare Project for use by occupants of the Timeshare Project, and except as otherwise provided in this Agreement, such other facilities at the Timeshare Project shall not include any amenities offered by Seller at the Hotel/Casino Property, including but not limited to gaming, conventions, hotel use (including facilities developed for hotel use as well as hotel use of Timeshare Units as provided herein), food and beverage, retail, entertainment (live or otherwise) and other recreational facilities.

(d)Construction Personnel.  As part of the construction process, Developer agrees to engage one or more qualified construction personnel with extensive experience in high rise construction of multi-residential buildings.

(e)Seller’s Approval of Development Plan and Plans & Specifications and Development Schedule.  The Developer shall submit to Seller, contemporaneously with submission to any governmental or quasi-governmental agency or official and/or with submission to any lender or other provider of funds and/or upon reasonable request by Seller, the Developer’s development plan for the Timeshare Project and its Plans and Specifications and Development Schedule for the Timeshare Project and any and all addenda, updates, modifications, supplements and amendments thereto.  Developer shall not proceed with implementation of any work provided for in any of the foregoing without Seller’s prior approval, not to be unreasonably withheld.

27

(f)Phases; Buildings.

(i)If, after Developer has exhausted all commercially reasonable efforts, to the extent that construction financing relative to a one phase Timeshare Project consisting of not fewer than 1,000 Timeshare Units and not fewer than 2,000 keys is unavailable, Developer shall construct the Timeshare Project in two or more phases, the first phase consisting of not fewer than five hundred (500) Timeshare Units and not fewer than 1,000 keys, in accordance with the Unit Count Example.  The Developer may in its discretion construct the Timeshare Units in multiple buildings within each phase, and may increase the number of Timeshare Units and number of keys in the first phase; provided, however, in any event there shall be no more than four (4) buildings in total for the Timeshare Project and any one building can contain no fewer than two hundred fifty (250) Timeshare Units and no fewer than 500 keys, in accordance with the Unit Count Example.

(ii)In the event that the Timeshare Project is to be completed in more than one phase as contemplated by this Subsection, Developer agrees that, subject to the conditions set forth herein, Developer shall immediately commence construction of the first phase and, thereafter (following satisfaction of and subject to the conditions set forth in Paragraph (iii) below), immediately commence construction of the second phase (and any subsequent phases) once the revenue generated from the unsold Timeshare Units within such previously commenced phase(s) exceeds:

(A)the maintenance fees owed in connection therewith; and

(B)Operating Costs; and

(C)the current interest expense then due on any construction financing owed by Developer relative thereto

and in any event shall commence construction of the final phase not less than four (4) years from the required date of completion of construction of the first phase of the Timeshare Project.

(iii)The Seller and/or the Developer, as applicable, shall in writing notify the other party or parties to this Agreement when the revenue threshold described in Subparagraph (ii) above has been crossed.  Developer shall commence construction of the next phase(s) not later than the date which is ninety (90) days following transmission of each such notice.

(g)Reversion or Perpetual Easement.

(i)If the Timeshare Project is developed in phases in accordance with this Agreement, and if Developer does not timely commence construction of the second and any subsequent phases in accordance with this Agreement (including but not limited to the requirement to provide assurance of completion in accordance with Subsection (n) below), then all portions of the Timeshare Project other than the portion upon which Developer has timely commenced construction (the “Reversion Property”) shall revert to the Seller, or, in the alternative, at Seller’s election, a perpetual easement upon the Reversion Property shall be granted to Seller, in either event at no cost to Seller; and, in either event, at the election of Seller, in order to complete construction of the Timeshare Project, Seller shall have full right, title and authority to receive, retain, use and modify any and/or all of Developer’s plans, and shall have all of the rights of Developer in and to any and all construction contracts, subcontracts, architect

28

agreements and similar and related documents and agreements pertinent to the Timeshare Project or any part thereof.

(ii)Upon timely commencement by Developer of construction of the second and any subsequent phase of the Timeshare Project in accordance with this Agreement (including but not limited to the requirement to provide assurance of completion in accordance with Subsection (n) below), then the reversionary rights and/or easement rights described above shall immediately terminate with respect to the applicable portion of the Timeshare Project.  For the purpose hereof, “timely commencement” means Developer shall have commenced construction of the final phase of the Timeshare Project not later than the date for commencement specified in or pursuant to Section 9(f)(ii) above and shall have provided assurance of completion in accordance with Subsection (n) below.

(iii)The reversionary rights and/or easement rights described in this Subsection (g) shall terminate as provided below:

(A)As to Phase One of the Timeshare Project, consisting of two (2) buildings, each containing at least 250 Timeshare Units and at least 500 keys, said reversionary rights and/or easement rights shall terminate with respect to said Phase One at such time as the Developer has provided evidence of delivery to the State of Nevada of the completion bond(s) and has provided the Parent Guaranty, as provided in Section 9(n) hereof with respect to said Phase One, and has commenced construction of and is contractually obligated to complete simultaneously both of the two buildings of said Phase One.

(B)If Phase Two of the Timeshare Project consists of at least 500 Timeshare Units in two (2) buildings and thereby completes Developer’s construction obligations concerning the Timeshare Project, including the Minimum Project Density, said reversionary rights and/or easement rights shall terminate with respect to said Phase Two at such time as the Developer has provided evidence of delivery to the State of Nevada of the completion bond(s) and has provided the Parent Guaranty,, as provided in Section 9(n) hereof with respect to said Phase Two, and has commenced construction of and is contractually obligated to complete simultaneously both of the two buildings of said Phase Two.

(C)If Phase Two of the Timeshare Project consists of at least 250 Timeshare Units in one (1) building, said reversionary rights and/or easement rights shall terminate with respect to said Phase Two at such time as the Developer has provided evidence of delivery to the State of Nevada of the completion bond(s) as provided in Section 9(n) hereof with respect to said Phase Two, and has commenced construction of and is contractually obligated to complete said Phase Two.

(D)If Phase Three of the Timeshare Project consists of at least 250 Timeshare Units in one (1) building and thereby completes Developer’s construction obligations concerning the Timeshare Project, including the Minimum Project Density, said reversionary rights and/or easement rights shall terminate with respect to said Phase Three at such time as the Developer has provided evidence of delivery to the State of Nevada of the completion bond(s) as provided in Section 9(n) hereof with respect to said Phase Three, and has commenced construction of and is contractually obligated to complete said Phase Three.

29

(iv)In order to prevent a reversion or easement as contemplated herein, Developer’s rights to develop the Timeshare Property (or applicable portion) may be assigned, such assignment and assignee subject to the prior approval of the Seller in its reasonable discretion, such approval not to be unreasonably withheld, conditioned or delayed.  In the event of an assignment pursuant to this Paragraph (iv),

(A)The assignee shall in writing assume all of the obligations of the Developer under this Agreement, the Timeshare Development Agreements and all other applicable documents and agreements; and, with respect to the portion of the Timeshare Property so assigned, Seller shall remain bound by all applicable provisions of this Agreement, including but not limited to provisions concerning marketing locations, exclusivity, management rentals and easements; and

(B)Developer shall be and remain liable for any and all acts and omissions, and all events and circumstances, occurring or arising on or prior to the effective date of the assignment; and

(C)With respect to the portion of the Timeshare Property so assigned, the assignee shall be liable for any and all acts and omissions, and all events and circumstances, occurring or arising after the effective date of the assignment; and

(D)With respect to this Agreement and the other Timeshare Development Documents, including but not limited to the Marketing and Leasing Agreement,

(1)the Developer and the assignee, to the extent of their respective interests in the Timeshare Property, shall be severally responsible for compliance with all applicable obligations owed to the Seller, pro rata in accordance with their respective interests in the Timeshare Property, or on such other basis as may agreed upon in writing among the Developer, the assignee and the Seller; and

(2)all of the Seller’s applicable obligations shall be owed to both the Developer and the assignee, pro rata in accordance with their respective interests in the Timeshare Property, or on such other basis as may agreed upon in writing among the Developer, the assignee and the Seller; and

(E)Thereupon, the Developer shall be released from liability hereunder with respect to the interests so assigned, subject to clause (B) above.

(v)In the event of a reversion or easement as contemplated herein, and if construction of the first phase was completed as required herein, then

(A)Until the occurrence of a Fully Sold Project to the extent of Timeshare Units in the portion of the Timeshare Project actually completed by Developer,

(1)the second and any subsequent phase shall not be developed or marketed as timeshares, and appropriate provisions shall be mutually negotiated relating to non-competition and interference with Developer’s timeshare sales and marketing efforts in the portion of the Timeshare Project actually constructed by Developer; and

30

(2)all applicable provisions of this Agreement – including but not limited to provisions concerning marketing fees, marketing locations, exclusivity, Vacation Rentals, Maintenance Agreements and easements – shall continue in full force and effect;

provided that the foregoing shall not limit or otherwise affect Seller’s activities with respect to anything other than Timeshare Intervals; and

(B)After occurrence of a Fully Sold Project to the extent of Timeshare Units in the portion of the Timeshare Project actually completed by Developer, Seller may develop and/or sell the second and any subsequent phases of the Timeshare Project without regard to the aforesaid limitations, including but not limited to a competing timeshare project and/or a competing timeshare developer.

(vi)See also Section 26(d) for reversion provisions effective in the event of certain defaults by Developer.  Said reversion provisions are incorporated by reference into this Subsection (g) as if fully restated.

(vii)If a reversion event occurs as provided herein, all right, title and interest of Developer with respect to the Reversion Property under this Agreement, and all right, title and interest of Developer with respect to the Reversion Property under all other applicable Timeshare Development Documents, shall immediately terminate; and Developer shall execute, seal, acknowledge and deliver such instruments of conveyance and such other documents and agreements as may be necessary or appropriate to confirm said termination and complete said reverter.

(h)Convention Center Space.  In addition to the foregoing, the Timeshare Project shall, at Seller’s option, subject to the Design/Approval Process, include up to 75,000 square feet of convention center space for the exclusive use of Seller, in accordance with the following:

(1)The location, design and layout, and plans and specifications for the convention center space shall be mutually agreed by Seller and Developer prior to commencement of construction.  It is currently anticipated that Phase One of the Timeshare Project shall include approximately half of the convention center space, and that Phase Two of the Timeshare Project shall include approximately half of the convention center space.

(2)The Seller and Developer shall enter into a triple-net lease for the convention center space on mutually agreed commercially reasonable terms and conditions prior to or as of Deed Delivery.  Said lease shall provide for an initial term of 25 years, with multiple successive automatic 5-year renewals unless Seller by written notice declines to renew at least 180 days prior to the then-current expiration date.  Said lease, and the Maintenance Agreement, shall both provide that termination or expiration of said lease shall automatically effect a termination of the Maintenance Agreement, and that termination or expiration of the Maintenance Agreement shall automatically effect a termination of said lease.  Further, said lease, and the Maintenance Agreement, shall both provide that a non-defaulting party’s remedies for default shall include the right to terminate both said lease and the Maintenance Agreement, but not the right to terminate only one of such agreements.

(3)Developer agrees that its “all-in” construction costs related to the convention center space shall not exceed $15,000,000 and shall be amortized pursuant to one or the other

31

of the following two (2) alternatives, such choice to be made by Developer at least six (6) months prior to the mutually agreed date of opening of the first portion of the convention center space:

(A)Fixed rent for the initial lease term in amount equal in each year to ten percent (10%) of Developer’s “all-in” construction costs related to the convention center space; in such event, any and all allocable revenue from the convention center space (determined as provided in subparagraph (D) below) shall accrue to Seller only and not to Developer; or

(B)Rent for the initial lease term in amount equal in each year to the sum of

(i)five percent (5%) of Developer’s “all-in” construction costs related to the convention center space; plus

(ii)allocation and payment to Developer of a portion of the net profits from operation of the convention center space, to be calculated, allocated and paid annually, in accordance with the following:

(a)first, to Developer, from net profits, an amount equal to five percent (5%) of Developer’s “all-in” construction costs related to the convention center space; and

(b)second, to Seller, from net profits, an amount equal to the amount paid to Developer in accordance with clause (a) above; and

(c)thereafter, said net profits shall be allocated and paid 50 percent to the Developer and 50 percent to the Seller.

(C)Rent for renewal lease terms to be mutually agreed and in accordance with market rates.

(D)Seller and Developer shall mutually agree upon a method of determining and accounting for convention center revenue.

(4)If Developer commences construction of convention center space in Phase Two, and if convention center space construction is commenced simultaneously with commencement of construction of the Timeshare Units in Phase Two in accordance with this Agreement, then said commencement of construction shall effect termination of the possibility of reversion as to the land upon which said construction is commenced.

(5)If and to the extent Seller elects that Developer develop and build the convention center space as aforesaid, the Parent Guaranty shall apply to such convention center space, effective (a) upon commencement of construction of the convention center space; or (b) if the convention center space is phased as provided in Paragraph (1) above, as to each such phased portion of the convention center space, upon the earlier to occur of commencement of construction of the applicable phase of the Timeshare Project or commencement of construction of the applicable portion of the convention center space.

(i)General Construction Standards. The configuration, location, materials, design and all construction drawings and specifications of all buildings and permanent improvements

32

(including all Timeshare Units and Furnishings) comprising the Timeshare Project are or are to be shown in the Plans and Specifications and Development Schedule and shall comply in all respects with the Complex Standards.  If Developer desires to materially modify the Plans and Specifications and Development Schedule for the Timeshare Project or for any Phase, the Developer shall deliver complete documentation of each such change to Seller.  Seller shall have ten (10) days following such complete documentation within which to give its approval or disapproval.   If Seller does not advise Developer in writing within such period of any matters to which Seller objects, Seller shall be deemed to have approved the Plans and Specifications and Development Schedule so submitted for Seller’s approval.

(j)Material Changes in Scope of Construction.  Following approval of the Plans and Specifications and Development Schedule, any design or construction changes made by Developer from the Plans and Specifications and Development Schedule for such Phase that – (i) materially alter the structural components of a building, or (ii) materially alter the exterior of a building, or (iii) alter the number of Timeshare Units or parking spaces, or (iv) change the general character of the Timeshare Project, or (v) reduce the fair market value of the proposed improvements below its fair market value prior to the proposed change – will require Seller’s prior written approval, which approval shall not be unreasonably withheld or delayed.  Seller shall be deemed to have approved a request for approval under this Subsection (j) if Seller has not sent a written disapproval within ten (10) days following receipt of a written request for approval pursuant to this Subsection (j).

(k)Responsibility for Design and Construction.  Seller shall have the right to approve the following items within ten (10) days after receipt of a notice from Developer identifying such items or a change in such items previously approved and if not approved or disapproved within such period, such items or change in such items will be deemed approved:

(i)the general contractor for construction of the Timeshare Project and/or any/each Phase, and

(ii)all major subcontractors, and

(iii)the length and scope of warranties of construction (not including manufacturer’s warranties) (which shall be no less than two years from issuance of the final and unconditional certificate of occupancy upon completion of construction).

(l)Inspections.   Seller and its agents or employees shall have the right to inspect the construction work at reasonable intervals during construction and after construction is substantially complete to ensure that the construction is consistent with the approved Plans and Specifications and Development Schedule for such improvements and in conformance with the Complex Standards.  If Seller determines that any portion of the Timeshare Project is not in compliance with this Agreement and/or the applicable construction documents and/or Complex Standards, Developer at its expense shall promptly correct any such non-compliance to Seller’s reasonable satisfaction.

(m)Developer/Builder Warranty.   Developer shall obtain, from its general contractor and all major subcontractors, warranties of materials and workmanship and that the construction performed is done in a good and workmanlike manner free from defects.  Such warranties shall extend for two years from the issuance of the final and unconditional certificate of occupancy for the portion of the improvements covered by such certificate and shall be expressly enforceable by, inter alia, Developer and Seller and their successors and assigns.

33

(n)Assurance of Completion; Completion Bond(s); Parent Guaranty.

(i)With respect to the first of two towers (each containing at least 250 units and at least 500 keys) in Phase 1 of the Timeshare Project, Developer, as a condition to Deed Delivery, shall obtain, and deliver to the Seller affirmative evidence of, performance, completion and payment bond(s), from sureties reasonably acceptable to Seller, for all construction on said first of two towers in Phase 1 of the Timeshare Project.  Such bond(s) shall name the State of Nevada as obligee thereunder, and shall be in form reasonably satisfactory to Seller.  The amount of each such bond(s) shall be for one hundred percent (100%) of all amounts required to be paid for the design and construction of said first of two towers in Phase 1 of the Timeshare Project.  The bond(s) provided for in this Paragraph (i) shall apply to the first tower only; see Paragraph (ii) below for assurance of completion for the second tower in the first phase of the Timeshare Project.

(ii)With respect to the second of two towers (each containing at least 250 units and at least 500 keys) in Phase 1 of the Timeshare Project, Developer, as a condition to Deed Delivery, shall cause Westgate Resorts, Ltd. to guarantee all of Developer’s design, construction, completion and other performance obligations, pursuant to a written guaranty (the “Parent Guaranty”) in form and substance satisfactory to Seller.  The Parent Guaranty shall include a covenant to maintain a net worth of at least $250,000,000, and the undertakings under the Parent Guaranty may not be delegated or assigned to any other entity or individual.  The principals of Westgate Resorts, Ltd. shall agree, individually, to not cause or permit Westgate Resorts, Ltd. to violate the aforesaid net worth and financial capacity covenants and tests or to assign or delegate its undertakings under the Parent Guaranty to any other entity or individual.  The form and substance of the Parent Guaranty is (or shall be, in accordance with the Documentation Schedule) attached hereto as Exhibit N and incorporated herein by reference.

(iii)With respect to the second and any subsequent phase of the Timeshare Project, Developer shall provide assurance of completion as follows:  If the third and fourth buildings of the Timeshare Project are commenced simultaneously, or are under construction at the same time, both evidence of delivery to the State of Nevada of a completion bond(s), and delivery of a Parent Guaranty, both in form and substance as provided above in this Subsection (n), shall be required.  Only evidence of delivery to the State of Nevada of a completion bond(s) in form and substance as provided above in this Subsection (n) shall be required during any time that only one of such buildings is under construction

(o)Construction Insurance.  Throughout the entire construction period, Developer shall carry and/or shall cause Developer’s General Contractor to carry a general liability policy of insurance insuring Seller (as an additional insured) against any liability whatsoever occasioned by accident on or about the Timeshare Property or any appurtenances thereto in connection with all construction and demolition work on the Timeshare Property.  Such policy or policies shall be issued by an insurer qualified to do business in Nevada and shall be in form, substance, and amounts in compliance with the standards of Developer’s institutional lender (subject to review and approval by Seller in its reasonable discretion).  The original policy, or a true copy thereof, or a certificate in the form of an Acord 28, shall be delivered to Seller prior to the commencement of work in, on or about the Timeshare Property.  Developer shall also obtain, or require its contractor(s) to furnish, worker’s compensation insurance in the amounts required by law, and Developer shall provide proof thereof to Seller.

(p)Cost of Improvements and Compliance with Laws and Codes.  Developer hereby covenants and agrees that the cost of all design and construction of all improvements in

34

connection with the construction of the Timeshare Project shall be the sole responsibility of Developer.  Developer further represents and covenants that all improvements of any nature whatsoever placed, installed or constructed on the Timeshare Property shall be constructed in compliance with all applicable laws, codes, rules, regulations and ordinances of all governmental and quasi governmental boards, agencies, and authorities having jurisdiction over the Properties or such improvements.

(q)Development and Construction Financing.   Developer shall provide, from time to time, confirmation, in form and substance reasonably acceptable to Seller, that Developer has obtained and has or will have available sufficient funds (e.g., debt and equity) to complete the development and construction of the Timeshare Project (or applicable phase) and to timely pay the Marketing Fees and other amounts payable to Seller under or pursuant to the provisions of this Agreement and the Marketing and Leasing Agreement.  Such confirmation shall be required, at a minimum, (i) at and as a condition precedent to Closing (preliminary), (ii) prior to Deed Delivery pursuant to Section 25(f) below, and (iii) prior to commencement of each phase if applicable.

(r)Express Conditions.  In addition to any other conditions, the Developer’s development and construction obligations hereunder shall be expressly contingent upon the following:

(i)Seller and Developer shall have mutually approved all of the Plans and Specifications and Development Schedule for the Timeshare Project; and

(ii)The Developer shall have received all applicable planning and development approvals for the Timeshare Project from Clark County and all other applicable governmental agencies (e.g., state and/or regional planning agencies and/or water allocation bodies and/or school districts)

– provided that Developer in good faith diligently pursues and exhausts all commercially reasonable efforts to obtain the foregoing approvals.

10.Licensing and Branding.

(a)At Closing under this Agreement, Developer and Planet Hollywood International, Inc. (“PHII”) shall enter into a PHII Licensing and Memorabilia Agreement (the “PHII Licensing and Memorabilia Agreement”) pursuant to which, and subject to the provisions of which, Developer shall be granted a license to use and shall use the name “Planet Hollywood Vacation Club by Westgate” (or such other name as may be mutually agreed) for the Timeshare Project.  Developer’s right to use said name for the Timeshare Project shall be perpetual and irrevocable, subject to the overriding interests of the owner of the “Planet Hollywood” name and license and related intellectual property.  The form and substance of the PHII Licensing and Memorabilia Agreement is (or shall be, in accordance with the Documentation Schedule) attached hereto as Exhibit K and incorporated herein by reference.

(b)Seller and Developer agree to negotiate in good faith for the development of additional timeshare projects utilizing the “Planet Hollywood Vacation Club” name and theme.

(c)Seller agrees to endeavor in good faith to enable Developer to acquire from PHII subject to the reasonable approval rights of PHII, a license to Developer to incorporate PHII’s trade name, trade mark and intellectual property in connection with any mutually agreed

35

theming of the Timeshare Project (a “PHII License”).  As part of the PHII License, PHII shall provide Developer the exclusive right to the marketing of the Timeshare Project from PHII’s restaurant locations, unless it is prohibited by contract or lease or by law, and Developer shall pay to PHII a lead generation fee equal to the greater of (i) fifty dollars ($50) per vacation package tour generated from such restaurant locations or (ii) lead generation fees Developer pays to any other person or party in similar or related circumstances.  As part of the PHII License, PHII shall agree to work with Developer to develop mutually beneficial marketing programs such as a “Planet Hollywood Timeshare Sales Premium Club Card” for restaurant access and/or other “perks” to enhance traffic flow to restaurants and to the Timeshare Project.

(d)In exchange for the PHII License, during the term of the PHII Licensing and Memorabilia Agreement and for so long thereafter as the Timeshare Project or any portion thereof is benefitting from the PHII License, PHII shall be paid a fee (the “PHII License Fee”) equal to the following amounts:

(1)Until 100 Percent Sell-Out, the PHII License Fee shall be equal to the sum of

(A)one percent (1%) of Net Interval Sales plus

(B)so long as the Maintenance Agreement (see Section 17) is in effect, one percent (1%) of Rental Income (defined in Section 18); and

(2)After 100 Percent Sell-Out, the PHII License Fee shall be equal to the sum of

(A)one percent (1%) of budgeted Operating Costs as per the timeshare owners association’s Operating Budget; plus

(B)so long as the Maintenance Agreement (see Section 17) is in effect, one percent (1%) of Rental Income (defined in Section 18).

The portion of the PHII License Fee described in paragraph (1)(A) above shall be payable monthly, in the same manner as payments of the Marketing Fee and/or Timeshare Advances; and the portion of the PHII License Fee described in paragraph (1)(B) and in paragraph (2) above shall be payable as provided in Section 18 below.  PHII shall be responsible for obtaining all licenses and/or permits as may be required under applicable law to receive the PHII License Fee as outlined above.

(e)The PHII Licensing and Memorabilia Agreement shall also govern subleasing and/or sublicensing of Planet Hollywood memorabilia at and/or in connection with the Timeshare Project.

(f)In the event that Seller shall cease utilizing the “Planet Hollywood” brand as the dominant theme within the Complex, Developer shall have the right, but not the obligation, to change the name and theming of the Timeshare Project to correspond with Seller’s dominant theme, provided that such change is made in accordance with the terms and conditions of this Agreement.

(g)Westgate Resorts, Ltd. shall also be paid a fee (the “Westgate License Fee”) equal to 1% of Rental Income (defined in Section 18), payable monthly, in the same manner as payments of the PHII License Fee, until 100 Percent Sell-Out and thereafter until termination of the Maintenance Agreement (see Section 17).  Westgate Resorts, Ltd. and/or affiliates shall be

36

responsible for obtaining all licenses and/or permits as may be required under applicable law to receive the Westgate License Fee as outlined above.

11.Timeshare Registration; Timeshare Sales.

(a)As part of the Design/Approval Process (see Section 5 above), Developer

(i)shall commence preparation of registration materials on or prior to the Effective Date; and

(ii)shall use best efforts to submit or cause to be submitted, as soon as possible following the Effective Date, complete and correct applications for registration of the Timeshare Project in the State of Nevada and for all other governmental approvals required by the State of Nevada in connection with marketing the Timeshare Project in Nevada; and

(iii)in any and all events, shall, prior to the date (the “Filing Date”) which is 180 days following the Effective Date, submit or cause to be submitted complete and correct applications for registration of the Timeshare Project in the State of Nevada and for all other governmental approvals required by the State of Nevada in connection with marketing the Timeshare Project in Nevada.

(b)In addition, Developer shall use commercially reasonable efforts to cause the Timeshare Project to be registered for timeshare sales in such other jurisdictions (collectively, together with the State of Nevada, the “Critical Jurisdictions”) as appropriate from time to time, in Developer’s sole discretion, to maximize sales velocity of Timeshare Intervals in the Timeshare Project.

(c)Developer shall complete the Nevada timeshare registration and shall commence sales of Timeshare Intervals in the Timeshare Project as soon as reasonably practicable following Closing on the Timeshare Property and the receipt of all applicable governmental authorizations necessary relative to the sale of the Timeshare Project; and, in any event, Developer shall complete the Nevada timeshare registration and shall commence sales of Timeshare Intervals in the Timeshare Project on or before the date (the “PH Sales Commencement Date”) which is the earliest to occur of

(A)the date which is 180 days following the earliest to occur of (i) the Filing Date or (ii) the date of submission of the State of Nevada registration application(s) pursuant to Subsection (a) above; or

(B)the date of approval by the State of Nevada for marketing the Timeshare Project in Nevada.

12.Marketing and Leasing Agreement.

(a)At or prior to Closing hereunder, Seller and Developer shall enter into a mutually acceptable Marketing and Leasing Agreement (the “Marketing and Leasing Agreement”) which will provide Developer the exclusive right as to the marketing and/or sale of timeshare/vacation ownership products within the Complex, to include, but not necessarily be limited to,

37

(i)display advertising and/or collateral material and/or preview invitations as part of the Hotel guest check-in packages;

(ii)place advertising and/or collateral material at the Hotel concierge;

(iii)place advertising and/or collateral material in the Hotel guestrooms and in other areas of the Hotel;

(iv)broadcast on a continuous play in-house channel, not less than 5 min. per hour, an in-room TV video for the Timeshare Project;

(v)to the extent not expressly prohibited or otherwise restricted by the Management Agreement between Seller and Starwood (or other operator/manager of the Hotel/Casino Property), utilize the guest information generated by Seller with respect to the Hotel/Casino for use in marketing the Timeshare Intervals in the Timeshare Project;

(vi)Seller shall use commercially reasonable efforts, to the extent not expressly prohibited or otherwise restricted by the Management Agreement between Seller and Starwood (or other operator/manager of the Hotel/Casino Property), to provide mutually agreed specialized concierge and check-in services to guests (this opportunity applies only to in-house marketing rather than normal guest check-in and is subject to revocation or modification if, in the reasonable opinion of Seller, these services are causing a material and adverse impact on guest experience in the Complex); and

(vii)Seller shall use commercially reasonable efforts, to the extent permitted by the Management Agreement between Seller and Starwood (or other operator/manager of the Hotel/Casino Property), to obtain all past registration cards and future reservations listing for purposes of soliciting timeshare tours.

The form and substance of the Marketing and Leasing Agreement is (or shall be, in accordance with the Documentation Schedule) attached hereto as Exhibit D.  The materials identified in clauses (i)-(iv) above shall be subject to Seller’s prior written approval which approval shall not be unreasonably withheld.

(b)The stated term of the Marketing and Leasing Agreement shall commence on the “Marketing Commencement Date”, which shall be as soon as reasonably possible after the Effective Date of this Agreement, as specified by Seller and Developer in a joint writing, but in no event later than the Closing Date, and shall run until the occurrence of the Fully Sold Project.

(c)Developer will commence operations under the Marketing and Leasing Agreement on the Marketing Commencement Date.  To the extent Developer has not obtained required Nevada approvals to commence marketing or sale of interests in the Timeshare Project as of the Marketing Commencement Date, Developer and/or related or affiliated entities shall be entitled to commence marketing in the Complex of Developer’s other existing timeshare projects, subject to payment, with respect to such other existing timeshare projects, of Marketing Fees with respect to such alternative timeshare marketing equal to the greater of

(1)Monthly payments, each in an amount equal to ten percent (10%) of all “Net Interval Sales” of such other existing timeshare projects, calculated in the manner provided herein for payment of Marketing Fees, as if such other existing timeshare projects

38

marketed and sold from the Complex were Timeshare Intervals in the Timeshare Project; or

(2)$100,000 per month.

Such marketing of other existing timeshare projects shall cease upon the occurrence of the PH Sales Commencement Date.

(d)Other than the Westgate Flamingo Bay Resort (to the extent owned by Developer and/or its related and/or affiliated entities), Developer shall not, in or near or with respect to Las Vegas, actively promote, or permit the distribution of (to the extent it may legally prohibit same) or distribute marketing or other solicitation materials relating to, competitors of the businesses operated in the Complex, including other Las Vegas timeshare projects.  Materials and procedures related to marketing or solicitation concerning the Westgate Flamingo Bay Resort at the Timeshare Property shall be subject to Seller’s prior written approval.  Any permitted marketing or solicitation concerning the Westgate Flamingo Bay Resort, and/or any timeshare property other than the Timeshare Project, shall cease on the PH Sales Commencement Date.  Notwithstanding the foregoing, Developer, at or prior to the time of closing on the sale of Timeshare Intervals, may provide to timeshare purchasers “owner kits” which mention Westgate timeshare properties other than the Timeshare Project, provided Seller shall have previously approved in writing such materials, which approval shall not be unreasonably withheld, delayed or conditioned and shall not require further approval unless subsequent revisions to such materials are not substantially similar to the approved materials.

(e)Seller shall have the right to display in the Timeshare Units, and at the Timeshare Property, advertising and/or collateral materials for the Hotel/Casino Property and other businesses operated in the Complex provided: (i) Developer shall have previously approved in writing such materials, which approval shall not be unreasonably withheld, delayed or conditioned and shall not require further approval unless subsequent revisions to such materials are not substantially similar to the approved materials; and (ii) Developer is not otherwise prohibited by law from providing such rights to Seller.

(f)All marketing and solicitation and related activity by or on behalf of Developer at or in connection with the Complex and/or the City Block shall at all times comply with the highest standards of decorum and professionalism and shall at all times be consistent with the Complex Standards and the ownership and operation by or on behalf of Seller of the Hotel/Casino Property.

13.Marketing & Use Leases and/or Easements.   At closing hereunder Developer will purchase and Seller will sell, subject to the reversion/easement provisions of Section 9(g) above, and subject to the City Block Covenants and Senior Lender Agreements, the following leases and easements related to the purchase of the Timeshare Property and the Timeshare Project of the Timeshare Project:

 (1)Marketing and Solicitation Leases (Kiosks).  Subject to the existing Lease and Concession Agreement, dated December 28, 2000 (the “Existing Paramount Lease”), by and between Aladdin Gaming, LLC and Paramount Marketing Consultants, Inc. (which expires May 15, 2004 and continues thereafter on a month-to-month basis, terminable upon 30 days notice to lessee), Seller, pursuant to the Marketing and Leasing Agreement, shall lease to Developer (which shall become effective on termination of the Existing Paramount Lease and continue thereafter until the Closing (but which may also

39

require Developer pay rent substantially similar to the Existing Paramount Lease) for the use by Developer of four (4) kiosks measuring approximately 12 feet by 12 feet located within the Complex in substantially the same locations as those currently used (the “Kiosks”) for timeshare marketing purposes including the exclusive right to offer for sale timeshare or other vacation ownership products within the Complex.

From and after the Closing, Seller shall cause the Kiosks to be provided to Developer rent free.

From and after the Closing, to the extent that Developer can demonstrate to Seller, acting reasonably, that additional kiosks will be required by Developer to generate sufficient sales relative to the Timeshare Project, the parties shall mutually agree on additional kiosks for use by Developer.

All such leases will terminate upon the sooner to occur of (A) one year following the Fully Sold Project, or (B) following the Fully Sold Project, the date at which Developer no longer exclusively sells Timeshare Intervals in the Timeshare Project; provided however that at the time of the termination of such leases, Seller and the Developer shall negotiate at Developer’s option a rental arrangement for the areas under lease at the then fair market rental rate.

(2)Resort and Amenities Access Easement/Agreement.  Seller shall grant a perpetual easement in favor of the Developer and any subsequent owner or owners and their respective guests and invitees of the Timeshare Project (including owners of Timeshare Intervals in the Timeshare Project) permitting such owners, and their tenants and guests, access to and use of the Hotel/Casino Property, including but not limited to gaming, food and beverage, retail, entertainment (live or otherwise) and other recreational facilities (swimming pools, health club, etc.), existing from time to time, on the same terms as are generally available to guests of the Hotel (the “Resort and Amenities Access Easement/Agreement”).  Seller shall receive, from owners of Timeshare Intervals in the Timeshare Project, reimbursement for Seller’s pro-rata share of Operating Costs (such that timeshare owners or guests shall have the same access rights as patrons and guests of the Hotel/Casino guests) for the amenities listed above, which reimbursement shall apply only to the swimming pool and the health club subsidy and shall not apply to any other hotel amenities, unless Developer and Seller elect to include the cost of any additional amenities in the annual operating/maintenance fees charged to owners.  The rate of reimbursement shall be based upon the number of Timeshare Units constructed as a percentage of the total number of hotel and Timeshare Units in the aggregate.  It is understood that these costs will be paid out of annual operating/maintenance fees charged to owners of Timeshare Intervals in the Timeshare Project.  The form and substance of the Resort and Amenities Access Easement/Agreement is (or shall be, in accordance with the Documentation Schedule) attached hereto as Exhibit F.

(3)Other Easements.  Such other easements and access rights relating to the Complex as shall be reasonably requested by Developer to permit the Timeshare Project and operation of the Timeshare Project in a physically integrated manner with the Hotel, as the same may be altered from time to time, provided such easements and access rights do not impair or otherwise adversely affect the current operation or value of the portion of the Complex burdened thereby or its intended manner of operation following the renovation thereof.

40

14.Sales Center Lease.

(a)The Marketing and Leasing Agreement executed and delivered at Closing under this Agreement shall include provisions implementing the substance of a Sales Center Lease (“Sales Center Lease”) for a minimum of 10,000 square feet of non-prime space within the Complex (such location, configuration and maximum size as determined by Seller in its sole discretion) for use as a sales center for the Timeshare Project (“Sales Center”).  The Sales Center shall be provided to Developer rent-free; provided that Developer shall pay Operating Costs (other than rent and CAM charges) including utilities and housekeeping.  Developer will be responsible for all tenant improvements relative to the Sales Center and Seller will have no obligation for such improvements.  The Sales Center Lease will terminate upon the sooner to occur of (1) one year following Fully Sold Project, and (2) following the Fully Sold Project, the date at which Developer no longer exclusively sells Timeshare Intervals in the Timeshare Project; provided, however that at the time of the termination of such Sales Center Lease, Seller and the Developer shall in good faith negotiate at Developer’s option a rental arrangement for the area under Sales Center Lease at the then fair market rental rate.

(b)The parties acknowledge that temporary space on the mezzanine level of the Hotel/Casino Property has been identified for use by Developer as a sales center hereunder until the permanent sales center has been built out.

15.Timeshare Sales Premiums.

(a)All premiums offered to prospective purchasers of Timeshare Intervals in the Timeshare Project as an incentive to take tours of the Timeshare Project or attend timeshare sales presentations pertaining to the Timeshare Project (collectively, “Timeshare Sales Premiums”) shall be purchased from the Seller or Seller’s designee, from the Casino, or from designated food and beverage, retail or entertainment outlets owned, operated or controlled by Seller and located in the Complex (including, for these purposes, any outlet subsequently leased or sold by Seller).  Timeshare Sales Premiums shall be purchased in initial increments in an amount to be mutually agreed but in any event no less than $65 and up to $75 (it being agreed by Seller that if Developer agrees to initial increments of $75, Seller shall ensure that the total retail value of such premiums shall be $100) (the “Base Timeshare Sales Premium Price”), which may be increased in increments of $25 if used in conjunction with a Timeshare Sales Premium purchased at the Base Timeshare Sales Premium Price.  Except for the following discounts, all Timeshare Sales Premiums shall be purchased at face value:

(i)Casino match-play vouchers may be purchased at a 50% discount to face value; provided, however, Seller reserves the right to substitute a substantially similar benefit for match-play vouchers for inclusion in premiums.

(ii)Seller shall use commercially reasonable efforts to cause show tickets to be made available to Developer for purchase at a 25% discount to face value; provided, however, should Seller institute a policy (as opposed to one-off events or limited promotions) to offer a discount rate to the general public or single or otherwise unbundled ticket sales to other third parties with respect to a particular show, the parties agree to negotiate in good faith an appropriate further discount to face value with respect to such show tickets which discount shall exceed the discount being provided to the general public or such third party, as the case may be; and provided, further, however, that, in the event Seller is unable to provide discounted show tickets as contemplated by this paragraph, Seller shall use commercially reasonable efforts to provide substitute

41

premiums reasonably satisfactory to Developer such as (but not limited to) food and beverage vouchers, other entertainment events, discounts on nightclub access, match play, or comparable premiums; provided, further, however, that if Seller is unable to provide substitute premiums reasonably satisfactory to Developer as aforesaid, then, during such time as Seller is unable to provide substitute premiums as aforesaid, Developer shall be entitled to increase its ability to use Off-Site Timeshare Sales Premiums (defined below) such that the number of Off-Site Timeshare Sales Premiums during such period shall not exceed 25% of the total number of all Timeshare Sales Premiums utilized by Developer during any such period.

(iii)Merchandise and Food & Beverage vouchers may be purchased at a 25% discount to face value.

(b)Subject to Developer’s ability to provide show tickets to Developer for purchase at a 25% discount to face value as set forth in Subsection (a)(ii) above, not less than 70% (by number) of the Timeshare Sales Premiums purchased by Developer shall consist of show tickets and/or casino match-play vouchers.

(c)Developer shall have the right to utilize Timeshare Sales Premiums, obtained independently by Developer, and which are not redeemable at the Complex (“Off-Site Timeshare Sales Premiums”), provided that the number of Off-Site Timeshare Sales Premiums in any twelve month period shall not exceed 1% of the total number of all Timeshare Sales Premiums purchased by Developer during that period; provided, however, in the event that Developer is able to demonstrate to Seller, acting reasonably, that the above limitation on Off-Site Timeshare Sales Premiums is materially impacting tour sales, the parties shall in good faith negotiate appropriate revisions to the above limitations, in any event not to exceed five percent (5%) in total.

(d)The parties’ agreements concerning Timeshare Sales Premiums shall be included in the Marketing and Leasing Agreement.

16.Vacation Packages; Room Block Agreement.

(a)Seller shall, at Developer’s option, make available to Developer 200 hotel rooms (or such greater number as may be mutually agreed) per day in the Hotel/Casino Property on the following terms for use solely by Developer in its vacation packages for promoting sales of Timeshare Intervals and not for resale (“Room Blocks”).  The location and finish of the Room Blocks available for such purpose on any given day shall vary according to the operating requirements of the Seller.

(b)Provided that the ADR for Room Blocks within the Timeshare Project are equal to or less than the ADR for rooms within the Hotel/Casino, as determined by the Seller, once the first phase of the Timeshare Project is completed, Developer shall be entitled to use Timeshare Units in the Timeshare Project, subject to mutually agreeable advance notice and subject to payment by Developer of the Reimbursement Rate defined below, in lieu of all or part of the Room Blocks.  The foregoing shall not preclude Developer from booking additional Room Blocks in the hotel at the rates set forth herein subject to availability.

42

(c)Developer shall release Room Blocks into Seller’s hotel-use inventory as follows:

(i)If Developer has not booked at least 50 Room Blocks for vacation packages at least 45 days prior to the date of the proposed stay, then Developer shall release to Seller Room Blocks in amount equal to the difference between 50 and the number of Room Blocks so booked; and

(ii)If Developer has not booked at least 100 Room Blocks (including any bookings recognized in Paragraph (i) immediately above) for vacation packages at least 30 days prior to the date of the proposed stay, then Developer shall release to Seller Room Blocks in amount equal to the difference between 100 and the sum of (A) the Room Blocks released pursuant to Paragraph (i) immediately above and (B) the number of Room Blocks so booked; and

(iii)If Developer has not booked at least 150 Room Blocks (including any bookings recognized in Paragraphs (i) and (ii) immediately above) for vacation packages at least 15 days prior to the date of the proposed stay, then Developer shall release to Seller Room Blocks in amount equal to the difference between 150 and the sum of (A) the Room Blocks released pursuant to Paragraph (i) and (ii) immediately above and (B) the number of Room Blocks so booked; and

(iv)If Developer has not booked at least 175 Room Blocks (including any bookings recognized in Paragraphs (i), (ii) and (iii) immediately above) for vacation packages at least 7 days prior to the date of the proposed stay, then Developer shall release to Seller Room Blocks in amount equal to the difference between 175 and the sum of (A) the Room Blocks released pursuant to Paragraphs (i), (ii) and (iii) immediately above and (B) the number of Room Blocks so booked; and

(v)If Developer has not booked all Room Blocks (including any bookings recognized in Paragraphs (i), (ii), (iii) and (iv) immediately above) for vacation packages at least 3 days prior to the date of the proposed stay, then Developer shall release to Seller all remaining unbooked Room Blocks.

Developer may retain any Room Blocks not booked in accordance with the foregoing release schedule, in which event Developer shall be required to pay Seller therefor as if said retained Room Blocks had been booked as provided in this Section, and in which event said retained Room Blocks shall be treated as booked for the purpose of the foregoing release schedule.  The foregoing release schedule shall be adjusted if the parties agree upon Room Blocks greater than or fewer than 200, as provided in Subsection (a).

(d)Except as provided below, Developer shall first offer to Seller all bookings for Vacation Package Rooms (as defined below).  The rate payable to Seller for Vacation Package Rooms in the Hotel reserved through Developer (or units in the Timeshare Project, if applicable, in accordance with Subsection (c) above) shall be the Reimbursement Rate (as defined below).  Developer and Seller shall negotiate in good faith to establish working protocols consistent with industry standards for the management of room reservation requests and cancellations.  For purposes hereof:

(i)“Vacation Package Room” shall mean a room package sold to a potential Timeshare Interval purchaser that requires a tour of the Timeshare Property as part of the package or an unhooked vacation package in states where Developer is not registered; provided

43

that unhooked vacation packages shall not exceed 20% of the total rooms booked by Developer; and

(ii)“Reimbursement Rate” shall mean

(A)for the twelve month period commencing on the Marketing Commencement Date (the “Initial Rate Period”), the lower of

(1)25% off the Lowest Published Rate, or

(2)$85 for room nights falling on Sundaythrough Thursday and $120 for room nights falling on Friday and Saturday – except that, when Monday is a holiday, $120 for the immediately preceding Sunday.

For the purpose hereof, the phrase “Lowest Published Rate” shall mean the advertised room rate for that particular time of week (e.g., weekend versus weekday) for a room available to the general public and specifically excluding one-off events and limited promotions; and

(B)upon the expiration of the Initial Rate Period, and for each succeeding twelve month period thereafter (each a “Rate Period”), the Reimbursement Rate shall be adjusted upward by the increase (if any) in the Consumer Price Index for the Las Vegas, Nevada standard metropolitan statistical area as published by the U.S. Bureau of Labor Statistics (the “CPI”) between the CPI published for the third month preceding the month in which the Initial Rate Period or the Rate Period then expiring, as applicable, commenced and the CPI published for the third month preceding the month in which the Initial Rate Period or the Rate Period then expiring, as applicable ended (as so adjusted from time to time, the “Adjusted RR”).

If Seller desires to charge a Reimbursement Rate for any Rate Period following the Initial Rate Period in excess of the Adjusted RR determined as set forth above for such Rate Period, Seller may do so and shall so notify Developer thereof in writing specifying the rate to be so charged (provided that such rate shall not apply with respect to any Vacation Package Rooms sold prior to the date which is thirty (30) days after the date of such notice), in which event, Developer shall be permitted for the remainder of such Rate Period to sell Vacation Package Rooms at any other hotel in Las Vegas, Nevada without first offering such bookings to Seller.

(e)The parties’ agreements concerning Vacation Packages and Room Blocks shall be included in the Marketing and Leasing Agreement.

17.Maintenance Agreement.

(a)Developer and its affiliated management agent will enter into a Master Maintenance Agreement (satisfactory to Seller and Developer in their reasonable discretion) pursuant to which Developer’s affiliated management agent will manage the Timeshare Project.  Developer’s affiliated management agent will, in turn, subcontract with Seller (who may in turn subcontract with Starwood or another approved manager) and enter into a mutually acceptable agreement (the “Maintenance Agreement”), in form and substance as is to be agreed upon prior to Deed Delivery and is (or shall be, in accordance with the Documentation Schedule) attached hereto as Exhibit H, whereby Seller, subject to the aforesaid Master Maintenance

44

Agreement, shall be responsible for the direct operation and maintenance of the Timeshare Project (or portions thereof as may be mutually agreed by Seller and Developer acting in a commercially reasonable manner), including both Timeshare Unit Vacancies and Timeshare Units which are occupied by purchasers of Timeshare Intervals or their guests or designees; provided, however, it is agreed by the parties hereto that the direct operating expenses, replacement reserves and other customary and appropriate expenses of the Timeshare Project shall be allocated to each Timeshare Interval in the Timeshare Project as a maintenance fee pursuant to an annual operating budget for the Timeshare Project, to be mutually agreed by Seller and Developer (the “Operating Budget”).  For purposes of the Maintenance Agreement, direct operating expenses shall expressly exclude any direct or indirect costs or expenses relating to the sale of Timeshare Units.  The Maintenance Agreement shall have an initial term of 25 years, with multiple successive automatic 5-year renewals unless Seller by written notice declines to renew at least 180 days prior to the then-current expiration date.  The Maintenance Agreement, and the convention center lease (see Section 9(h) above), shall both provide that termination or expiration of said lease shall automatically effect a termination of the Maintenance Agreement, and that termination or expiration of the Maintenance Agreement shall automatically effect a termination of said lease.  Further, the Maintenance Agreement, and the said lease, shall both provide that a non-defaulting party’s remedies for default shall include the right to terminate both the Maintenance Agreement and said lease, but not the right to terminate only one of such agreements.

(b)Notwithstanding the Master Maintenance Agreement or the Maintenance Agreement, Developer, and not Seller or Starwood, shall be responsible for and shall separately accomplish (1) Reservations made by Timeshare Interval owners for occupancy in the Timeshare Project; (2) Check-in by Timeshare Interval owners and/or their guests; and (3) Repairs at the Timeshare Project.

(c)Maintenance fees established pursuant to the Operating Budget shall be applied in part to fees payable under the Maintenance Agreement and in part to fees payable to the Developer for its services provided pursuant to Subsection (b), all of which shall be deemed to be Operating Costs for all purposes hereunder.  Developer shall collect all such fees, which shall not exceed, in the aggregate, the market-standard fee payable for such combined services for other comparable properties in Las Vegas, Nevada.  Developer, pursuant to the Operating Budget as mutually agreed and as modified from time to time, shall allocate and pay said fees as to be agreed mutually between Seller and Developer (in connection with approving the Operating Budget) to fees and expenses of management and maintenance of the Timeshare Project.  This Subsection (c) is subject to confirmation as the Maintenance Agreement is finalized prior to Closing

(d)Notwithstanding anything herein to the contrary, it is acknowledged and agreed that Developer has approved Starwood and Seller to act as approved manager(s) pursuant to the Maintenance Agreement.  In the event neither Starwood nor Seller continues to act as manager(s) pursuant to the Maintenance Agreement, any replacement or substitute manager shall be subject to the approval of the Developer, not to be unreasonably withheld, provided the replacement or substitute is not a substantial competitor to Westgate in Las Vegas or other markets.

18.Timeshare Unit Vacancies; Vacancy Rentals.

(a)Developer agrees that during the term of the Maintenance Agreement Seller shall have exclusive operational control of all Timeshare Unit Vacancies and Seller shall offer, under

45

exclusive license, the rental, management and maintenance of all such Timeshare Unit Vacancies (“Vacancy Rentals”) at rates and terms to be determined by Seller, acting reasonably, it being agreed by the parties that Seller may, from time to time, utilize a management company for Vacancy Rentals substantially similar to the manner in which Seller may utilize a management company in connection with the Hotel/Casino Property.

(b)As consideration for providing the Vacancy Rentals, the parties agree as follows:

(A)Gross rental income arising from Vacancy Rentals (“Rental Income”), plus

(B)Gross income arising from the maintenance fees established on all Timeshare Units

(collectively “Gross Rent and Maintenance Fee Income”), shall be collected by Seller and shall be distributed as follows:

(i)First, to pay the PHII License Fee, the Westgate License Fee and any fee occasioned by any third-party management company (e.g., Starwood); and

(ii)Second, to the Seller and/or the Developer, as applicable, in the amount of Shore Up or shortfall paid in prior periods by Developer and/or Seller pursuant to Subsection (c) below, or to the extent payment thereof is attributable to Seller or Developer, respectively; and

(iii)Third, to the payment of all Operating Costs incurred in connection with the Project (to the extent not paid as part of the first distribution provided for above); and

(iv)Fourth, provided that the Timeshare Project is constructed as required pursuant to Section 9, or, in the event the Timeshare Project is developed in phases, provided the Developer has complied with its obligation to complete construction of each phase as and when required pursuant to, and as described in, Section 9(a) and Section 9(f), to the payment (or reimbursement to Developer) of

(a)one-half (1/2) (i.e., 50%) of all interest on any construction loan(s) attributable to Timeshare Intervals accruing prior to completion of the first phase of the Timeshare Project provided for in Section 9; plus one-half (1/2) (i.e., 50%) of all interest on any construction loan(s) attributable to construction of parking to meet the Parking Requirement as provided in Section 6, but said payment or reimbursement shall be available only to the extent the Parking Requirement does not exceed 800 parking spaces; provided, however, that Seller’s reimbursement obligation shall not exceed $2,700,000 for all such construction interest accruing prior to completion of said first phase; and

(b)after completion of the first phase of the Timeshare Project as described in clause (a) immediately above, all (i.e., 100%) of all interest on any construction loan(s) attributable to Timeshare Intervals in the Timeshare Project (including said first phase as well as the second and any subsequent phase) accruing after said completion of said first phase; plus all (i.e., 100%) of all interest on any construction loan(s) attributable to construction of parking to meet the Parking Requirement as provided in Section 6 accruing after said completion of said first phase, but said payment or reimbursement shall be available only to the extent the Parking Requirement does not exceed 800 parking spaces;

46

provided, however, that, in all events, all principal of all such construction loan(s) shall be allocated to all Timeshare Intervals in the Timeshare Project or applicable phase (whether or not such Timeshare Intervals have actually been added to the Timeshare Plan), and, upon sale of each Timeshare Interval, the allocated portion of principal shall be applied to reduce the outstanding principal balance of the applicable construction loan(s); and provided, further, however, that the aforesaid 800 parking space limitation shall be increased to the extent (but only to the extent) that construction of the convention center space, provided for in Section 9(h) of this Agreement, causes the Parking Requirement to increase.

(v)Fifth, to the payment to Seller of an amount equal to the payment to Developer as set forth in the fourth distribution provided for above (in the event of any shortfall, such amounts shall accrue until fully paid); and

(vi)Sixth, to be distributed between Developer and Seller on a 50/50 basis.

(c)In the event that the Operating Costs of the Timeshare Project exceed the Gross Rent and Maintenance Fee Income, any shortfall (except to the extent representing profit or general overhead or other amounts not actually paid by Developer as direct costs of Developer’s management or maintenance of the Timeshare Project) shall be covered by

(i)The Seller, at any time that both (A) the Timeshare Project or (applicable phase) has been constructed as contemplated herein such that Minimum Project Density (or applicable portion) has been achieved by Developer, as provided in Section 9(a), Section 9(f) and other applicable provisions of this Agreement; and (B) the Maintenance Agreement has not expired without renewal or has not been terminated due to breach, violation or default by Developer; and

(ii)The Developer, if the conditions in clause (i) above have not been met.

The obligation of the Seller or the Developer, as the case may be, to cover the shortfall as aforesaid is sometimes referred to in this Agreement as the “Shore-Up” obligation.

(d)Notwithstanding anything contained herein to the contrary, all maintenance fee payments must be credited and posted on the applicable homeowner association books and records as required by law.

(e)It is the expectation of the parties hereto that Developer’s construction of Timeshare Units will initially exceed realized demand for the Timeshare Units as Timeshare Intervals, so that, initially, a relatively larger number of Timeshare Units will be treated as Timeshare Unit Vacancies available for Vacancy Rental under this Section.  It is further the expectation of the parties that the timing of release of Timeshare Unit Vacancies for submission to the timeshare regime and for sale as Timeshare Intervals will correspond generally to the rate at which sales of Timeshare Intervals “catch up” with the inventory of completed Timeshare Units.  For the purpose of the Shore Up obligations in this Agreement, a completed Timeshare Unit will be treated as a hotel suite for any applicable period, and Developer shall not be responsible for maintenance fees for said Timeshare Unit for said period, if and to the extent that Developer has released said Timeshare Unit for Vacancy Rental not later than thirty (30) days prior to the commencement of said period.  The foregoing is subject to confirmation as the Maintenance Agreement is finalized prior to Closing.

47

(f)The reporting, audit and related provisions of Section 4(f) shall apply to Vacancy Rentals.

(g)The parties’ agreements concerning Vacancy Rentals shall be included in the Marketing and Leasing Agreement.

19.Pre-Timeshare Activities.  Seller and Developer shall jointly commence and diligently pursue good faith negotiations to:

(i)develop a plan for the coordination of the development of the Timeshare Project with the renovation of the Hotel (as defined in the PSA) intended to facilitate the physical integration of the Hotel renovation and development of the Timeshare Project;

(ii)identify and assess the interrelationships between the Timeshare Project, Hotel, Casino (as defined in the PSA) and Mall Property, aka Desert Passage Shopping Center (aka/fka Aladdin Bazaar) (Boulevard Investments), and determine appropriate and reasonable cost allocations amongst the Timeshare Property, the remainder of the Complex and Mall Property (Desert Passage Shopping Center) of the costs and expenses required to be paid under the City Block Covenants, including but not limited to the Shared Parking Agreement (aka Parking Use Agreement), REA, Northwind Utility Agreement and Harmon Avenue Intersection Plan (as the same are defined in the PSA); and

(iii)identify and enter into any required ingress, egress construction and utility easements, parking rights and easements (or applicable amendments to existing parking agreements and easements) or other access and use rights reasonably necessary to (a) comply with applicable legal requirements or (b) permit the efficient Timeshare Project of the Timeshare Project

(collectively, the “Pre-Timeshare Project Activities”); and

(iv)enter into agreements to create mutually agreed discounts for owners of Timeshare Units within the Timeshare Project with discounts to include gaming promotions, food and beverage, retail, entertainment (live or otherwise) and other recreational facilities (swimming pools, health club, etc.), and other items which may be mutually agreed upon to enhance the ownership experience and value.

In conjunction therewith, Developer and Seller (to the extent necessary) shall cause to be prepared such preliminary design studies regarding the Timeshare Project and the Hotel renovation, respectively, as shall be reasonably required to pursue the Pre-Timeshare Project Activities.  Developer shall have the right, and shall make available a representative of Developer, to participate in all negotiations with the owner of the Mall Property aka Desert Passage Shopping Center (aka/fka Aladdin Bazaar) (Boulevard Investments) regarding the foregoing.  It is expressly understood that the obligations of Seller and its related and affiliated entities including, but not limited to, all marketing rights, rental agreement easements, shall be binding upon its successors, assigns, and subsequent property owners, except as may be otherwise required by the Senior Lenders.

In addition, and as a condition precedent to Closing, Seller shall obtain a nondisturbance and attornment agreement and/or similar coordination and cooperation undertakings, from the Senior Lenders, with respect to the Senior Lender Agreements and the Senior Lenders’ rights

48

with respect to the Complex, all in form and substance satisfactory to Developer, acting reasonably.  Developer’s proposed form of nondisturbance and attornment agreement is (or shall be, in accordance with the Documentation Schedule) attached hereto as Exhibit B.

20.Representations. Covenants and Warranties of the Seller.  All representations, covenants, and warranties set forth in this Section and other applicable Sections of this Agreement, and liability for breach thereof, shall survive the Closing and any subsequent delivery of the deed unless otherwise indicated.  Seller hereby represents and warrants to Developer as to the following matters, each of which is so represented and warranted to be materially true and correct both as of the Effective Date (unless otherwise noted) and through and as of the Closing Date.  The continued truth of each of the representations and warranties as of the Closing Date shall be a condition precedent to Developer’s obligation to close.

(i)Due Organization and Qualification.  Seller is a duly organized limited liability company, validly existing and in good standing in the state of Nevada, and has the power and authority to enter into and perform all of its obligations under this Agreement.

(ii)Litigation.   To the Seller’s knowledge after reasonable inquiry, and other than the litigation identified on Schedule 20, there are no pending or threatened matters of litigation, administrative action or arbitration pending against the Seller or the Timeshare Property, or any pending or threatened eminent domain, expropriation, condemnation or other governmental proceedings involving a taking of the Timeshare Property or any part thereof or affecting the Timeshare Property which can or will materially and adversely affect Seller’s ability to perform its obligations under this Agreement or which will materially and adversely impair Developer’s intended use of the Timeshare Property.  To the Seller’s knowledge, no attachments, execution proceedings, assignments, insolvency, bankruptcy or reorganization proceedings are pending or threatened or available against, or contemplated by, the Seller.

(iii)Certain Information.   Seller has no reason to believe that all records and other documents which have been, or are to be, delivered by the Seller under this Agreement are, or in the case of future deliveries, will be, true, accurate and complete, and fairly present the information set forth therein in a manner which is not misleading; provided, however, that any financial projections, marketing analyses and similar deliveries are provided for information only and without representation or warranty of any kind.

(iv)Authority to Enter into and Consummate the Agreement.  Seller’s execution of, and performance under, this Agreement is contracted through its authorized officer.  By virtue of the execution of this Agreement, the Seller represents that it has the right and authority to enter into this Agreement and that the Seller has the ability to perform all of its obligations hereunder without any consents from any public or private parties other than pursuant to the PSA and the City Block Covenants and the Senior Lender Agreements.  The execution and delivery of this Agreement, and the performance of Seller’s obligations hereunder, have been duly and validly authorized by all necessary corporate action on the part of the Seller.  This Agreement constitutes a legal, valid and binding obligation of the Seller, which is enforceable against the Seller in accordance with its terms, subject to enforceability, bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights generally and to general equitable principles.  To the Seller’s knowledge after reasonable inquiry, neither the execution nor delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will conflict with or result in a breach under any agreement or instrument by

49

which the Seller or the Timeshare Property is bound, subject to applicable consents required under or in connection with the PSA and the City Block Covenants and the Senior Lender Agreements, as listed on Schedule 20 attached hereto (or to be attached hereto, in accordance with the Documentation Schedule), and will not constitute a violation of any applicable law, rule, regulation, judgment, writ, order or decree of any governmental entity or court to which the Seller or the Timeshare Property is subject.  Seller is not a party to, and to the Seller’s knowledge the Timeshare Property is not subject to, any contract, understanding or agreement, written or oral, other than this Agreement and the agreements listed in Schedule 20.

(v)No Known Breaches or Violations.  Seller has received no written notice of any breach of any zoning or land use requirements.  Seller has not received written notice pertaining to the Timeshare Property regarding any violations of any state, local, federal or other law, statute, regulation, code, ordinance, decree or order.

(vi)Access.  To Seller’s knowledge after reasonable inquiry, subject to the applicable City Block Covenants, the Timeshare Property abuts, and has direct, permanent and unobstructed access for purposes of ingress and egress to, public roads or streets sufficient to satisfy all zoning, building and land use codes, restrictions and regulations.

(vii)Title.   Seller is contract purchaser of the Timeshare Property.  To Seller’s knowledge, no other agreements, options or rights of first offer or refusal exist to purchase or use the Timeshare Property or any portion thereof.  To Seller’s knowledge, no other party is in possession of any portion of or has any claim or right to possession of the Timeshare Property.

(viii)Certain Tax Matters.  The Seller is a “United States Person” within the meaning of Section 1545(f)(3) of the Internal Revenue Code of 1986, as amended, and shall execute and deliver to the Developer, at closing, an “Entity Transferor” certification.

21.Limitation.  Notwithstanding anything to the contrary herein or in any other document or agreement, Developer acknowledges that

(A)Seller is acquiring the Complex, including the Timeshare Property, from Aladdin Gaming, L.L.C. pursuant to the PSA; and

(B)Closing under this Agreement is to occur no sooner than simultaneously with closing under the PSA, and

(C)Seller is relying upon the representations and warranties of Aladdin Gaming, L.L.C. in and pursuant to the PSA; and

(D)any representations and/or warranties and/or covenants and/or agreements of Seller in this Agreement pertaining in any way to the Timeshare Property are derived from and limited by the corresponding representations and/or warranties and/or covenants and/or agreements of Aladdin Gaming LLC in the PSA.

Seller represents that after reasonable inquiry, Seller has no knowledge of facts and circumstances that would make any matter described in this Section 21 inconsistent with any of Seller’s representations and warranties in Section 20.

50

22.Covenants of the Seller.  Seller hereby covenants with the Developer, from and after the Effective Date and through the Closing Date (or such other specified date), that Seller will faithfully perform its obligations under this Agreement.  Seller shall also reasonably and promptly cooperate with the Developer in the Developer’s efforts to obtain approval from governmental entities and others for the Developer’s Timeshare Documents including, without limitation, executing applications, consents and authorizations for the Developer to proceed which the Developer shall prepare at its cost and expense.

23.Covenants of the Developer.   Developer hereby covenants with the Seller, from and after the Effective Date and through the Closing Date (or such other specified date), that Developer will faithfully perform its obligations under this Agreement.

24.Representations and Warranties of the Developer.  All representations and warranties set forth in this Section shall survive the Closing and any subsequent delivery of the deed unless otherwise indicated. Developer hereby represents and warrants to the Seller as to the following matters, each of which is so represented and warranted to be materially true and correct both as of the Effective Date and through and as of the Closing Date. The continued truth of each of the representations and warranties as of the Closing Date shall be a condition precedent to Seller’s obligation to close.

(i)Due Organization and Qualification.  Developer is a duly organized limited partnership, validly existing and in good standing in the State of Florida, and qualified to do business in the State of Nevada, and has the power and authority to own the Timeshare Property or the interest therein to be acquired pursuant to this Agreement and enter into and perform its obligations under this Agreement.

(ii)Authority to Enter into and Consummate the Agreement.  Developer’s execution of, and performance under, this Agreement is contracted through its authorized officer.  By virtue of the execution of this Agreement, the Developer represents that it has the right and authority to enter into this Agreement and that the Developer has the ability to perform all of its obligations hereunder without any consents from any public or private parties.  The execution and delivery of this Agreement, and the performance of Developer’s obligations hereunder, have been duly and validly authorized by all necessary corporate and partnership action on the part of the Developer and its constituents.  This Agreement constitutes a legal, valid and binding obligation of the Developer, which is enforceable against the Developer in accordance with its terms, subject to enforceability, bankruptcy, insolvency and other laws of general applicability relating to or affecting creditors’ rights generally and to general equitable principles.  Neither the execution nor delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will conflict with or result in a breach under any agreement or instrument by which the Developer is bound, and will not constitute a violation of any applicable law, rule, regulation, judgment, writ, order or decree of any governmental entity or court to which the Developer is subject.  Developer is not a party to any contract, understanding or agreement, written or oral, other than this Agreement and the agreements listed in Schedule 24 attached hereto (or to be attached hereto, in accordance with the Documentation Schedule).

25.Closing and Deed Delivery.

(a)Developer’s Conditions Precedent to Closing.  The obligations of the Developer to effect the transactions contemplated by this Agreement shall be subject to

51

satisfaction of all of the following conditions precedent unless waived in writing by the Developer, in its sole discretion:

(i)All representations and warranties of the Seller shall be true and correct in all material respects as of the Effective Date and the Closing Date and, if applicable, as of the date of delivery of the deed in accordance with Subsection (f) below; and the Seller shall have delivered an officer’s certificate, dated the Closing Date, and, if applicable, as of the date of delivery of the deed as aforesaid, to such effect; and

(ii)All Title Objections, Survey Objections, Environmental Objections and Zoning and Land Use Objections, if any, shall have been resolved to the Developer’s reasonable satisfaction or waived; and

(iii)As of the Closing Date and, if applicable, as of the date of delivery of the deed in accordance with Subsection (f) below, Seller shall not be (i) subject to any order, decree, judgment or injunction of a court or governmental body of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated herein nor (ii) a party to any pending action, suit or proceeding before any court or governmental agency of competent jurisdiction which seeks to enjoin or prohibit the consummation of the transactions contemplated hereby, or to cause any of the transactions contemplated hereby to be rescinded following their consummation, or which materially and adversely affects the Timeshare Property or the use of the Timeshare Property in accordance with the Developer’s intended use; and

(iv)Seller shall have performed all material obligations and complied with all material covenants and obtained all necessary approvals and consents required or contemplated by this Agreement; and

(v)The parties shall have concluded and executed all applicable Timeshare Development Agreements; and

(vi)Seller shall have closed under the PSA and/or shall close under the PSA simultaneously with Closing under this Agreement; and

(vii)The Senior Lenders shall have given all required consents to the Closing of the transaction and shall have executed the nondisturbance and attornment agreement as provided in Section 19 above; and

(viii)All other consents and approvals, including but not limited to those referred to in Section 6, Section 9, Section 20(iv), Schedule 20, Section 32(c) and Section 37, to the extent then applicable, shall have been obtained.

(b)Seller’s Conditions Precedent to Closing.  The obligations of Seller to effect the transactions contemplated by this Agreement shall be subject to satisfaction of the following conditions precedent at or prior to the Closing Date for each Phase unless waived in writing by Seller, at its sole discretion:

(i)Closing shall have occurred under the PSA to the satisfaction of the Seller; and

(ii)The representations and warranties of the Developer shall be true and correct in all material respects as of the Effective Date and the Closing Date; and

52

(iii)All Title Objections, Survey Objections, Environmental Objections and Zoning and Land Use Objections, if any, shall have been resolved to the Seller’s reasonable satisfaction or waived; and

(iv)Developer shall not be (i) subject to any order, decree, judgment or injunction of a court or governmental body of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated herein nor (ii) a party to any pending action, suit or proceeding before any court or governmental agency of competent jurisdiction which seeks to enjoin or prohibit the consummation of the transactions contemplated hereby, or to cause any of the transactions contemplated hereby to be rescinded following their consummation, or which materially and adversely affects the Timeshare Property or the use of the Timeshare Property in accordance with the Developer’s intended use; and

(v)Developer shall have performed all material obligations and complied with all material covenants and obtained all necessary approvals and consents required or contemplated by this Agreement; and

(vi)The parties shall have concluded and executed all applicable Timeshare Development Agreements; and

(vii)The Senior Lenders shall have given all required consents to the Closing of the transaction; and

(viii)The satisfaction or waiver of all of the Developer’s Conditions Precedent to Closing as provided in Section 25(a); and

(ix)All consents and approvals, including but not limited to those referred to in Section 20(iv) and Schedule 20, shall have been obtained.

(c)Closing Date and Location.  Subject to the other provisions of this Agreement, the date of Closing hereunder (the “Closing Date”) shall be no later than December 31, 2004.  The Closing shall occur in Las Vegas, Nevada at a location to be designated by Seller, with consent of Developer, not to be unreasonably withheld, or by mail/overnight courier service (if the Developer and Seller so elect), on or as of the Closing Date.

(d)Closing Documents.  At the Closing, (i) Seller shall execute and deliver, or shall cause to be executed and delivered, to Developer (or other applicable person), such title affidavits and related items as may be reasonably requested by the Title Company handling settlement, including but not limited to a settlement statement and a FIRPTA affidavit; and (ii) Developer shall execute and deliver, or shall cause to be executed and delivered, to Seller (or other applicable person), an insured closing protection letter from the parent of the Title Company and such title affidavits and related items as may be reasonably requested by the Title Company handling settlement, including but not limited to a settlement statement; and (iii) Seller and Developer shall execute and deliver, or shall cause to be executed and delivered, all such other applicable documents and agreements, including but not limited to all applicable Timeshare Development Agreements, and other items as shall be necessary or appropriate to effect the Closing in accordance with this Agreement.

53

(e)Prorations and Closing Costs.

(1)Taxes, utilities and related items shall be prorated as of the date of Deed Delivery, and any bills or invoices dated or delivered to or received by Developer with respect thereto following the Closing Date shall be the responsibility of Developer to pay.  If exact amounts for any prorated items are not available on the date of Deed Delivery, such items shall be prorated on the basis of the most recent information available, and shall be re-prorated when more accurate information becomes available.

(2)Seller shall pay for (i) half of the transfer and recordation taxes on the transfer deed; (ii) all transfer and recordation taxes and all other recording fees and costs for all title curative instruments, if any; and (iii) its own attorney’s fees.  Developer shall pay for all other closing and recordation taxes, fees, costs and expenses, including but not limited to (1) the title insurance premiums for all title insurance policies provided for herein and/or required by Developer’s providers of funds; (2) half of the transfer and recordation taxes, and all other recording fees and costs, for the transfer deed and for all other documents and instruments to be recorded and/or filed in any applicable land records and/or in any applicable governmental records; (3) all fees, charges, costs and expenses of any and all contractors, agents, consultants and professionals engaged to perform due diligence or other services with respect to the Timeshare Property; and (4) its own attorney’s fees.

(f)Deed Delivery.

(1)Notwithstanding occurrence of Closing as provided herein, the Special Warranty Deed, with Reversion, in form and substance as set forth in Exhibit I attached hereto (or to be attached hereto, in accordance with the Documentation Schedule) and incorporated herein by reference, and the Bill of Sale in form and substance as set forth in Exhibit J attached hereto (or to be attached hereto, in accordance with the Documentation Schedule) and incorporated herein by reference, shall not be required from Seller, and shall not be delivered or recorded without Seller’s approval in Seller’s sole discretion, unless and until

(i)Developer shall have delivered to Seller confirmation, in form and substance reasonably acceptable to Seller, as provided in Section 9(q), that Developer has obtained and/or will have available sufficient funds (e.g., debt and equity) to complete the development and construction of the Timeshare Project (or, if applicable, the first phase thereof) and to timely pay the Marketing Fees and other amounts payable to Seller under or pursuant to the provisions of this Agreement and the Marketing and Leasing Agreement;

(ii)The Developer shall have obtained and delivered to Seller the assurances of completion in accordance with Section 9(n), including but not limited to evidence of delivery to the State of Nevada of the completion bond(s) and to the Parent Guaranty described in said Section 9(n), for the construction of at least the first phase of the Timeshare Project, described herein; and

(iii)Seller and Developer shall have mutually approved all of the Plans and Specifications and Development Schedule for the Timeshare Project; and

(iv)The Developer shall have received all applicable planning and development approvals for the Timeshare Project from Clark County and all other applicable governmental agencies (e.g., state and/or regional planning agencies and/or water allocation bodies and/or school districts); and

54

(v)The Developer shall have received registration approval from the applicable State of Nevada timeshare regulatory agency concerning Phase 1 of the Timeshare Project.

On the date of delivery of the Special Warranty Deed, with Reversion, the Timeshare Property shall be conveyed free of all Title Objections, Survey Objections, Environmental Objections and Zoning and Land Use Objections, other than those resolved as provided in this Agreement.

(2)Developer shall satisfy all conditions for delivery of the deed as provided above (“Deed Delivery”) not later than the PH Sales Commencement Date.

(3)In addition to any other conditions, the Developer’s development and construction obligations hereunder and under the Timeshare Development Agreements shall be expressly contingent upon the following:

(i)Seller and Developer shall have mutually approved all of the Plans and Specifications and Development Schedule for the Timeshare Project; and

(ii)The Developer shall have received all applicable planning and development approvals for the Timeshare Project from Clark County and all other applicable governmental agencies (e.g., state and/or regional planning agencies and/or water allocation bodies and/or school districts)

– provided that Developer in good faith diligently pursues and exhausts all commercially reasonable efforts to obtain the foregoing approvals.  In the event these conditions (subject to said proviso) in this Paragraph (3) are not satisfied prior to the date of Deed Delivery set forth herein, the Developer shall have no further liability for development and construction hereunder and under the Timeshare Development Agreements.

26.Breach; Remedies.

(a)Breach (other than failure to close or failure to satisfy conditions to Deed Delivery) and Opportunity to Cure.

In the event that either party is in breach of its representations, warranties, covenants or other obligations under this Agreement other than the obligation to close, the non-breaching party shall give notice to such effect, specifying the nature of such breach, in which event the breaching party shall have thirty (30) days following the receipt of such notice to cure such breach. If such breach is not cured within such period, the non-breaching party shall have the rights (i) to enforce the terms of this Agreement by seeking a judicial decree of specific performance or other equitable remedy and/or (ii) to pursue such other relief (including damages) as may be available at law or in equity.

(b)Seller’s Failure to Close or Deliver the Deed.  In the event of Seller’s failure to close on the sale of the Timeshare Property or to deliver the deed when required to do so in accordance with this Agreement, Developer may enforce the requirement to close or to deliver the deed by seeking a judicial decree of specific performance or other equitable remedy.

(c)Developer’s Failure to Close or Satisfy Conditions.  In the event of Developer’s failure to close on the purchase of the Timeshare Property or to satisfy the conditions to Closing or Deed Delivery when required to do so in accordance with this Agreement and/or in accordance with any applicable deadline, and in the event same

55

constitutes a default by Developer hereunder, Seller may enforce the requirement to close or to satisfy said conditions by seeking a judicial decree of specific performance, and Seller may also seek and prove and collect consequential, actual and any other damages available at law or in equity; provided, however,

(1)if Developer’s failure to close or to satisfy conditions to Closing or Deed Delivery is due solely to

(A)Developer’s inability, after good faith diligent pursuit and exhaustion of all commercially reasonable efforts, to obtain

(i)all applicable planning and development approvals (assuming that the conditions set forth in Section 25(f)(3)(i) have been satisfied) for the Timeshare Project from Clark County and all other applicable governmental agencies (e.g., state and/or regional planning agencies and/or water allocation bodies and/or school districts); or

(ii)registration approval from the applicable State of Nevada timeshare regulatory agency concerning Phase 1 of the Timeshare Project; or

(B)acts of God or labor actions which make it impossible, in the exercise of commercially reasonable efforts, to develop and build the Timeshare Project as contemplated herein (after reasonable accommodation by Seller); or

(C)act of war or terrorism (identified as such by the United States Government under the USA Patriot Act and/or subject to the benefits of the Terrorism Risk Insurance Act) which directly, materially and adversely affects tourism in Las Vegas, Nevada for a period of at least four (4) consecutive months; or

(D)the death or incapacity of David Siegel; or

(E)Disapproval or other adverse action by the owner of the Mall Property to the extent occurring as described in and subject to the provisions of Section 6(a)(5) above; or

(F)Seller’s inability, good faith diligent pursuit and exhaustion of all commercially reasonable efforts, to obtain confirmation of utilities as and to the extent provided in and subject to the provisions of Section 6(e) above;

and is not (and does not arise from) a default by Developer hereunder, then this Agreement shall be terminated, subject to Developer’s continuing duties to Seller concerning confidential and/or proprietary information and any and all other provisions hereof which survive termination of this Agreement, and Seller shall have no remedy under this Section 26 for Developer’s failure to close or satisfy conditions; and

(2)Following Closing (assuming that the conditions set forth in Section 25(f)(3)(i) have been satisfied), if Developer’s failure to satisfy conditions to Deed Delivery is due solely to

56

(A)Developer’s inability, after good faith diligent pursuit and exhaustion of all commercially reasonable efforts, to obtain construction financing for the development and construction of the first phase of the Timeshare Project, or

(B)Developer’s inability, after good faith diligent pursuit and exhaustion of all commercially reasonable efforts, to obtain and deliver to the Seller evidence of the completion bond(s) described in Section 9(n);

then, whether or not same constitutes a default hereunder, Developer shall be liable to Seller for $7,000,000 as liquidated damages, and upon payment thereof this Agreement shall be terminated, subject to Developer’s continuing duties to Seller concerning confidential and/or proprietary information and any and all other provisions hereof which survive termination of this Agreement, and Seller shall have no further remedy under this Section 26 for Seller’s failure to satisfy conditions to Deed Delivery, the parties agreeing hereby that, in such event, liquidated damages is a reasonable remedy under the circumstances.

Whatever the reason or remedy for Developer’s failure to close, Developer shall deliver to Seller any and all information and all books, records, documents and other items delivered to or obtained by or generated by Developer in any way related to the Timeshare Property and/or the Complex.

(d)Specific Developer Defaults.  If Developer shall fail to:

(i)commence and diligently prosecute in good faith the Design/Approval activities as required herein, or

(ii)commence sales of Timeshare Intervals in Phase 1 of the Timeshare Project on or prior to the PH Sales Commencement Date, and such failure shall continue for thirty (30) days following written notice thereof from Seller, or

(iii)pay the Timeshare Advances or Marketing Fee when due,

when required pursuant to applicable provisions of this Agreement, subject to applicable conditions, then:

(A)if Deed Delivery has not occurred hereunder, Seller may terminate this Agreement by giving notice to Developer, upon which the parties shall have no further rights or obligations hereunder other than as provided in Section 33 and Section 26(c); and

(B)if Deed Delivery has occurred hereunder,

(1)Seller may terminate Developer’s rights under any and/or all applicable Timeshare Development Agreements – including (but not limited to) the Marketing and Leasing Agreement, and the Maintenance Agreement – and may draw upon the Letter of Credit; and Developer shall no longer have the right to pursue development of the Timeshare Project; and

57

(2)Notwithstanding clause (1) above,

(a)the Resort and Amenities Access Easement/ Agreement shall not terminate to the extent applicable to any portion of the Timeshare Project as to which (i) the possibility of reversion, as provided in Section 9(g), has expired; and (ii) sale of Timeshare Intervals has commenced in accordance with this Agreement and there is outstanding (or consummated) at least one contract with a bona fide third-party consumer to purchase a Timeshare Interval; and

(b)until the occurrence of a Fully Sold Project to the extent of Timeshare Units in the portions of the Timeshare Project as to which the possibility of reversion has terminated as provided herein, and so long as the Developer is not in breach of its obligations pursuant to Section 9(a) and Section9(f) with respect to such portions not subject to reversion, all applicable provisions of this Agreement – including but not limited to provisions concerning marketing fees, marketing locations, exclusivity, management rentals and easements – and the Sales Center Lease, shall continue in full force and effect with respect to such portions not subject to reversion; provided that the foregoing shall not limit or otherwise affect Seller’s activities with respect to anything other than Timeshare Intervals; and

(c)after the occurrence of a Fully Sold Project to the extent of Timeshare Units in the portions of the Timeshare Project as to which the possibility of reversion has terminated as provided herein, and so long as the Developer is not in breach of its obligations pursuant to Section 9(a) and Section 9(f) with respect to such portions not subject to reversion, Seller may develop and/or sell the second and any subsequent phases of the Timeshare Property without regard to the aforesaid limitations, including but not limited to a competing timeshare project and/or a competing timeshare developer; and the Sales Center Lease shall be terminated; and

(3)The Timeshare Property, or applicable portion (see Section 9(g) above), shall revert to Seller, and Developer shall execute, seal, acknowledge and deliver such instruments of conveyance and such other documents and agreements as may be necessary or appropriate to complete said reverter and vest in Seller good and marketable fee simple title to all of the Timeshare Property (or applicable portion), real, personal and mixed, and to relieve Developer to the extent applicable of liability to Seller under the Timeshare Development Documents with respect to the Reversion Property; and

(4)If requested by Seller, Developer will transfer to Seller (or its designee) all design information and other work product related to the construction of the Timeshare Project other than information proprietary to Developer^’s timeshare business; and

(5)Subject to any applicable duty to mitigate, Seller shall be entitled to such other remedies as may be available hereunder and/or at law and/or in equity.

58

Any design information or other work product transferred to Seller shall be used by Seller only in connection with the Timeshare Project on the Timeshare Property.

(e)Other.  The rights and remedies provided in the preceding subsections of this Section shall be the sole and exclusive rights and remedies of the parties hereto with respect to the breaches identified therein.  Nothing herein contained, however, shall be deemed to limit any rights or remedies of the parties following the Closing for any misrepresentation, breach of covenant, breach of warranty or other matter thereafter asserted by the parties hereto.  Each of the parties acknowledges that the remedies stated herein have been negotiated and provide mutual, satisfactory and adequate and proper compensation and consideration to each of the parties and that such remedies take into account the peculiar risks of each of the parties.  Each party waives any right to assert the defense of lack of mutuality of remedy.  Any and all remedies provided for herein and/or available at law or in equity shall survive Closing hereunder.

(f)Reversion.  Notwithstanding anything contained in this Agreement to the contrary, once a reversion as set forth in this Agreement has occurred, and except with respect to the Developer’s potential liability for liquidated damages as set forth in Subsection (c) above, any remedies available to Seller hereunder or under other applicable Timeshare Agreements, or at law or in equity, shall be limited to remedies pertinent to only the portion of the Timeshare Project as to which the possibility of reversion has terminated.

27.Notices.   All notices hereunder shall be in writing and sent to the recipients thereof through the use of any one of (a) a recognized national commercial delivery service providing regular overnight delivery service, (b) hand delivery or (c) certified mail, return receipt requested, and shall be deemed properly delivered when and if delivered to the recipient’s office by any of such service, as evidenced by the delivery receipt obtained by such service from the recipient’s office (or if no such receipt is returned to the sender, then two (2) Business Days after the delivery service acknowledges receipt of the notice for delivery) or evidence of the recipient’s refusal of such notice, such notices to be delivered to the parties at the addresses set forth below:

If to the Developer:	Westgate Resorts, Ltd.
	5601 Windhover Drive
	Orlando, Florida 32819
	Attn:	David A. Siegel
	Attn:	David Crabtree
with copy to:	Greenspoon, Marder, Hirschfeld ,
	Rafkin, Ross & Berger, P.A.
	201 East Pine Street, Suite 500
	Orlando, Florida 32801
	Attn:	Michael E. Marder, Esq.
If to the Seller:	OpBiz, L.L.C.
	3667 Las Vegas Blvd. South
	Las Vegas, Nevada 89109
	Attn:	Mark S. Helm, Esq.

59

with copy to:	Holland & Knight LLP
	2099 Pennsylvania Ave., N.W.
	Washington, D.C. 20006
	Attn:	Robert M. Chasnow, Esq.

Either party may change the person and/or address required for proper notice by giving the other party written notice of such modification in the manner described in this Section.

A duplicate notice may be also sent by facsimile (fax) as an accommodation but notice shall be effective only if delivered by method (a), (b) or (c) listed above.

28.Brokers.   Each of the Developer and the Seller warrants that no broker has been involved in connection with this transaction.  The parties agree to indemnify, defend and hold each other harmless against the commission claims of any brokers with whom the indemnifying party is claimed to have dealt, and further from and against any loss, cost (including reasonable attorney fees), damage, claim, demand or liability relating to broker claims which may be asserted against the indemnified party and which arises by, through or under the indemnifying party.

29.Applicable Law.  This Agreement and all questions of interpretation, construction and enforcement hereof, and all controversies hereunder, shall be governed by the applicable statutory and common law of the State of Nevada without regard to conflict of law principles.

30.Partial Invalidity.  In the event any term or provision of this Agreement shall be held illegal, unenforceable or inoperative as a matter of law, the remaining terms and provisions of this Agreement shall not be affected thereby, but each such term and provision shall be valid and shall remain in full force and effect if the deletion of the invalid provision shall not destroy the clear intent and purpose of this Agreement (or deprive either party of a material benefit contemplated by this Agreement).

31.Good Faith.  Each party agrees to take all actions respectively required of it or otherwise contemplated hereunder promptly and in good faith.

32.Assignment.

(a)This Agreement shall be binding upon and shall inure to the benefit of the successors and permitted assigns of the parties hereto.

(b)Seller in its sole discretion may permit Developer to assign and delegate its rights and obligations hereunder to a single-purpose entity wholly owned and controlled by Developer, in which event Developer shall remain fully responsible for all payment and performance obligations of Developer hereunder and under all other related documents and agreements.

(c)Developer may collaterally assign its rights hereunder and/or under any of the other Timeshare Development Agreements as security for its construction financing for the Timeshare Project and/or in connection with receivables financing pertinent to the Timeshare Project; provided that any such collateral assignment assigns only the rights of Developer pursuant to the Timeshare Development Agreements and does not modify any of the Developer’s obligations thereunder or modify or adversely affect any of the Seller’s rights and obligations thereunder; and provided further that any exercise of remedies by a lender or other

60

holder of any such collateral assignment, and any acquisition of assets or exercise of rights under any such collateral assignment, shall be subject to all applicable provisions of this Agreement and the other applicable Timeshare Development Agreements; it is understood and acknowledged that any lender foreclosing pursuant to the aforesaid assignment(s), or any purchaser at such foreclosure, shall also be entitled to any benefits available otherwise to Developer hereunder.  Seller acknowledges that Developer requires financing, secured by collateral assignments of Developer’s rights hereunder and/or under other Timeshare Development Agreements, in order to complete Developer’s obligations under this Agreement.

(d)To comply with requirements of its lenders, and/or for other reasons, Seller, without notice to or consent from Developer, may assign and/or delegate its rights and responsibilities hereunder and/or under the other Timeshare Development Agreements, provided any such assignee and/or delegee shall assume all applicable responsibilities of Seller; and/or may cause a parent, subsidiary or other affiliate to transfer the Timeshare Property to Developer at Deed Delivery and/or to otherwise fulfill Seller’s undertakings herein.  It is currently contemplated that a parent, subsidiary or other affiliate named or colloquially known as MezzCo will be said transferor.  Any and all references herein to Seller shall be read and understood in the context of this Section.

(e)Seller may collaterally assign its rights hereunder and/or under any of the other Timeshare Development Agreements as security for loans and other financial accommodations, without any requirement for approval by Developer, provided that Seller shall provide notice to Developer of the material terms of any such collateral assignment.

(f)This Section shall not limit the ability of Developer to assign its development rights as provided in (but subject to compliance with) Section 9(g) in order to avoid the application of the reversionary provisions of said Section.

(g)Except as provided above in this Section, neither party may assign any of its rights or obligations under this Agreement in whole or in part without the prior written consent of the other party.

33.Non-Merger; Survival.  The provisions of all Sections of this Agreement (and the representations and warranties set forth herein), including but not limited to the default and remedy provisions herein, shall survive the Closing and shall not be merged into the documents of conveyance from Seller to Developer at or in connection with Closing or any Timeshare Development Agreement or any other applicable document or agreement, unless and to the extent expressly indicated otherwise.

34.Entire Agreement.  This Agreement embodies the entire understanding between the parties, and supersedes any and all prior agreements and understandings, written or oral, formal or informal.

35.Number, Gender etc.  All pronouns and nouns and variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the context and identity of the parties may require.

36.Construction of Agreement.  This Agreement shall not be construed more strictly against one party than the other merely by virtue of the fact that it may have been prepared by counsel for one of the parties.  The headings of various Sections in this Agreement are for convenience only and are not to be utilized in construing the content or meaning of the

61

substantive provisions hereof.  Each party acknowledges and waives any claim contesting the existence and the adequacy of the consideration given by the other in entering into this Agreement.  All recitals, exhibits, schedules and similar items referred to herein and attached or intended to be attached hereto are incorporated into this Agreement by reference as integral parts of this Agreement.

37.Missing Exhibits, Schedules, etc.; Documentation Schedule.  If and to the extent that any exhibits and/or schedules is/are not attached hereto as an exhibit(s) and/or schedule(s) on the Effective Date of this Agreement, the form and substance thereof shall be negotiated in good faith between the parties hereto and shall be agreed upon and so attached on or before the date which is set forth below:

Exhibit, Schedule, etc.		To be Agreed Upon and Attached
Exhibit A	Timeshare Property	Attached hereto
Exhibit B	Developer’s Form of SNDA	30 days following Effective Date*
Exhibit C	Letter of Credit	Closing Date
Exhibit D	Marketing and Leasing Agreement	Closing Date
Exhibit E	Reserved
Exhibit F	Resort & Amenities Access Easement	Closing Date
Exhibit G	Reserved
Exhibit H	Maintenance Agreement	Deed Delivery
Exhibit I	Special Warranty Deed, with Reversion	Closing Date
Exhibit J	Bill of Sale & General Assignment	Closing Date
Exhibit K	PHII Licensing & Memorabilia Agreement	30 Days following Effective Date*
Exhibit L	Statement Format	Closing Date
Exhibit M	Reserved
Exhibit N	Parent Guaranty (Westgate)	30 Days following Effective Date*
Exhibit O	Escrow Agreement	Closing Date
Exhibit P	Reserved
Schedule 20	Seller Disclosures	30 Days following Effective Date*
Schedule 24	Developer Disclosures	30 Days following Effective Date*

38.Waivers; Extensions.  No waiver of any breach of any agreement or provisions herein contained shall be deemed a waiver of any preceding or succeeding breach thereof or of any other agreement or provisions herein contained.  No extension of time for performance of any obligations or acts shall be deemed an extension of the time for performance of any other obligations or acts.

*but not, in any event, later than December 31, 2004.

62

39.Time.  Time is of the essence with respect to this Agreement.  Whenever the time for performance of any act hereunder falls on a Saturday or Sunday or a legal holiday in Orlando, Florida or Las Vegas, Nevada, such time shall be ipso facto extended to the next Business Day.

40.Counterparts; Faxed Signatures; etc.  This Agreement may be executed in counterparts and/or via use of multiple signature pages, each of which shall be deemed an original.  It shall not be necessary that all signatures of all parties, or that all signatures necessary to bind any party, appear on the same counterpart or signature page.  Signatures hereon transmitted via telefacsimile (fax) or similar means, in accordance with Section 27, shall be valid and binding on all parties so transmitting.

41.Modifications.  This Agreement may not be modified orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

42.Attorney Fees and Expenses.  Should either party institute legal proceedings founded upon a breach of this Agreement, except as any party’s remedies or recoveries may be otherwise expressly limited hereunder, the prevailing party shall be entitled to recover from the other party its reasonable attorneys’ and paralegal fees and expenses incurred in connection with trial court proceedings, on appeal and in bankruptcy or administrative proceedings which interpret or enforce such party’s rights under this Agreement.

43.Further Assurances.  Each party, at any time, and from time to time, shall deliver to the other party such additional and other documents and agreements, and shall do and perform such other matters, as the other party may reasonably request, to fully effect the purposes of this Agreement.

44.Force Majeure.  If a cause of delay is not due to the willful act or neglect of such party, then except where the provisions of this Agreement clearly provide to the contrary, neither Seller nor Developer shall be deemed in default with respect to the performance of any of the terms, covenants and conditions of this Agreement if such failure shall be due to any strike, lockout, civil commotion, war-like operation, invasion, rebellion, hostilities, military or usurped power, sabotage, governmental regulations or controls, inability to obtain any materials for reasons beyond Seller’s control, Act of God or other casualty or cause beyond the reasonable control of such party. In any such event, except where expressly noted in this Agreement, the time for performance of such obligations) shall be extended one day for each day such party is prevented from performing its obligations) under this Agreement by such force majeure.  This provision shall not limit or support any delay in Developer’s obligation to pay Timeshare Advances timely in accordance with this Agreement.

45.No Third Party Beneficiary.  Neither party intends that the purchasers of timeshare interests in the Timeshare Project or that any other individual or entity (other than the Senior Lenders to the extent of their interests in the Seller and the Complex) will have the status of a third party beneficiary of any provision of this Agreement for the purpose of enforcing such provision.  The foregoing shall not adversely affect the ability of purchasers of Timeshare Intervals to enforce their rights under applicable Timeshare Development Agreements or the ability of collateral assignees (see Section 32) to enforce their rights under their applicable security instruments.

63

46.Confidentiality.  Developer covenants that as long as this Agreement remains in effect (and following its termination for any cause whatsoever), Developer (and Developer’s affiliates) will hold in strict confidence all data and information obtained by Developer concerning the Timeshare Property and/or the Complex and/or the Seller, in connection with this Agreement or otherwise, except that Developer may disclose information concerning the Timeshare Property to those individuals and entities assisting Developer in connection with the Design/Approval Process and, if appropriate, to Developer’s lender, sureties and such governmental agencies and authorities as may be required by law.

47.Exclusivity.   Until the first to occur of – (i) 100 Percent Sell-Out; (ii) the exercise by Seller of its termination right in Section 26(d), (iii) any uncured default by Seller or its related or affiliated entities pursuant to the various agreements contemplated hereunder (collectively, the “Termination Events”) – Developer and its affiliates will not market, sell or contract for marketing or sale of timeshare interests in a Westgate or any other timeshare product located on Las Vegas Boulevard.  The parties agree that the foregoing restriction specifically excludes Westgate Flamingo Bay (to the extent owned by Developer and/or its related and/or affiliated entities) (but the foregoing exclusion does not affect or modify any other provisions of this Agreement pertaining to Westgate Flamingo Bay; see Section 12).  The parties further agree that the foregoing restriction shall be suspended for each year (see Section 4(d)) following any year in which Developer achieves Net Interval Sales exceeding $100,000,000, as verified by Seller in accordance with Section 4(f) (periodic reports, audits, etc.) and related provisions hereof.

[END OF PAGE.]

64

IN WITNESS WHEREOF, the parties have executed this Agreement, effective for all purposes as of the Effective Date set forth on the first page hereof.

Seller:

OPBIZ, L.L.C.,

a Nevada limited liability company

By:

Print:

Title:

Developer:

WESTGATE RESORTS, LTD.,

a Florida limited partnership

By:

Print:

Title:

The undersigned joins in the foregoing Agreement solely for the purpose of agreeing to execute and deliver the Deed and other applicable documents if, as and when required pursuant thereto.

MEZZCO LLC,
a Nevada limited liability company

By:

Print:

Title:

Exhibits & Schedules:

Exhibit A	Timeshare Property
Exhibit B	Nondisturbance and Attornment Agreement protecting Developer’s access to Complex
Exhibit C	Guaranty/Security for Timeshare Advances and Marketing Fees
Exhibit D	Marketing and Leasing Agreement
Exhibit E	Reserved
Exhibit F	Resort and Amenities Access Easement/Agreement
Exhibit G	Reserved
Exhibit H	Maintenance Agreement
Exhibit I	Special Warranty Deed, with Reversion
Exhibit J	Bill of Sale
Exhibit K	PHII Licensing and Memorabilia Agreement
Exhibit L	Monthly Itemized Statement – Marketing Fee Calculation & Net Timeshare Intervals
Exhibit M	Reserved
Exhibit N	Parent Guaranty
Exhibit O	Escrow Agreement
Exhibit P	Reserved
Schedule 20	Seller Disclosures
Schedule 24	Developer Disclosures

65

Exhibit A

Timeshare Property

[TO BE CONFIRMED]

PARCEL ONE (1):

EXPLANATION:

THIS LEGAL DESCRIBES PARCEL NC AS SHOWN IN FILE 111, PAGE 84 OF SURVEYS ON FILE AT THE CLARK COUNTY, NEVADA RECORDER’S OFFICE.

LEGAL DESCRIPTION

PARCEL NC

A PORTION OF LOT 1 OF AS SHOWN IN THAT CERTAIN FINAL MAP ENTITLED “THE ALADDIN COMMERCIAL SUBDIVISION” AS RECORDED IN BOOK 96, PAGE 33 OF PLATS ON FILE AT THE CLARK COUNTY, NEVADA RECORDER’S OFFICE AND LYING WITHIN A PORTION OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 21, TOWNSHIP 21 SOUTH, RANGE 61 EAST M.D.M., CLARK COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER (NW 1/4) OF SAID SECTION 21 BEING ON THE CENTERLINE OF HARMON AVENUE; THENCE ALONG THE SOUTH LINE OF THE NORTHWEST QUARTER (NW 1/4) OF SAID SECTION 21, AND THE CENTERLINE OF SAID HARMON AVENUE, NORTH 89°31’10” EAST, 904.20 FEET; THENCE DEPARTING SAID SOUTH LINE AND STREET CENTERLINE, NORTH 00°28’50” WEST, 93.28 FEET TO THE NORTHERLY RIGHT OF WAY OF SAID HARMON AVENUE TO THE POINT OF BEGINNING; THENCE DEPARTING SAID NORTHERLY RIGHT-OF-WAY, NORTH 00°36’40” WEST, 142.49 FEET TO THE BEGINNING OF A CURVE, CONCAVE SOUTHEASTERLY AND HAVING A RADIUS OF 130.00 FEET; THENCE NORTHEASTERLY ALONG SAID CURVE TO THE RIGHT, THROUGH A CENTRAL ANGLE OF 90°00’00”, AN ARC LENGTH OF 204.20 FEET TO A POINT OF TANGENCY; THENCE NORTH 89°23’20” EAST, 511.60 FEET TO THE WESTERLY RIGHT-OF-WAY OF AUDRIE LANE; THENCE ALONG SAID WESTERLY RIGHT-OF-WAY, SOUTH 00°36’40” EAST, 282.16 FEET TO THE BEGINNING OF A CURVE, CONCAVE NORTHWESTERLY AND HAVING A RADIUS OF 30.00 FEET; THENCE SOUTHWESTERLY ALONG SAID CURVE TO THE RIGHT, THROUGH A CENTRAL ANGLE OF 90°07’50”, AN ARC LENGTH OF 47.19 FEET TO THE NORTHERLY RIGHT-OF-WAY OF SAID HARMON AVENUE; THENCE ALONG SAID NORTHERLY RIGHT-OF-WAY, THE FOLLOWING SEVEN (7) COURSES: (1) SOUTH 89°31’10” WEST, 72.93 FEET TO THE BEGINNING OF A CURVE, CONCAVE NORTHERLY AND HAVING A RADIUS OF 25.00 FEET; THENCE (2) WESTERLY ALONG SAID CURVE TO THE RIGHT THROUGH A CENTRAL ANGLE OF 09°27’42”, AN ARC LENGTH OF 4.13 FEET; THENCE (3) NORTH 81°01’08” WEST, 68.86 FEET TO THE BEGINNING OF A CURVE, CONCAVE SOUTHERLY AND HAVING A RADIUS OF 25.00 FEET; THENCE (4) WESTERLY ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 09°27’42”, AN ARC LENGTH OF 4.13 FEET; THENCE (5) SOUTH 89°31’10” WEST, 396.66 FEET TO THE BEGINNING OF A CURVE, CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 30.00 FEET; THENCE (6) NORTHWESTERLY ALONG SAID CURVE TO THE RIGHT, THROUGH A CENTRAL ANGLE OF 93°33’45”, AN ARC LENGTH OF 48.99 FEET TO A POINT OF NON-TANGENCY, A RADIAL

LINE TO SAID POINT BEARS NORTH 86°55’05” WEST; THENCE (7) SOUTH 80°41’11” WEST, 36.38 FEET TO THE POINT OF BEGINNING.

CONTAINS 188,792 SQUARE FEET (4.33 ACRES), MORE OR LESS. PARCEL NC HAS AN UPPER ELEVATION OF INFINITY.

EXCEPTING THEREFROM THE FOLLOWING DESCRIBED AREA:

COMMENCING AT THE AFOREMENTIONED POINT “A”; THENCE NORTH 00°36’40” WEST, 132.97 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING NORTH 00°36’40” WEST, 9.51 FEET TO THE BEGINNING OF A CURVE, CONCAVE SOUTHEASTERLY AND HAVING A RADIUS OF 130.00 FEET; THENCE NORTHEASTERLY ALONG SAID CURVE TO THE RIGHT THROUGH A CENTRAL ANGLE OF 90°00’00”, AN ARC LENGTH OF 204.20 FEET; THENCE NORTH 89°23’20” EAST, 105.35 FEET; THENCE SOUTH 44°22’41” WEST, 101.35 FEET; THENCE SOUTH 89°21’45” WEST, 101.25 FEET; THENCE SOUTH 00°25’39” EAST, 67.78 FEET; THENCE SOUTH 89°22’54” WEST, 62.23 FEET TO THE POINT OF BEGINNING.

THIS PARCEL HAS A LOWER PLANE ELEVATION OF 2117.29 FEET AND AN UPPER PLANE ELEVATION OF 2144.29 FEET.

FURTHER EXCEPTING THEREFROM THE FOLLOWING DESCRIBED AREA:

PARCEL NB11 AS SHOWN IN FILE 111, PAGE 83 OF SURVEYS ON FILE AT THE CLARK COUNTY, NEVADA RECORDER’S OFFICE DESCRIBED AS FOLLOWS;

COMMENCING AT THE AFOREMENTIONED POINT “A”; THENCE NORTH 00°36’40” WEST, 132.97 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING NORTH 00°36’40” WEST, 9.51 FEET TO THE BEGINNING OF A CURVE, CONCAVE SOUTHEASTERLY AND HAVING A RADIUS OF 130.00 FEET; THENCE NORTHEASTERLY ALONG SAID CURVE TO THE RIGHT THROUGH A CENTRAL ANGLE OF 90°00’00”, AN ARC LENGTH OF 204.20 FEET; THENCE NORTH 89°23’20” EAST, 105.35 FEET; THENCE SOUTH 44°22’41” WEST, 101.35 FEET; THENCE SOUTH 89°21’45” WEST, 101.25 FEET; THENCE SOUTH 00°25’39” EAST, 67.78 FEET; THENCE SOUTH 89°22’54” WEST, 62.23 FEET TO THE POINT OF BEGINNING.

CONTAINS 14,906 SQUARE FEET, MORE OR LESS.

PARCEL NB 11 HAS A LOWER PLANE ELEVATION OF 2144.29 FEET AND AN UPPER PLANE ELEVATION OF 2173.00 FEET.

FURTHER EXCEPTING THEREFROM THE FOLLOWING DESCRIBED AREA:

PARCEL NB7 AS SHOWN IN FILE 111, PAGE 82 OF SURVEYS ON FILE AT THE CLARK COUNTY, NEVADA RECORDER’S OFFICE DESCRIBED AS FOLLOWS;

BEGINNING AT THE AFOREMENTIONED POINT “A”; THENCE NORTH 00°36’40” WEST, 132.97 FEET; THENCE NORTH 89°22’54” EAST, 62.23 FEET; THENCE SOUTH 00°25’39” EAST, 159.12 FEET TO THE NORTHERLY RIGHT-OF-WAY OF SAID HARMON AVENUE AND BEING A POINT ON A NON-TANGENT CURVE, CONCAVE NORTHEASTERLY AND HAVING A RADIUS OF 30.00 FEET, FROM WHICH THE RADIUS BEARS NORTH 07°23’15” EAST; THENCE NORTHWESTERLY ALONG SAID RIGHT-OF-WAY AND CURVE, THROUGH A CENTRAL ANGLE OF 85°41’41”, AN ARC LENGTH OF 44.87 FEET TO A POINT OF NON-TANGENCY, A

2

RADIAL LINE TO SAID POINT BEARS NORTH 86°55’05” WEST; THENCE ALONG A NON-TANGENT LINE, SOUTH 80°41’11” WEST, 36.38 FEET TO THE POINT OF BEGINNING.

CONTAINS 8,639 SQUARE FEET, MORE OR LESS.

PARCEL NB7 HAS A LOWER PLANE ELEVATION OF 2117.29 FEET AND AN UPPER ELEVATION OF INFINITY.

PARCEL TWO (2):

A NON EXCLUSIVE EASEMENT FOR PEDESTRIAN AND VEHICULAR INGRESS, EGRESS, PARKING, UTILITIES, MAINTENANCE AND OTHER USES AS PROVIDED FOR IN THAT CERTAIN “CONSTRUCTION OPERATION AND RECIPROCAL EASEMENT AGREEMENT” BY AND BETWEEN ALADDIN GAMING, LLC, ALADDIN BAZAAR, LLC AND ALADDIN MUSIC HOLDINGS, LLC RECORDED MARCH 2, 1998 IN BOOK 980302 AS INSTRUMENT NO. 00003 AND RE-RECORDED MARCH 24, 1998 IN BOOK 980324 AS INSTRUMENT NO. 01111 AND RE-RECORDED MAY 29, 1998 IN BOOK 980529 AS INSTRUMENT NO. 02358 AND RE-RECORDED OCTOBER 22, 1998 IN BOOK 981022 AS INSTRUMENT NO. 00509 AS AMENDED BY MEMORANDUM OF AMENDMENT AND RATIFICATION OF REA RECORDED NOVEMBER 20, 2000 IN BOOK 20001120 AS INSTRUMENT NO. 00858, AS AMENDED BY SECOND AMENDMENT OF CONSTRUCTION, OPERATION RECIPROCAL EASEMENT AGREEMENT RECORDED MARCH 31, 2003 IN BOOK 20030331 AS INSTRUMENT NO. 04875, AS FURTHER AFFECTED BY MEMORANDUM OF SETTLEMENT AGREEMENT DATED AUGUST 19, 2003 RECORDED AUGUST 25, 2003 IN BOOK 20030825 AS INSTRUMENT NO. 01005 OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA.

PARCEL THREE (3):

A NON EXCLUSIVE RIGHT TO USE THAT CERTAIN MULTI-LEVEL PARKING STRUCTURE AND SURFACE-LEVEL PARKING FACILITIES AS PROVIDED FOR IN THAT CERTAIN “MEMORANDUM OF COMMON PARKING AREA USE AGREEMENT” BY AND BETWEEN ALADDIN GAMING, LLC AND ALADDIN BAZAAR, LLC RECORDED MARCH 2, 1998 IN BOOK 980302 AS INSTRUMENT NO. 00005 AND RE-RECORDED MAY 29,1998 IN BOOK 980529 AS INSTRUMENT NO. 02360 OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA.

3

Exhibit B

Nondisturbance and Attornment Agreement

Exhibit C

Guaranty/Security for Timeshare Advances and Marketing Fees

Exhibit D

Marketing and Leasing Agreement

Exhibit E

Reserved

Exhibit F

Resort and Amenities Access Easement/Agreement

Exhibit G

Reserved

Exhibit H

Maintenance Agreement

Exhibit I

Special Warranty Deed, with Reversion

Exhibit J

Bill of Sale

Exhibit K

PHII Licensing and Memorabilia Agreement

Exhibit L

Monthly Itemized Statement

Marketing Fee Calculation & Net Timeshare Intervals

Exhibit M

Reserved

Exhibit N

Parent Guaranty

Exhibit P

Reserved

Schedule 20

Seller Disclosures

City Block Covenants:  Documents and agreements binding upon the properties in the city block (the “City Block”) in which the Complex is located – including the Northwind Property, the Mall Property and the Complex (which includes the Hotel/Casino Property and the Timeshare Property (collectively, the “City Block Properties”) – and the owners of said properties.  See Section 19.

Seller’s Environmental Assessment:  That certain Environmental Assessment dated                    prepared by                                       .

Seller’s Survey:  That certain ALTA Survey dated March 24, 2003 by Horigan Survey for the Complex.

Seller’s Title Report:   That certain Preliminary Title Report dated March 14, 2003 prepared by United Title of Nevada.

Senior Lender Agreements:   Amended and Restated Loan and Facilities Agreement dated as of                      among the Seller and the Senior Lenders, together with all documents and agreements related thereto, all of which affect the Seller and the Complex including the Timeshare Property.

Consents and Approvals required under the PSA:

Consents and Approvals required under the City Block Covenants:

Consents and Approvals required under the Senior Lender Agreements:

Schedule 22

Developer Disclosures

EX-10.26

Exhibit 10.26

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is entered into as of September 1, 2004, by and between OpBiz, L.L.C. (“Employer”), and Donna Lehmann (“Employee”).

1.Employment.  Employer hereby employs Employee, and Employee hereby accepts employment by the Employer, as Employer’s Chief Financial Officer to perform such executive, managerial or administrative duties, commensurate with Employee’s position, as Employer may specify from time to time, during the Specified Term as defined in Section 2.

2.Effective Date; Specified Term.  This Agreement shall be effective as of Employee’s commencement date.  Subject to earlier termination as provided herein, the term of the Employee’s employment hereunder shall commence on September 1, 2004, and terminate on the first anniversary thereof (the “Specified Term”).  If Employee remains employed by Employer following the Specified Term, any such employment shall be on an at-will basis, unless the parties agree in writing to extend the Specified Term.

3.Compensation.

a.Base Salary.During the Specified Term, in consideration of the performance by Employee of Employee’s obligations hereunder to Employer and its parents, subsidiaries, affiliates, and joint ventures (collectively, the “Employer Group”), Employer shall pay Employee an annual base salary (the “Base Salary”)  of $250,000.00.  Any increases in Base Salary shall be at Employer’s sole discretion and shall be effective on the annual anniversary date under Section 2 hereof; provided, however, Employer agrees that the minimum Base Salary increase for Employee shall be five percent (5%) per annum for the first two years, should Employee remain employed with Employer.  The Base Salary shall be payable in accordance with the payroll practices of Employer as in effect from time to time for Employer’s senior executives.

b.Bonus Compensation. Employee is eligible to participate in Employer’s bonus program as formulated from time to time by Employer’s Board of Directors in its sole discretion (“Employer Bonus Program”).  Such Employer Bonus Program is primarily based on achievement of Employer’s EBITDA goals and Employee’s performance as determined by the Board of Directors.  The annual bonus for the in each year may be up to fifty percent (50%) of Employee’s Base Salary.  In addition to the participation by Employee in the Employer Bonus Program, Employer agrees that Employee shall be paid a one-time transition bonus of $75,000, within thirty (30) days of the date first set forth above and payable in accordance with the payroll practices of Employer

1

c.Employee Benefit Programs.  During the Specified Term, Employee shall be entitled to participate in Employer’s employee benefit plans as are generally made available from time to time to Employer’s senior executives, subject to the terms and conditions of such plans, and subject to Employer’s right to amend, terminate or take other similar actions with respect to such plans.

d.Business Expense Reimbursements.  Employer will pay or reimburse Employee for all reasonable out-of-pocket expenses, including travel expenses, Employee incurs during the Specified Term in the course of performing Employee’s duties under this Agreement upon timely submission of appropriate documentation to Employer, as prescribed from time to time by Employer.

e.Options.  Subject to the prior approval of the Nevada Gaming Commission, the availability of an exemption from registration under applicable securities laws, and the approval of appropriate members of the Employer Group, Employee is eligible to receive options to purchase three tenths (.3) of one percent (1%) (subject to dilution in the discretion of the Employer Group) of equity interest (non-voting) in Mezzco, LLC (or such other entity as determined by the Employer Group).  Employee’s options shall carry a strike price based on a $100 million equity value, will vest in three (3) equal installments on the annual anniversary of Employee’s employment with the Employer, should Employee remain employed with the Employer, and will be subject to such terms and conditions as may be set forth in the option grant.

4.Extent of Services. Employee agrees that the duties and services to be performed by Employee shall be performed exclusively for members of the Employer Group.  Employee further agrees to perform such duties in an efficient, trustworthy, lawful, and businesslike manner.  Employee agrees not to render to others any service of any kind whether or not for compensation, or to engage in any other business activity whether or not for compensation, that is similar to or conflicts with the performance of Employee’s duties under this Agreement, without the prior written approval of the Board.  Such services shall be rendered primarily in Las Vegas, Nevada.

5.Policies and Procedures.  In addition to the terms herein, Employee agrees to be bound by Employer’s policies and procedures including drug testing and background checks, as they may be established or amended by Employer in its sole discretion from time to time.  In the event the terms in this Agreement conflict with Employer’s policies and procedures, the terms herein shall take precedence.  Employer recognizes that it has a responsibility to see that its employees understand the adverse effects that problem gambling and underage gambling can have on individuals and the gaming industry as a whole.  Employee agrees to read, understand, and comply with Employer’s policy prohibiting underage gaming and supporting programs to treat compulsive gambling.

2

6.Licensing Requirements.  Employee represents, warrants, and acknowledges that Employer is engaged in a business that is or may be subject to and exists because of privileged licenses issued by governmental authorities in Nevada and other jurisdictions in which Employer or Employer Group is engaged or has applied or, during the Specified Term, may apply to engage in the gaming business.  If requested to do so by Employer or Employer Group, Employee shall apply for and obtain any license, qualification, clearance or the like that shall be requested or required of Employee by any regulatory authority having jurisdiction over Employer or Employer Group.

7.Failure to Satisfy Licensing Requirement.  If Employee fails to satisfy any licensing requirement referred to in Section 6 above, or if any governmental authority directs the Employer to terminate any relationship it may have with Employee, or if Employer shall determine, in Employer’s reasonable judgment, that Employee was, is or might be involved in, or is about to be involved in, any activity, relationship(s) or circumstance that could or does jeopardize the business of Employer or Employer’s Group, reputation or such licenses, or if any such license is threatened to be, or is, denied, curtailed, suspended or revoked, this Agreement may be terminated by Employer and the parties’ obligations and responsibilities shall be determined by the provisions of Section 11.

8.Restrictive Covenants.

a.Competition.  Employee acknowledges that, in the course of Employee’s responsibilities hereunder, Employee will form relationships and become acquainted with certain confidential and proprietary information as further described in Section 8(b).  Employee further acknowledges that such relationships and information are and will remain valuable to the Employer and Employer Group and that the restrictions on future employment, if any, are reasonably necessary in order for Employer and Employer Group to remain competitive in the gaming industry.  In recognition of their heightened need for protection from abuse of relationships formed or information garnered before and during the Specified Term of the Employee’s employment hereunder, Employee covenants and agrees for the Minimum Employment Period (defined below)  , not to directly or indirectly be employed by, provide consultation or other services to, engage or participate in, provide advice, information or assistance to, fund or invest in, or otherwise be connected or associated in any way or manner with, any firm, person, corporation or other entity which is either directly, indirectly or through an affiliated company or entity, engaged in gaming or proposes to engage in gaming in Clark County,  Nevada.   The covenants under this Section 8(a) include but are not limited to Employee’s covenant not to:

i.Make known to any third party the names and addresses of any of the customers of Employer or any member of Employer Group, or any other information or data pertaining to those customers; provided that for purposes of this Section 8(a)(i), the Restrictive Period shall be for a two

3

(2) year period immediately following termination of employment for any reason (the “Restrictive Period”);

ii.Call on, solicit, induce to leave and/or take away, or attempt to call on, solicit, induce to leave and/or take away, any of the customers of Employer or any member of the Employer Group, either for Employee’s own account or for any third party; provided that for purposes of this Section 8(a)(i), the Restrictive Period shall be for a one (1) year period immediately following termination of employment for any reason;

iii.Call on, solicit and/or take away, any potential or prospective customer of Employer or any member of the Employer Group, on whom the Employee called or with whom Employee became acquainted during employment (either before or during the Specified Term), either for Employee’s own account or for any third party; provided that for purposes of this Section 8(a)(i), the Restrictive Period shall be for a one (1) year period immediately following termination of employment for any reason; and

iv.Approach or solicit any employee or independent contractor of Employer or any member of the Employer Group with a view towards enticing such person to leave the employ or service of Employer or any member of the Employer Group, or hire or contract with any employee or independent contractor of Employer or any member of the Employer Group, without the prior written consent of the Employer, such consent to be within Employer’s sole and absolute discretion; provided that for purposes of this Section 8(a)(i), the Restrictive Period shall be for a one (1) year period immediately following termination of employment for any reason.

b.Confidentiality.  Employee covenants and agrees that Employee shall not at any time during the Specified Term or thereafter, without Employer’s prior written consent, such consent to be within Employer’s sole and absolute discretion, disclose or make known to any person or entity outside of the Employer Group any Trade Secret (as defined below), or proprietary or other confidential information concerning Employer or any member of the Employer Group, including without limitation, Employer’s customers and its casino, hotel, and marketing data practices, procedures, management policies or any other information regarding Employer or any member of the Employer Group, which is not already and generally known to the public through no wrongful act of Employee or any other party.  Employee covenants and agrees that Employee shall not at any time during the Specified Term, or thereafter, without the Employer’s prior written consent, utilize any such Trade Secrets, proprietary or confidential information in any way, including communications with or contact with any such customer other than in connection with employment hereunder.  For purposes of this Section 8, Trade Secrets is defined as data or information, including a

4

formula, pattern, compilation, program, device, method, know-how, technique or process, that derives any economic value, present or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may or could obtain any economic value from its disclosure or use.

c.Former Employer Information.  Employee will not intentionally, during the Specified Term, improperly use or disclose any proprietary information or Trade Secrets of any former employer or other person or entity and will not bring onto the premises of the Employer any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.

d.Third Party Information.  Employee acknowledges that Employer and other members of the Employer Group have received and in the future will receive from third parties their confidential or proprietary information subject to a duty to maintain the confidentiality of such information and to use it only for certain limited purposes.  Employee will hold all such confidential or proprietary information in the strictest confidence and will not disclose it to any person or entity or to use it except as necessary in carrying out Employee’s duties hereunder consistent with Employer’s (or such other member of the Employer Group’s) agreement with such third party.

e.Employer’s Property.  Employee hereby confirms that Trade Secrets, proprietary or confidential information and all information concerning customers who utilize the goods, services or facilities of any hotel and/or casino owned, operated or managed by Employer constitute Employer’s exclusive property (regardless of whether Employee possessed or claims to have possessed such information prior to the date hereof).  Employee agrees that upon termination of employment, Employee shall promptly return to the Employer all notes, notebooks, memoranda, computer disks, and any other similar repositories of information (regardless of whether Employee possessed such information prior to the date hereof) containing or relating in any way to the Trade Secrets or proprietary or confidential information of each member of the Employer Group, including but not limited to, the documents referred to in Section 8(b).  Such repositories of information also include but are not limited to any so-called personal files or other personal data compilations in any form, which in any manner contain any Trade Secrets or proprietary or confidential information of Employer or any member of the Employer Group.

f.Notice to Employer.  Employee agrees to notify Employer immediately of any employers for whom Employee works or provides services (whether or not for remuneration to Employee or a third party) during the Specified Term or within the Restrictive Period.  Employee further agrees to promptly notify Employer, during Employee’s employment with Employer, of any contacts made by any

5

gaming licensee that concern or relate to an offer of future employment (or consulting services) to Employee.

9.Representations. Employee hereby represents, warrants and agrees with Employer that:

a.The covenants and agreements contained in Sections 4 and 8 above are reasonable, appropriate and suitable in their geographic scope, duration and content; the Employer’s agreement to employ the Employee and a portion of the compensation and consideration to be paid to Employee hereunder is separate and partial consideration for such covenants and agreements; the Employee shall not, directly or indirectly, raise any issue of the reasonableness, appropriateness and suitability of the geographic scope, duration or content of such covenants and agreements in any proceeding to enforce such covenants and agreements;and such covenants and agreements shall survive the termination of this Agreement, in accordance with their terms;

b.The enforcement of any remedy under this Agreement will not prevent Employee from earning a livelihood, because Employee’s past work history and abilities are such that Employee can reasonably expect to find work in other geographic areas and lines of business;

c.The covenants and agreements stated in Sections 4, 6, 7, and 8 above are essential for the Employer’s reasonable protection;

d.Employer has reasonably relied on these covenants and agreements by Employee; and

e.Employee has the full right to enter into this Agreement and by entering into and performance of this Agreement will not violate or conflict with any arrangements or agreements Employee may have or agreed to have with any other person or entity.

f.Employee acknowledges and warrants to Employer the receipt and sufficiency of separate consideration for the assignment by Employer of Employer’s rights and Employee’s obligation under Section 8.

Notwithstanding Section 21 Employee agrees that in the event of Employee’s breach or threatened breach of any covenants and agreements set forth in Sections 4 and 8 above, Employer may seek to enforce such covenants and agreements in court through any equitable remedy, including specific performance or injunction, without waiving any claim for damages.  In any such event, Employee waives any claim that the Employer has an adequate remedy at law or for the posting of a bond.

10.Termination for Death or Disability.  Employee’s employment hereunder shall terminate upon Employee’s death or Disability (as defined below).  In the event of Employee’s death

6

or Disability, Employee (or Employee’s estate or beneficiaries in the case of death) shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) any earned but unpaid bonus then payable to Employee (which shall be paid on Employer’s next scheduled payroll date), (3) business expense reimbursement pursuant to Section 3(d), and (4) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto. For purposes of this Section 10, Disability is defined as Employee’s incapacity, certified by a licensed physician selected by Employer (“Employer’s Physician”), which precludes Employee from performing the essential functions of Employee’s duties hereunder for sixty (60) days or more.  In the event Employee disagrees with the conclusions of the Employer’s Physician, Employee (or Employee’s representative) shall designate a physician (“Employee’s Physician”), and Employer’s Physician and Employee’s Physician shall jointly select a third physician (“Third Physician”), who shall make the determination which determination shall be final and binding on the parties hereto.  Employee hereby consents to any examination or to provide or authorize access to any medical records that may be reasonably required by Employer’s Physician or the Third Physician in connection with any determination to be made pursuant to this Section 10.

11.(a)Termination by Employer for Cause.  Employer may terminate Employee’s employment hereunder for Cause (as defined below) at any time.  If Employer terminates Employee’s employment for Cause, Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) business expense reimbursement pursuant to Section 3(d), and (3) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto.  For purposes of this Section 11 (a), Cause is defined as Employee’s (i) failure to abide by Employer’s policies and procedures, (ii) misconduct, insubordination, or inattention to Employer’s business, (iii) failure to perform the duties required of Employee up to the standards established by the Board, or other material breach of this Agreement (other than as a result of a Disability), or (iv) failure or inability to satisfy the requirements stated in Section 7 above.

(b)At Will Termination by Employer.  Employer may terminate Employee at will at any time upon fifteen (15) days prior written notice, or, in the Employer’s sole discretion, the equivalent of two weeks of Base Salary in lieu of notice.

If Employer terminates Employee at will under this Section 11(b), Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of

7

employment (which shall be paid on Employer’s next scheduled payroll date), (2) business expense reimbursement pursuant to Section 3(d), and (3) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto, and (4) three (3) months of Base Salary if Employee is terminated in Year 1 of the Specified Term; or six (6) months of Base Salary if Employee is terminated in Year 2 of the Specified Term; or nine (9) months of Base Salary if Employee is terminated in Year 3 of the Specified Term, provided that severance pay shall  not exceed an amount equivalent to Base Salary from the date of termination to the date this Employment Agreement would otherwise expire but for earlier termination.

(c)Licensing Contingency.  Employer acknowledges that Employee must relinquish other employment to enter into this Employment Agreement.  Various state licensing requirements have not yet been finalized with Employer and may not be granted.  In the event Employee resigns her position with her current employer and a gaming license is not granted to the Employer, Employer agrees to compensate Employee for a period of time not greater than sixty (60) days after Employee ceases employment or until Employee finds substitute employment, whichever is shorter, with Employer due solely to the failure of Employer to obtain gaming licenses, due to no fault of Employee.

12.Termination by Employee.  Employee may terminate Employee’s employment hereunder upon sixty (60) days’ prior written notice to Employer.  If Employee shall terminate her employment other than for (a) death, (b) Disability, (c) failure of Employer to pay Employee’s compensation when due, or (d) material reductions in Employee’s duties and responsibilities without her consent, Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) any earned but unpaid bonus then payable to Employee (which shall be paid on Employer’s next scheduled payroll date), (3) business expense reimbursement pursuant to Section 3(d), and (4) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto.    Notwithstanding anything contained in this Agreement to the contrary, Employee agrees that Employee shall not give notice of Employee’s termination of Employee’s employment hereunder for a minimum of six (6) months from the date first set forth above, such period of time, coupled with the notice contained in this Section 12, shall be the “Minimum Employment Period” for purposes of this Agreement.

13.Release; Full Satisfaction.  Notwithstanding anything to the contrary, no payments or benefits shall be provided that are in addition to the payments or benefits that would be provided pursuant to Section 12, unless and until Employee executes and delivers a standard form of general release of claims, and such release has become irrevocable; provided, however, that Employee shall not be required to release any indemnification

8

rights or continuing rights to benefits under Employer’s benefit plans, in accordance with the terms and conditions of such plans.

14.Cooperation Following Termination.  Following termination of employment of Employee’s employment hereunder for any reason, Employee agrees to reasonably cooperate with Employer upon the reasonable request of the Board and to be reasonably available to Employer with respect to matters arising out of Employee’s services to any member of the Employer Group.  Employer shall reimburse, or at Employee’s request, advance Employee for expenses reasonably incurred in connection with such matters.

15.Interpretation; Each Party the Drafter.  Each of the parties was represented by or had the opportunity to consult with counsel who either participated in the formulation and documentation of, or was afforded the opportunity to review and provide comments on, this Agreement.Accordingly, this Agreement and the provisions contained in it shall not be construed or interpreted for or against any party to this agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.

16.Indemnification.  Employer shall indemnify Employee to the fullest extent permitted by Nevada law and the articles of incorporation and bylaws of the Employer.  Such indemnification shall include, without limitation, the following:

a.Indemnification Involving Third Party Claims.  Employer shall indemnify Employee if Employee is a party to or is threatened to be made a party to or otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (each a “Claim”), other than a Claim by or in the name of Employer or any entity in the Employer Group, by reason of the fact that Employee is or was serving as an employee or agent of Employer or any entity in the Employer Group (each an “Indemnifiable Event”), against all expenses, including attorneys’ fees, judgments, fines, and amounts paid in settlement (collectively, “Expenses”) actually and reasonably incurred by Employee in connection with the investigation, defense, settlement or appeal of such Claim, if Employee either is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner Employee reasonably believed to be in or not opposed to the best interests of Employer and, in the case of a criminal Claim, in addition had no reasonable cause to believe that her conduct was unlawful.

b.Determination of Appropriateness of Indemnification.  Notwithstanding the foregoing, the obligations of Employer under Section 16 shall be subject to the condition that, unless ordered by a court, a determination shall have been made that indemnification is proper under the specific circumstances, pursuant to and in accordance with NRS Section 78.751, as in effect from time to time.

9

c.Indemnification for Defense Only.  The indemnification authorized by this Section 16 does not include any actions, suits or proceedings initiated by Employee against Employer or any entity in the Employer Group.

d.Settlement of Claims.  Neither Employee nor Employer shall settle any Claim without the prior written consent of the other (such consent not to be unreasonably withheld or delayed).

17.Severability.  If any provision hereof is unenforceable, illegal or invalid for any reason whatsoever, such fact shall not affect the remaining provisions hereof, except in the event a law or court decision, whether on application for declaration, or preliminary injunction or upon final judgment, declares one or more of the provisions of this Agreement that impose restrictions on Employee unenforceable or invalid because of the geographic scope or time duration of such restriction.  In such event, Employer shall have the option:

(A)To deem the invalidated restrictions retroactively modified to provide for the maximum geographic scope and time duration that would make such provisions enforceable and valid.

Exercise of this option shall not affect Employer’s right to seek damages or such additional relief as may be allowed by law in respect to any breach by Employee of the enforceable provisions of this Agreement.

18.Survival.  Notwithstanding anything in this Agreement to the contrary, to the extent applicable, Sections 8 through and including Section 17 shall survive the termination of this Agreement.

19.Notice.  For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) when personally delivered, (ii) the business day following the day when deposited with a reputable and established overnight express courier (charges prepaid), or (iii) five (5) days following mailing by certified or registered mail, postage prepaid and return receipt requested.  Unless another address is specified, notices shall be sent to the addresses indicated below:

To Employer:

OpBiz, LLC

3667 Las Vegas Blvd.

Las Vegas, Nevada 89109

Attn: Michael V. Mecca

10

With a copy to:

To Employee:

Donna Lehmann

9501 Scenic Sunset Dr.

Las Vegas, Nevada 89117

or to such other address as either party shall have furnished to the other in writing in accordance herewith.

20.Tax Withholding.  Notwithstanding any other provision of this Agreement, Employer may withhold from any amounts payable under this Agreement, or any other benefits received pursuant hereto, such Federal, state, local and other taxes as shall be required to be withheld under any applicable law or regulation.

21.Dispute Resolution.

a.Any dispute, claim or controversy arising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud, or arising from or related in any way to Employee’s employment with Employer will be submitted first to mediation to be exclusively paid for by Employer up to a maximum of $2,000 in mediation fees and costs, with each party to bear its own attorney’s fees and costs.  If the parties wish to engage in mediation, which mediator’s fee and costs exceeds $2,000, the parties shall, after payment of the first $2,000 by Employer, thereafter equally share the mediator’s fee and costs.  If the parties are not successful in resolving disputes pursuant to mediation, the parties agree that any claim or controversy arising from or in any way related to this Agreement to the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud or arising from or related in any way to Employee’s employment with Employer, will be submitted for final resolution by private arbitration before a single arbitrator and in accordance with the National Rules for the Resolution of Employment Disputes and practices then in effect of, the American Arbitration Association, or any successors thereto (“AAA”), except where those rules conflict with these provisions, in which case these provisions control; provided, however, that Employer shall have the right to seek in court equitable relief, including a temporary restraining order, preliminary or permanent injunction or an injunction in aid of arbitration, to enforce its rights set forth in Section 8.  The arbitration will be held in Las Vegas, Nevada.

11

b.Giving recognition to the understanding of the parties hereto that they contemplate reasonable discovery, including document demands and depositions, the arbitrator shall provide for discovery in accordance with the Nevada Rules of Civil Procedure as reasonably applicable to this private arbitration.

c.To the extent possible, the arbitration hearings and award will be maintained in confidence, except as may be required by law or for the purpose of enforcement of an arbitral award.

d.Each party shall bear its own attorney’s fees, costs and expenses incurred in connection with arbitration proceedings pursuant to this Agreement to arbitrate.  The fees, costs, and expenses of the arbitrators and related expenses shall be paid by the Employer up to a maximum of $5,000.  Any fees, costs and expenses of the arbitrators shall thereafter be shared equally between Employer, on one hand, and Employee on the other hand.

e.Each party hereto waives, to the fullest extent permitted by law, any claim to punitive or exemplary or liquidated or multiplied damages from the other.

22.No Waiver of Breach or Remedies.  No failure or delay on the part of Employer or Employee in exercising any right, power or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

23.Amendment or Modification.  No amendment, modification, termination or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by a member of the Board (other than Employee), and Employee, nor consent to any departure by the Employee from any of the terms of this Agreement shall be effective unless the same is signed by a member of the Board (other than Employee).  Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

24.Governing Law; Venue.  The laws of the State of Nevada shall govern the validity, construction, and interpretation of this Agreement, without regard to conflict of law principles.  Each party irrevocably submits to the exclusive jurisdiction of the courts of the State of Nevada located in Clark County in any action, suit or proceeding arising out of or relating to this Agreement or any matters contemplated hereby, and agrees that any such action, suit or proceeding shall be brought only in such court.

25.Headings.  The headings in this Agreement have been included solely for convenience of reference and shall not be considered in the interpretation or construction of this Agreement.

12

26.Assignment.  This Agreement is personal to Employee and may not be assigned by Employee.

[THIS SPACE INTENTIONALLY LEFT BLANK]

13

27.  Prior Agreements.  This Agreement shall supersede and replace any and all other prior discussions and negotiations as well as any and all agreements and arrangements that may have been entered into by and between Employee or any predecessor thereof, on the one hand, and Employee, on the other hand, prior to the date first written above relating to the subject matter hereof.  Employee acknowledges that all rights under such prior agreements and arrangements shall be extinguished.

IN WITNESS WHEREOF, Employer and Employee have entered into this Agreement in Las Vegas, Nevada, as of the date first written above.

“EMPLOYEE”
DONNA LEHMANN
Signature
“EMPLOYER”
OpBiz, L.L.C.
By:
Its:
	Title

14

EX-10.27

Exhibit 10.27

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is entered into as of November 2, 2004, by and between OpBiz, LLC, d/b/a Planet Hollywood Resort & Casino (“Employer”), and Mark S. Helm (“Employee”).

1.Employment.  Employer hereby employs Employee, and Employee hereby accepts employment by the Employer, as Employer’s Senior Vice President & General Counsel to perform such executive, managerial or administrative duties, commensurate with Employee’s position, as Employer may specify from time to time, during the Specified Term as defined in Section 2.  Employee shall report directly to the Chief Executive Officer of the Employer.

2.Effective Date; Specified Term.  This Agreement shall be effective as of Employee’s commencement date.  Subject to earlier termination as provided herein, the term of the Employee’s employment hereunder shall commence on November 2, 2004 and terminate on the third (3rd) anniversary thereof (the “Specified Term”).  If Employee remains employed by Employer following the Specified Term, any such employment shall be expressly on an at will basis, unless the parties specifically agree in writing to extend the Specified Term.

3.Compensation.

a.Base Salary.During the Specified Term, in consideration of the performance by Employee of Employee’s obligations hereunder to Employer and its parents, subsidiaries, affiliates, and joint ventures (collectively, the “Employer Group”), Employer shall pay Employee an annual base salary (the “Base Salary”) of $215,000, subject to annual review (provided that such review shall not entail a reduction in the Base Salary).  The Base Salary shall be payable in accordance with the payroll practices of Employer as in effect from time to time for Employer’s senior executives.

b.Bonus Compensation. Employee is eligible to participate in the Planet Hollywood Resort and Casino Discretionary Management Bonus Plan according to its terms, as amended from time to time by the Board of Directors in its sole discretion.  Such Bonus Plan is primarily based on achievement of Employer’s EBITDA goals and Employee performance as determined by the Board; provided that such Bonus Plan shall contemplate up to 50% of Employee’s Base Salary being paid out on such EBITDA goals and Employee performance.  Employee shall be eligible to receive such other bonuses as may be determined in the sole discretion of Employer’s Board of Directors.

c.Employee Benefit Programs.  During the Specified Term, Employee shall be entitled to participate in Employer’s employee benefit plans as are generally made

1

available from time to time to Employer’s senior executives, subject to the terms and conditions of such plans, and subject to Employer’s right to amend, terminate or take other similar actions with respect to such plans.

d.Relocation Expense Reimbursements.  Employer requires Employee to relocate to Las Vegas, Nevada as soon as practicable.  Accordingly, Employer will pay or reimburse Employee for Employee’s reasonable relocation expenses from Orlando, Florida to Las Vegas, Nevada, such expenses to include:  (i) one house-hunting trip for Employee and Employee’s spouse; (ii) relocation expenses in moving Employee’s personal property and household goods, including packing and transport (and shipment of two (2) automobiles, if necessary); (iii) final travel expenses for Employee and spouse (and two pets); (iv) direct and actual closing costs and broker fees on sale of residence in Orlando, Florida capped at ten thousand dollars ($10,000.00); and (v) temporary housing in the Las Vegas area for Employee; provided that such temporary housing shall be subject to Employee’s obligation to use commercially reasonable best efforts to immediately secure permanent housing and shall in any event be capped at three thousand dollars ($3,000.00) (collectively, the “Relocation Expenses”).  Reimbursement of Relocation Expenses will be fully “grossed-up” by the Company for any imputed income required to be recognized so that the economic effect to Employee is the same as if these benefits were provided to Employee on a non-taxable basis.  Notwithstanding the foregoing, Employee agrees that if Employee resigns within the first six months of employment under this Agreement, Employee shall repay to Employer all Relocation Expenses paid by Employer.  If Employee resigns between the seventh and twelfth month of employment under this Agreement, Employee shall repay to Employer 50% of the Relocation Expenses.  From and after the first anniversary of employment, Employee shall have no reimbursement obligation of any kind with respect to Relocation Expenses.

e.Business Expense Reimbursements.  Employer will pay or reimburse Employee for all reasonable out-of-pocket expenses, including travel expenses, bar licensing expenses and continuing legal education that Employee incurs during the Specified Term in the course of performing Employee’s duties under this Agreement upon timely submission of appropriate documentation to Employer, as prescribed from time to time by Employer.

f.Option Plan.  Employee is eligible to participate in the Planet Hollywood Resort and Casino Management Incentive Options Plan (“Options Plan”) according to its terms, as established and amended from time to time by the Board of Directors in its sole discretion.

Pursuant to the terms of the Options Plan, Employee is eligible to receive options to purchase two tenths of one percent (.2%) (subject to dilution as set forth in the

2

Options Plan) of equity interest in Mezzco, LLC (or such other entity as determined by the Options Plan).  Employee’s options shall carry a strike price based on a $100 million equity value and will vest in three equal installments on the first three annual anniversary dates of the Specified Term.

4.Extent of Services. Employee agrees that the duties and services to be performed by Employee shall be performed exclusively for members of the Employer Group.  Employee further agrees to perform such duties in an efficient, trustworthy, lawful, and businesslike manner.  Employee agrees not to render to others any service of any kind whether or not for compensation, or to engage in any other business activity whether or not for compensation, that is similar to or conflicts with the performance of Employee’s duties under this Agreement, without the prior written approval of the Board.

5.Policies and Procedures.  In addition to the terms herein, Employee agrees to be bound by Employer’s policies and procedures including drug testing and background checks, as they may be established or amended by Employer in its sole discretion from time to time.  In the event the terms in this Agreement conflict with Employer’s policies and procedures, the terms herein shall take precedence.  Employer recognizes that it has a responsibility to see that its employees understand the adverse effects that problem gambling and underage gambling can have on individuals and the gaming industry as a whole.  Employee agrees to read, understand, and comply with Employer’s policy prohibiting underage gaming and supporting programs to treat compulsive gambling.

6.Licensing Requirements.  Employee acknowledges that Employer is engaged in a business that is or may be subject to and exists because of privileged licenses issued by governmental authorities in Nevada and other jurisdictions in which Employer or Employer Group is engaged or has applied or, during the Specified Term, may apply to engage in the gaming business.  If requested to do so by Employer or Employer Group, Employee shall apply for and obtain, at Employer’s cost, any license, qualification, clearance or the like that shall be requested or required of Employee by any regulatory authority having jurisdiction over Employer or Employer Group.

7.Failure to Satisfy Licensing Requirement.  If Employee fails to satisfy any licensing requirement referred to in Section 6 above, or if any governmental authority directs the Employer to terminate any relationship it may have with Employee, or if Employer shall determine, in Employer’s sole and exclusive judgment, that Employee was, is or might be involved in, or is about to be involved in, any activity, relationship(s) or circumstance that could or does jeopardize the business of Employer or Employer’s Group, reputation or such licenses, or if any such license is threatened to be, or is, denied, curtailed, suspended or revoked, this Agreement may be terminated by Employer and the parties’ obligations and responsibilities shall be determined by the provisions of Section 11(b).

3

8.Restrictive Covenants.

a.Competition.  Employee acknowledges that, in the course of Employee’s responsibilities hereunder, Employee will form relationships and become acquainted with certain confidential and proprietary information as further described in Section 8(b).  Employee further acknowledges that such relationships and information are and will remain valuable to the Employer and Employer Group and that the restrictions on future employment, if any, are reasonably necessary in order for Employer and Employer Group to remain competitive in the gaming industry.  In recognition of their heightened need for protection from abuse of relationships formed or information garnered before and during the Specified Term of the Employee’s employment hereunder, Employee covenants and agrees for:

i.the twelve (12) month period immediately following termination of employment for any reason (the “Restrictive Period”), not to, unless required by law or administrative process:

A.Make known to any third party the names and addresses of any of the customers of Employer or any member of Employer Group, or any other information or data pertaining to those customers;

B.Call on, solicit, induce to leave and/or take away, or attempt to call on, solicit, induce to leave and/or take away, any of the customers of Employer or any member of the Employer Group, either for Employee’s own account or for any third party;

C.Call on, solicit and/or take away, any potential or prospective customer of Employer or any member of the Employer Group, on whom the Employee called or with whom Employee became acquainted during employment (either before or during the Specified Term), either for Employee’s own account or for any third party; and

D.Approach or solicit any employee or independent contractor of Employer or any member of the Employer Group with a view towards enticing such person to leave the employ or service of Employer or any member of the Employer Group, or hire or contract with any employee or independent contractor of Employer or any member of the Employer Group, without the prior written consent of the Employer, such consent to be within Employer’s sole and absolute discretion.

4

b.Confidentiality.  Employee covenants and agrees that Employee shall not at any time during the Specified Term or thereafter, without Employer’s prior written consent, such consent to be within Employer’s sole and absolute discretion, disclose or make known to any person or entity outside of the Employer Group any Trade Secret (as defined below), or proprietary or other confidential information concerning Employer or any member of the Employer Group, including without limitation, Employer’s customers and its casino, hotel, and marketing data practices, procedures, management policies or any other information regarding Employer or any member of the Employer Group, which is not already and generally known to the public through no wrongful act of Employee or any other party.  Employee covenants and agrees that Employee shall not at any time during the Specified Term, or thereafter, without the Employer’s prior written consent, utilize any such Trade Secrets, proprietary or confidential information in any way, including communications with or contact with any such customer other than in connection with employment hereunder.  For purposes of this Section 8, Trade Secrets is defined as data or information, including a formula, pattern, compilation, program, device, method, know-how, technique or process, that derives any economic value, present or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may or could obtain any economic value from its disclosure or use.

c.Former Employer Information.  Employee will not intentionally, during the Specified Term, improperly use or disclose any proprietary information or Trade Secrets of any former employer or other person or entity and will not bring onto the premises of the Employer any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.

d.Third Party Information.  Employee acknowledges that Employer and other members of the Employer Group have received and in the future will receive from third parties their confidential or proprietary information subject to a duty to maintain the confidentiality of such information and to use it only for certain limited purposes.  Employee will hold all such confidential or proprietary information in the strictest confidence and will not disclose it to any person or entity or to use it except as necessary in carrying out Employee’s duties hereunder consistent with Employer’s (or such other member of the Employer Group’s) agreement with such third party.

e.Employer’s Property.  Employee hereby confirms that Trade Secrets, proprietary or confidential information and all information concerning customers who utilize the goods, services or facilities of any hotel and/or casino owned, operated or managed by Employer constitute Employer’s exclusive property (regardless of whether Employee possessed or claims to have possessed such information prior to the date hereof).  Employee agrees that upon termination of employment,

5

Employee shall promptly return to the Employer all notes, notebooks, memoranda, computer disks, and any other similar repositories of information (regardless of whether Employee possessed such information prior to the date hereof) in the possession of Employee containing or relating in any way to the Trade Secrets or proprietary or confidential information of each member of the Employer Group, including but not limited to, the documents referred to in Section 8(b).  Such repositories of information also include but are not limited to any so-called personal files or other personal data compilations in any form, which in any manner contain any Trade Secrets or proprietary or confidential information of Employer or any member of the Employer Group.

f.Notice to Employer.  Employee agrees to notify Employer immediately of any employers for whom Employee works or provides services (whether or not for remuneration to Employee or a third party) during the Specified Term or within the Restrictive Period.  Employee further agrees to promptly notify Employer, during Employee’s employment with Employer, of any contacts made by any gaming licensee that concern or relate to an offer of future employment (or consulting services) to Employee.

9.Representations. Employee hereby represents, warrants and agrees with Employer that:

a.The covenants and agreements contained in Sections 3, 4, 6, 7, and 8 above are reasonable, appropriate, and suitable in their geographic scope, duration, and content; the Employer’s agreement to employ the Employee and a portion of the compensation and consideration to be paid to Employee hereunder is separate and partial consideration for such covenants and agreements; the Employee shall not, directly or indirectly, raise any issue of the reasonableness, appropriateness and suitability of the geographic scope, duration or content of such covenants and agreements in any proceeding to enforce such covenants and agreements;and such covenants and agreements shall survive the termination of this Agreement, in accordance with their terms;

b.The enforcement of any remedy under this Agreement will not prevent Employee from earning a livelihood, because Employee’s past work history and abilities are such that Employee can reasonably expect to find work in other areas and lines of business;

c.The covenants and agreements stated in Sections 4, 6, 7, and 8 above are essential for the Employer’s reasonable protection;

d.Employer has reasonably relied on these covenants and agreements by Employee; and

6

e.Employee has the full right to enter into this Agreement and by entering into and performance of this Agreement will not violate or conflict with any arrangements or agreements Employee may have or agreed to have with any other person or entity.

f.Employee acknowledges and warrants to Employer the receipt and sufficiency of separate consideration for the assignment by Employer of Employer’s rights and Employee’s obligation under Section 8.

Notwithstanding Section 25, Employee agrees that in the event of Employee’s breach or threatened breach of any covenants and agreements set forth in Sections 4 and 8 above, Employer may seek to enforce such covenants and agreements in court through any equitable remedy, including specific performance or injunction, without waiving any claim for damages.  In any such event, Employee waives any claim that the Employer has an adequate remedy at law or for the posting of a bond.

10.Termination for Death or Disability.  Employee’s employment hereunder shall terminate upon Employee’s death or disability (as defined below).  In the event of Employee’s death or disability, Employee (or Employee’s estate or beneficiaries in the case of death) shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) any earned but unpaid bonus then payable to Employee (which shall be paid on Employer’s next scheduled payroll date), (3) expense reimbursement pursuant to Section 3(d) and (e), and (4) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto. For purposes of this Section 10, disability is defined as Employee’s incapacity, certified by a licensed physician selected by Employer (“Employer’s Physician”), which precludes Employee from performing the essential functions of Employee’s duties hereunder for sixty (60) days or more.  In the event Employee disagrees with the conclusions of the Employer’s Physician, Employee (or Employee’s representative) shall designate a physician (“Employee’s Physician”), and Employer’s Physician and Employee’s Physician shall jointly select a third physician (“Third Physician”), who shall make the determination which determination shall be final and binding on the parties hereto.  Employee hereby consents to any examination or to provide or authorize access to any medical records that may be reasonably required by Employer’s Physician or the Third Physician in connection with any determination to be made pursuant to this Section 10.

11.a.Termination by Employer for Cause.  Employer may terminate Employee’s employment hereunder for Cause (as defined below) at any time.  If Employer terminates Employee’s employment for Cause, Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of

7

employment (which shall be paid on Employer’s next scheduled payroll date), (2) business expense reimbursement pursuant to Section 3(e), and (3) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto.  For purposes of this Section 11, Cause is defined as Employee’s (a) failure to abide by Employer’s policies and procedures, (b) misconduct, insubordination, or inattention to Employer’s business, (c) failure to perform the duties required of Employee up to the standards established by the Board, or other material breach of this Agreement (other than as a result of a Disability), or (d) failure or inability to satisfy the requirements stated in Section 7 above.  Prior to a termination for cause under this paragraph 11(a), the Employer must provide a written letter of deficiency to Employee that details Employee’s deficient conduct and thereafter provide Employee 30 days to cure such deficiency.  If after 30 days Employer continues to believe cause exists to terminate the Employee, then Employer shall send a second letter to Employee terminating Employee that memorializes the failure of Employee to cure the asserted deficiency.

b.Termination by Employer without Cause.  Employer may terminate Employee “at will” at any time upon fifteen (15) days prior written notice, or, in the Employer’s sole discretion, the equivalent of two weeks of Base Salary in lieu of notice.  If Employer terminates Employee at will under this paragraph, Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) any earned but unpaid bonus then payable to Employee (which shall be paid on Employer’s next scheduled payroll date), (3) expense reimbursement pursuant to Section 3(d) and (e), (4) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto, and (5) twelve (12) months of Base Salary.

12.Termination by Employee.  Employee may terminate Employee’s employment hereunder upon thirty (30) days’ prior written notice to Employer.  If Employee terminates his employment other than for (a) death, (b) disability, (c) failure of Employer to pay Employee’s compensation when due, (d) an uncured default of this Agreement by Employer following written notice to Employer and a reasonable opportunity for Employer to cure, or (e) material reductions in Employee’s duties and responsibilities without his consent, and (f) a change of control of Employer other than through a public offering, Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) expense reimbursement pursuant to Section 3(e), and (3) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto.

8

In the event that Employee terminates this Agreement as a result of Sections 12(c),(d),(e) or (f), Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) any earned but unpaid bonus then payable to Employee (which shall be paid on Employer’s next scheduled payroll date), (3) expense reimbursement pursuant to Section 3(d) and (e), (4) benefits provided pursuant to Section 3, subject to the terms and conditions applicable thereto, and (5) twelve (12) months of Base Salary.

13.Release; Full Satisfaction.  Notwithstanding anything to the contrary, no payments or benefits shall be provided that are in addition to the payments or benefits that would be provided pursuant to Section 12, unless and until Employee executes and delivers a standard form of general release of claims; provided, however, that Employee shall not be required to release any indemnification rights or continuing rights to benefits under Employer’s benefit plans, in accordance with the terms and conditions of such plans.

14.Cooperation Following Termination.  Following termination of employment of Employee’s employment hereunder for any reason, Employee agrees to reasonably cooperate with Employer upon the reasonable request of the Board and to be reasonably available to Employer with respect to matters arising out of Employee’s services to any member of the Employer Group.  Employer shall reimburse, or at Employee’s request, advance Employee for expenses reasonably incurred in connection with such matters.

15.Interpretation; Each Party the Drafter.  Each of the parties was represented by or had the opportunity to consult with counsel who either participated in the formulation and documentation of, or was afforded the opportunity to review and provide comments on, this Agreement.Accordingly, this Agreement and the provisions contained in it shall not be construed or interpreted for or against any party to this agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.

16.Indemnification.  Employer shall indemnify Employee to the fullest extent permitted by Nevada law and the articles of incorporation and bylaws of the Employer.  Such indemnification shall include, without limitation, the following:

a.Indemnification Involving Third Party Claims.  Employer shall indemnify Employee if Employee is a party to or is threatened to be made a party to or otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (each a “Claim”), other than a Claim by or in the name of Employer or any entity in the Employer Group, by reason of the fact that Employee is or was serving as an employee or agent of Employer or any entity in the Employer Group (each an “Indemnifiable Event”), against all expenses, including attorneys’ fees, judgments, fines, and amounts paid in settlement (collectively, “Expenses”) actually and

9

reasonably incurred by Employee in connection with the investigation, defense, settlement or appeal of such Claim, if Employee either is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner Employee reasonably believed to be in or not opposed to the best interests of Employer and, in the case of a criminal Claim, in addition had no reasonable cause to believe that his or her conduct was unlawful.

b.Determination of Appropriateness of Indemnification.  Notwithstanding the foregoing, the obligations of Employer under Section 16 shall be subject to the condition that, unless ordered by a court, a determination shall have been made that indemnification is proper under the specific circumstances, pursuant to and in accordance with NRS Section 78.751, as in effect from time to time.

c.Indemnification for Defense Only.  The indemnification authorized by this Section 16 does not include any actions, suits or proceedings initiated by Employee against Employer or any entity in the Employer Group.

d.Settlement of Claims.  Neither Employee nor Employer shall settle any Claim without the prior written consent of the other (such consent not to be unreasonably withheld or delayed).

17.Severability.  If any provision hereof is unenforceable, illegal or invalid for any reason whatsoever, such fact shall not affect the remaining provisions hereof, except in the event a law or court decision, whether on application for declaration, or preliminary injunction or upon final judgment, declares one or more of the provisions of this Agreement that impose restrictions on Employee unenforceable or invalid because of the geographic scope or time duration of such restriction.  In such event, Employer shall have the option:

(A)To deem the invalidated restrictions retroactively modified to provide for the maximum geographic scope and time duration that would make such provisions enforceable and valid; or

(B)To terminate this Agreement pursuant to Section 11 as a Termination without Cause.

Exercise of any of these options shall not affect Employer’s right to seek damages or such additional relief as may be allowed by law in respect to any breach by Employee of the enforceable provisions of this Agreement.

18.Survival.  Notwithstanding anything in this Agreement to the contrary, to the extent applicable, Sections 8 through and including Section 17 shall survive the termination of this Agreement.

19.Notice.  For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given

10

(i) when personally delivered, (ii) the business day following the day when deposited with a reputable and established overnight express courier (charges prepaid), or (iii) five (5) days following mailing by certified or registered mail, postage prepaid and return receipt requested.  Unless another address is specified, notices shall be sent to the addresses indicated below:

To Employer:

OpBiz, LLC

3667 Las Vegas Boulevard

Las Vegas, Nevada 89109

Attn: Michael V. Mecca

To Employee:

Mark S. Helm

3734 Britainshire Court

Orlando, Florida 32837

or to such other address as either party shall have furnished to the other in writing in accordance herewith.

20.Tax Withholding.  Notwithstanding any other provision of this Agreement, Employer may withhold from any amounts payable under this Agreement, or any other benefits received pursuant hereto, such Federal, state, local and other taxes as shall be required to be withheld under any applicable law or regulation.

21.Dispute Resolution.

a.Any dispute, claim or controversy arising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud, or arising from or related in any way to Employee’s employment with Employer will be submitted for final resolution by private arbitration before a single arbitrator and in accordance with the National Rules for the Resolution of Employment Disputes and practices then in effect of, the American Arbitration Association, or any successors thereto (“AAA”), except where those rules conflict with these provisions, in which case these provisions control; provided, however, that Employer shall have the right to seek in court equitable relief, including a temporary restraining order, preliminary or permanent injunction or an injunction in aid of arbitration, to enforce its rights set forth in Section 8.  The arbitration will be held in Las Vegas, Nevada.

11

b.Giving recognition to the understanding of the parties hereto that they contemplate reasonable discovery, including document demands and depositions, the arbitrator shall provide for discovery in accordance with the Nevada Rules of Civil Procedure as reasonably applicable to this private arbitration.

c.To the extent possible, the arbitration hearings and award will be maintained in confidence, except as may be required by law or for the purpose of enforcement of an arbitral award.

d.Each party shall bear its own costs and expenses incurred in connection with arbitration proceedings pursuant to this Agreement to arbitrate.  The costs and expenses of the arbitrators and related expenses shall be shared equally between Employer, on one hand, and Employee on the other hand.

e.Each party hereto waives, to the fullest extent permitted by law, any claim to punitive or exemplary or liquidated or multiplied damages from the other.

22.No Waiver of Breach or Remedies.  No failure or delay on the part of Employer or Employee in exercising any right, power or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

23.Amendment or Modification.  No amendment, modification, termination or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by a member of the Board (other than Employee), and Employee, nor consent to any departure by the Employee from any of the terms of this Agreement shall be effective unless the same is signed by a member of the Board (other than Employee).  Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

24.Governing Law; Venue.  The laws of the State of Nevada shall govern the validity, construction, and interpretation of this Agreement, without regard to conflict of law principles.  Each party irrevocably submits to the exclusive jurisdiction of the courts of the State of Nevada located in Clark County in any action, suit or proceeding arising out of or relating to this Agreement or any matters contemplated hereby, and agrees that any such action, suit or proceeding shall be brought only in such court.

25.Headings.  The headings in this Agreement have been included solely for convenience of reference and shall not be considered in the interpretation or construction of this Agreement.

26.Assignment.  This Agreement is personal to Employee and may not be assigned by Employee.

12

27.Successors and Assigns.  This Agreement may be assigned by Employer to its successors and shall be binding upon the successors and assigns of Employer.

28.Prior Agreements.  This Agreement shall supersede and replace any and all other prior discussions and negotiations as well as any and all agreements and arrangements that may have been entered into by and between Employee or any predecessor thereof, on the one hand, and Employee, on the other hand, prior to the Closing Date relating to the subject matter hereof.  Employee acknowledges that all rights under such prior agreements and arrangements shall be extinguished.

IN WITNESS WHEREOF, Employer and Employee have entered into this Agreement in Las Vegas, Nevada, as of the date first written above.

“EMPLOYEE”
MARK S. HELM
Signature
“EMPLOYER”
OPBIZ, LLC, d/b/a PLANET HOLLYWOOD RESORT & CASINO
By:
Its:
	Title

13

EX-10.28

Exhibit 10.28

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is entered into as of August 9, 2004, by and between OpBiz, L.L.C. (“Employer”), and Bruce Himelfarb (“Employee”).

1.Employment.  Employer hereby employs Employee, and Employee hereby accepts employment by the Employer, as Employer’s Vice President of Casino Marketing to perform such executive, managerial or administrative duties, commensurate with Employee’s position, as Employer may specify from time to time, during the Specified Term as defined in Section 2.

2.Effective Date; Specified Term.  This Agreement shall be effective as of Employee’s commencement date.  Subject to earlier termination as provided herein, the term of the Employee’s employment hereunder shall commence on August 23, 2004, and terminate on the third (3rd) anniversary thereof (the “Specified Term”).  If Employee remains employed by Employer following the Specified Term, any such employment shall be on an at-will basis, unless the parties agree in writing to extend the Specified Term.

3.Compensation.

a.Base Salary.During the Specified Term, in consideration of the performance by Employee of Employee’s obligations hereunder to Employer and its parents, subsidiaries, affiliates, and joint ventures (collectively, the “Employer Group”), Employer shall pay Employee an annual base salary (the “Base Salary”) as follows:  Year 1 of the Specified Term - $250,000.00; Year 2 of the Specified Term - $275,000.00; Year 3 of the Specified Term - $300,000.00.  Increases in Base Salary for Years 2 and 3 shall be effective on the annual anniversary date under Section 2 hereof.  The Base Salary shall be payable in accordance with the payroll practices of Employer as in effect from time to time for Employer’s senior executives.

b.Bonus Compensation. Employee is eligible to participate in Employer’s bonus program as formulated from time to time by Employer’s Board of Directors in its sole discretion (“Employer Bonus Program”).  Such Employer Bonus Program is primarily based on achievement of Employer’s EBITDA goals and Employee’s performance as determined by the Board of Directors.  Notwithstanding the foregoing, Employee’s annual bonus for the time period beginning on the commencement date and ending December 31, 2004, shall not be less than $35,000.00.  The annual bonus for the 2005 and 2006 calendar years shall not be less than $100,000.00 in each such year and may be up to fifty percent (50%) of Employee’s Base Salary.  Commencing January 1, 2007, Employee shall be eligible to receive such bonuses pursuant to the Employer Bonus Program as may be determined in the sole discretion of Employer’s Board of Directors, which may be up to fifty percent (50%) of Employee’s Base Salary.

1

c.Employee Benefit Programs.  During the Specified Term, Employee shall be entitled to participate in Employer’s employee benefit plans as are generally made available from time to time to Employer’s senior executives, subject to the terms and conditions of such plans, and subject to Employer’s right to amend, terminate or take other similar actions with respect to such plans.

d.Business Expense Reimbursements.  Employer will pay or reimburse Employee for all reasonable out-of-pocket expenses, including travel expenses, Employee incurs during the Specified Term in the course of performing Employee’s duties under this Agreement upon timely submission of appropriate documentation to Employer, as prescribed from time to time by Employer.

e.Options.  Subject to the prior approval of the Nevada Gaming Commission, the availability of an exemption from registration under applicable securities laws, and the approval of appropriate members of the Employer Group, employee is eligible to receive options to purchase .25% (subject to dilution in the discretion of the Employer Group) of equity interest (non-voting) in Mezzco, LLC (or such other entity as determined by the Employer Group).  Employee’s options shall carry a strike price based on a $100 million equity value, will vest in three (3) equal installments on the annual anniversary dates of the Specified Term, and will be subject to such terms and conditions as may be set forth in the option grant.

4.Extent of Services. Employee agrees that the duties and services to be performed by Employee shall be performed exclusively for members of the Employer Group.  Employee further agrees to perform such duties in an efficient, trustworthy, lawful, and businesslike manner.  Employee agrees not to render to others any service of any kind whether or not for compensation, or to engage in any other business activity whether or not for compensation, that is similar to or conflicts with the performance of Employee’s duties under this Agreement, without the prior written approval of the Board.  Such services shall be rendered primarily in Las Vegas, Nevada.

5.Policies and Procedures.  In addition to the terms herein, Employee agrees to be bound by Employer’s policies and procedures including drug testing and background checks, as they may be established or amended by Employer in its sole discretion from time to time.  In the event the terms in this Agreement conflict with Employer’s policies and procedures, the terms herein shall take precedence.  Employer recognizes that it has a responsibility to see that its employees understand the adverse effects that problem gambling and underage gambling can have on individuals and the gaming industry as a whole.  Employee agrees to read, understand, and comply with Employer’s policy prohibiting underage gaming and supporting programs to treat compulsive gambling.

6.Licensing Requirements.  Employee acknowledges that Employer is engaged in a business that is or may be subject to and exists because of privileged licenses issued by

2

governmental authorities in Nevada and other jurisdictions in which Employer or Employer Group is engaged or has applied or, during the Specified Term, may apply to engage in the gaming business.  If requested to do so by Employer or Employer Group, Employee shall apply for and obtain any license, qualification, clearance or the like that shall be requested or required of Employee by any regulatory authority having jurisdiction over Employer or Employer Group.

7.Failure to Satisfy Licensing Requirement.  If Employee fails to satisfy any licensing requirement referred to in Section 6 above, or if any governmental authority directs the Employer to terminate any relationship it may have with Employee, or if Employer shall determine, in Employer’s reasonable judgment, that Employee was, is or might be involved in, or is about to be involved in, any activity, relationship(s) or circumstance that could or does jeopardize the business of Employer or Employer’s Group, reputation or such licenses, or if any such license is threatened to be, or is, denied, curtailed, suspended or revoked, this Agreement may be terminated by Employer and the parties’ obligations and responsibilities shall be determined by the provisions of Section 11.

8.Restrictive Covenants.

a.Competition.  Employee acknowledges that, in the course of Employee’s responsibilities hereunder, Employee will form relationships and become acquainted with certain confidential and proprietary information as further described in Section 8(b).  Employee further acknowledges that such relationships and information are and will remain valuable to the Employer and Employer Group and that the restrictions on future employment, if any, are reasonably necessary in order for Employer and Employer Group to remain competitive in the gaming industry.  In recognition of their heightened need for protection from abuse of relationships formed or information garnered before and during the Specified Term of the Employee’s employment hereunder, Employee covenants and agrees for the three  (3) month period immediately following termination of employment for any reason (the “Restrictive Period”), not to directly or indirectly be employed by, provide consultation or other services to, engage or participate in, provide advice, information or assistance to, fund or invest in, or otherwise be connected or associated in any way or manner with, any firm, person, corporation or other entity which is either directly, indirectly or through an affiliated company or entity, engaged in gaming or proposes to engage in gaming in Clark County,  Nevada.   The covenants under this Section 8(a) include but are not limited to Employee’s covenant not to:

i.Make known to any third party the names and addresses of any of the customers of Employer or any member of Employer Group, or any other information or data pertaining to those customers;

3

ii.Call on, solicit, induce to leave and/or take away, or attempt to call on, solicit, induce to leave and/or take away, any of the customers of Employer or any member of the Employer Group, either for Employee’s own account or for any third party;

iii.Call on, solicit and/or take away, any potential or prospective customer of Employer or any member of the Employer Group, on whom the Employee called or with whom Employee became acquainted during employment (either before or during the Specified Term), either for Employee’s own account or for any third party; and

iv.Approach or solicit any employee or independent contractor of Employer or any member of the Employer Group with a view towards enticing such person to leave the employ or service of Employer or any member of the Employer Group, or hire or contract with any employee or independent contractor of Employer or any member of the Employer Group, without the prior written consent of the Employer, such consent to be within Employer’s sole and absolute discretion.

b.Confidentiality.  Employee covenants and agrees that Employee shall not at any time during the Specified Term or thereafter, without Employer’s prior written consent, such consent to be within Employer’s sole and absolute discretion, disclose or make known to any person or entity outside of the Employer Group any Trade Secret (as defined below), or proprietary or other confidential information concerning Employer or any member of the Employer Group, including without limitation, Employer’s customers and its casino, hotel, and marketing data practices, procedures, management policies or any other information regarding Employer or any member of the Employer Group, which is not already and generally known to the public through no wrongful act of Employee or any other party.  Employee covenants and agrees that Employee shall not at any time during the Specified Term, or thereafter, without the Employer’s prior written consent, utilize any such Trade Secrets, proprietary or confidential information in any way, including communications with or contact with any such customer other than in connection with employment hereunder.  For purposes of this Section 8, Trade Secrets is defined as data or information, including a formula, pattern, compilation, program, device, method, know-how, technique or process, that derives any economic value, present or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may or could obtain any economic value from its disclosure or use.

c.Former Employer Information.  Employee will not intentionally, during the Specified Term, improperly use or disclose any proprietary information or Trade Secrets of any former employer or other person or entity and will not bring onto the premises of the Employer any unpublished document or proprietary

4

information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.

d.Third Party Information.  Employee acknowledges that Employer and other members of the Employer Group have received and in the future will receive from third parties their confidential or proprietary information subject to a duty to maintain the confidentiality of such information and to use it only for certain limited purposes.  Employee will hold all such confidential or proprietary information in the strictest confidence and will not disclose it to any person or entity or to use it except as necessary in carrying out Employee’s duties hereunder consistent with Employer’s (or such other member of the Employer Group’s) agreement with such third party.

e.Employer’s Property.  Employee hereby confirms that Trade Secrets, proprietary or confidential information and all information concerning customers who utilize the goods, services or facilities of any hotel and/or casino owned, operated or managed by Employer constitute Employer’s exclusive property (regardless of whether Employee possessed or claims to have possessed such information prior to the date hereof).  Employee agrees that upon termination of employment, Employee shall promptly return to the Employer all notes, notebooks, memoranda, computer disks, and any other similar repositories of information (regardless of whether Employee possessed such information prior to the date hereof) containing or relating in any way to the Trade Secrets or proprietary or confidential information of each member of the Employer Group, including but not limited to, the documents referred to in Section 8(b).  Such repositories of information also include but are not limited to any so-called personal files or other personal data compilations in any form, which in any manner contain any Trade Secrets or proprietary or confidential information of Employer or any member of the Employer Group.

f.Notice to Employer.  Employee agrees to notify Employer immediately of any employers for whom Employee works or provides services (whether or not for remuneration to Employee or a third party) during the Specified Term or within the Restrictive Period.  Employee further agrees to promptly notify Employer, during Employee’s employment with Employer, of any contacts made by any gaming licensee that concern or relate to an offer of future employment (or consulting services) to Employee.

9.Representations. Employee hereby represents, warrants and agrees with Employer that:

a.The covenants and agreements contained in Sections 4 and 8 above are reasonable, appropriate and suitable in their geographic scope, duration and content; the Employer’s agreement to employ the Employee and a portion of the compensation and consideration to be paid to Employee hereunder is separate and

5

partial consideration for such covenants and agreements; the Employee shall not, directly or indirectly, raise any issue of the reasonableness, appropriateness and suitability of the geographic scope, duration or content of such covenants and agreements in any proceeding to enforce such covenants and agreements;and such covenants and agreements shall survive the termination of this Agreement, in accordance with their terms;

b.The enforcement of any remedy under this Agreement will not prevent Employee from earning a livelihood, because Employee’s past work history and abilities are such that Employee can reasonably expect to find work in other geographic areas and lines of business;

c.The covenants and agreements stated in Sections 4, 6, 7, and 8 above are essential for the Employer’s reasonable protection;

d.Employer has reasonably relied on these covenants and agreements by Employee; and

e.Employee has the full right to enter into this Agreement and by entering into and performance of this Agreement will not violate or conflict with any arrangements or agreements Employee may have or agreed to have with any other person or entity.

f.Employee acknowledges and warrants to Employer the receipt and sufficiency of separate consideration for the assignment by Employer of Employer’s rights and Employee’s obligation under Section 8.

Notwithstanding Section 21 Employee agrees that in the event of Employee’s breach or threatened breach of any covenants and agreements set forth in Sections 4 and 8 above, Employer may seek to enforce such covenants and agreements in court through any equitable remedy, including specific performance or injunction, without waiving any claim for damages.  In any such event, Employee waives any claim that the Employer has an adequate remedy at law or for the posting of a bond.

10.Termination for Death or Disability.  Employee’s employment hereunder shall terminate upon Employee’s death or Disability (as defined below).  In the event of Employee’s death or Disability, Employee (or Employee’s estate or beneficiaries in the case of death) shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) any earned but unpaid bonus then payable to Employee (which shall be paid on Employer’s next scheduled payroll date), (3) business expense reimbursement pursuant to Section 3(d), and (4) benefits provided pursuant to Section 3(c), subject to the terms and

6

conditions applicable thereto. For purposes of this Section 10, Disability is defined as Employee’s incapacity, certified by a licensed physician selected by Employer (“Employer’s Physician”), which precludes Employee from performing the essential functions of Employee’s duties hereunder for sixty (60) days or more.  In the event Employee disagrees with the conclusions of the Employer’s Physician, Employee (or Employee’s representative) shall designate a physician (“Employee’s Physician”), and Employer’s Physician and Employee’s Physician shall jointly select a third physician (“Third Physician”), who shall make the determination which determination shall be final and binding on the parties hereto.  Employee hereby consents to any examination or to provide or authorize access to any medical records that may be reasonably required by Employer’s Physician or the Third Physician in connection with any determination to be made pursuant to this Section 10.

11.(a)Termination by Employer for Cause.  Employer may terminate Employee’s employment hereunder for Cause (as defined below) at any time.  If Employer terminates Employee’s employment for Cause, Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) business expense reimbursement pursuant to Section 3(d), and (3) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto.  For purposes of this Section 11 (a), Cause is defined as Employee’s (i) failure to abide by Employer’s policies and procedures, (ii) misconduct, insubordination, or inattention to Employer’s business, (iii) failure to perform the duties required of Employee up to the standards established by the Board, or other material breach of this Agreement (other than as a result of a Disability), or (iv) failure or inability to satisfy the requirements stated in Section 7 above.   Prior to a termination for cause under this paragraph 11(a), the Employer must provide a written letter of deficiency to Employee which details Employee’s deficient conduct and thereafter provide Employee 30 days to cure such deficiency.  If after 30 days, Employer continues to believe cause exists to terminate the Employee, then Employer shall send a second letter to Employee terminating Employee that memorializes the failure of Employee to cure the asserted deficiency.

(b)  At Will Termination by Employer.  Employer may terminate Employee at will at any time upon fifteen (15) days prior written notice, or, in the Employer’s sole discretion, the equivalent of two weeks of Base Salary in lieu of notice.

If Employer terminates Employee at will under this Section 11 (b), Employee shall have no right to receive any compensation or benefit hereunder or otherwise from Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) business expense reimbursement pursuant to Section 3(d), and (3) benefits provided

7

pursuant to Section 3(c), subject to the terms and conditions applicable thereto, and (4) twelve (12) months of Base Salary if Employee is terminated in any year of the Specified Term; provided that severance pay shall  not exceed an amount equivalent to Base Salary from the date of termination to the date this Employment Agreement would otherwise expire but for earlier termination.

(c)  Lisencing Contingency.  Employer acknowledges that Employee must relinquish other employment to enter into this Employment Agreement.  Various state licensing requirements have not yet been finalized with Employer and may not be granted.  In the event Employee resigns his position with his current employer (The Venetian) and a gaming license is not granted to the Employer, Employer agrees to compensate Employee under this Agreement until such time as Employee finds suitable replacement employment, but under no circumstance for a period of time greater than ninety (90) days after Employee ceases employment with Employer due solely to the failure of Employer to obtain gaming licenses, due to no fault of Employee.

12.Termination by Employee.  Employee may terminate Employee’s employment hereunder upon thirty (30) days’ prior written notice to Employer.  If Employee shall terminate his employment other than for (a) death, (b) Disability, (c) failure of Employer to pay Employee’s compensation when due, or (d) material reductions in Employee’s duties and responsibilities without his consent, Employee shall have no right to receive any compensation or benefit hereunder or make any other claims against Employer or any member of the Employer Group on and after the effective date of termination of employment other than (1) unpaid Base Salary earned to the date of termination of employment (which shall be paid on Employer’s next scheduled payroll date), (2) any earned but unpaid bonus then payable to Employee (which shall be paid on Employer’s next scheduled payroll date), (3) business expense reimbursement pursuant to Section 3(d), and (4) benefits provided pursuant to Section 3(c), subject to the terms and conditions applicable thereto.

13.Cooperation Following Termination.  Following termination of employment of Employee’s employment hereunder for any reason, Employee agrees to reasonably cooperate with Employer upon the reasonable request of the Board and to be reasonably available to Employer with respect to matters arising out of Employee’s services to any member of the Employer Group.  Employer shall reimburse, or at Employee’s request, advance Employee for expenses reasonably incurred in connection with such matters.

14.Interpretation; Each Party the Drafter.  Each of the parties was represented by or had the opportunity to consult with counsel who either participated in the formulation and documentation of, or was afforded the opportunity to review and provide comments on, this Agreement.Accordingly, this Agreement and the provisions contained in it shall not be construed or interpreted for or against any party to this agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.

8

15.Indemnification.  Employer shall indemnify Employee to the fullest extent permitted by Nevada law and the articles of incorporation and bylaws of the Employer.  Such indemnification shall include, without limitation, the following:

a.Indemnification Involving Third Party Claims.  Employer shall indemnify Employee if Employee is a party to or is threatened to be made a party to or otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (each a “Claim”), other than a Claim by or in the name of Employer or any entity in the Employer Group, by reason of the fact that Employee is or was serving as an employee or agent of Employer or any entity in the Employer Group (each an “Indemnifiable Event”), against all expenses, including attorneys’ fees, judgments, fines, and amounts paid in settlement (collectively, “Expenses”) actually and reasonably incurred by Employee in connection with the investigation, defense, settlement or appeal of such Claim, if Employee either is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner Employee reasonably believed to be in or not opposed to the best interests of Employer and, in the case of a criminal Claim, in addition had no reasonable cause to believe that his or her conduct was unlawful.

b.Determination of Appropriateness of Indemnification.  Notwithstanding the foregoing, the obligations of Employer under Section 16 shall be subject to the condition that, unless ordered by a court, a determination shall have been made that indemnification is proper under the specific circumstances, pursuant to and in accordance with NRS Section 78.751, as in effect from time to time.

c.Indemnification for Defense Only.  The indemnification authorized by this Section 16 does not include any actions, suits or proceedings initiated by Employee against Employer or any entity in the Employer Group.

d.Settlement of Claims.  Neither Employee nor Employer shall settle any Claim without the prior written consent of the other (such consent not to be unreasonably withheld or delayed).

16.Severability.  If any provision hereof is unenforceable, illegal or invalid for any reason whatsoever, such fact shall not affect the remaining provisions hereof, except in the event a law or court decision, whether on application for declaration, or preliminary injunction or upon final judgment, declares one or more of the provisions of this Agreement that impose restrictions on Employee unenforceable or invalid because of the geographic scope or time duration of such restriction.  In such event, Employer shall have the option:

(A)To deem the invalidated restrictions retroactively modified to provide for the maximum geographic scope and time duration that would make such provisions enforceable and valid.

9

Exercise of this option shall not affect Employer’s right to seek damages or such additional relief as may be allowed by law in respect to any breach by Employee of the enforceable provisions of this Agreement.

17.Survival.  Notwithstanding anything in this Agreement to the contrary, to the extent applicable, Sections 8 through and including Section 17 shall survive the termination of this Agreement.

18.Notice.  For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) when personally delivered, (ii) the business day following the day when deposited with a reputable and established overnight express courier (charges prepaid), or (iii) five (5) days following mailing by certified or registered mail, postage prepaid and return receipt requested.  Unless another address is specified, notices shall be sent to the addresses indicated below:

To Employer:

With a copy to:

To Employee:

or to such other address as either party shall have furnished to the other in writing in accordance herewith.

19.Tax Withholding.  Notwithstanding any other provision of this Agreement, Employer may withhold from any amounts payable under this Agreement, or any other benefits received pursuant hereto, such Federal, state, local and other taxes as shall be required to be withheld under any applicable law or regulation.

10

20.Dispute Resolution.

a.Any dispute, claim or controversy arising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud, or arising from or related in any way to Employee’s employment with Employer will be submitted first to mediation to be exclusively paid for by Employer up to a maximum of $5,000 in mediation fees and costs, with each party to bear its own attorney’s fees and costs.  If the parties wish to engage in mediation, which mediator’s fee and costs exceeds $5,000, the parties shall, after payment of the first $5,000 by Employer, thereafter equally share the mediator’s fee and costs.  If the parties are not successful in resolving disputes pursuant to mediation, the parties agree that any claim or controversy arising from or in any way related to this Agreement to the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud or arising from or related in any way to Employee’s employment with Employer, will be submitted for final resolution by private arbitration before a single arbitrator and in accordance with the National Rules for the Resolution of Employment Disputes and practices then in effect of, the American Arbitration Association, or any successors thereto (“AAA”), except where those rules conflict with these provisions, in which case these provisions control; provided, however, that Employer shall have the right to seek in court equitable relief, including a temporary restraining order, preliminary or permanent injunction or an injunction in aid of arbitration, to enforce its rights set forth in Section 8.  The arbitration will be held in Las Vegas, Nevada.

b.Giving recognition to the understanding of the parties hereto that they contemplate reasonable discovery, including document demands and depositions, the arbitrator shall provide for discovery in accordance with the Nevada Rules of Civil Procedure as reasonably applicable to this private arbitration.

c.To the extent possible, the arbitration hearings and award will be maintained in confidence, except as may be required by law or for the purpose of enforcement of an arbitral award.

d.Each party shall bear its own attorney’s fees, costs and expenses incurred in connection with arbitration proceedings pursuant to this Agreement to arbitrate.  The fees, costs, and expenses of the arbitrators and related expenses shall be paid by the Employer up to a maximum of $5,000.  Any fees, costs and expenses of the arbitrators shall thereafter be shared equally between Employer, on one hand, and Employee on the other hand.

e.Each party hereto waives, to the fullest extent permitted by law, any claim to punitive or exemplary or liquidated or multiplied damages from the other.

11

21.No Waiver of Breach or Remedies.  No failure or delay on the part of Employer or Employee in exercising any right, power or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

22.Amendment or Modification.  No amendment, modification, termination or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by a member of the Board (other than Employee), and Employee, nor consent to any departure by the Employee from any of the terms of this Agreement shall be effective unless the same is signed by a member of the Board (other than Employee).  Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

23.Governing Law; Venue.  The laws of the State of Nevada shall govern the validity, construction, and interpretation of this Agreement, without regard to conflict of law principles.  Each party irrevocably submits to the exclusive jurisdiction of the courts of the State of Nevada located in Clark County in any action, suit or proceeding arising out of or relating to this Agreement or any matters contemplated hereby, and agrees that any such action, suit or proceeding shall be brought only in such court.

24.Headings.  The headings in this Agreement have been included solely for convenience of reference and shall not be considered in the interpretation or construction of this Agreement.

25.Assignment.  This Agreement is personal to Employee and may not be assigned by Employee.

26.Prior Agreements.  This Agreement shall supersede and replace any and all other prior discussions and negotiations as well as any and all agreements and arrangements that may have been entered into by and between Employee or any predecessor thereof, on the one hand, and Employee, on the other hand, prior to the Closing Date relating to the subject matter hereof.  Employee acknowledges that all rights under such prior agreements and arrangements shall be extinguished.

IN WITNESS WHEREOF, Employer and Employee have entered into this Agreement in Las Vegas, Nevada, as of the date first written above.

12

“EMPLOYEE”
BRUCE HIMELFARB
Signature
“EMPLOYER”
OpBiz, L.L.C.
By:
Its:
	Title

13

EX-21.1

Exhibit 21.1

List of Subsidiaries of BH/RE, L.L.C.

Name of Subsidiary	Jurisdiction of Organization
EquityCo, L.L.C.	Nevada
MezzCo, L.L.C.	Nevada
OpBiz, L.L.C.	Nevada

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Donna Lehmann, Chief Financial Officer of BH/RE, L.L.C., a Nevada Limited Liability Company, certify that:

1.I have reviewed this annual report on Form 10-K of BH/RE, LLC;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 14, 2005
	/S/ Donna Lehmann
	Donna Lehmann
	Chief Financial Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert Earl, Manager of BH/RE, L.L.C., a Nevada Limited Liability Company, certify that:

1.I have reviewed this annual report on Form 10-K of BH/RE, LLC;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 14, 2005
	/S/ Robert Earl
	Robert Earl
	Director and Manager

EX-31.3

Exhibit 31.3

CERTIFICATION

I, Douglas P. Teitelbaum, Manager of BH/RE, L.L.C., a Nevada Limited Liability Company, certify that:

1.I have reviewed this annual report on Form 10-K of BH/RE, LLC;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 14, 2005
	/S/ Douglas P. Teitelbaum
	Douglas P. Teitelbaum
	Director and Manager

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certify as follows:

1.Donna Lehmann is the Chief Financial Officer of BH/RE, LLC, a Nevada Limited-Liability Company (the “Company”).

2.The undersigned certifies to the best of her knowledge:

(A)  The Company’s Form 10-K for the annual period ended December 31, 2004 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”); and

(B)  The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  April 14, 2005

/S/ Donna Lehmann

Donna Lehmann

Chief Financial Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certify as follows:

1.Robert Earl is a Director and Manager of BH/RE, LLC, a Nevada Limited-Liability Company (the “Company”).

2.The undersigned certifies to the best of his knowledge:

(A)  The Company’s Form 10-K for the annual period ended December 31, 2004 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”); and

(B)  The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  April 14, 2005

/S/ Robert Earl

Robert Earl

Director and Manager

EX-32.3

Exhibit 32.3

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certify as follows:

1.Douglas P. Teitelbaum is a Director and Manager of BH/RE, LLC, a Nevada Limited-Liability Company (the “Company”).

2.The undersigned certifies to the best of his knowledge:

(A)  The Company’s Form 10-K for the annual period ended December 31, 2004 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”); and

(B)  The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  April 14, 2005

/S/ Douglas P. Teitelbaum

Douglas P. Teitelbaum

Director and Manager

EX-99.1

Exhibit 99.1

COMPENSATION COMMITTEE CHARTER
OPBIZ, L.L.C.

Purposes

The Compensation Committee of the Board establishes and administers the Company’s policies, programs and procedures for compensating its senior management.  Among other things, the Committee has direct responsibility to:

(a)determine, or recommend to the Board for determination, the compensation of the Company’s President and Chief Executive Officer; and

(b)determine, or recommend to the Board for determination, the compensation of the other executive officers of the Company.

Composition

Size.  The size of the Committee shall be determined by the Board, but it must always have at least three members.

Qualifications.  Desirable qualifications for Committee members include experience in business management, executive compensation, employee benefits, and human resources.

Appointment and Removal.  The Board selects Committee members.The Committee will select a Committee Chair from among its members.  Each Committee member will serve at the pleasure of the Board for such term as the Board may decide or until such Committee member is no longer a Board member.

Duties and Responsibilities

The duties and responsibilities of the Committee shall include the following:

1.Establish Executive Compensation Policies and Programs.  The Committee will develop and implement the Company’s compensation policies and programs for executive officers and Board members.

2.Review and Approve Executive Officer Compensation.  The Committee will review and approve, at least annually, corporate goals and objectives relevant to the compensation of the President and Chief Executive Officer and the other executive officers of the Company.  The Committee will, either as a Committee or together with other independent directors (as directed by the Board), evaluate the performance of the executive officers in the light of those corporate goals and objectives and set compensation levels for these executive officers based on those evaluations and any other factors as it deems appropriate.

3.Recommend Incentive Compensation Plans.  The Committee will make recommendations to the Board with respect to the approval, adoption and amendment of all cash- and equity-based incentive compensation plans in which any executive officer of the Company participates.

4.Recommend Equity-Based Plans.  The Committee will also make recommendations to the Board with respect to the approval, adoption and amendment of all other equity-based plans.

5.Administer Compensation Plans.  The Committee will administer the equity-based incentive compensation plans in which the Company’s officers and employees participate and other plans in which the Company’s officers and employees participate that contemplate administration by the Committee.  The Committee, or a subcommittee, shall approve all grants of options and other equity-based awards, subject to the terms and conditions of applicable plans.

6.Oversee Regulatory Compliance.  The Committee will, in consultation with appropriate officers of the Company, oversee regulatory compliance with respect to compensation matters, including overseeing any compensation programs intended to preserve tax deductibility, and, as may be required, establishing performance goals and determining whether performance goals have been attained for purposes of Section 162(m) of the Internal Revenue Code.

7.Review Employment Agreements and Severance Arrangements.  The Committee will review and approve any proposed employment agreement with, and any proposed severance or retention plans or agreements applicable to, any executive officer of the Company.  The Committee shall review and approve any severance or other termination payments proposed to be made to any executive officer of the Company.

8.Board Reports.  The Committee will report its activities to the Board at least annually in such manner and at such times as the Committee or the Board deem appropriate.

9.Other Delegated Duties or Responsibilities.  The Committee will perform any other duties or responsibilities delegated to the Committee by the Board from time to time.

Meetings

The Committee will meet as frequently as necessary to carry out its responsibilities under this Charter.  The Committee Chair will, in consultation with the other members of the Committee and appropriate officers of the Company, establish the agenda for each Committee meeting.  Any Committee member may submit items to be included on the agenda.  Committee members may also raise subjects that are not on the agenda at any meeting.  The Committee Chair or a majority of the Committee members may call a meeting of the Committee at any time.  A majority of the number of Committee members selected by the Board will constitute a quorum for conducting business at a meeting of the Committee.  The act of a majority of Committee

2

members present at a Committee meeting at which a quorum is in attendance will be the act of the Committee, unless a greater number is required by law or the Company’s Operating Agreement or unless the matter requires approval by the members or managers of EquityCo, L.L.C. under its Second Amended and Restated Operating Agreement.  The Committee Chair will supervise the conduct of the meetings and will have other responsibilities as the Committee may specify from time to time.

The Committee may request any officer or other employee of the Company, or any representative of the Company’s legal counsel or other advisors, to attend a meeting or to meet with any members or representatives of the Committee.  Any individual whose performance or compensation is to be discussed at a Committee meeting should not attend such meeting unless specifically invited by the Committee.  Notwithstanding the foregoing, the President and Chief Executive Officer may not be present while the Committee is voting on or discussing the President and Chief Executive Officer’s compensation.  Any Committee member may be excused from a meeting to permit the remaining members of the Committee to act on any matter in which such member’s participation is not appropriate, and such member’s absence shall not destroy the quorum for the meeting.

Delegation

The Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Committee.  In particular, the Committee may delegate the approval of certain transactions to a subcommittee consisting solely of members of the Committee who are (a) ”non-employee directors” within the meaning under Rule 16b-3 of the Securities Exchange Act of 1934, and (b) ”outside directors” for the purposes of Section 162(m) of the Internal Revenue Code.

Resources and Authority

The Committee shall have appropriate resources and authority to discharge its responsibilities, including, without limitation, appropriate funding, in such amounts as the Committee deems necessary, to compensate any consultants or any other advisors retained by the Committee.  The Committee will have the sole authority to retain and terminate compensation consultants to assist in the evaluation of director or executive officer compensation and the sole authority to approve the fees and other retention terms of such compensation consultants.  The Committee may also retain independent counsel and other independent advisors to assist it in carrying out its responsibilities.

Compensation Committee Report

The Committee, with the assistance of management and any outside advisors the Committee deems appropriate, shall prepare a report for inclusion in any proxy statement required to be filed by BH/RE, L.L.C..

Annual Review

At least annually, the Committee will (a) review this Charter with the Board and recommend any changes to the Board and (b) evaluate its own performance against the

3

requirements of this Charter and report the results of this evaluation to the Board.  The evaluation will include establishment of the goals and objectives of the Committee for the upcoming year.  The Committee will conduct its review and evaluation in such manner as it deems appropriate.

4